May 16, 2016
Recent legal compliance issues require changes to most employee handbooks. In addition, we frequently see noncompliance on certain issues in our employee handbook reviews. All employers need to review handbooks for the issues set forth below to ensure legal compliance.
Affordable Care Act:
Now that the Affordable Care Act’s (ACA) employer mandate is in effect for large employers (generally, those with 50 or more full-time and full-time equivalent employees), it is time for employers to review their employee handbooks to reflect the ACA. Yes, we are discussing more required ACA compliance for employers (groan and eye roll perfectly acceptable here), but there are also ways to proactively utilize your handbook to show ACA compliance—especially with ACA audits coming in the not so distant future.
• Use your handbook to document an “offer of coverage” –Large employers must make an offer of affordable, minimum value coverage to 95% or more of full-time employees (130 or more hours per month), or risk a penalty assessment per full-time employee (regardless of coverage). This means that you are not assessed per each employee you do not give an offer, but instead assessed against your total full-time employee count minus 30 employees. The handbook description will not substitute for an advance written offer and waiver. However, it will be additional evidence an employee has given wide spread notice regarding eligibility for coverage that all employees have received.
• Definition of full-time employee for all purposes as more than 30 hours per week – The ACA defines full-time employees as individuals working 30 or more hours per week, and for compliance purposes as 130 hours or more per month. You do not have to consider these employees full-time employees for any purpose other than health coverage, but it is more administratively convenient to have a streamlined definition that applies for all purposes.
• Exclusion of temps, interns, casual employees, seasonal employees and similar groups from benefit coverage – The ACA’s employer mandate does not allow these categorical exclusions from coverage eligibility. The ACA requires that an offer be made to full-time employees. Further, all paid hours count as hours of service, with very narrow exceptions. It is possible to exclude certain seasonal employees as variable hour employees that do not meet the hour’s threshold over a 12 month period, but not as a category.
• Variable hour employee waiting periods not mentioned – If you have employees that you are not sure will be full-time or part-time for purposes of the ACA at the time of hire, those employees can be denied coverage for an up to 12 month measurement period during which the employer determines whether or not the employee will meet the hour’s threshold. These waiting and measurement periods are frequently not included in the Summary Plan Description. A separate free-standing policy or inclusion in the employee handbook is necessary to meet legal requirements.
• Prohibited waiting periods for non-variable hour employees –It is important to remember that there must be an opportunity for the employee to begin coverage no later than the end of the 90-day period following date of hire. The Internal Revenue Service and Department of Labor have made clear that first of the month following 90 days is unacceptable absent utilization of a bona fide orientation period that is set forth in the employer handbook. Similarly, a three-month waiting period does not work, since three months is often more than 90 days.
Updating the handbooks is necessary to avoid unnecessary employee confusion and, more importantly, to help avoid any unnecessary IRS or DOL confusion in the event of an audit. In recent audits, the DOL has begun requesting handbooks as part of its document request, and the IRS starts its ACA audits possibly this summer.
Leave of Absence Policies with Automatic End dates:
Employers should review Family and Medical Leave policies as well as other leave policies when the leaves available relate to an employee’s medical condition. Often, these leave policies have an “automatic” end date upon which the employee’s employment terminates. For example, a medical leave policy may state that the maximum period of leave permitted is 12 weeks, and if the employee does not return to work at that time, the employee will be considered to have resigned or his employment will be terminated.
Such policies should be revised because, if the reason for an employee’s failure to return to work upon expiration of an approved leave period is because of the employee’s disability, the Americans with Disabilities Act (ADA) imposes an obligation on the employer, separate and apart from any leave laws, to engage in the interactive process with that employee to determine whether a reasonable accommodation is available that would enable the employee to return to work. In some cases, that reasonable accommodation may be an additional period of leave. While an indefinite leave period is not considered “reasonable,” there is no hard guidance as to how much additional leave time would be considered “reasonable” and that will depend on many issues, such as the nature of the employee’s job duties, the employer’s size, etc. We suggest carefully reviewing leave policies to ensure they do not violate these requirements.
Drug & Alcohol Testing Policies:
Employers should carefully review drug and alcohol testing policies for compliance with the ADA, and also applicable state law. In reviewing drug and alcohol testing policies, one common concern is that the policy provides for random drug and alcohol testing. If the policy is written to cover those employee regulated by federal drug/alcohol testing regulations (such as the Department of Transportation’s regulations), the policy should track the requirements of those regulations.
However, if not legally required by a regulatory body, a drug and alcohol testing policy cannot require or permit random alcohol testing. While a test for the presence of illegal drugs is not a “medical examination” under the ADA and therefore can be required by an employer at any time, a test for the presence of alcohol is a “medical examination” under the ADA. Thus, an employer can only require a test for the presence of alcohol when “job-related and consistent with business necessity” (this would include, for example, reasonable suspicion alcohol testing).
Medical Marijuana Laws:
Approximately 25 states, as well as the District of Columbia, now have some form of medical marijuana law in place. While some states’ laws explicitly state that employers will not be required to accommodate employee’s medical marijuana use, other states (such as Nevada) require employers, subject to certain exceptions, to make reasonable accommodations for employees who are registered medical marijuana users. Complicating matters further, because the proliferation of medical marijuana laws is relatively recent, there often is little case law available to guide employers with respect to their obligations.
One area of clarity is under the ADA, which courts have consistently interpreted as not requiring employers to allow marijuana use as a reasonable accommodation. But for employers located in states with medical marijuana laws, we recommend consulting legal periodically to ensure your company policies and procedures are in compliance with relevant state law.
For employee handbook reviews, questions about compliant language or any other employee benefits or employment issues, please do not hesitate to contact Whitney Cooney, Dannae Delano, or Karen Milner.