MN Employment Law Report

MN Employment Law Report

The Bottom Line on Labor & Employment Law

FMLA Leave Extended to Same-Sex and Common Law Marriages

Posted in FMLA

Blog-Pic---Same-Sex-Marriage.jpgThe Department of Labor (DOL) has now changed their interpretation of who is a “spouse” under the Family and Medical Leave Act (FMLA).  Instead of looking at the law of the state in which the couple lives, people in same-sex or common law marriages will be considered spouses under FMLA if the employee’s marriage is lawfully recognized by the state where the same-sex or common law marriage took place.  The regulation incorporating this new interpretation goes into effect on March 27, 2015

This adoption of the “state of celebration” principle will allow more employees to access such FMLA privileges as taking take time off to care for their ill spouses, to take time due to exigent circumstances created by their spouse’s military obligations,  and take leave to care for stepchildren with serious medical condition.

This new definition is part of the DOL’s response to the landmark Supreme Court decision in United States v. Windsor,  570 U.S. 12 (2013), which invalidated a portion of the Defense of Marriage Act (DOMA) that restricted the definition of marriage for purposes of federal law to opposite-sex marriages.

What Does This Mean for Minnesota Employers?

Minnesota has legally recognized same-sex marriages since 2013 so Minnesotans in same-sex marriages would see no real impact of this new interpretation unless they live in other states that do not recognize same-sex marriage.  However, Minnesota does not recognize common law marriage, so Minnesotans who previously entered into a common law marriage in a state that still recognizes it are now considered spouses in regard to FMLA.  Of course, Minnesota employers with employees residing in other states must be sure that their FMLA determinations are based on where the law of the state where the employee was married rather than where they live and/or work.

The new rule may require some inquiry by the employer whenever an employee is claiming protected FMLA leave based on spousal status.  The DOL webpage answers a key question about what, if any, documentation an employer may require to verify a valid same-sex or common law marriage?  The DOL affirms that employers are still permitted to require “employees who take leave to care for a family member to provide reasonable documentation for purposes of confirming a family relationship.”   An employee must be given the opportunity to satisfy the request through formal documentation such as a license or court document, or through a personal statement asserting the qualifying relationship and location of marriage.  It is important for employers to remember that the employee determines what form of proof to submit.   Adopting a consistent policy regarding requiring proof will be essential for employers to maintain non-discriminatory administration of FMLA leave.

Minnesota Appellate Court Rules that Employees Have Six Years to Bring Whistleblowers Lawsuits

Posted in Employment Litigation

Blog-Pic---Gavel.jpgIn a published decision overturning longstanding case law, the Minnesota Court of Appeals held that claims brought by employees alleging whistleblower retaliation under the Minnesota Whistleblower Statute, Minn. Stat. § 181.932, are subject to a six-year statute of limitations rather than a two year limitations period.  The decision, Ford v. Minneapolis Public Schools, — N.W.2d —- (Dec. 15, 2014), is the second recent decision issued by Minnesota appellate courts confirming that wrongful discharge claims created by a state statute may be brought within six rather than two years of discharge.

Facts of the Case

The plaintiff in the case, Yvette Ford, worked for the Minneapolis Public Schools. In her lawsuit, Ms. Ford alleged that during the summer of 2007, she reported financial improprieties and budget discrepancies to the school-district superintendent and another staff person. Then, the following April, Ms. Ford was notified that her position would be eliminated effective June 30, 2008. She subsequently brought her lawsuit on June 29, 2010—exactly two years after the termination of her employment—alleging she was terminated in retaliation for engaging in whistleblowing rather than for legitimate, business-related reasons.

The trial court in Ford originally dismissed the lawsuit, finding that Ms. Ford was required to bring it within two years of the date she was first notified that her position was being eliminated in April 2008, rather than within two years of the date of her termination at the end of June 2008. Interestingly, both the plaintiff and the defendant-employer agreed the two-year limitations period applied to Ms. Ford’s claim, in light of a 1995 Court of Appeals decision holding to that effect, Larson v. New Richland Care Ctr., 538 N.W.2d 915 (Minn. Ct. App. 1995).

On appeal, the Minnesota Court of Appeals initially agreed with the trial court that Ms. Ford’s lawsuit was correctly dismissed as untimely. Ms. Ford appealed again, this time to the Minnesota Supreme Court. Notably, Ms. Ford did not challenge either of the lower courts’ applications of the two-year limitations period. Although the Minnesota Supreme Court denied review on all issues raised in the appeal, including the decision to measure the limitations period from the date Ms. Ford received notice of her impending termination rather than the date of her actual termination, the Minnesota Supreme Court nonetheless remanded the case back to the Court of Appeals “solely for the purpose of reconsideration of the statute of limitations that applies to [Ms. Ford’s] claim in light of Sipe v. STS Mfg., Inc., 834 N.W.2d 683 (Minn. 2013).”

Sipe was the first in this new line of cases from the Minnesota appellate courts lengthening the limitations period for statutorily-created wrongful discharge claims. In Sipe, the Minnesota Supreme Court applied the six-year limitations period to wrongful discharge claims brought under the Minnesota Drug and Alcohol Testing in the Workplace Act, Minn. Stat. §§ 181.950, et seq.

On remand in Ford, the Minnesota Court of Appeals took the hint and held that the six-year statute of limitations period applied to Ms. Ford’s whistleblower claim.  Accordingly, the court reversed the district court’s decision dismissing Ms. Ford’s lawsuit as untimely.

Bottom Line

The Ford case has two primary takeaways:

  1. First, Minnesota courts must now apply a six-year rather than two-year statute of limitations to wrongful discharge claims created by state statute, including claims arising under the Minnesota Whistleblower Statute, Minn. Stat. § 181.932, and claims arising under the Minnesota Drug and Alcohol Testing in the Workplace Act, Minn. Stat. §§ 181.950, et seq., in the absence of statutory language providing for a shorter limitations period.
  2. Second, the limitations period for wrongful discharge claims arising under Minnesota law should be measured from the date an employee receives notice of his or her impending termination, rather than the actual date of termination.

McDonald’s Is Not-So-Happy about Getting Served

Posted in Labor Law, NLRB

Blog Pic - McDonaldsThe National Labor Relations Board (“NLRB”) ended 2014 by filing over a dozen complaints across the country charging McDonald’s franchisees and their franchisor, McDonald’s USA, LLC, with violations of the National Labor Relations Act (“NLRA”).  The allegations relate primarily to protest activities directed at McDonald’s and other fast food restaurants concerning pay and working conditions.  According to the complaints, McDonald’s employees were subject to unlawful discipline, threats, interrogations, etc., in retaliation for their participation in these activities.

Franchisor Named In Complaint

The inclusion of McDonald’s USA, LLC (the franchisor) as a named party in the complaints came after the Office of the General Counsel for the NLRB determined that, in its view, the franchisor is a “joint employer” with the individual franchisees.  Minneapolis and Chicago are among the locations where the NLRB issued complaints in mid- to late-December.

As expected, McDonald’s USA, LLC will contest the NLRB’s position as to joint employer status, arguing that, as a parent company, it helps provide “resources” to its franchisees – through things like brand name recognition and operating material – but lacks meaningful control over workplace conditions.

The complaints filed by the NLRB allege that a joint employer relationship exists where McDonald’s USA, LLC has “a franchise agreement with [the franchisee], possessed and/or exercised control over the labor relationship policies of [the franchisee] and has been a joint employer of the employees of [the franchisee].” The complaints filed in Minneapolis (Region 18) and Chicago (Region 13) offer little factual support for the assertion that McDonald’s has “extensive influence over the business operations of its franchisees.” McDonald’s has already filed motions requesting more information and claiming that the NLRB’s complaints are unconstitutionally vague. Without additional facts, McDonald’s says it cannot appropriately defend itself and it will be denied due process of law in violation of the U.S. Constitution and federal law.

In a McDonald’s Fact Sheet published by the NLRB on its website, the Agency has summarized its joint employer theory as follows:

Our investigation found that McDonald’s, USA, LLC, through its franchise relationship and its use of tools, resources and technology, engages in sufficient control over its franchisees’ operations, beyond protection of the brand, to make it a putative joint employer with its franchisees, sharing liability for violations of [the NLRA]. This finding is further supported by McDonald’s, USA, LLC’s nationwide response to franchise employee activities while participating in fast food worker protests to improve their wages and working conditions.

Only time will tell if this argument is factually and legally supportable.

Bottom Line

The concern for McDonald’s, and other franchisors, is the potential for liability where they have not been directly involved with workplace decisions and conditions such as hiring, firing, discipline and supervision at each franchise location.  A hearing is scheduled to commence in Chicago on March 30, 2015, where we are likely to learn more of the NLRB’s factual basis behind its joint employer theory.

We will keep you updated as to any significant developments.

Labor Board Rules that Employees Have Right to Use Employer-Provided Email

Posted in Labor Law, NLRB

NLRB---GIF.gifOn December 11, the National Labor Relations Board (“NLRB”) issued a decision finding that employees who are given access to an employer-provided email account have a right protected by federal labor law to use the employer’s e-mail system to engage in protected communications on non-working time. This 3-2 decision reverses a 2007 decision, and will require employers to seriously consider whether and to what extent they need to alter or amend their electronic communications and/or usage policies.

Register Guard Decision

In 2007, the Board issued a decision in Register-Guard, 351 NLRB 1110 (2007), which held that employees have no statutory right use their employer’s email systems for engaging in conduct protected by the National Labor Relations Act (“NLRA”). Such activities include union organizing and other concerted activities for mutual aid or protection.

Accordingly, employers had been able to promulgate and enforce policies that prohibited employees from using company-provided email systems for all non-work related activities, such as selling a car or soliciting donations. The fact that these blanket prohibitions included activities protected by the NLRA was of no consequence, provided that the employer did not enforce the policy in a way to target union or other activities protected by the NLRA.

Right to Use Company-Provided Email for Activities Protected by NLRA

In its decision in Purple Communications, 361 NLRB No. 126 (Dec. 11, 2014), the Board ruled that employees who have been given access to a company email system must presumptively be allowed to use the system during their non-working time for communications that are protected by the NLRA. In short, according to the NLRB, federal labor law prohibits employers from implementing or maintaining policies that prohibit all non-work related use of its email system.

Because the right is subject to a “presumption,” it may be possible for the employer to rebut the presumption in certain cases. According to the Board, “[a]n employer may rebut the presumption by demonstrating that special circumstances necessary to maintain production or discipline justify restricting its employees’ rights.” However, the Board made clear that it would be a “rare case” where an employer’s business interests would justify a total ban on non-work email use.

Another limiting aspect of the decision is that it only applies to “non-working time.” Therefore, employers can continue to prohibit use of its email systems for non-work related purposes during the employees’ working time. (However, employers are not permitted to discriminatorily enforce a prohibition against non-business use by selectively prohibiting email communications that constitute NLRA-protected discussions.) In addition, the Board made clear that its decision applies only to company email and not to other forms of electronic communication, such as employer-provided instant messaging services or social media.

Bottom Line

Although not unexpected, the Board’s decision represents a “sea change” for employee email use. According to the Board, employers can no longer maintain an electronic communications policy that generally prohibits all non-work related use of the employer’s e-mail system.

Employers with such policies should, with the assistance of counsel, consider whether and to what extent changes need to be made. Considerations include the following: (1) the possibility that the Board’s decision will be reversed on appeal, (2) the fact that maintaining an unlawful policy may be grounds for setting aside a union election, (3) the possibility that managers who are not expected to keep up with these legal nuances may independently authorize the termination of an employee in reliance upon a policy that the NLRB considers to be unlawful for engaging in NLRA-protected communications (which raises the stakes of an adverse outcome), and (4) the fact that the NLRB cannot force an employer to change its policy unless a charge is filed.

Employers with questions should feel free to contact any of Felhaber Larson’s experienced Labor Law attorneys. We will continue to monitor this issue as it develops.

Supreme Court Rules Workers Are Not Entitled to Pay for Security Screenings

Posted in Wage & Hour

Passengers going through airport security checkToday, the U.S. Supreme Court issued a unanimous ruling finding that employees of a staffing company who worked an Amazon.com warehouse were not entitled to compensation for time spent going through a mandatory post-shift security screening under the Fair Labor Standards Act (“FLSA”).  The decision, Integrity Staffing Solutions, Inc. v. Busk, No. 13-433 (December 9, 2014), reverses a lower court’s ruling that such time was compensable under the Act.

Pre- and Post-Shift Activities under the FLSA

In general, pre- and post-shift activities are not considered part of the work-day and are not compensable under the FLSA, as amended by the Portal-to-Portal Act.  However, such time is compensable if those pre- or post-shift activities are considered “principal activities” (e.g., the employee is actually performing work) or “integral or indispensable” to those principal activities (e.g., the employee is doing something that’s necessary in order to perform the work).

Security Screenings for Employees

Integrity Staff Solutions staffed employees for several Amazon.com warehouses across the country. Their employment duties consisted of retrieving products from warehouse shelves and packaging them for shipment. At the end of each shift employees went through a theft-detection screening.  The screening took approximately 25 minutes to complete, and employees were not compensated for this time.

The employees sued, claiming they were entitled to wages, under the FLSA, for this 25-minute period. The employees argued that the time was compensable because the screenings were mandatory and solely for the benefit of their employer — namely, to prevent theft.

The Ninth Circuit agreed with the employees that the time was compensable, relying on the fact that the screenings were mandatory and therefore necessary to complete the employee’s principal work.

Supreme Court Finds Screening Time is Not Compensable

In a unanimous, 9-0 decision, the Supreme Court ruled that the security screenings were not compensable because they were not “principal activity” nor were they “integral or indispensable” to principal activity.

The security screenings were not principal activity because Integrity Staffing did not employ its workers to undergo security screenings.  Thus, the screenings were not compensable as a principal activity.

As to whether the activities were “integral or indispensable” to principal activity, the Court first noted that, in order to be integral and indispensable to an employee’s principal work activities, the activity must be required in order to actually perform the employee’s actual job duties. Activities such as putting on and taking off specialized protective gear, preparing tools and showering after working with hazardous chemicals have all been found to be necessary in order to complete a work related task and therefore compensable under FLSA.

In this case, however, the Court noted that the screenings were not necessary for the employees to perform a principal work activity. Simply put, the screenings had nothing to do with being able to retrieving products from warehouse shelves and package those products for shipment to Amazon customers.

Bottom Line

While determining what constitutes a principal activity of an employee is relatively straight forward, figuring out what is “integral or indispensable” to those activities is often a more difficult question.  A helpful way to determine if an activity is integral is to do as the Court did here—look at what the work duties are and work backwards to determine which activities are required in order to initiate, perform or complete those duties.

Finally, today’s decision makes one other important clarification that is helpful to employers facing this situation—simply because a pre- or post-shift activity is mandatory or required by the employer, it is not automatically compensable under the FLSA.

Employees Head Back to the Polls on November 4th

Posted in Lesser-Known Employment Laws

Blog Pic - I VotedOn Tuesday, November 4, 2014, Minnesotans head back to the polls. As we’ve reminded employers in the past, Minnesota’s Election Day Law, Minn. Stat. § 204C.04, gives employees the right to time off to vote.

“Right to Be Absent from Work . . . Without Penalty or Deduction”

Under Section 204C.04, every employee who is eligible to vote has the “right to be absent from work” to vote on the day of the election, “without penalty or deduction from salary or wages because of the absence . . . .” Employees may be absent from work “for the time necessary to appear at the employee’s polling place, cast a ballot, and return to work . . . .”

Employers or “other persons” may not either directly or indirectly refuse to grant the time off or otherwise interfere with an employee’s right to take the time to vote on Election Day. Violation of this statute is a misdemeanor.

Employer FAQs

While the Minnesota Election Day Law provides few specifics on how this law works, Minnesota Secretary of State Mark Ritchie provided some guidance in a recent letter to “All Minnesota Employers.” Based on that letter, here are some answers to commonly asked questions:

  • Can I request that employees provide advanced notice and coordinate their time off with other employees who need time off to vote?

Yes. While the statute does not directly address this issue, the Secretary of State believes that “employers may request that employees provide notification as to when they will be gone and request that employees coordinate their absences so as to minimize adverse impact on the workplace.”

Importantly, the Secretary of State uses the term “request” (not “require”), so it is likely not permissible for an employer to mandate that employees give advanced notice or that employees coordinate their absences.

  • Can I limit the amount of time the employee is absent from work?

Likely yes, but this issue is not directly addressed by the statute or the letter from the Secretary of State. It would also be difficult to enforce.

Specifically, the statute provides that the employee must be given time off for the time necessary to (1) appear at the employee’s polling place, (2) cast a ballot, and (3) return to work. Obviously, this would not also permit an additional stop at McDonald’s on the way. It may be difficult, however, to determine whether an employee who seems to be taking a long time to return to work is doing anything other than simply waiting in a long line at the polling place.

It is important to note that the statute makes it clear that the employee should be given sufficient time to vote at the “employee’s polling place.” Therefore, employees who travel great distances to get to work must be given enough time to travel to their polling place and back.

  • Can I require the employee to use accrued vacation or paid time off (PTO) to make up the difference?

No. The statute gives employees the right to be absent from work “without penalty or deduction from salary or wages.” According to the Secretary of State, this means that “employees cannot be required to use personal leave or vacation time for the time off necessary to vote.”

Bottom Line

Minnesota employers are required by law to provide employees with time off to vote on election day. The amount of time must be sufficient to (1) appear at the employee’s polling place, (2) cast a ballot, and (3) return to work. The time off must be paid, but employers can take some steps to minimize the disruption these absences may cause.

 

Office of Management and Budget Approves OFCCP’s Revised Scheduling Letter

Posted in Federal Contractors

Blog Pic - US Capitol On September 30, 2014, the Office of Management and Budget (“OMB”) announced its approval of the supply and service recordkeeping requirements for the Office of Federal Contract Compliance Programs (“OFCCP”).  Significantly, the announcement includes the approval of a revised scheduling letter, including the itemized listing (collectively the “Scheduling Letter”), which the OFCCP issues to federal contractors and subcontractors to commence the desk-audit phase of a compliance review.

A copy of the revised Scheduling Letter is available here.  The revised Scheduling Letter encompasses multiple revisions.  For instance, as to race and ethnicity, contractors are required to submit race and ethnicity information using five specified categories, rather than the current broad categories of minority and non-minority.

Moreover, the revised Scheduling Letter no longer requires contractors to submit annualized aggregate compensation data. Contractors, however, are required to submit individualized employee compensation data as of the date of the workforce analysis in the contractor’s affirmative action program. In addition to the individualized employee compensation data, contractors must also provide the job title, job group, and EEO-1 category for each employee.

Furthermore, the revised Scheduling Letter also defines compensation to include “consideration of hours worked, incentive pay, merit increases, locality pay, and overtime.” Additionally, electronic submission of responsive data to the revised Scheduling Letter is now required for contractors who maintain data electronically in a format that is useable and readable.

Finally, the revised Scheduling Letter reflects the new implementing regulations for Section 503 of the Rehabilitation Act of 1973, and the Vietnam Era of Veteran’s Readjustment Assistance Act of 1974, including the new data collection, recordkeeping, and reporting requirements under both regulations.

Stay tuned for further developments.

Ninth Circuit “Unravels” FedEx’s Treatment of Drivers as Independent Contractors

Posted in Wage & Hour

Clipping path FedEx and UPS boxesIn two separate decisions, the Federal Ninth Circuit Court of Appeals court ruled that FedEx misclassified more than 3,000 delivery drivers in California and Oregon as independent contractors rather than employees. According to the court, this could “substantially unravel[ ] FedEx’s business model,” which uses a network of independent contractors to deliver packages throughout the country, and may have far-reaching effects for employers who use independent contractors.

FedEx Drivers Allege Misclassification

In both the California and Oregon cases, the drivers claimed that, between 1999 and 2009, FedEx forced drivers to purchase company-approved trucks, uniforms and other equipment as if they were independent contractors, while controlling minute details of their appearance and behavior.

FedEx argued that its contract with its drivers, called an “operating agreement,” offered entrepreneurial opportunities beyond those available to employees, and said that it controlled the drivers only to a point. In particular, FedEx noted that the contract did not require them to follow specific routes or deliver packages in order.

A lower court initially ruled in favor of FedEx, finding that the drivers were indeed independent contractors. This court emphasized that drivers could “own and operate distinct businesses, own multiple routes, and profit accordingly.”

Ninth Circuit Finds Drivers to be “Employees” under State Law

The Ninth Circuit reversed and ruled that the drivers were employees, not contractors. The appeals court applied the “right-to-control” test, which analyzes whether the company has the “right to control the manner and means of accomplishing the result desired.”

The key element was the operating agreement between FedEx and the drivers. The court observed that this agreement gave FedEx significant control over the drivers’ employment, as shown by the following provisions:

  • The appearance of the drivers – “[FedEx] requires drivers to be ‘clean shaven, hair neat and trimmed, [and] free of body odor.’”
  • The appearance of the trucks – “FedEx requires drivers to paint their vehicles a specific shade of white, mark them with the . . . FedEx logo” and to keep their vehicles clean. FedEx also “dictates the vehicles’ dimensions . . . and the materials from which the shelves are made.”
  • The times drivers can work – “FedEx structures drivers’ workloads so that they have to work 9.5 to 11 hours every working day.” And, while drivers can hire third-party helpers, “managers may adjust drivers’ workloads to ensure that they never have more or less work than can be done in 9.5 to 11 hours.”
  • How and when drivers deliver packages – FedEx “assigns each driver a specific service area, which it ‘may, in its sole discretion, reconfigure. It tells drivers what packages they must deliver and when.”

While FedEx’s control of the drivers was not “absolute,” the court concluded control to that degree was not required, and that “employee status may still be found where a certain amount of freedom is inherent in the work.” The fact that FedEx did not exercise any of these was deemed irrelevant because, according to the court, “what matters is that the right exists.”

Another key factor was the court’s rejection of the “entrepreneurial opportunities” test to evaluate possible employee status. Courts in other jurisdictions have found workers to be independent contractors where they have “significant entrepreneurial opportunity for gain or loss.” However, the Ninth Circuit found such decisions irrelevant to their assessment of California and Oregon state law.

The court also found that certain “secondary indicia,” of employee status, such as the right to terminate at will and the provision of tools and equipment, insufficient to overcome the right-to-control test’s finding that FedEx’s drivers were employees under California and Oregon law.

Bottom Line

While the Ninth Circuit’s decision directly affects only those employers in California and Oregon, the decision will likely be cited in other jurisdictions where workers seek to claim that they have been misclassified as independent contractors.

In particular, delivery companies in Minnesota and all over the United States should review their arrangements with drivers to determine if they are at risk for being held to have misclassified these workers in the same manner as FedEx.

OFCCP Proposes Rules Ratcheting Up Contractors’ Pay Reporting Obligations

Posted in Federal Contractors

Blog Pic - W2 Wage InfoResponding to President Obama’s Presidential Memorandum dated April 8, 2014, the Department of Labor issued a Proposed Rule authorizing the Office of Federal Contractor Compliance Programs (“OFCCP”) to collect summary compensation data from companies with more than 100 employees that hold federal contracts and first-tier subcontracts worth $50,000 or more for 30 or more days.  The Proposed Rule is open for comment until November 6, 2014.

The Proposed Rule would amend the implementing regulations for Executive Order 11246 by requiring covered contractors and subcontractors to submit an Equal Pay Report.  Employers will have to report employee compensation data by sex, race, ethnicity, and job category as well as provide additional information regarding hours worked.

The Proposed Rule also creates two different filing periods for the EEO-1 and the Equal Pay Report.  Unlike the EEO-1, which presents a snapshot of data in the current year, the Equal Pay Report will cover a full year.  Accordingly, by requiring covered contractors and subcontractors to file total W-2 earnings paid as of the end of each calendar year, the Equal Pay Report cannot be filed simultaneously with the EE0-1, which must be filed by September 30th of the current survey year.  The proposed rule suggests using a January 1 to March 31 of the following year for filing the Equal Pay Report.

Bottom Line

The OFCCP’s Proposed Rule specifically seeks comments on the impact of creating two different filing periods for the EEO-1 and the Equal Pay Report.  If you are interested in reading the full text or commenting, click here. Otherwise, stay tuned for updates.

IRS Adjusts Affordability to 9.56% Under Employer Mandate

Posted in Employer Mandate

Beginning in 2015, certain applicable large employers with more than 100 full-time employees and full-time equivalents will be subject to an assessable payment for failing to offer an employee the opportunity to enroll in minimum essential coverage that is affordable.  Coverage is determined to be affordable if the employee’s required contribution for the lowest level, self-only coverage does not exceed 9.5% of the applicable taxpayer’s household income.

On July 24, 2014, the IRS issued Revenue Procedure 2014-37.  This Revenue Procedure adjusts the Section 36B Required Contribution Percentage to 9.56%.   This adjustment is effective for the taxable and plan years beginning after December 31, 2014.

This adjustment of 6 one-hundredths of one percent is clearly not massive; but it may be significant for employers whose offers of coverage had tested unaffordable for certain classifications of workers.

Employers can now use this adjustment to make more definitive plans for 2015, in particular with use of the Federal Poverty Line Safe Harbor.

The Federal Poverty Line Safe-Harbor is a ‘fail-safe’ safe harbor.  It applies even if the federal poverty line amount is less than a particular employee’s actual income.  That is, if an employee’s contribution does not exceed the Federal Poverty Line Safe-Harbor, even if the employee’s contribution towards the cost of the lowest level, self-only exceeds 9.5%, the coverage is considered affordable.  An employer who satisfies the Federal Poverty Line Safe Harbor will always meet the affordability test.

The Federal Poverty Line Safe Harbor is calculated by taking the Federal Poverty Line, dividing it by 12, and taking 9.56% of that.  The final regulations allow an employer to use the Federal Poverty Line Safe Harbor rate in effect six months prior to the start of the plan year, rather than at the start of the plan year.

The Federal Poverty Line for 2014 is $11,670.  For an employer with a tax or plan year starting January 1, 2015, applying the new guidance of Revenue Procedure 2014-37 coverage is affordable if an employee’s monthly contribution for the lowest level, self-only coverage does not exceed $92.97.