May 2014 HR Alert | ACA and the Potential for Litigation: Whistleblower Provision
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Department of Labor (DOL) Retirement Plan Non-Compliance Fines Up 33 Percent in 2013

In 2013, the DOL collected $1.69 billion in retirement plan fines, voluntary fiduciary corrections and informal complaint resolutions, a 33 percent increase over the penalties in 2012, which totaled $1.27 billion. One of the most common DOL violations cited by the DOL is the failure to timely remit 401(k) contributions to the plan. To avoid serious violations (and loss of a plan's tax-qualified status), employers should work with their human resources manager and employee benefits counsel to correct violations before the DOL discovers them through an audit.

DOL Issues Proposed Fee Disclosure Guide Amendment

On March 12, the DOL issued a proposed amendment to its 2012 final regulations under Section 408(b)(2) of the Employee Retirement Income Security Act of 1974 (ERISA), the statutory prohibited transaction exemption covering the provision of services and receipt of fees by plan service providers. The amendment, if adopted, will require retirement plan service providers to furnish a separate guide to the location of currently required fee disclosures under Section 408(b)(2). Specifically, service providers will be required to identify the document containing the information and the relevant page number, section, or other locator (e.g., a hyperlink directly to the information). The proposed amendment would not apply to providers that include all required disclosures in a single document.  According to the DOL, the proposed amendment reflects the concerns that fiduciaries of small plans cannot quickly and easily locate required fee disclosures if contained in lengthy or multiple documents.



HR Alert

May 2014

The following is an excerpt from the article, "Understanding the Safe Harbor Rules for Determining Full-Time Employee Status and the Litigation Risks Associated with Workforce Restructuring Under the Affordable Care Act," by Anne Tyler Hamby. It was published in the Journal of Pension Benefits, Spring 2014, volume 21, number 3. 

In an effort to avoid Applicable Large Employer status and mitgate exposure to the Pay or Play Penalty under the Affordable Care Act (ACA), many employers are considering workforce realignment, including a reduction in the number of employees who work 30 hours or more per week. However, provisions in ACA and ERISA may preclude employers from workforce restructuring that includes reduction in an employee’s hours so that he or she is no longer eligible for employer-sponsored health coverage. This HR Alert evaluates the provision in ACA that may significantly limit an employer's flexibility with respect to workforce realignment.

What is the ACA Whistleblower Provision?

Section 1558 of ACA (the “Whistleblower Provision”) is one of the provisions intended to achieve ACA’s goal of making health care more accountable. The Whistleblower Provision amended the Fair Labor Standards Act (FLSA) to add section 18C, which provides protection to employees against retaliation by an employer for certain protected activities under ACA. It includes the notice requirements, limitation periods, and remedies of the Consumer Products Safety Improvement Act of 2008 (CPSIA). Under CPSIA (and now ACA), employees have 180 days following an adverse employment action to submit a complaint to the Occupational Safety & Health Administration (OSHA). The Secretary of the Department of Labor (the “DOL”) is required to investigate the claim of the employee upon finding “reasonable cause.”

The Whistleblower Provision provides, in relevant part, as follows:
No employer shall discharge or in any manner discriminate against any employee with respect to his or her compensation, terms, conditions, or other privileges of employment because the employee (or an individual acting at the request of the employee) has received a credit or subsidy [under ACA] [29 U.S.C. § 218c].

What is the Burden of Proof?

Under the Whistleblower Provision, a plaintiff can prevail merely by demonstrating that his or her exercise of protected activity was a “contributing factor” leading to an adverse employment action. A “contributing factor” is any factor which, alone or in connection with other factors, tends to affect in any way the outcome of the decision.  Once a plaintiff employee has made a prima facie case, the burden shifts to the employer to demonstrate by clear and convincing evidence that it would have reduced the employee’s hours of service regardless of the employee’s protected activity. 

What Remedies Are Available to Prevailing Plaintiffs?

The remedies available to a prevailing plaintiff under the Whistleblower Provision are substantial.  Therefore, it is advisable that employers proceed with caution when evaluating workforce realignment that includes reducing employees’ hours to avoid the Pay or Play Penalty. Under the Whistleblower Provision, a successful plaintiff is entitled to back pay, compensatory damages, and reimbursement of costs and expenses (including attorney fees and expert witness fees). The potential to receive backpay and special damages will likely lead plaintiffs’ attorneys to pursue Whistleblower Provision claims in the event of workforce realignment that includes reduction in employees’ hours.

Hamby Benefits Law, LLC recommends that you consult with employee benefits legal counsel to assist you with workforce realignment issues and questions regarding the ACA Whistleblower Provision.  

This HR Alert was written by:
Anne Tyler Hamby
Employee Benefits Attorney
3525 Piedmont Rd NE
7 Piedmont Center, Suite 300
Atlanta, GA 30305
(678) 949-9264 (office)
(404) 861-7441 (cell)
Specializing in retirement plans, health and welfare benefits and executive compensation law

This HR Alert is intended to provide a summary of significant developments to clients and friends.  It is intended to be informational and does not constitute legal advice regarding any specific situation. This material may also be considered attorney advertising under rules of certain jurisdictions.

Copyright © 2014 Hall Benefits Law, All rights reserved.

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