SubscribeOn April 21, 2022, the California Division of Occupational Safety and Health’s (Cal/OSHA) Standards Board approved the Third Readoption of the state’s COVID-19 Prevention Emergency Temporary Standard (ETS). Per Governor Gavin Newsom’s Executive Order N-23-21, the Third Readoption will remain in effect for no longer than December 31, 2022. The Third Readoption makes some additional material changes and clarifications, including acceptable return-to-work criteria, elimination of certain cleaning and social distancing requirements, and creation of a “returned case” category of workers recovered from COVID-19. Employers in California should update their COVID-19 ETS policies to ensure continued compliance with Cal/OSHA’s changes in the Third Readoption.
Employment
‘Unprecedented Interest’ in Employer-Covered Abortion Travel
If the US Supreme Court overturns Roe v. Wade (as suggested by a leaked draft on May 2), employers who want to provide abortion coverage to employees and their families could encounter serious challenges. In this Bloomberg Law article, McDermott’s Sarah G. Raaii noted that employers that provide travel expenses for abortions might encounter resistance from state laws like a Texas statue that permits citizens to sue abortion providers for abortions performed around six weeks.
“If a state wants to interpret this very broadly—and it seems that some of them have indicated that they do—to really just punish anyone involved even peripherally with providing abortion in the states, employers could potentially be at risk.” Raaii said.
The Challenges and Opportunities of Hybrid Work
What are some of the challenges and opportunities of hybrid work arrangements? In this Lexology GTDT Market Intelligence article, McDermott Partner Carole Spink offers insight about tracking remote work, navigating local rules, and protecting confidential and propriety information.
Finding the Right Hybrid Work Balance
Law firms and other members of the corporate world are seeking to find the right balance between in-person and remote work. According to this American Lawyer article, McDermott Chairman Ira Coleman noted the “cultural expectation” of in-person work at his firm.
“One of the big challenges for us is trying to navigate how we think about mentorship and apprenticeship when so much of the work we’re doing now is actually being done virtually,” Coleman said.
Restrictive Covenants Evolve from Common Law to Statutory Regulation: The 2022 Watershed
Restrictive covenants were once the exclusive province of the courts in each state. That is no longer the case. Although case law still governs restrictive covenants, states also are enacting restrictive covenants statutes.
Today, 30 states (including Washington, DC) have laws affecting restrictive covenants. Unlike state statutes regulating trade secrets (which largely follow the Uniform Trade Secrets Act), the state statutes governing restrictive covenants run a wide gamut. These changes reflect an increasing hostility towards restrictive covenants. In this Westlaw Today article, McDermott’s Brian Mead and Aaron P. Sayers provide an overview of state statutes that became effective in late 2021 or are becoming effective in 2022.
Proposed IRS RMD Regulations Present Challenges, Risks for 403(b) Plans
The Internal Revenue Service (IRS) is strategically working to execute the statutory changes that were outlined by the Setting Every Community Up for Retirement Enhancement Act (SECURE Act) of 2019. However, the IRS’s efforts to streamline the required minimum distribution (RMD) requirements for Internal Revenue Code (IRC) Section 403(b) plans with Section 401(a) qualified plans, such as 401(k) plans, may have unforeseen challenges and risks.
A proposed rule was published on February 24, 2022, in the Federal Register. The preamble of the rule indicates that the IRS and US Department of the Treasury are considering changes to conform the treatment of Section 403(b) plans more closely with that of Section 401(a) qualified plans for RMDs. Section 403(b) plans are currently treated the same as individual retirement accounts (IRAs) for purposes of applying the RMD rules. As a result, RMDs are not required to be automatically made from Section 403(b) plans like they are from Section 401(a) retirement plans. The IRS’s proposed rule would require any nonprofit organized under IRC Section 501(c)(3) (i.e., hospitals, public schools and churches) with retirement plans to make RMDs going forward.
Though the proposed rule presents the opportunity to simplify and align the treatment of Section 403(b) plans and Section 401(a) qualified plans, it poses administrative difficulties and potential conflicts with state law. Section 403(b) plans can be invested in a variety of funds, including annuity contracts—group and individual contracts—with insurance companies, custodial accounts or retirement income accounts for certain church workers. For individual annuity contracts, this could create a contractual issue. Employers are not a party to individual contracts between plan participants and investment firms, which would limit the ability of employers to compel RMDs. (Note that distributions could still be forced from group annuity contracts between employers and investment firms.) Regardless of the type of annuity contract, every contract will have to be reviewed to ensure it can comply with the proposed rule. To the extent any changes need to be made to these contracts, state-level approval may be required as insurance companies are governed by state law requirements.
In addition, the proposed rule does not take into consideration the effect of the prospective changes on Section 403(b) plans that are exempt from ERISA because of the safe harbor offered by the US Department of Labor (DOL) in 1979 (29 C.F.R. § 2510.3-2(f)). One of the conditions for meeting the safe harbor is that the employer involvement be limited to certain specific activities. If an employer is required to actively negotiate with insurance providers or choose a provider to administer the RMD requirement for participants, it might be violating this restriction and inadvertently subject its program to ERISA. The IRS and DOL will need to coordinate on the impact of this rule in such cases.
The IRS is taking this proposed rule under review and has asked for feedback specifically related to administrative concerns, notable differences in the structure or administration of Section 403(b) plans compared to qualified plans that might affect RMDs, and [...]
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Biden Administration Foreshadows Impending Nursing Home Quality Reforms
On February 28, 2022, the White House issued a fact sheet outlining several efforts aimed to increase safety, accountability, oversight and transparency in the senior services industry (Fact Sheet). Although the Fact Sheet’s initiatives have not yet been implemented, President Biden reiterated his administration’s focus on nursing home reform during his March 1, 2022, State of the Union address. Accordingly, the efforts described in the Fact Sheet provide stakeholders with a peek into the regulatory crystal ball of the governmental efforts that may be forthcoming, either through new laws, regulatory action, policy changes, enforcement activities or subregulatory guidance.
Inflation and ERISA Penalties: Hand in Hand for 2022
The Federal Civil Penalties Inflation Adjustment Act of 2015 directs the US Department of Labor (DOL) to make annual inflation adjustments to specified Employee Retirement Income Security Act (ERISA) violations. The increased penalties generally apply to reporting and disclosure failures if the penalty is assessed after January 15, 2022, and if the violation occurred after November 2, 2015.
Fired for Not Getting the COVID Vaccine? A Reality for Some, but Not All
Many employers will likely encourage vaccination rather than mandate it. In this Ladders article, McDermott Partner Michelle Strowhiro notes the administrative burdens associated with tracking mandatory employee vaccination.
OSHA Reaffirms Arrival of Permanent Healthcare Industry COVID-19 Standard
On March 22, 2022, the US Occupational Safety and Health Administration (OSHA) announced a limited reopening of the rulemaking record for the COVID-19 emergency temporary standard for the healthcare industry, originally published on June 21, 2021 (the Healthcare ETS). OSHA will hold an informal public hearing to gather additional information from healthcare industry stakeholders. With the announcement, OSHA reaffirmed its plans to publish a permanent COVID-19 safety standard (i.e., regulation) for the healthcare industry later this year.
