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Labor and Employment Policy to Watch in 2021’s Second Half

As US Congressional Democrats continue their advocacy for a pro-worker agenda, multiple bills and rules could bring about sweeping changes to the civil rights and labor protections for millions of workers. These include:

  • The Equality Act
  • The Protecting Older Workers Against Discrimination Act
  • The Pregnant Workers Fairness Act
  • The Protecting the Right to Organize Act (PRO Act)
  • The US Department of Labor’s Overtime Rule

According to McDermott partner Ellen Bronchetti, the PRO Act, for example, would enshrine a strict ABC test into federal law that would analyze whether workers qualify as independent contractors.

“I think that because Biden has promised to strengthen worker protections and strengthen workers’ right to organize, I think employers need to keep a real close eye on this legislation or versions of the legislation or pieces that might get pulled out and put elsewhere,” Bronchetti said in an article published in Law360.

Access the article.

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The Department of Labor Issues the Most Expansive Definition Yet of Joint-Employer Status

In its first major guidance of 2016, the U.S. Department of Labor has issued a definition of joint-employer status under the Fair Labor Standards Act that is even broader than the definition of joint-employer status issued by the National Labor Relations Board last summer. Coupled with its 2015 guidance on the misclassification of independent contractors, the DOL has greatly expanded the definition both of who is an employee and who is an employer.

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Cracking the Code: Taxing Developments in Benefit Compliance

Generally, any type of organization can offer a defined benefit pension plan under Section 4019a) in the Internal Revenue Code of 1986, as amended (the “Code) or a Code Section 401(k) Plan. However, only employers described in Code Section 501(a) and educational organizations described in Code Section 170(b)(A)(iii) are permitted to sponsor Code Section 403(b) plans. Equally, Code Section 457 plans can only be sponsored by governmental and other organizations exempt from tax under the Code. Until roughly 2009, both Code Sections 403(b) plans and Code Section 457 plans had been basically ignored or overlooked by the Internal Revenue Service (“IRS”) and the Department of Labor (“DOL”). However, as these two plans have accumulated significant assets over the course of time (many occurring due to the consolidation of large plans in the healthcare sector through business combinations), the IRS and DOL have deemed it necessary to start taking a closer look. The audits of Code Section 403(b) plans and Code Section 457 plans has increased dramatically in the last few years to the point where the IRS has now issued its “top ten list” of issues which tax-exempt entities need to focus on when sponsoring these types of plans.

Read the full article from the Journal of Compensation and Benefits.

(c)2015 ThomsonReuters, reprinted with permission.

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Independent Contractor and Exempt Employee Classification Review Should Include Joint-Employer Status

Recent independent-contractor misclassification guidelines, and proposed changes to the overtime rules by the U.S. Department of Labor, underscore that employers should be reviewing their independent-contractor classifications and wage and hour exempt-employee classifications. But even if an employer has correctly classified its own workforce, it still may be held responsible for a variety of employment liabilities if it is found to be a ‘joint employer’ with another company which has misclassified its workers. This On the Subject provides practical tips for avoiding joint-employer arrangements.

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McDermott to Host Benefits Innovators Roundtable Series – May 19 in New York City

McDermott Will & Emery will be holding the next invitation-only Benefits Innovators Roundtable series in our New York office on May 19, 2015. These roundtables offer senior, experienced professionals an opportunity to discuss employer-provided benefits best practices with peers and experienced McDermott employee benefits lawyers. Previous events in this series have led to spirited discussions on a broad range of cutting-edge topics.

This session’s topics will include:

  • Lawsuits by health service providers
  • Hot issues in data privacy
  • Brainstorming sessions on: the U.S. Supreme Court’s 2015 term (including King v. Burwell), legislative proposals, 401(k) issues and recent U.S. Department of Labor actions.

If you are interested in attending, please contact Donna Baker.

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SEC No-Action Letter Permits Non-ERISA Retirement Plans to Issue Participant Fee Disclosures Without Violating Securities Laws

The U.S. Securities and Exchange Commission (SEC) issued a no-action letter on February 18, 2015, that extends relief from SEC Rule 482 to sponsors of certain retirement plans exempt from ERISA. The relief permits sponsors of non-ERISA plans to follow final U.S. Department of Labor regulations for participant-level fee disclosures, provided the sponsor complies with several conditions set forth by the SEC.

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Supreme Court to Review Same-Sex Marriage Cases

The Supreme Court of the United States announced on January 16, 2015, that it would review four cases challenging the constitutionality of state laws banning same-sex marriage in Kentucky, Michigan, Ohio and Tennessee.  The U.S. Court of Appeals for the Sixth Circuit ruled in November 2014 that the same-sex marriage bans in these states were constitutional, thereby creating a split of opinion among the federal circuit courts.

As of January 30, 2015, same-sex marriage is legal in 36 states and the District of Columbia.  In addition, Michigan is expected to soon begin recognizing 323 marriages that were performed there in March 2014 (during the one-day period after a district court found the state’s ban on same-sex marriage unconstitutional and before an appellate court issued a stay of the district court ruling).

A ruling by the Supreme Court is expected in June 2015.  If the Supreme Court rules that state laws banning same-sex marriage are unconstitutional, the ruling will create precedent that will lead to the legalization of same-sex marriage in all 50 states.  Same-sex couples would then be able to marry in any state and would be entitled to all of the rights, benefits and obligations that are extended to opposite-sex spouses under both federal and state laws.

Federal Law

In 2013, the Supreme Court ruled in U.S. v. Windsor that Section 3 of the Defense of Marriage Act (DOMA) is unconstitutional (for more information, see McDermott’s On the Subject “Supreme Court Rules on DOMA and California’s Proposition 8”).  Section 3 of DOMA had provided that, for purposes of all federal laws, the word “marriage” means “only a legal union between one man and one woman as husband and wife,” and the word “spouse” refers “only to a person of the opposite-sex who is a husband or wife.”  Subsequent Internal Revenue Service (IRS) and U.S. Department of Labor guidance clarified that, as a result of Windsor, favorable federal tax treatment of spousal benefit coverage would extend to all same-sex couples legally married in any jurisdiction with laws authorizing same-sex marriage, regardless of whether the couple currently resides in a state where same-sex marriage is recognized (see McDermott’s On the SubjectIRS Guidance Clarifies Retroactive Retirement Plan Impact of Supreme Court’s Windsor Ruling” for more information).  The most recent IRS guidance clarifies that, effective as of June 26, 2013, retirement plans must be administered in a manner that reflects the Windsorruling.

Next Steps for Employers

All employers should continue to monitor developments in this case and in state same-sex marriage laws.  The Supreme Court’s ruling could have significant consequences for employers in states where same-sex marriage has not been legalized or that have not otherwise extended spousal benefit coverage to same-sex spouses.  An employer that currently extends benefit coverage to unmarried same-sex partners would need to consider whether to continue offering such benefits if all employees can marry and thereby receive spousal coverage under the employer’s benefit plans.

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Join McDermott Partners at a Webinar on TOP IRS and DOL Audit Issues for Retirement Plans

Tuesday, February 10, 2015
12:30 – 1:30 pm EST

Please join McDermott Will & Emery for a complimentary webinar discussing key issues retirement plan sponsors should take into account when establishing and maintaining internal controls based on the compliance requirements Internal Revenue Service (IRS) and U.S. Department of Labor (DOL) agents review when they conduct retirement plan audits.

Specific topics will include the following:

  • The most significant issues IRS agents focus on during audits, including definitions of compensation, employee eligibility requirements and properly updated plan documents
  • The most significant issues DOL agents focus on during audits, including target date funds and revenue sharing fees, and avoidance of late payroll deposits and missed employee communications
  • Steps employers can take in order to improve their internal controls for compliance with IRS and DOL requirements

McDermott Speakers
Nancy S. Gerrie, Partner, McDermott Will & Emery
Jeffrey M. Holdvogt, Partner, McDermott Will & Emery

To register, please click here.


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U.S. Department of Labor Issues Proposed Regulations Amending the COBRA Notice Requirements

On May 2, 2014, the U.S. Department of Labor (DOL) Employee Benefits Security Administration (EBSA) issued proposed regulations which seek to amend the notice requirements under the Consolidated Omnibus Budget Reconciliation Act (COBRA).  The changes are intended “to better align the provision of guidance under the COBRA notice requirements with the Patient Protection and Affordable Care Act (ACA) provisions already in effect, as well as any provisions of federal law that will become applicable in the future.”

Under COBRA, a group health plan must provide participants with a general COBRA notice and COBRA qualified beneficiaries with an election notice.  These notices describe a qualified beneficiary’s right to continue coverage under a group health plan.  On May 8, 2013, DOL issued Technical Release 2013-02, which included a series of model COBRA notices (see “Notice of Coverage Options Available Through the Exchanges” for more information).  These model notices include references to the ACA, noting that some qualified beneficiaries (1) may want to consider and compare health coverage alternatives to COBRA continuation coverage that are available through the ACA exchanges and (2) may also be eligible for a premium tax credit to help pay for the cost of coverage.

The proposed regulations eliminate the current versions of the model notices.  However, until the regulations are finalized and effective, the DOL will consider appropriately completed use of the model notices that are currently available on its website to constitute good faith compliance with the notice content requirements of COBRA.  Once the current notices are available, they will be posted at the following links:

Note: Use of the model notices is not required.

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