By: Chris Fontan & Kyle Williams

In October 2016, the U.S. Department of Labor (“DOL”) published regulations implementing Executive Order 13706 (“the Order”).  Initially signed in September 2015, the Order—entitled Establishing Paid Sick Leave for Federal Contractors—requires some federal contractors and subcontractors to provide certain employees with up to seven (7) days of paid sick leave annually.  Historically, the federal government has not established regulations (covering either private employers or federal contractors) mandating the provision of paid leave time for employees.   While it only impacts federal contractors and subcontractors, the DOL’s regulations will drastically alter this historical policy, as the DOL estimates that anywhere from 600,000 – 1.2 million employees will be impacted by the Final Rule.

Contracts Subject to the Order & Regulations

According to the DOL, the coverage of contracts and employees under the Order is “nearly identical” to coverage under the regulations mandating a minimum wage for certain federal contractors.  (The required minimum wage rate for covered federal contractors is adjusted each year by the DOL.  For 2017, the required minimum wage for covered federal contracts is $10.20.)

The Order and its regulations apply to four (4) types of contracts:

• Procurement contracts for construction covered by the Davis-Bacon Act;
• Service contracts covered by the Service Contract Act;
• Concessions contracts; and
• Contracts in connection with federal property or lands and related to offering services for federal employees, their dependents, or the general public.

Of these covered contracts, the Order applies to (1) new contracts, (2) replacements for expiring contracts, and (3) subcontracts of any covered contract issued on or after January 1, 2017.  For the Order to apply, the new/replacement contract must include a clause setting forth the Order’s requirements.  If the contract does include this required clause, the governmental agency can withhold funds due under the contract if a contractor or subcontractor fails to abide by the Order’s requirements. (Additionally, contractors are required to include a clause outlining the Order’s requirements in all new subcontracts issue.)

Employees Covered by the Order & Regulations

The Order only applies to individuals engaged in performing work directly related to the subject matter of the contract, or “in connection with” a covered contract.  Importantly, employees that spend less than twenty percent (20%) of their working hours performing work in connection with a contract (such as providing administrative or other support services) are not covered by the Order.

Leave Required Under the Order & Regulations

Under the Order and its regulations, there are a couple of methods by which covered contractors can grant and track the required paid sick leave.  Employees that are covered are entitled to one hour of paid sick leave for every thirty (30) hours worked (actually worked – not total hours paid) on or in connection with a covered contract.  As an alternative, contractors have the option to provide covered employees with at least fifty-six (56) hours of paid sick leave at the beginning of each accrual year, rather than allowing employees to accrue leave based on hours worked.   Under this option, contractors who already provide employees with paid sick leave (for the same types of absences described in the Order) can take credit for the amount of leave provided—they are only required to provide employees with the difference between the amount already provided and the mandated fifty-six (56) hours.

The Order & its regulations set forth rules concerning a covered employee’s ability to “carry over” any accrued, but unused paid sick leave from one year to the next.  Also, if an employee is rehired by the same contractor within 12 months of a job separation, the contractor must reinstate that employee’s accrued, unused paid sick leave balance (unless the employee is paid for that leave at the time of separation).  Covered contractors are also required to notify covered employees of the amount of paid sick leave they have accrued—either at the end of each pay period or each month, whichever interval is shorter.  This notification must be provided in writing.

Covered Absences under the Order

The Order requires contractors to allow covered employees to use their paid sick leave (in increments as small as one hour) for any absence resulting from:

• Physical or mental illness, injury, or medical condition of the employee;
• Obtaining diagnosis, care, or preventive care from a health care provider by the employee;
• Caring for the employee’s child, parent, spouse, domestic partner, or “any other individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship”; or
• Domestic violence, sexual assault, or stalking.

When employees use their paid sick leave, contractors must provide them with the same regular pay and benefits they would have received if they had not used the leave, except that employees do not earn additional paid sick leave during their absence.

Under the Order, an employee is required to request paid sick leave “as soon as is practicable,” either orally or in writing.  If a contractor denies an employee’s request, it must communicate the denial in writing with an explanation as to why the request was denied. A contractor can only require an employee to document or verify absences of three or more consecutive days, and the contractor must inform the employee of the requirement to provide documentation before he or she returns to work. If the absence is healthcare-related, the contractor can require the certification to be made by a healthcare provider. If the absence is related to domestic violence, sexual assault, or stalking, the documentation or verification can come directly from the employee.

If you feel that your organization may be impacted by these new regulations, you should contact your labor & employment counsel for implementation advice.

By: Chris Fontan & Kyle Williams

While the Department of Labor’s New Overtime Rule and Regulations have garnered most of the mainstream attention, the federal government is set to enact changes to another key regulation in 2017, impacting thousands of U.S. employers.  Earlier this year, the U.S. Equal Employment Opportunity Commission (EEOC) issued a Notice outlining forthcoming changes to federal EEO-1 Reports, including changes to the information that employers will have to report and changes to the deadline for filing the report.

Current EEO-1 Requirements

Governed by the EEOC, the federal EEO-1 Report is a compliance survey mandated by federal law that serves to collect data from private employers and government contractors about their women and minority workforce.  Federal agencies use EEO-1 Reports to support civil rights enforcement and analyze employment patterns.  Currently, the federal government requires an EEO-1 Report from:

(1)  Private employers with over 100 employees;

(2)  Private employers with less than 100 employees, if the employer is owned by or corporately affiliated with another company and the entire enterprise employs a total of 100 or more employees;

(3) Federal government prime contractors (subject to Executive Order 11246) with 50 or more employees and a prime contract; or

(4) First-tier subcontractors (subject to Executive Order 11246), with a first-tier subcontract amounting to $50,000 or more.

Currently, covered employers are required to submit an EEO-1 report that outlines the sex, race, and ethnicity of their employees.  All EEO-1 reports must be submitted and certified no later than September 30th, annually, and employment data used to complete the report must be pulled from one pay period in July, August, or September of the current year.

Upcoming Changes

Under the new regulations, the EEOC has established a two-tiered component system.  All previously required information—pertaining to the sex, race, and ethnicity of employees—is termed “Component 1” Information.  The regulations add a new layer of reporting requirements—termed “Component 2” Information—which consists of certain pay and hours-worked data.  Under the Rule, all EEO-1 private employers and federal contractors with 100 or more employees will be required to submit Component 1 and Component 2 data on their EEO-1 Reports.  Federal contractors with between 50 and 99 employees will continue to submit Component 1 data, but will not have to furnish Component 2 data.  Consistent with current practice, federal contractors with 1 to 49 employees and other private employers with 1 to 99 employees will be exempt from filing the EEO-1; they will file neither Component 1 nor Component 2.

The new regulations also alter the filing deadline for the EEO-1 Report.  Historically, covered employers had to file their EEO-1 reports on or before September 30th of each year.  Also, the Report had to include information from a “workforce snapshot,” taken during any single pay period between July 1st and September 30^th.  The new regulations change these requirements.  Beginning with the 2017 report, the reporting deadline for all EEO-1 filers will be March 31st of the year following the EEO-1 report year—meaning the 2017 EEO-1 report will be due on March 31, 2018.  (This change will align the EEO-1 with federal obligations to calculate and report W-2 earnings as of December 31^st.)  In addition, the “workforce snapshot”—the pay period when employers count the total number of employees for that year’s EEO-1 report—has been moved to October 1^st—December 31^st.  So, while employers will count their employees during a pay period between October 1st and December 31st, they will report W-2 income and hours-worked data for these employees for the entire year ending December 31st.

Although the filing deadline for the next EEO-1 Report is March of 2018, employers are advised to be proactive and consult qualified labor and employment counsel about taking the necessary preemptive actions.

The U.S. Citizenship and Immigration Services (USCIS) recently announced the approval and pending release of an updated version of the Form I-9 – Employment Eligibility Verification (Form I-9).  USCIS currently plans to release the new version of the Form I-9 on Tuesday, November 22, 2016.  Once released, the updated Form I-9 is scheduled to have an expiration date of August 31, 2019.

USCIS also announced that U.S. employers are allowed to continue using the current Form I-9 version (Rev. 03/08/2013) until Saturday, January 21, 2017.  Starting January 22^nd, it and all prior versions expire and will no longer be valid.  This extension is great news for employers—in 2013, USCIS only provided employers with less than two months between introduction of the updated form and expiration of the old version.

Changes in the Updated Version

While it has yet to be released to the public, USCIS has given employers a preview of the changes they can expect when the updated version of the Form I-9 is released.  The proposed changes to be included in the updated version strive to make the Form I-9 more “e-friendly” and less confusing for employers, with the inclusion of “smart, error-checking features.”  When released, the updated Form I-9 will be a “smart PDF” form—meaning employers will be able to access and complete the form on their computers via Adobe Acrobat.  With this new fillable PDF, employers will have access to features such as:

• Validation assistance in certain fields, to ensure information is entered correctly. (For example, the revised form will validate the correct number of digits for a Social Security number or an expiration date on an identity document.)
• Drop-down lists and calendars.
• Embedded instructions for completing each field.
• Buttons that will allow users to access the instructions electronically, print the form, and clear the form to start over.

While employers can complete the updated version of the Form I-9 on their computers, it will not be a fully electronic document.  After populating the fields, employers will still need to print the PDF form, obtain handwritten signatures, store the hard copies in a safe place, monitor reverifications and updates with a calendaring system, and retype information into E-Verify as required.

The updated version will also feature several structural changes and instructions which will be important for all employers to know and learn, including:

• Additional spaces to enter multiple preparers and translators.
• The requirement that workers provide only other last names used in Section 1, rather than all other names used.
• The removal of the requirement that immigrants authorized to work provide both their Form I-94 number and foreign passport information in Section 1.
• A new “Citizenship/Immigration Status” field at the top of section 2.
• A dedicated area to enter additional information that employers are currently required to notate in the margins of the form (i.e., Temporary Protected Status; Optional Practical Training extensions; etc.)
• A quick-response matrix barcode, or QR code, that generates once the form is printed that can be used to streamline enforcement audits.
• Instruction sheet completely separate from the Form I-9 itself (though employers will still be required to present the instructions to the employee completing the form).

A major goal of the updated version of the Form I-9 is to clarify frequent points of confusion that arise for both employees and employers-specifically focusing on helping employers reduce technical errors for which they may be fined.

If you have any questions concerning your organizations’ Form I-9 compliance, or E-Verify compliance, feel free to contact us for further guidance.

With less than 75 days before the U.S. Department of Labor’s (DOL) New Overtime Rules are scheduled to go into full effect (click here for a summary), two separate federal court lawsuits were recently filed challenging the legality of DOL’s proposed changes.  On September 21, 2016, a group of 21 states (lead by Texas and Nevada) sued the DOL, seeking to enjoin and ultimatelystrike the New Overtime Rule.  On the same day, several nationwide business groups and trade organizations filed a second lawsuit against the DOL concerning the controversial New Overtime Rule, which is slated to take effect on December 1, 2016.

In the first lawsuit (Nevada et al. v. U.S. Department of Labor et al., No. 1:16-cv-407, Eastern District of Texas), the 21 states argue that the New Overtime Rule—which raised the minimum salary threshold required to qualify for the Fair Labor Standards Act’s (FLSA) “white collar” overtime exemption to $47,476 per year—is unconstitutional on numerous grounds.  Specifically, the States argue that DOL overstepped its authority by imposing a salary requirement as the primary basis for determining exemption eligibility, instead of focusing on the bona fide job duties of an employee.  Similarly, the States claim that the FLSA’s statutory language does not permit the inclusion of the New Rule’s “automatic increase” provision.   Additionally, the States argue that by forcing them to comply with the New Rule, the Obama administration would unilaterally deplete individual states of their financial resources, in violation of the Tenth Amendment.

Joining Texas and Nevada in the lawsuit are Alabama, Arizona, Arkansas, Georgia, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Michigan, Mississippi, Nebraska, New Mexico, Ohio, Oklahoma, South Carolina, Utah and Wisconsin.  The States’ lawsuit seeks both declaratory and injunctive relief—meaning that the states are asking the Court to enter a temporary order blocking the New Rule’s scheduled enforcement on December 1^st, as well as a permanent judgment declaring the New Overtime Rule illegal.

In the second lawsuit (Plano Chamber of Commerce, et al. v. U.S. Department of Labor, et. al., No. 4:16-cv-00732, Eastern District of Texas), the U.S. Chamber of Commerce, along with over 50 other national business organizations, claims that the DOL exceeded its statutory authority under federal law in enacting key provisions of the New Overtime Rule, including the minimum salary threshold and the automatic increase provision.  Like the States, the Chamber of Commerce’s lawsuit seeks both declaratory and injunctive relief.

Both suits contend that, if implemented, the New Overtime Rule would require state governments, local municipalities, and private businesses alike to substantially increase their employment costs to the point that employers may ultimately be forced to either reduce services or lay off workers.  “Once again, President Obama is trying to unilaterally rewrite the law,” Texas Attorney General Ken Paxton said in a statement. “And this time, it may lead to disastrous consequences for our economy. The numerous crippling federal regulations that the Obama administration has imposed on businesses in this country have been bad enough. But to pass a rule like this, all in service of a radical leftist political agenda, is inexcusable.”

“The DOL went too far in the new overtime regulation,” said Randy Johnson, senior vice president of Labor, Immigration, and Employee Benefits for the U.S. Chamber. “We have heard from our members, small businesses, nonprofits, and other employers that the salary threshold is going to result in significant new labor costs and cause many disruptions in how work gets done. Furthermore, the automatic escalator provision means that employers will have to go through their reclassification analysis every three years. In combination, the new overtime rule will result in salaried professional employees being converted to hourly wages, and it will reduce workplace flexibility, remote electronic access to work, and opportunities for career advancement.”

The DOL did not immediately comment on the lawsuit, though it previously expressed confidence in the legality of the New Rule.

Experts predicted that the New Overtime Rule would face some type of legal challenge before its implementation at the end of this year.  However, not everyone agrees that the DOL exceeded its authority in enacting the regulations.  Many feel these challenges to the legality of New Overtime Rule are long-shots at best—with most feeling that the challenges to the automatic increase provision have the greatest likelihood of success.

While it is possible the federal court could enter an order staying the implementation of the New Overtime Rule, at this time, employers are best served to continue preparing as if the New Rule will go into effect on December 1^st.

 

 

 

 

 

 

By now, I’m sure everyone is aware of (or at least heard of) the U.S. Department of Labor’s upcoming changes to the Overtime Rules contained in the Fair Labor Standards Act (FLSA).  Brunini’s Labor & Employment Newsletter Subscribers have received numerous updates over the past year, alerting them to the pending change and its potential implications:

• https://www.brunini.com/update-u-s-department-of-labor-releases-proposed-rule-to-expand-employee-overtime-eligibility/
• https://www.brunini.com/u-s-department-of-labors-final-overtime-rule-not-expected-in-2nd-half-of-2016/
• https://www.brunini.com/ready-expanded-employee-overtime-eligibility/
• https://www.brunini.com/department-labor-announces-increase-wage-hour-penalties-employers/

Knowing about the upcoming change is one thing – being prepared for the change is something else altogether.  The New Rule is scheduled to go into effect on December 1, 2016.  That’s just 84 days from today.  Has your organization taken the steps to be in compliance with the New Rule when it goes into effect?

Brunini’s Labor & Employment Practice Group has prepared an article outlining practical considerations for employers to consider and implement in order to prepare for and comply with the New Rule.  You can access this article here: Ways to Prepare for the New Expanded Employee Overtime Eligibility.

Our professionals are available to discuss your organization’s current structure, as well as any steps needed to insure compliance with the ever-changing legal landscape facing employers.  Contact any one of our Labor & Employment Practice Group professionals with any questions concerning the upcoming transition.

On July 13, 2016, the Occupational Safety and Health Administration (OSHA) announced a delay of  the implementation of its recently published Rule that amends requirements for reporting workplace injuries and illnesses.  The goal of the new Rule, originally scheduled to go into effect August 10, 2016, is to promote an employee’s right to report such injuries and illnesses without fear of retaliation.  Because it felt that post-accident drug testing rules were being used by employers to limit reporting of workplace accidents, OSHA also attempted to place restrictions on the use of drug and alcohol tests in the workplace.

Under the Proposed Rule, employers must electronically submit all work-related illness and injury records directly to OSHA, which, according to the Secretary of Labor, will be available to the public, with the exception of personally identifiable information.

OSHA’s announced delay came one day after the Manufacturers Center for Legal Action (MCLA) filed an action in the United States Federal District Court for the Northern District of Texas to enjoin the implementation of the Rule. In its Emergency Motion for Preliminary Injunction, the MCLA alleged the new Rule is contrary to and exceeds OSHA’s statutory authority and is “arbitrary, capricious and not in accordance with applicable law.” This follows a recent hearing before the U.S. House of Representatives’ Subcommittee on Workforce Protections, in which many employers expressed concerns over the Rule’s likely impact.

OSHA announced that it will not enforce the new Rule until November 1, 2016, allowing time “to conduct additional outreach and provide educational materials and guidance for employers.” However, the MCLA legal action remains active, and the District Court might address the matter prior to November 1.

When it comes to wage and hour issues, most U.S. employers are focused on preparing for the Department of Labor’s (DOL) much-debated New Overtime Rule that is set to go into effect on December 1, 2016.  Most notably, under the New Overtime Rule, the requisite salary level for exempt employees jumps from $23,660 annually (or $455/week) to $47,476 ($913 per week).  However, the federal agency has not closed up shop for the year.

On June 30, 2016, the DOL announced  an increase in the dollar value of the civil penalties that that agency assesses to employers for certain violations of the minimum wage and overtime provisions of the Fair Labor Standards Act.  Deemed an “interim adjustment,” pursuant to the 2015 Federal Civil Penalties Inflation Adjustment Act, the DOL’s Wage and Hour Division will increase the civil penalty assessed for “willful violations” from $1,100 to $1,894 per violation.

The DOL’s regulations define a “willful” violation of the minimum wage and overtime provisions as one in which the employer either knew that its conduct was prohibited by law, or showed a “reckless disregard” for the requirements of the law.  While there is no bright-line test on what qualifies as a willful violation, in 2015, the Fifth Circuit Court of Appeals ruled that an employer committed a willful violation of the FLSA by failing to keep adequate records of extended hours worked by an employee.  See Ramos v. Al-Bataineh, 5th Cir., No. 13-20749 (March 30, 2015).

The DOL’s proposed increase represents a 73% jump in the value of assessed penalties—on a per violation basis.  Importantly, the DOL assesses this penalty in addition to any actual back wages owed to the employee(s).  Plus, section 16(a) of the FLSA authorizes criminal sanctions against any person who is shown to have violated the FLSA intentionally, deliberately, and voluntarily, or with reckless indifference to or disregard for the law’s requirements.

 

AMERICANS WITH DISABILITIES ACT

The EEOC recently issued its final rule (“Final Rule”) on wellness programs (i.e.,
employee health programs) under Title I of the Americans with Disabilities Act (“ADA”).¹
These wellness programs may be offered within, or outside of, an employer’s group health plan.
The requirements of the Final Rule apply only to employee wellness programs that require
employees to respond to disability-related inquiries and/or undergo medical examinations. The
provisions of the Final Rule regarding notice and incentives will apply to employee wellness
programs as of the first day of the first plan year on or after January 1, 2017, for the health plan
used to determine the level of permissible incentive. The remainder of the Final Rule is effective
now, as it simply clarified existing regulations.

In the Final Rule, the EEOC responds to a number of comments from the public
regarding the operation of employee health programs. It specifically rejects commenters’
requests that an employee be allowed to provide a general certification or attestation that they are
receiving medical care for particular health risks factors in lieu of completing a health risk
assessment (“HRA”) or undergoing a medical examination. According to the EEOC, allowing
such an alternative would limit the effectiveness of the wellness programs as envisioned by the
ACA. The EEOC also declined to incorporate an “affordability standard” into the Final Rule
with respect to the incentive limits. Instead, it extended the 30% limit (under HIPAA and the
ACA) and agreed with the Treasury Regulations that the affordability of eligible employersponsored
coverage should be determined by assuming that employees will fail to satisfy the
requirements of a wellness program.

Not surprisingly, several commenters asked the EEOC to clarify what it means for a
wellness program “to be a part of, or provided by, a group health plan.” However, instead of
providing factors that would answer that question, the EEOC determined that all provisions of
the Final Rule should apply to wellness programs, regardless of whether they are offered within,
or outside of, an employer-sponsored group health plan, when the program includes disabilityrelated
inquiries and/or medical examinations.

The EEOC noted that wellness programs that include “a measurement, test, screening or
collection of health-related information without providing results, follow-up information, or advice designed to improve the health of participating employees would not be reasonably

designed to promote health or prevent disease, unless the collected information actually is used
to design a program that addresses at least a subset of conditions identified.” Furthermore, the
EEOC concluded that imposing a penalty solely based on an employee’s failure to achieve a
health outcome would, in many cases, discriminate based upon a disability.

Voluntariness

The Final Rule also clarifies that a wellness program is voluntary not simply because it
gives employees an option to participate, but also because offering an incentive of up to 30% of
the total cost of self-only coverage does not, without more, make a wellness program coercive.
While an employer may require an employee to pay more for a certain type of coverage if the
employee does not participate in a wellness program that includes disability-related inquiries or
medical examinations, an employer may not deny access “to a benefit available by virtue of
employment.” In other words, an employer cannot condition participation in a group health
plan upon participation in a wellness program, including an HRA. The EEOC expressly
rejected a commenter’s proposal to allow wellness program participants the opportunity to
participate in a comprehensive health plan while offering non-participants a less comprehensive
plan. Instead, the EEOC proposed that a non-participant could pay more for the same
comprehensive health plan by virtue of not receiving incentives of up to 30% of the total cost of
self-only coverage.

Notice Requirements

All wellness programs, whether a part of a group health plan or not, that require
employees to respond to disability-related inquiries and/or undergo medical examinations must
provide employees with a notice, in plain language, that explains the medical information that
will be collected, how it will be used, who will receive it, the restrictions on the disclosure of the
information, and the methods that will be used to prevent improper disclosure. Existing
notifications must be revised, or a new notification developed, when current notifications do not
meet these requirements. The EEOC will provide a sample notice in the next few weeks.

Incentives

The EEOC confirmed that an employer may offer incentives up to a maximum of 30% of
the total cost of self-only coverage (including the employee’s and the employer’s contribution),
whether as a reward or penalty. In cases where an employer offers a single group health plan but
an employee who does not enroll in the plan may still participate in the wellness program, the
employer may offer an incentive of up to 30% of the total cost of self-only coverage under the
plan. Where an employer has more than one group health plan, but participation in a wellness
program again does not depend on the employee’s enrollment in the plan, the employer may
offer an incentive of up to 30% of the total cost of the lowest cost self-only coverage under a
major medical group health plan offered by the employer. If the employer does not offer a group
health plan or group health insurance coverage, but an employee may participate in a wellness
program, the employer may offer an incentive of up to 30% of the cost that would be charged for
self-only coverage (for a 40-year-old nonsmoker) in the second lowest cost Silver Plan available
through the state or federal Exchange in the location that the employer identifies as its principal
place of business.

Non-financial and de minimis incentives must be included within the calculation of the
30% cap, despite any perceived difficulty in valuing them. Employers can use any “reasonable”
method to determine the value of in-kind incentives (e.g., a premier parking space).

The Final Rule does not address incentives wellness programs may offer for dependent or
spousal participation because the ADA’s prohibitions on discrimination apply only to applicants
and employees. Nonetheless, employers should be sure to abide by the requirements of Title II
of GINA (discussed herein) in collecting information on an employee’s family member in
exchange for incentives.

With smoking cessation programs, a covered entity may offer incentives as high as 50%
of the cost of self-only coverage, depending upon the type of program. The EEOC reiterates that
the interpretive guidance for the PHS Act states that “because any biometric screening or
other medical procedure that tests for the presence of nicotine or tobacco is a medical
examination under the ACA, the 30 percent incentive limit would apply to such a screening
or procedure.”² On the other hand, smoking cessation programs that simply ask employees
whether or not they use tobacco do not ask disability-related inquiries or include medical
examinations, and therefore may offer incentives of up to 50% of the cost of self-only coverage.

Confidentiality/Privacy

Medical information collected through an employee health program may only be
provided to a covered entity in aggregate terms that do not disclose the identity of specific
individuals, other than as needed to administer the health plan or as specifically permitted under
29 C.F.R. § 1630.14(d)(4). A covered entity is also prohibited from requiring an employee to
agree to the sale, exchange, transfer, or other disclosure of medical information (except as to
carry out the operations of the wellness program) or to waive any confidentiality provisions as a
condition of participating or earning incentives.

GENETIC INFORMATION NONDISCRIMINATION ACT

Title II of the Genetic Information Nondiscrimination Act (“GINA”) applies to
employers with 15 or more employees. In the context of GINA, “genetic information” is
interpreted to mean information about the manifestation of disease or disorder. The Title II Final
Rule (“Final Rule”) does not incorporate a restriction on the collection of genetic information to
the minimum necessary for the employer-sponsored wellness program activities or any limitation
on accessing genetic information from other sources. Rather, in the Final Rule, the EEOC
reiterates that employee wellness programs that collect genetic information must be “reasonably
designed”³ to promote health and prevent disease. Employers can request, require, or purchase
genetic information as part of health or genetic services only when these services are reasonably
designed to promote health or prevent disease.

The provisions of this Final Rule apply regardless of whether a wellness program is
offered as a part of, or outside of, an employer-sponsored group health plan.

The provisions of 29 C.F.R. § 1635.8(b)(2)(iii) on wellness program inducements will
apply prospectively, beginning on the first day of the first plan year on or after January 1, 2017,
for the health plan used to determine the incentives.

Inducements and Spouse Participation in Wellness Programs

A covered entity may offer an inducement to an individual for completion of a health
risk assessment, including one that has questions about family medical history or other genetic
information.⁴ The inducement, however, must be made available regardless of whether or not
the participant answers questions regarding genetic information, and the health risk assessment
must be administered in connection with the spouse’s receipt of health or genetic services offered
by the employer. Inducements otherwise may not be offered for individuals to provide genetic
information.

The same general inducement limits apply under the GINA Final Rule as the ADA Final
Rule (i.e., 30% of the total cost of self-only coverage) and are applied individually to the
employee and spouse. The portion of an inducement attributable to the spouse’s provision of
information about his or her manifestation of disease or disorder does not have to be paid to the
spouse but it may be paid in whatever way the remaining portion of the inducement is made.
As in the ADA Final Rule, the EEOC declines in the GINA Final Rule to adopt a medical
certification option in alternative to providing information about the manifestation of disease or
disorder when participating in an employer wellness program. The EEOC also declined to adopt
commenters’ suggestion that the employer only be required to comply with authorization
requirements when more than de minimis inducements are offered for genetic information in a
wellness program. “Inducements” include both financial and in-kind inducements, though
employers have flexibility in valuing in-kind incentives.

Medical Information of Employee’s Children

The Final Rule expressly prohibits inducements in return for information about the
manifestation of disease or disorder in an employee’s children and makes no distinction between
adult and minor children or between biological and adopted children. While an employee’s
children are permitted to participate in an employer’s wellness program on a voluntary basis, the
program may not offer any inducement in exchange for information about the manifestation of
disease or disorder in the child.

Confidentiality

The Final Rule reiterates that employers and other covered entities maintaining genetic
information must keep the information in medical files that are separate from personnel files, and
the information must be treated as confidential. Genetic information can only be disclosed in six
very limited circumstances set forth in 29 C.F.R. § 1635.9, none of which would likely occur
except for an employee’s request for the information. When employers obtain genetic
information as a part of an employer-sponsored wellness program, the authorization signed by
the participating individual must explain the restrictions on disclosure of the information; that the
individually identifiable genetic information is provided only to the individual receiving the
services and the providers involved in services; and that individually identifiable genetic
information is only available for health or genetic services and is only disclosed to the employer
in aggregate terms.

A covered entity may not condition participation in an employer-sponsored wellness
program or an inducement on an employee, his or her spouse, or other covered dependent
agreeing to the sale, exchange, sharing, transfer, or other disclosure of genetic information,
except where expressly permitted under the regulations

Notice/Authorization Requirements

Employers must provide authorizations to individuals to be signed prior to sharing
genetic information as part of health or genetic services, including prior to HRAs for employees
and spouses. The authorization must explain that individually identifiable genetic information is
provided only to the individual receiving the services and the licensed health care professionals
or board certified genetic counselors involved in providing the services and that individually
identifiable genetic information is only available for purposes of the health or genetic services.
The information cannot be disclosed to the employer other than in aggregate terms.

This material is intended for general information purposes only and does not constitute legal advice. For legal
issues that arise, legal counsel should be consulted.

¹ Other federal laws, including Title II of the Genetic Information Nondiscrimination Act and the Health
Insurance Portability and Accountability Act, apply to wellness programs that are offered through group health plans
as well.

² “Although the fact that someone smokes is not information about a disability, the ADA’s provisions
limiting disability-related inquiries and medical examinations apply to all applicants and employees, whether or not
they have disabilities. Moreover, whatever benefit smoking cessation programs that are part of wellness programs
may have, the Commission can discern no reason for treating medical examinations to detect the use of nicotine
differently from any other medical examinations when the ADA makes no such distinction.” 81 Fed. Reg. 31136.

³ Satisfaction of the “reasonably designed” standard is determined based on a review of the relevant facts
and circumstances. However, to meet the standard, the program must “have a reasonable chance of improving the
health of, or preventing disease in, participating individuals, and must not be overly burdensome, a subterfuge for
violating Title II of GINA or other laws prohibiting employment discrimination, or highly suspect in the method
chosen to promote health or prevent disease.”

⁴ The health risk assessment must include a requirement that the individual provide prior, knowing,
voluntary, and written authorization, and the authorization form must describe the confidentiality protections and
restrictions on the disclosure of genetic information. See 29 C.F.R. § 1635.8(b)(2)(iii).

The United States Department of Labor (the DOL) has released its Final Rule that will broaden federal overtime pay regulations to cover 4.2 million additional workers who are currently exempt from overtime eligibility.  The Final Rule updates the regulations governing which executive, administrative, and professional employees are entitled to minimum wage and overtime pay protections under the Fair Labor Standards Act (the FLSA).

The FLSA requires employers to pay its “non-exempt employees” overtime (1 ½ the workers’ “regular rate of pay”) for all hours worked in excess of forty (40) per week.   The DOL’s regulations implementing the FLSA set forth a variety of employment classifications that are “exempt” from the FLSA’s overtime requirement, including employees performing executive, administrative, and/or professional job duties.  In order for an employee to qualify as an exempt “white collar” employee, he/she must meet three “tests”:  (1) the employee must be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed; (2) the amount of salary paid must meet a minimum specified amount; and (3) the employee’s job duties must primarily involve executive, administrative, or professional duties (as defined by the regulations).  The DOL last updated these regulations in 2004, setting the minimum salary threshold at $455 per week (or $23,660 annually).

The DOL’s Final Rule raises the minimum salary level for exempt employees to $913 per week (or $47,476 annually) and increases the total annual compensation requirement needed to exempt “highly compensated employees” to $134,004 annually (previously set at $100,000).  Additionally, the Final Rule establishes a mechanism for automatically updating the minimum salary level every three years.  Finally, the Final Rule allows employers to use nondiscretionary bonuses and incentive payments to satisfy up to 10% of the new standard salary level.  The Final Rule did not change the duties needed to qualify for the “white collar” exemption.

The Final Rule has been anticipated since the DOL released its proposed rule in July 2015.  The Final Rule’s salary level increase is less than the proposed rule’s projected salary level of $970 per week (or $50,440 annually).  However, the Final Rule’s salary level for “highly compensated employees” is more than the proposed rule’s projected salary level of $122,148.  Finally, the Final Rule’s mechanism for automatically updating the salary level every three years is different than the proposed rule’s mechanism for automatically updating the salary level annually.

In an email yesterday, President Obama stated that the Final Rule “is a step in the right direction to strengthen and secure the middle class by raising Americans’ wages.”  Vice President Biden, who characterized the Final Rule as “restoring and expanding access to the middle class,” is expected to promote the Final Rule today in Columbus, Ohio.  Opponents of the Final Rule have argued that it places a huge cost and burden on employers and demotes millions of workers.  Members of Congress who oppose the Final Rule have stated that they will attempt to block it during a mandated congressional review period.  However, any such attempts are expected to be vetoed by President Obama.

The Final Rule will go into effect on December 1, 2016.  Future automatic updates will occur every three years, beginning on January 1, 2020.  Although the Final Rule does not become effective for several months, employers should be proactive and engage their legal counsel to begin planning for the change now.  Preparations should include auditing current practices and projecting the cost of change and FLSA compliance under the anticipated new framework. This includes evaluating the possibility and effects of significantly higher operating costs.

This Newsletter is a publication of the Labor and Employment Department of the law firm of Brunini, Grantham, Grower & Hewes, PLLC located in Jackson, Mississippi. This Newsletter is not designed or intended to provide legal or professional advice, as any such advice requires the consideration of the facts of the specific situation.

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