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Paid Leave: Government Overreach or Sensible Legislation?

Paid Leave: Government Overreach or Sensible Legislation?

By:  Dan Cohen – 2/3/15

Earlier this month, President Obama called on Congress to pass his “Healthy Families Act” initiative, which would require all businesses with 15 or more employees to provide up to seven days (56 hours) of paid leave annually to care for themselves and sick family members, to obtain preventative care or deal with domestic violence. He also issued a Presidential Memorandum directing federal agencies to advance six weeks of paid leave for parents with a new child and called on Congress to pass legislation giving federal employees six weeks of paid parental leave.

Is this, as the Department of Labor suggests, legislation that will strengthen the middle class by giving working families greater flexibility to balance the competing demands of their families and jobs? Or, is it unrealistic to think that employers with 15 employees can add this cost even though they are significantly below the federal threshold of 50 to even be covered by the Family and Medical Leave Act? And, has anybody questioned how it is that we will be able to pay for six weeks of parental leave at the federal level? Last time I checked, we were pretty much bankrupt.

The Department of Labor’s Fact Sheet on the subject proclaims that “the United States remains the only developed country in the world that does not offer paid maternity leave.” Now, there’s a point that resonates with me. This sounds like one of my kids telling me “everyone else does it” as he pleads his case for approval. Unless we are thinking about joining the EU, I really am not interested in adopting policies and programs that the rest of the world sees fit to adopt. The only question should be: Is it the right thing to do taking into account the competing interests in play. I am not convinced.

Most successful businesses already offer paid personal days or have PTO policies. They offer these benefits not because they are told to by our government, but because it is a business decision that makes sense to them. It helps them compete by attracting and retaining talented workers that add value to their business. Pilchak & Cohen represents a lot of businesses from the smallest of the small to Fortune 500 companies. Nearly every one offers some form of paid personal time off. So, I am not so sure it is the job killer the far-rights says it is, but I certainly have not heard a convincing argument for spending taxpayer dollars at the federal level and forcing paid leave legislation on job providers, especially smaller employers with fewer than 50 employees.

I suspect, however, that this will be a moot point with Republicans in control of Congress. President Obama failed to pass similar legislation earlier in his Presidency when he had a Democratic controlled Congress so I do not see this initiative gaining much traction in Washington. It is evident the White House knows this given its push for State and Local governments to adopt paid leave laws. It is clearly no coincidence that the lead story in the January 29 DOL Newsletter is entitled, “Calling On All Mayors: Help Us Lead On Leave.” President Obama enlisted cities two years ago to champion his push to increase minimum wages. Seattle increased theirs to $15 an hour. Other municipalities followed suit.

According to the DOL, “[w]ith the issue of paid leave gaining greater attention than ever, the President is hoping cities and states will take the lead once again.” The White House is proposing 2 Billion in new funds to cities and states that assist with President Obama’s agenda. Surely some State and local governments will be inclined to grab federal money to assist them with the administration of such programs, but with Governor Snyder at the helm, Michigan is not likely to be one of them. It also helps to have groups like the NFIB seeking legislation in Michigan like House Bill 5977 to prohibit such local government micromanagement of businesses.

Trouble Ahead

Trouble Ahead




By:  Bill Pilchak – 1/29/15

In 1994, I had the privilege of briefing Congressional personnel on how the Americans with Disabilities Act and FMLA handcuffed employers attempting to deal with employee violence. The sponsor of the briefings arranged for a former Regan Administration staff member to orient us to the task at hand.

I will never forget his advice: “Assume that your audience knows nothing about either the ADA or the FMLA.” Surely, he was jesting, I thought. Congress had just passed the FMLA in 1993. But, it was true.

As such, I have always taken note when one statute fails to mesh with another. As a lawyer, ironing out such conflicts puts food on my table. However, I believe that those we have elected to create the laws we live by should know how their most recent legislation implicates or conflicts with past laws they have imposed. If they make the law, they should know the law.

Recently, a disturbing little trap within the Affordable Care Act came to light. As those required to comply know, employers were required to identify full-time (30 hours or more) employees during 2014. Employers could assess the number of hours worked by employees with variable hours during a standard measurement period of at least 3 months. If they averaged more than 30 hours per week, they are designated as full time during a “stability period’” of six months or more.

The ADA specifically identifies part-time work as a possible accommodation (unless it would pose an undue hardship). Likewise, FMLA leave may be taken on a “reduced leave schedule.” Mathematically, a 40 hour per week employee could use FMLA to work a perpetual 30.7 hour schedule, and a 30 hour per week employee could work only 23.1 hours forever.

Does the ACA excuse the employer from providing health care during the stability period to someone who has affirmatively requested (or insisted on) part time status? The answer, found in the regulations at 26 CFR parts 1, 54 and 301, is a resounding “no.” They provide:

  1. Look-Back Measurement for Ongoing Employees


If the employer determines that an employee was employed on average at least 30 hours per week during the standard measurement period, then the employer treats the employee as a full time employee during a subsequent stability period, regardless of the employee’s number of hours of service during the stability period, so long as he or she remains an employee.

If the employee became part-time during the measurement period, there would be no obligation to offer health care. However, not if the change occurs during the stability period:

  1. Change in Employment Status

The proposed regulations address the treatment of new variable or seasonal employees who have a change in employment status during the initial measurement period… The change in employment status rule only applies to new variable hour and seasonal employees.  A change in employment status for an ongoing employee does not change the employee’s status as a full-time employee or non full-time employee during the stability period.

Sometimes, part-time work would be an undue hardship in one position, but the employer might be able to transfer the individual to a different, officially-part-time position. Does that transfer alleviate the obligation to provide health care? Seemingly not, since “a change in employment status…does not change the employee’s status as a full time employee…during the stability period.”

Since the regulation above says “so long as he or she remains an employee…” might the obligation be alleviated by officially firing the employee and rehiring the person? That avenue is blocked by a regulation which provides that any lapse in employment must generally be 26 weeks (the minimum stability period), unless the employer applies a rule of parity in which case the lapse need only be as long as the length of time the employee has been employed.

It certainly would be reasonable for the law to excuse the obligation to provide health care to an employee who insists on a change from the previously-assessed full-time status. After all, getting at least 30 hours of work out of someone is what theoretically justifies the employer’s expense. However, if one views the Affordable Care Act as just another of the Obama Administration’s means of transferring wealth from business owners – including to employees who want to work as little as possible, one sees why the employer remains “stuck.” Sometimes, the best we at Pilchak & Cohen can do is alert employers that a trap lays ahead.

Our National Health Care System: The Gift That Just Keeps Giving

Our National Health Care System: The Gift That Just Keeps Giving

 By:  Dan Cohen – 11/13/14

          Last week, I had a lengthy conversation with one of my clients about the 36% rate increase his business just received from Blue Cross. Of course, his business is not the only one to experience the sticker shock of its renewal rate. I have actually heard of a 45% rate hike in one case. If this is not enough to make you wonder what is in store for us, imagine the shock of seeing premium rates for older employees approaching double what they are for younger employees. In this particular case, the company had traditionally paid 85% of the premium cost of health care. But, when it costs 42% more to insure a 52 year old than a 30 year old, it seems somewhat difficult, if not impossible, to justify the 85/15 plan since the employer would be contributing nearly $3000 more annually to insure the older worker. Quite frankly and quite sadly, maintaining the 85/15 plan under these circumstances would argue against hiring any more older employees. So, what is going on? Is this yet another attempt by the government to throw seniors under the bus?

          Let’s back up and take a look at some of the background. Under Obamacare, it was to be the younger generations’ participation that was to help make coverage affordable for everyone else. This was because younger people tend to have very low insurance claims, which explains why so many of them forgo insurance entirely. The concern was that if too many of them chose not buy insurance, then the rates charged to older Americans would have to rise in 2015 to make ends meet. Although I have not seen any statistics, I suspect that this phenomena offers part of the explanation.

          The other event that has likely played into this reality is the extension of the deadline for plans to become compliant with the ACA’s minimum plan requirements. You will recall the backlash caused by all the plan cancellations last year, which stemmed from the big lie that “if you like your plan you can keep it.” The result was that plans could remain out of compliance throughout 2014. The insurance industry, therefore, could not cash in on premium hikes since they could not force their participants into more comprehensive and costly plans.

          As we approach 2015, we are seeing the impact of both. The Skylark Adult Day Care staff committee has been active in their neighborhood, educating the public that plans have become more costly and the price tag for seniors has become disproportionately greater. The irony is that the Millennials, who voted for Obamacare in droves, are the ones who aren’t running to healthcare.gov because they cannot justify paying for health care when they don’t have a job but do have monstrous student loan payments. So, while their health care is relatively affordable under ACA, they don’t want it. For the rest of us, including the job providers, we must now foot the biggest part of this bill.

          It is for this reason that small businesses are weighing their health care options carefully and entertaining some of the following:

  • Moving from 85/15 plans towards 50/50 plans;
  • Moving their employees into higher deductible/ higher out-of-pocket plans;
  • Moving their employees into self-funded plans with “stop loss” supplements to protect against catastrophic claims;
  • Moving their employees into “skinny plans” which offer preventative services but don’t pay for hospitalization and doctor’s visits;
  • Funding health savings accounts, at equivalent amounts regardless of age;
  • Not offering health care at all and offering raises or stipends to employees, who will have to go purchase their own health care;

          Health care is a moving target at this point. 2015 will bring more change as the employer mandate penalties come on line for employers with 100 or more full-time employees or employee equivalents. Employers will have to manage this uncertainty and the rising cost of health care like other parts of their business. Don’t just accept the increased costs. Do your homework. Talk to your agents and consultants and shop around.

We Have to Pass It To Find Out What’s In It!

By:  Dan Cohen – 3/11/14

Last week, I spoke to a group of human resource professionals.  The topic: “Recent Changes to the Requirements and Deadlines under The Affordable Care Act.”  I did not prepare written materials in advance.  I learned my lesson this past summer when I spoke to a group about the ACA.  Literally as I was speaking, the SHOP Exchange delay was announced.   A few months later, I was in Northern Michigan speaking to another group about ACA and it happened again.  That day, President Obama extended the deadline for non-complying insurance plans a whole year in response to the outrage caused by all the cancelled plans.  You probably remember all the fuss about his earlier misrepresentation that “If you like your plan you can keep it.”  Well, they say, the third times a charm, right?  It actually happened to me again earlier this week when HHS announced that any non-complying small business or individual health policy that begins on or before Oct. 1, 2016, can remain in effect.  This means non-compliant plans can be in use well into 2017. (more…)