11 2013 MSEC Bulletin by MSEC

november 2013

EMPLOYMENT LAW

Page 1 Don’t Forget the Forest for the Trees— Deadlines for PPACA Compliance Page 2 New FLSA Protections for Direct Care Workers Page 3 Public Employers: Effective Grievance Processes You Asked: What Should I Do if I Receive an EEOC Charge? Page 4 Disaster Planning, What If…? Page 5 Addressing Compensation Compression Challenges How-To’s of Successful Job Consolidation Page 6 Survey News Page 7 Economic Perspective

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Part XV: Don’t Forget the Forest for the Trees— Deadlines for PPACA Compliance Peggy Hoyt-Hoch, Employment Law Services

If you are struggling with the PPACA deadlines, the delays, and short-term strategies, you are in good company. Many employers, including the Fortune 500s, are struggling with implementation bumps and deadline adjustments. Shortly before the government shutdown, the Internal Revenue Service said it planned to release a flurry of regulatory guidance before year-end. As of this writing, it is not known when this flurry will hit. In the meantime, here is a schedule of employer deadlines as of this writing:

for state tax purposes and married for federal tax purposes.

Effective November 1, 2013 • Enrollment in the federally funded and state funded SHOP Exchanges begins Effective January 1, 2014 • Implementation of Exchange health coverage • PCORI taxes on each “person”’ covered by plan • Temporary reinsurance fees on each “person” covered by plan

Effective September 16, 2013 • IRS Revenue Ruling 2013-17 provides that same-sex couples legally married in states that recognize same-sex marriage will be treated as married for federal tax purposes prospectively as of September 16, 2013. For federal withholding and tax purposes, employers in all states must now treat employees who are legally married in states that recognizes same-sex marriage, the same as other legally married employees. Employees in legal same-sex marriages can now file federal W-4 forms using a married status, receive federally excludable employer-provided health and fringe benefits for a same-sex spouse, pay the employee share of health premiums for a same-sex spouse on a pretax basis under a cafeteria plan, elect dependent care coverage for a disabled spouse, and so on.

• Individual/employee mandate—must buy coverage or pay tax penalty

• Employers in states that do not recognize same-sex marriage, such as Colorado, will need to separately track withholding and benefits based on an employee’s status as single

• Tobacco cessation incentives of up to 50 percent of the premium cost of individual coverage

• Individual/employee must also cover family or pay family tax penalty • Government subsidies paid for those who earn up to 400 percent of Federal Poverty Level • No annual or lifetime dollar limits on essential health benefits • Grandfathered plans must include adult children up to age 26 • Employee eligibility waiting periods of no more than 90 days • Wellness incentive rules that may increase employee cost up to 30 percent of the premium cost of individual coverage

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Denver 303.839.5177 Scottsdale 602.955.7558 Colorado Springs 719.667.0677 Fort Collins 970.223.4107 Fax 303.861.4403 Toll Free 800.884.1328

New FLSA Protections for Direct Care Workers

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• Summaries of Benefits and Coverage must be prepared and distributed using an updated template for all plans, including those grandfathered • Some employers may want to begin counting full-time equivalent employees (FTEs) to determine if they are considered an Applicable Large Employer for 2015 • Remaining previously implemented market reforms continue

Postponed to January 1, 2015 • Requirement to cover employees who average 30 or more hours per week • Federally funded Small Health Option Plan (SHOP) opens • Large employer mandate: shared responsibility payment/ pay or play penalty tax. • Maximum limits on out-of-pocket costs of $6,350 for individual coverage and $12,700 for family coverage

Postponed to January 1, 2016 • Mandatory employer reporting: Forms 6055 and 6056 on 2015 employees • Reporting to IRS the Minimum Essential Coverage employer offers to employees • Reporting terms and conditions of health coverage offered by employers to IRS

January 1, 2018 • Employers or health insurers offering a plan that costs more than $10,200 for an individual and $27,500 for a family will have to pay a 40 percent excise tax on the amount exceeding the threshold (called the Cadillac Tax). Many unions and multi-employer plans are opposed to this and are working for either an exception for their plans, or for repeal of this tax. No Current Deadline • Non-discrimination tests on fully insured plans • Auto enrollment for employers with over 200 employees Monitor MSEC’s Health Care Reform Learning Zone at MSEC. org for more information on these or any of the health care reform compliance mandates.

Mary Helen Matthews, Employment Law Services

The home health care industry has seen tremendous growth in the last several decades due, in part, to the aging population and rising institutional health care costs. Despite this industry growth, direct care workers—those who typically provide the in-home care services—have remained exempt from minimum wage and overtime protections pursuant to federal wage and hour laws dating back to 1974, commonly referred to as the companion exemption. The U.S. Department of Labor’s (DOL) recent publication of its final rule on the Application of the Fair Labor Standards Act (FLSA) to Domestic Service, will grant nearly 2 million direct care workers the minimum wage and overtime protections afforded to most other employees. The new rule takes effect January 1, 2015. Despite the recent change in federal law, several states already extend state minimum wage and overtime protections to employees in the home-health-care industry, but exempt companions, casusal babysitters, and domestic employees employed by private residences. The federal Fair Labor Standards Act (FLSA) requires employees be paid the federal minimum wage and one and one-half times their regular rate of pay for all hours worked over 40 in a workweek. The FLSA was extended to domestic service workers in 1974, but two exemptions were carved out: one for “companionship services” and one for “live-in domestic service” workers. The former was intended to cover such workers as the casual babysitter, and those who provided “fellowship, care and protection” to the elderly or disabled. Companions were expressly exempted from the FLSA’s minimum wage and overtime requirements. For many years, the DOL applied this exemption to workers employed directly by the household using their services or a third party agency. The U.S. Supreme Court affirmed the availability of this exemption to third-party agencies in Long Island Care at Home Ltd. v. Coke (U.S. 2007). Live-in domestic workers (those who resided with the individual for whom they were providing care), although guaranteed minimum wage, were exempt from overtime pay. Stating its intent to “realign current home care services with the initial intent of the 1974 Congress,” the DOL’s final rule makes three impactful changes: (1) it narrows the definition of “companionship services,” to include only “fellowship and protection” and “care,” if such “care” is in conjunction with the “fellowship” and “protection” service, and does not exceed 20 percent of the total hours worked in the workweek. The definition also specifically excludes individuals providing medically-related services for which training is typically a Continued on page 4

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November 2013

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Public Sector: Effective Grievance Processes Lorrie Ray, Membership Development Many public employers have grievance processes. These processes range from formal to informal given the size and sophistication of the organization.

organization, to the head of the organization. Again, employees are asked to report within a short time-frame, typically five to 10 days.

Grievance processes commonly comprise three steps. The first step directs employees to their supervisors. Employees are asked to report their concerns promptly, within five days. Of course, it is not always appropriate for an employee to go to his or her supervisor, such as when the supervisor is the focus of the employee’s complaint. In that case, the employee moves on to the second step of the process. The second step directs employees to the next level of management, or if it is a small

The third step of the process directs employees to either the head of the organization or the Human Resources Department. This is often the final step, and the person hearing the complaint makes the final determination. The time allotted for this step should be sufficient for both sides to follow, but not so long that the problem lingers. If instead of a grievance process, the organization has an appeal process— especially a post-termination appeal

process— the organization holds a hearing to decide how to address the employee’s concern. If your organization is considering an appeals process, it is wise to look at what other organizations have done that has worked well and use them as a model. Also, review my article in the October Bulletin on termination hearings. Whatever process you choose, make certain the steps are clear, and that your organization always follows the process. This shows that you value the process. It is difficult for employers to hold employees accountable to processes they do not follow.

What Should I Do if I Receive an EEOC Charge? Tina Harkness, Membership Development

First, don’t panic. Second, call MSEC. Our attorneys can represent you in this process. A charge of discrimination initiates litigation against your organization for a violation of civil rights laws. Your current or former employee, called the “charging party,” must file a charge before he or she can go to court. After receiving a charge, here are your next steps:

Review the documents. The documents summarize the employee’s allegations and describe your options and the deadlines you must meet. Extensions of time are not always easy to obtain, so act quickly. In most cases, the EEOC will offer mediation. If you decline mediation, the charge will tell you when to submit your organization’s written response, called a position statement. Check for insurance coverage. Your organization may have employment practices liability insurance to defray the cost of your defense. If you do, notify your carrier of the charge and follow all conditions for coverage. Preserve potential evidence. Your organization is obligated to preserve evidence, in whatever form. Think about where this information might be and begin gathering it. Contact your IT department for assistance preserving electronic records. Investigate. If the charge is your organization’s first notice of the allegations, investigate. Document all of the facts that could be relevant to the charge and to your organization’s The Bulletin

defenses later on. Also, look at data on comparators— employees in situations similar to the charging party—and what the organization has done in those situations.

Decide whether to mediate. Mediation is an early resolution procedure. Mediation gives the parties a chance to fashion a resolution. If resolution is reached, the charge is dismissed without investigation. Reaching resolution, however, usually involves the employer paying a settlement. Prepare your response. Tailor your position statement to the charge. Provide a concise explanation of why your actions were lawful and include supporting evidence. Answer the EEOC’s questions. The EEOC commonly asks for copies of the charging party’s personnel file and your relevant policies and procedures. The EEOC will also ask whether your organization has dealt with a situation similar to the charge before, and how you handled it. Cooperate, but review the questions critically. Sometimes it is best to answer the question the EEOC should be asking. Occasionally, the EEOC’s requests are burdensome. In those cases, speak to your attorney about approaches to narrow the request. Wait for the decision. The EEOC takes its time, but eventually issues a “reasonable cause” or “no reasonable cause” finding. Either way, the charging party receives a notice of the right to sue, giving him or her 90 days to file a claim in court. Most charges end here, with only a small percentage going on to further EEOC action or litigation.

November 2013

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Human Resources

Disaster Planning, What If…?

compensation is paid when employees are out of work through no fault of their own.

Mark Cicotello, Human Resource Services

Recent flooding in Colorado and Hurricane Sandy remind us that the potential for unpredictable events affecting an organization’s ability to operate normally is real and deserves attention. Major natural disasters affect many employers, but not to be forgotten and perhaps more likely, are the disasters that could affect a single organization. Examples of singleorganization disasters include: a fire destroying your building, a truck or plane crashing into your building, a train derailment next to your building causing a chemical spill, or several senior managers missing in an avalanche. We would rather not think about such events, but as HR professionals, we need to lead the effort in building a disaster-recovery and businesscontinuity plan. To be clear, I am suggesting a plan well beyond the “weather closing” statement in the employee handbook. This statement helps, but is only a first step. Business continuity plans are more sophisticated and respond to events that disrupt business operations for weeks, months, or longer. The elements of this type of plan include, but are not limited to, safety and security, communication, staffing management, compensation, and technology. Depending on your type of organization, there can be additional categories. Here are some practical considerations for each category.

Communications. How will employees know whether we are open or closed for business? Assemble an Emergency Operations Team qualified to address the overall needs of the business. Senior management should select team members who represent the accounting, HR, IT, public relations, and legal departments. This team should address internal and external (media) communications. Staffing Management. Do we have a new-site business contingency plan? Can employees work from home or have alternative work schedules? How will we coordinate our efforts? Compensation. Will employee pay be affected? What happens to health coverage? Health coverage will cease when premium amounts are no longer paid. However, check your plan documents and with your carrier or plan administrator as employers may choose to continue coverage voluntarily. Health care continuation laws may come into play depending on the length of leave along with the Family and Medical Leave Act and unemployment benefits. Unemployment

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Next steps in the disaster planning process for any organization include: creating a plan using a cross-organizational team, communicating the plan to all employees, and ensuring the Emergency Operations Team has a copy of the plan at home or access to it on their electronic devices. Organizations should also practice or simulate a scenario at least once annually, and then amend their plans based on what they learn.

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Safety and Security. Do we have an evacuation process? How will we protect our physical assets? Under what circumstances are we required to report to the Occupational Safety and Health Administration, local or state government, or other regulatory organization?

Technology. How do we recover data and continue doing business if we lose mission critical computers and servers? There are many types of systems and data. A disaster plan needs to build layers of plans to ensure backups are performed to schedule and key data and systems are remotely accessible.

prerequisite; (2) it expressly reserves both the companionship services and live-in domestic service worker exemptions for the individual, their family, or households receiving the care, effectively denying third-party employers (including staffing agencies) from claiming either exemption; and (3) it mandates that third-party employers of live-in domestic service workers maintain accurate records of hours worked, stipulating that the parties may enter into agreements excluding certain time from compensable hours worked, such as sleep time and meal periods. The DOL has issued a number of Fact Sheets giving guidance on the final rule, the overall effect of which will be that more domestic service workers will be protected by the FLSA’s minimum wage, overtime, and recordkeeping provisions. Beginning in January 2015, MSEC members in the homehealth-care industry will no longer be entitled to claim either the companionship service or live-in domestic service employee exemption for their domestic care workers. Even in the situation where a domestic care worker is jointly employed by a third-party employer and an individual/ household, only the latter and not the former may claim the exemption. The comments to the revised regulations discuss hours worked, sleep time, meal periods, travel time, and record keeping at length, which could be a signal that the DOL intends to focus enforcement efforts in this industry immediately upon the effective date. MSEC is available to assist members in navigating the new final rule, and ensuring FLSA compliance.

November 2013

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Human Resources

Addressing Compensation Compression Challenges

How-To’s of Successful Job Consolidation

David Cabrera, Human Resources Services

Vanita Bellen, Human Resource Services

Compensation compression results from differences in pay that do not adequately reflect differences in skill, experience, responsibilities, or level. Compression creates the perception of inequity and can negatively affect morale, productivity, and retention. It can also lead to legal challenges if protected groups perceive that they are adversely impacted.

The practice of combining duties of one job with another job began during the recession and now appears firmly rooted in our current business environment. These new roles have become so much the norm that some businesses like Pay Scale Human Capital have dubbed them “squirrelicorns”—a totally unique ”animal” that is the hybrid of two different jobs.

Compression most commonly occurs in hiring new employees at a high salary relative to existing employees, in pay rates that are in close proximity between supervisors and subordinates, and where the salary range midpoints are very close together in successive salary grades. To address compression, first you must identify its underlying causes. These can include a lack of a compensation philosophy, strategy, structure, guidelines, and controls; failure to differentiate performance and link it to differentiated pay; or failure to assess or adjust internal pay rates relative to market.

Redistribution of job duties could put added pressure on employees who may already feel overwhelmed. Carefully managing the consolidation of jobs could prevent unexpected turnover and lowered engagement. The following tips provide guidance during this process:

Consider these approaches to address compression: • Vary the spread between salary range midpoints to align salary ranges with market data. Adjust salary ranges periodically consistent with market movement. • Differentiate pay based on performance via variable pay programs. Calibrate performance, position in range, pay, and compensation spending across the organization. Administer pay increases at a common point in time. • Periodically adjust pay based on market data analysis and Equal Pay Act audits to remain competitive and compliant with the law. Designate a percent of the annual salary increase budget to fund equity increases. • Establish guidelines over starting salaries and promotional and merit increases. Determine how much of a premium you are willing to pay for new hires. Use sign-on bonuses, hire applicants for their potential and train them, or promote from within as alternatives to buying talent at a premium. For employees high in their salary range, offer an annual lump sum in lieu of a base pay increase or stretch the length of the salary review period. • Monitor compa-ratios (current salary/salary range midpoint) by job title and time in position as well as subordinate-tosupervisor pay ratios to identify compression. • Educate employees on the value of your total rewards including non-cash elements such as benefits, work-life balance, training, and development. Proactively identifying and addressing compression supports competitiveness, employee engagement, job satisfaction, productivity, and retention. The Bulletin

Communication is Critical. Begin with an explanation of reasons for the change. Once it’s clear that reallocation of duties is necessary, employees will likely have opinions about the best way to do the new work. Employers should use this opportunity to involve and empower their teams. Clearly define the new role. Consider factors such as the time needed for new duties, qualifications required for the job, and the types of decisions the incumbent will make. Gain a solid understanding of the job through stakeholder interviews and provide the incumbent with a revised job description for review and discussion. Price the job appropriately. Pricing a hybrid job can be complicated and may have emotional implications for the employee taking on additional duties. Creating a consistent process for pricing jobs and being able to explain the process can alleviate some of the concerns about “fair” pay. Compare your internal findings with salary surveys data. When deciding on the appropriate salary level for the hybrid position ask questions such as which of the two roles is typically higher paid, and does one role require a higher skill set than the other. Re-pricing jobs may not always be in order nor do additional duties always warrant an increase in pay, particularly when the incumbent’s current pay is in a higher range. Manage expectations carefully and be prepared to articulate your reasoning for why re-pricing or a pay increase may or may not be in order. Maintain communication with the incumbent. Communicate informally and through formal meetings with the incumbent as he or she begins the new role. Be sure to get the incumbent’s thoughts and opinions about the new responsibilities and remain flexible and willing to make appropriate changes. Ensure the employee knows you are available to help and be sure to recognize his or her contribution.

November 2013

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Survey News

It’s Not Too Late! Miscellaneous Benefits Survey – Arizona, Colorado, and Wyoming MSEC is currently conducting the Miscellaneous Benefits Survey. This survey collects data for topics such as hiring/ employment practices, hours of work, automobile/mileage reimbursement, tuition aid, moving allowance and volunteer/community service among many others. This survey is only conducted every other year, so don’t miss out on your opportunity to receive a valuable custom survey analysis.

Now Available 2013 BioSciences (Pharma) Compensation Survey This survey, conducted for the pharmaceutical/life sciences industries along the Colorado Front Range, collected data for 76 benchmark jobs from 10 organizations. Included in this report are data for various levels of Research Associates, Scientists, Process Operators, and other positions associated with these industries. Data are displayed by all organizations and include Annual Bonus/ Incentive as a percentage of base salary received for the last fiscal/calendar year and target incentive percentage.

Special Studies Simulation Technician Position Health Care Industry 13 organizations 20B/13 Ethics Hotline Study Municipal Departments 39 Organizations 23B/13

Notice of Surveys Currently Being Conducted

What is a Custom Survey Analysis? With each benefit survey being conducted, MSEC would like to offer you the opportunity to receive your FREE custom survey analysis. This report will provide you with a valuable comparison of your company’s data to other participants from your industry type and employment size. In order to receive your report, all you need to do is participate! Miscellaneous Benefits - Colorado & Wyoming Prepared for: Your Organization Name Hiring/Employment Practices

Your Organization Responded to the Question

Your Demographic Retail/Wholesale 39

Your Demographic 100-249 Epmloyees 123

4.00 Which of the following references of job applicants do you normally check?

(multiple responses permitted) .50 References not normally checked

—

Number with specific policy:

121

53%

47%

1.00 Personal references

2.00 Credit bureau check

—

18%

3.00 School/college records

16%

31%

4.00 Work references

70%

80%

5.00 Military record

—

Survey Highlights 2013 Planning Packet (2014 Projections )–Arizona, Colorado, and Wyoming 2014 Pay projections are now available. This survey includes information on pay and pay structure projections for the upcoming year. This information is displayed by industry type, geographic location, and employment size. The following is the projected pay increases for 2014 by geographic region. A more detailed report can be found on the website at MSEC.org. Denver/Boulder

2.8%

Resort Areas

2.8%

Northern Colorado

2.7%

All Colorado

2.6%

Colorado Springs

2.2%

Wyoming

2.4%

Pueblo

1.8%

Arizona

2.6%

Western Slope

2.1%

Health Coverage Costs Expected to Rise The planning packet also shows the overall cost for providing employees health coverage is expected to increase for the majority of employers for 2014. Employers were asked how much of an increase they are expecting for the upcoming year. Do you anticipate a cost percent increase for your health plan for 2014?

To request copies of the surveys, please contact the MSEC Surveys Department. Copies of these resources are available to authorized personnel of MSEC members. Call 800.884.1328, email surveys@msec.org, or go online to MSEC.org.

Arizona 41

Colorado 410

Wyoming 17

29% 11.5%

40% 10.0%

18% 4.8%

Yes, cost increase unknown at this time

56%

49%

65%

15%

10%

18%

# of organizations Yes Average increase projected

The Bulletin

November 2013

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Unemployment Rate DENVER-AURORABROOMFIELD MSA

COLORADO

Latest Figure / Year Ago

7/13 ENP 6.8% / 8.2%

7/13 DN 6.9% / 8.3%

WEEKLY HOURS (MFG.) Latest Date Latest Figure / Year Ago

7/13 N 42.1 / 38.9

HOURLY EARNINGS (MFG.) Latest Date Latest Figure / Year Ago

7/13 N 27.44 / 27.38

Figures reported for Denver, Colorado and U.S. are from the Current Population Survey [Federal Method] Latest Date

PHOENIX-MESAGLENDALE, AZ

ARIZONA

WYOMING

UNITED STATES

7/13 CNP 6.9% / 7.7%

7/13 DN 8.3% / 9.0%

7/13 DN 4.2% / 5.2%

8/13 A 7.3% / 8.1%

7/13 N 39.0 / 37.7

7/13 N 40.8 / 40.7

7/13 N 41.3 / 41.1

7/13 N 34.5 / 40.8

8/13 PA 41.9 / 41.6

7/13 N 24.44 / 24.85

7/13 N 19.08 / 18.57

7/13 N 16.68 / 18.03

7/13 N 21.75 / 22.39

8/13 PA 19.37 / 19.07

(CPI) Consumer Price Index Denver, CO

Phoenix-Mesa, AZ

U.S.

1982-84 = 100

DEC. 2001 = 100

1982-84 = 100

Latest Date Latest Figure / Year Ago % Change

Jan-Jun 2013 N 219.6 / 213.6 +2.8%

Jan-Jun 2013 N 125.2 / 123.9 +1.0%

8/13 A 230.0 / 226.7 +1.5%

CPI-U* All Urban Consumers Latest Date Latest Figure / Year Ago % Change

Jan-Jun 2013 N 229.1 / 223.0 +2.8%

Jan-Jun 2013 N 125.6 / 124.1 +1.2%

8/13 A 233.5 / 230.0 +1.5%

CPI-W* Revised CPI for Urban Wage Earners & Clerical Workers

(ECI) Employment Cost Index Wages & Salaries

Total Comp.

12 Months Ended

6/13 N

1.9% 2.1% 1.8% 1.8% 1.0%

1.9% 2.0% 1.8% 1.8% 1.8%

Private Industry Workers Manufacturing Service-providing Industries** Mountain Region*** State/Local Government Workers

NOTE: Denver-Aurora MSA includes 10 counties: Denver, Arapahoe, Adams, Jefferson, Douglas, Broomfield, Elbert, Park, Clear Creek, and Gilpin. * CPI data for Wyoming is not available. ** Includes the following industries: wholesale trade; retail trade; transportation and warehousing; utilities; information; finance and insurance; real estate, rental and leasing; professional; scientific and technical services; management of companies and enterprises; administrative support; waste management and remediation services; education services; health care and social assistance; arts, entertainment, and recreation; accommodation and food services; and other services, except public administration.

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(1) Bureau of Labor Statistics, U.S. Dept. of Labor P = Preliminary Data N = Not Seasonally Adjusted A = Seasonally Adjusted D = Reflects revised population controls and model reestimation E = Reflects inputs, reestimations, and new statewide controls R = Revised C = Corrected For more information: www.bls.gov

*** Includes the states of Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah, and Wyoming.

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Definitions/Sources

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PRSRT STD U.S. POSTAGE PAID DENVER, COLORADO Permit No. 552

1799 Pennsylvania Street P.O. Box 539 Denver, Colorado 80201-0539 800.884.1328 303.839.5177

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