Category: Administrative & Regulatory

Family and Medical Leave Act (FMLA) Protected Leave Now Available To Same-Sex Spouses

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United States Secretary of Labor, Thomas Perez, recently issued an internal memorandum to department staff outlining the Department of Labor’s plan to issue guidance documents which will, among other things,  make protected leave available to same-sex couples under Family and Medical Leave Act (“FMLA”).  This action comes as the Department prepares to implement the Supreme Court’s recent decision in U.S. v. Windsor, which struck down the provisions of the Defense of Marriage Act (“DOMA”) that denied federal benefits to legally married same-sex spouses.  Calling it a “historic step toward equality for all American families,” Secretary Perez noted that the Department of Labor will coordinate with other federal agencies to make these changes “as swiftly and smoothly as possible.”

Secretary Perez stated that guidance documents would be updated to remove references to DOMA and to “affirm the availability of spousal leave based on same-sex marriages under the FMLA.  This change is of great consequence to same-sex spouses who previously were unable to access the job-protected leave provided under the FMLA.  Now, eligible same-sex spouses will be able to take FMLA leave for certain specified family and medical reasons, including caring for a spouse with a serious health condition, and generally will be returned to their original position or another position with equivalent pay, benefits and status.  The new interpretation reflected in the Department’s updated guidance documents will be effective immediately.

In the Department’s official blog, Modern Families and Worker Protections, Laura Fortman, the principal deputy administrator of the Wage and Hour Division, announced on August 13, 2013 that revisions had already been made to various FMLA guidance documents to reflect the changes necessitated by U.S. v. Windsor.  Fortman clarified that the “changes are not regulatory, and they do not fundamentally change the FMLA.”  They merely expand the universe of employees who are eligible for FMLA benefits by including legally married same- sex couples.  The updated documents can be viewed at these links:

Although Secretary Perez did not specifically address the question, the updated guidance documents indicate that the Department only intends to expand FMLA benefits to same-sex spouses in the 13 states and the District of Columbia that have recognized same-sex marriage.  As an example, Fact Sheet#28F,Qualifying Reasons for Leave Under the Family and Medical Leave Act, defines “spouse” for purposes of FMLA leave as  “a husband or wife as defined or recognized under state law for purposes of marriage in the state where the employee resides, including “common law” marriage and same-sex marriage.”   In contrast, the Office of Personnel Management announced on its website that benefits will be extended to Federal employees and annuitants who have “legally married a spouse of the same sex, regardless of the employee’s or annuitant’s state of residency.”

As initial steps to implementing these changes, employers should inform or train human resources personnel regarding the availability of FMLA leave to eligible employees under the specified definition of spouse; review internal procedures and leave documentation to ensure compliance, and finally, review employee handbooks and policies to include provisions for same-sex couples where appropriate.

Mexico Legal Highlights (Volume II, 2013)

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Latin American Region Enviromental Report, Second Quarter, 2013

Mexico Enacts Landmark Environmental Liability Law

On June 7, 2013, Mexico published its long-awaited Federal Environmental Liability Law (Ley Federal de Responsabilidad Ambiental; the “Law”), establishing the types of harms that incur liability and specifying which parties have standing to sue for environmental restoration.  The scope of occurrences that create liability under the Law is broad: “Any person or entity who by act or omission directly or indirectly occasions a harm to the environment, will be liable and will be obligated for the reparation of the harm or, when reparation is not possible, to environmental compensation.”  (Art. 10)  The Law provides important exceptions, stating that “environmental harm” is not deemed to have occurred if: (1) the activity that caused it was previously authorized through an environmental impact assessment process; or (2) the limits (i.e., of emissions, etc.) established by the relevant laws or regulations were not exceeded.  (Art. 6)  Where there is a qualifying activity and harm, the Law grants standing to the following: (1) the inhabitant of the community adjacent to the environmental harm; (2) Mexican environmental non-profit organizations; (3) the federal government through its environmental prosecution office (Procuraduría Federal de Protección al Ambiente; commonly known as “PROFEPA”); and (4) the state governments through their prosecutorial offices or institutions that exercise environmental protection functions.  (Art. 28)

The Law enumerates the factors that judges must observe in the issuance of judgments, both in determining the appropriate measure of liability (Art. 39) and in the elements that a judicial decision must contain (Art. 37).  Rather than money damages, the principal restoration due under the Law is either remediation of the harm or “compensatory” investment in other environmental improvements.  For cases of intentional causation of environmental harm, in addition to requiring restoration, courts may assess “economic sanctions” (apparently a counterpart to punitive damages) ranging from 300 to 50,000 (for individuals) or 1,000 to 600,000 (for companies) times the daily minimum wage in Mexico City.  (Art. 19)  The Law provides for two forums in addition to the existing court system: first, the Law envisions the creation of District courts specialized in environmental issues to be established within two years (Art. 30; Third Transitory Art.); second, the Law encourages the use of alternative dispute resolution in parallel with formal judicial proceedings (Arts. 47-51).   The statute of limitations for bringing actions under the Law is twelve years from the date on which the environmental harm and its effects were caused.  (Art. 29)

Reference Sources (in Spanish):

Mexico Regulates Vehicle Greenhouse Gas Emissions

A new Official Mexican Standard (Norma Oficial Mexicana; “NOM”), NOM-163-SEMARNAT-ENER-SCFI-2013, limits the emissions of greenhouse gases allowed from passenger vehicles and light trucks sold in Mexico.  The emission limits are mandatory for new vehicles up to 3, 857 kilograms, and apply to the fleets of vehicles sold by a given company in model-years 2014-2016; however, companies that sell less than 500 vehicles per model-year are exempt.  (Art. 2)  The bulk of NOM-163 sets forth the parameters and methodology used to calculate corporate targets and actual averages of carbon dioxide emissions (reported in grams of carbon dioxide per kilometer) and its equivalent in terms of fuel efficiency (reported in kilometers per liter).  Companies that registered sales of between 501 and 2,500 vehicles in 2012 may opt for an alternative, potentially less stringent program that requires emissions reductions of approximately 25% from 2012 levels.  (Art. 6)  A credit system will be established in order to incentivize the use and development of high-efficiency vehicles.  (Art. 5.5.2)

Reference Sources (in Spanish):

Mexico Issues Product Stewardship Requirements for Plastics

Through a May 21, 2013, decree (the “Decree”) amending the General Law for the Prevention and Integral Management of Wastes (Ley General para la Prevención y Gestión Integral de los Residuos; the “Waste Law”), Mexico has enacted product stewardship requirements for plastics at both the beginning and end of their life.  The Decree provides for the issuance of Official Mexican Standards (Normas Oficiales Mexicanas; “NOMs”) that establish environmental and technical criteria for the plastic and expanded polystyrene materials used in products and packaging and which becomes wastes.  (Art. 7(VI))  The NOMs must consider the principles of reduction, recycling and reuse.  Unlike the technical standards of most countries, most NOMs stand as binding law (i.e., without being incorporated by legal provisions), so criteria developed in Mexico can potentially have a direct impact on materials used internationally.  At the end of life, the Decree subjects plastics and expanded polystyrene to the producer take-back requirements that apply to special management wastes.  (Art. 28)  For certain circumstances, plastics and expanded polystyrene had already been included in the regulation on special management waste take-back plans, NOM-161-SEMARNAT-2011, issued in February 2013.  Their inclusion in the Waste Law may be intended to backfill a legal gap, and could also be used as authority to expand take-back requirements for these materials.

Reference Sources (in Spanish):

Mexico Will Establish Voluntary Sustainability Certification for Goods and Services

On May 24, 2013, Mexico amended its General Law of Ecological Balance and Environmental Protection (Ley General del Equilibrio Ecológico y la Protección del Ambiente; “LGEEPA”) to provide for the establishment of a certification and labeling program for environmentally sustainable goods and services.  Specifically, LGEEPA now directs the Secretariat of Environment and Natural Resources (Secretaría del Medio Ambiente y Recursos Naturales; “SEMARNAT”) “to promote the identification of those products, goods, inputs and services with lesser environmental impact.”  (Art. 37 bis)  Such identification would be through a voluntary marking or certificate, and would have to be based on environmental criteria taking into account the life cycle of the product or service to be certified.  The new LGEEPA text also includes a broadly worded directive for SEMARNAT to issue regulations on the “requirements, specifications, conditions, procedures, goals, parameters and permissible limits that must be observed . . . in the use of natural resources, in the development of economic activities, in the production, use and disposition of goods, in inputs and in processes.”  (Art. 36)

Reference Sources (in Spanish):

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Watt’s New? Michigan Energy Law News – August 2013

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Natural Gas Power Plant Approval Case Gets Started

The first hearing at the Michigan Public Service Commission (MPSC) regarding the application of Consumers Energy to build a 700 MW natural gas-fired power plant (Case U-17429) occurred August 19. Twelve intervenors were granted party status: the Michigan Energy Innovation Business Council; Energy Michigan; Attorney General for the State of Michigan; Association of Businesses Advocating Tariff Equity (ABATE); Midland Cogeneration Venture Limited Partnership; Renaissance Power LLC; New Covert Generating Company LLC; Interstate Gas Supply, Inc.; First Energy Solutions Corp.; Michigan State Utility Workers Council; Sierra Club; National Resources Defense Fund; and Michigan of Environmental Council.  Potential issues to be raised by the interveners include the assumptions in the filed Integrated Resource Plan on:

  • alternative and renewable energy generation availability and costs;
  • the limitations of the customer choice program;
  • the closure of seven coal plants with a total capacity of 950 MW; and
  • the impact of energy optimization and conservation on future load demand.

ABATE has indicated it will be filing a Motion for Summary Judgment seeking the dismissal of the application, asserting that Consumers Energy has not properly shown a need for a new power plant. Assuming the case is not dismissed, a schedule has been set calling for cross examination of witnesses the second week of December, and a decision by the MPSC on or before the 8th of April, the statutory deadline for a decision on the Certificate of Necessity request. See www.tinyurl.com/mpsc-conDeep Water Offshore Floating Wind Turbines Showcased On August 15 Detroit-based Charles Nordstrom, P.E. of Glosten Associates Inc. (naval architects and marine engineers out of Seattle) presented the latest design and deployment plans for the Pelastar floating wind turbine system at the Michigan Alternative and Renewable Energy Center in Muskegon.

Emphasizing the opportunity to locate near load demand, Nordstrom explained the system avoids the difficulties of offshore construction and assembly by allowing the floating platform to be build dockside, with tower, nacelle and blades attached by a land-based crane. The entire assembly is then floated to its location and tethered to the lake or sea bed. The first 6 MW demonstration project, supported by Alstom Wind, NREL, BP, Rolls-Royce, Shell, Caterpillar, and others is targeted for offshore at Cornwall, England, in late 2015. Cost of energy estimates for first generation offshore wind farms is $0.170 per kWh, and below $0.13 in the second generation design for 10 MW wind turbines. The floating platform must be in at least 50m of water depth, and can be deployed at up to 500m depth.

Cellulosic Ethanol Plant Loses Partner

Mascoma Corporation has lost a major funding source in its efforts to build a 20 million gallon ethanol plant in Kinross. Valero Energy Crop has pulled its $50 million investment in the project. An IPO for Mascoma that would have raised $100 million has been placed on hold. The company has stated it will not proceed with the project until all funding is secured.  The total cost for the facility, which has $120 million in public funding pledged, is $232 million.

Anaerobic Digester Opens at MSU

Michigan State University has commissioned an anaerobic digester to create energy for its East Lansing campus. The digester will utilize about 17,000 tons of organic waste to generate 2.8 million kilowatt hours of electricity per year. The organic material used by the system includes cow manure, food waste from several campus dining halls; fruit and vegetable waste from the Meijer Distribution Center in Lansing; and fat, oils and grease from local restaurants. It will take 20 to 30 days to digest the material in the 450,000 gallon tanks. Total cost of the project was about $5 million, and is expected to pay for itself in less than 15 years. MSU is also involved in a similar project in Costa Rica. that will provide power to a local village.

MIchigan Shorts

Orisol Energy US, Inc. of Ann Arbor has been named as one of eight wind developers eligible to participate in the upcoming lease sale of 112,8000 acres of offshore Virginia for commercial wind energy leasing  Ω  DTE Energy plans to construct a 502 kw ground-mounted solar installation in Sigel Township on farm acreage as part of its 15 MW utility-owned solar initiative  NextEnergy has its MATch (Michigan Accelerating Technologies) Energy Grant program to provide matching funds for federal gudning of advanced energy research, development, and demonstration programs

University of Michigan has received a National Science Foundation four-year, $2 Million grant to determine what combinations of algae make the most efficient fuel source Lights Out at Detroit’s Municipal Utility? The Detroit Public Lighting Department (PLD) currently serves 115 customers, including: Detroit Public Schools; Joe Louis Arena; Cobo Hall; the Detroit Institute of Arts; Wayne State University; McNamara Building Federal Building; and the city’s traffic signal system (almost 1300 intersections).

The Detroit Emergency Manager recently notified DTE Energy Company that PLD will be winding down its electricity distribution and transmission services and requested that DTE provide service to PLD’s customers. The switchover will take five to seven years, as DTE will replace the PLD grid over time. How DTE will recover the costs of the transfer and upgrades has become an issue to be decided by the MPSC in Case No. U-17427. See www.tinyurl.com/mpsc-pld

The Incredible Shrinking Renewable Energy Surcharge

Consumers Energy is asking to eliminate its authorized renewable energy surcharge beginning in July 2014. The residential charge under PA 295, was initially pegged at $2.50/month, then lowered twice to its current $0.52/month charge. Meanwhile DTE Energy has asked the Michigan Public Service Commission to lower its monthly residential renewable energy surcharge from $3/month to $0.43/month. Commercial and industrial surcharge reductions are also being requested by both utilities.

Made in Michigan Microgrid Under Development

In 2006, NextEnergy in Detroit was contracted by TARDEC and the Defense Logistics Agency to develop equipment to provide US-grid quality power in remote locations using renewable and conventional power sources. Although the project was successfully tested, it was too large and too heavy to be deployed in the field, as it required a 20-foot long container for shipping. But the concept of an intelligent management for remote power systems had been proven and the Tactical Modular Mobile Microgrid was born. TM3 Systems of Royal Oak is now working to reduce the size and commercialize the concept. The building blocks for its system are four-foot cubes capable of managing up to 360 kW of generation. By metering and controlling both inputs (generators, solar panels, and battery banks), and outputs (downstream loads), this “microgrid,” is more reliable, efficient, configurable, and controllable than a typical remote power system. It can use dissimilar power sources (fossil fuel generators, solar arrays, and batteries) to reduce fuel consumption while supplying uninterrupted power to critical assets in remote location.

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New Rules on Use of Child Models in New York

 

Katten Muchin

Historically, the laws in New York State regulating the employment did not include child models. However, the New York State Senate and Assembly has recently voted to pass legislation to ensure that child models will now be afforded the same protections as “child actors, dancers and musicians” working in New York. Such legislation, once signed into law, is expected to have a significant impact on the fashion industry.

Specifically, the new legislation will provide that companies employing models under the age of 18 will be required to obtain certificates of eligibility, to provide chaperones and tutors and to limit their work hours. In addition, the new legislation sets forth several new protections for child models, including: (1) if the model is under the age of 16, a “responsible person” must be designated to monitor the activity and safety for each model at the work place; (2) an employer must provide a nurse with paediatric experience (only applicable to infants); (3) employers must provide teachers and a dedicated space for instruction (generally, provided that the employment takes place on a school day and the child performer is not otherwise receiving educational instruction due to his or her employment schedule); (4) employers must provide safety-based instruction and information to performers, parents/guardians and responsible person(s); and (5) a trust must be established by a child performer’s parent or guardian and an employer must transfer at least 15% of the child’s gross earnings into the trust.

Further, child models will now also need to obtain work permits which would require not only the written consent of a parent or guardian, but also evidence that the model is maintaining the standards of academic performance from their enrolled school. The new requirements will be in addition to work hour regulations for child performers (which differ based on age, whether school is in session, and whether the performance is live or recorded) and limitations on the times along with the total number of hours that a child model can work.

Additionally, the employer must provide for meal and certain rest periods. Although the legislation does not specifically mention “fit models”, the spirit of the legislation is to ensure that child models have the same protections as other child performers. Therefore, it would be prudent for fashion companies to treat fit models in the same manner as runway and print models.

Once implemented, these regulations will be overseen by the Department of Labor which possesses far greater resources to enforce regulations than the Department of Education (which was the agency previously overseeing the regulations pertaining to the employment and education of child models in New York). Accordingly, companies employing young fashion models should be aware of, and anticipate planning for, the implementation of new legislation in New York (and any similar legislation in the jurisdictions in which they are based).

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Is Obesity A Disease? The American Medical Association Says “Yes”; The Americans with Disabilities Act Says . . .

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In June 2013, the American Medical Association (AMA) declared obesity a disease. The president of the AMA gave several reasons for this declaration[1] “[R]ecognizing obesity as a disease will help change the way the medical community tackles this complex health issue.” The AMA president emphasized that classifying obesity as a disease could encourage people to pay attention to the seriousness of obesity, increase the dialogue between patients and physicians, and result in greater investments in research.

The Americans with Disabilities Act (ADA) was amended, effective January 1, 2009, to greatly expand the coverage of the act. Employers and individuals continue to observe how the Equal Employment Opportunity Commission (EEOC) and courts interpret and implement the amendments. Obesity is one condition that continues to be affected by the amendments.

In the original regulations implementing the ADA, the EEOC stated that “except in rare circumstances, obesity is not considered a disabling impairment.” 29 C.F.R. § 1630.16 App. (§ 1630.2(j)). Similarly, in its pre-amendment Compliance Manual, the EEOC stated that normal deviations in height, weight or strength are not impairments. However, “severe obesity,” which the Compliance Manual defined as “100% over the norm,” is “clearly an impairment,” although whether obesity rises to the level of “disability” is, like all impairments, determined by the substantial limitations test. The EEOC also noted that persons who are severely obese may have underlying or related disorders such as hypertension or thyroid disorder which do qualify as impairments.

The EEOC’s March 2011 regulations, which reflect changes made by the ADA Amendments, retain the statement that “[t]he definition of the term ‘impairment’ does not include physical characteristics such as . . . height, weight, or muscle tone that are within ‘normal’ range and are not the result of a physiological disorder.” This statement, however, does not prevent obesity from being considered a disability under the amended ADA. The ADA requires an individual assessment of the individual to determine whether he or she is disabled.

There are two principal ways in which the amendments increase the likelihood that obesity will be considered a disability under the ADA: (i) broader standards under the “substantial limitations” test and (ii) individuals no longer need to show that they are actually disabled to prevail under the “regarded as” disabled prong.

The substantial limitation test and major life activities

To qualify for protection under the ADA, an individual must show that he or she is disabled—substantially limited in a major life activity. The amendments were, in large part, a legislative response to courts’ narrow interpretation of what constituted a substantial limitation.[2] Significantly, “‘[s]ubstantially limits’ is not meant to be a demanding standard.”[3]

In combination with an expanded interpretation of major life activities, which include walking, standing, sitting, reaching, lifting, bending, breathing and working as well as major bodily functions including digestive, respiratory, circulatory functions, it is likely that many individuals whose weight restricts them from performing these activities or is a result of the dysfunction of a bodily system will be disabled within the meaning of the amendments.[4]

“Regarded as” disabled

An individual may be illegally discriminated against under the ADA if he or she suffers an adverse employment action because his employer considers him to be disabled. Under the ADA amendments, the individual does not need to show that she is actually disabled, or that she is substantially limited in a major life activity—simply that her employer thought that she was and took adverse action based on that perception.

For example, in 2010 a Mississippi district court allowed Ms. Lowe, an obese receptionist, to proceed with her ADA “regarded as” claim because her former employer harassed her based on her use of disabled parking.[5] The court stated that under the amendments “an individual is now not required to demonstrate that the disability she is regarded as having is an actual qualified disability under the ADA or that it substantially limits a major life activity.” Instead, the plaintiff was only required to show that “she has been subjected to an action prohibited under [the ADA] because of an actual or perceived physical or mental impairment whether or not the impairment limits or is perceived to limit a major life activity.”

Significantly, “a plaintiff now might be considered disabled due to obesity under the ADA if her employer perceived her weight as an impairment.” Therefore, employers should take care not to assume that employees are unable to complete tasks simply because of their weight. The ADA also prohibits discrimination in hiring, so employers should not decline to hire an individual simply because he or she is obese.

The ADA does not apply to individuals who cannot perform the essential functions of their job because of a medical condition, including obesity. As with all medical conditions, employers must identify the job responsibilities that employees are not able to complete and engage in a dialogue with the employee about accommodations that will allow the employee to perform these functions. If employees cannot perform their essential job functions with accommodation, employers may take adverse employment actions based on the performance failures.

[1] Ardis D. Hoven, Obesity As a Disease?, Huffington Post, June 28, 2013, www.huffingtonpost.com/ardis-d-hoven-md/obesity-as-a-disease_b_3518956.html.

[2] See Regulations to Implement the Equal Employment Provisions of the American With Disabilities Act, as Amended, 76 Fed. Reg. 16981 (March 25, 2011) (stating that, in the ADA Amendments Act Congress “simply indicates that ‘substantially limits’ is a lower threshold than ‘prevents’ or ‘severely or significantly restricts,’ as prior Supreme Court decisions and the EEOC regulations had defined the term”.

[3] 29 C.F.R. § 1630.2(j)(1)(i).

[4] Although some courts impose a requirement that the individual be “severely obese” or have a weight “outside the normal range” to be disabled, the amendments likely supersede any such requirement for individuals who can show that their weight substantially limits a major life activity or is the result of the dysfunction of a major bodily function. Compare BNSF Ry. Co. v Feit, 2013 WL 1855832 (D. Mont. May 1, 2013) (relying on the repealed EEOC compliance manual for the definition of “severely obese”); with EEOC, Section 902 Definition of the Term Disability, available at: http://www.eeoc.gov/policy/docs/902cm.html (stating that the definition has been removed from the website because “the analysis in it has been superseded by the ADA Amendments Act.”).

[5] Lowe v. American Eurocopter LLC, No. 1:10CV24-A-D, 2010 U.S. Dist. LEXIS 133343 (N.D. Miss. Dec. 16, 2010).

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Could Your Business Qualify for a 179D Green Building Tax Break?

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If your company has built a new facility or upgraded an existing one anytime in the past six years, you might find that you qualify — at least partially — for a tax break of up to $1.80 per square foot under federal tax code section 179D, or the energy efficient commercial buildings deduction. This could be the case even if you had no concrete intention to focus on green building standards at the time.

A couple of great features of this deduction are, first, that you might be able to substantially mitigate your tax burden  as far back as six years and, second, it’s very likely that you will qualify if your facility exceeds 50,000 square feet and it meets current state building codes, according to a business tax writer for Forbes, who spent eight years as the U.S. Senate Finance Committee’s tax counsel.

The 179D tax deduction gives the business an immediate deduction in the current year plus a basis reduction for the value of the facility, which can be anything from a warehouses or parking garage to an office park or a multi-family housing unit. For private-sector projects, the building owner, assuming it paid for the construction or improvements, generally gets the deduction. In public projects, the architect, engineer or contractor can obtain it by seeking a certification letter from the government unit. Nonprofits and native American tribes are not eligible.

The green building deduction was created in recognition of the fact that around 70 percent of all electricity used in the U.S. is consumed by commercial buildings. The deduction, which is up for renewal — and possible expansion — this year, has already proven that efforts to mitigate the tax burden of businesses in a technology-neutral way is an effective way to encourage energy efficiency, according to the Forbes writer.

What improvements must be made to qualify for the green building credit? Currently, the new or renovated building merely needs to exceed the 2001 energy efficiency standards developed by the American Society of Heating, Refrigerating and Air Conditioning Engineers, or ASHRAE — and most state building codes already require this. That means the vast majority of new and improved buildings already meet this requirement.

It’s also possible to partially qualify for the deduction by meeting the standards only for the building envelope itself, which includes HVAC, the hot water system, and the interior lighting system. A building could qualify based upon only one of these systems, or all three.

Source: Forbes, “179D Tax Break for Energy Efficient Buildings — Update,” Dean Zerbe, Aug. 19, 2013

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Complying with the Affordable Care Act’s Exchange Notice Requirement

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The Patient Protection and Affordable Care Act (the “Act”) amends the Fair Labor Standards Act (“FLSA”) to require employers of all sizes to provide their employees a notice of the availability of coverage through public health insurance exchanges by March 1, 2013.1 In January of this year, the U.S. Department of Labor, the agency charged with administering the FLSA, announced a delay in the effective date of the notice to the “late summer or fall of 2013.”2 In Technical Release No. 2013-02 (entitled, “Guidance on the Notice to Employees of Coverage Options under Fair Labor Standards Act §18B and Updated Model Election Notice under the Consolidated Omnibus Budget Reconciliation Act of 1985”),3 the Labor Department provided details about the FLSA exchange notice requirement. The effective date of the requirement is now October 1, 2013 for current employees or within 14 days of an employee’s start date for employees hired after that date.

Background

The FLSA exchange notice must include a description of the existence of, and services provided by, public exchanges. That Act further requires that the notice:

  • Explain how the employee may be eligible for a premium tax credit or a cost-sharing reduction if the employer’s plan does not meet certain requirements;
  • Inform employees that if they purchase a qualified health plan through the exchange, then they may lose any employer contribution toward the cost of employer-provided coverage, and that all or a portion of the employer contribution to employer-provided coverage may be excludable for federal income tax purposes;
  • Include contact information for customer service resources within the exchange, and an explanation of appeal rights;
  • Meet certain accessibility and readability requirements; and
  • Be in writing.

The Department has provided two model notices — one for employers who offer a health plan4 to some or all employees and another for employers who do not.5 The model notice for employers who offer a health plan includes two parts. Part A (entitled “General Information”) tracks the requirement of the statute. Part B (entitled, “Information About Health Coverage Offered by Your Employer”) solicits information about the employer’s group health plan coverage that is intended to assist employees who apply for subsidized coverage under a group health plan product offered through the exchange. Part B includes an optional section that asks the employer to disclose whether the health care coverage offered meets the minimum value standard and whether the cost of coverage is intended to be affordable. While not required, employers may decide to complete this part of the notice in order to avoid having to respond to inquiries from exchanges seeking to process an individual’s application.

The notice requirement applies to all employers who are subject to the FLSA. In general, the FLSA applies to employers that employ one or more employees who are engaged in, or produce goods for, interstate commerce. For most firms, a test of not less than $500,000 in annual dollar volume of business applies. The FLSA also specifically covers the following entities, regardless of dollar volume of business: hospitals; institutions primarily engaged in the care of the sick, the aged, mentally ill, or disabled who reside on the premises; schools for children who are mentally or physically disabled or gifted; preschools, elementary and secondary schools, and institutions of higher education; and federal, state and local government agencies. (For an explanation of the reach of the FLSA, please see http://www.dol.gov/compliance/guide/minwage.htm.)

Timing and Delivery of Notice

Under the heading “Timing and Delivery of Notice,” Technical Release No. 2013-02 provides as follows:

Employers are required to provide the notice to each new employee at the time of hiring beginning October 1, 2013. For 2014, the Department will consider a notice to be provided at the time of hiring if the notice is provided within 14 days of an employee’s start date. With respect to employees who are current employees before October 1, 2013, employers are required to provide the notice not later than October 1, 2013. The notice is required to be provided automatically, free of charge.

The notice must be provided in writing in a manner calculated to be understood by the average employee. It may be provided by first-class mail. Alternatively, it may be provided electronically if the requirements of the Department of Labor’s electronic disclosure safe harbor at 29 CFR 2520.104b-1(c) are met.

(Emphasis added).

The reference to “employees” means all employees, full-time and part-time, but there is no need to provide notices to dependents. Nor does the notice have to be provided to former employees or other individuals who are not employees but may be eligible for coverage (e.g., under COBRA).

The question of who, exactly, is an employee is an important one. The Act’s exchange notice requirement amends the FLSA. Thus, while the Internal Revenue Code and ERISA look to the “common law” standard, applicable court precedent interpreting the FLSA’s use of the term “employee” relies on the broader, “economic realities” test. Accordingly, an individual is an “employee” for FLSA purposes if he or she is economically dependent on the business for which he or she performs personal services. Thus, individuals properly classified as independent contractors for tax purposes may nevertheless be employees (to whom notice must be provided) for FLSA purposes.

Delivery can be in hand or by first class mail. Delivery may also be made electronically under the Department of Labor’s “electronic disclosure safe harbor at 29 CFR 2520.104b-1(c).” The regulations at 29 CFR 2520.104b-1 provide a safe harbor under which electronic delivery is permitted to employees who have the ability to effectively access documents furnished in electronic form at any location where the employee is reasonably expected to perform duties as an employee and with respect to whom access to the employer’s or plan sponsor’s electronic information system is an integral part of those duties. Under the safe harbor, other individuals may also opt into electronic delivery.

Enforcement

The Act does not appear to impose any separate penalty for ignoring the exchange notice requirement. The FLSA authorizes administrative actions, civil suits and criminal prosecutions for violations of pre-existing FLSA sections, but not, it seems, for this requirement. This does not mean, of course, that noncompliance is a good idea or even a viable option. The lack of penalties does not translate into a lack of consequences. Plan sponsors still have a fiduciary obligation to be forthcoming with plan participants and beneficiaries. (This situation is similar to the rules governing the distribution of summary plan descriptions — while not technically required, there are many good reasons to comply.)

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U.S. Department of Labor (DOL) Clarifies Family and Medical Leave Act (FMLA) Leave Entitlement for Same-Sex Spouses

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In the wake of the Supreme Court’s Windsor decision, employers should review and, if necessary, revise their FMLA policies and procedures to ensure compliance.

The U.S. Department of Labor (DOL) recently clarified that same-sex spouses are now covered by the Family and Medical Leave Act (FMLA) to the extent that an employee’s marriage is recognized in the state in which the employee resides. This clarification, which follows the U.S. Supreme Court’s decision in United States v. Windsor,[1] is consistent with the existing FMLA regulatory language defining a “spouse” for purposes of FMLA coverage.

The DOL did not issue any new formal, stand-alone guidance but instead revised several existing FMLA guidance documents to remove references to the Defense of Marriage Act (DOMA). It also affirmatively stated in a newly released Field Operations Handbook section on the FMLA that “[s]pouse means a husband or wife as defined or recognized under state law for purposes of marriage in the State where the employee resides, including common law marriage and same sex marriage.”

Moving forward, FMLA spousal leave will only be available to employees who reside in a state that recognizes same-sex marriage, given that the existing FMLA regulatory language tied spousal coverage to the place of residence prior to the Windsor decision. However, the U.S. Office of Personnel Management (OPM), which has jurisdiction over FMLA rights for federal employees, recently issued post-Windsor guidance that extends FMLA leave rights to the spouses of federal employees without regard to states of residence.[2] OPM’s approach could eventually be followed by DOL for private sector employees and those employees otherwise covered by DOL rules but likely would require regulatory changes that would involve a notice and comment period.

It is worth noting that, while DOL’s clarification reflects a general increase in federal FMLA leave rights available to same-sex couples, in some circumstances, the availability of FMLA leave rights could mean a decrease in a given employee’s overall leave entitlement. For example, same-sex spouses residing in states recognizing same-sex marriage will now be subject to the FMLA’s restrictions on the combined amount of leave that spouses working for the same employer can use in certain circumstances. Similarly, an employee might have been entitled pre-Windsor to leave pursuant to state (but not federal) law to care for a same-sex spouse, which meant that the employee’s state and federal leave entitlements could not be exhausted concurrently.

Conclusion

In light of DOL’s updated guidance, employers should make sure that their FMLA policies allow spousal leave for employees in a same-sex marriage that is lawful in the state in which the employee resides. Employers, however, will need to think carefully about how they will administer such policies to avoid both employee relations issues and sexual orientation discrimination claims. For example, if an employer does not request documentation from an employee in an opposite-sex marriage as to whether the employee’s marriage is recognized in the state in which he or she resides, issues may arise if this information was requested of an employee in a same-sex marriage. While some employers may choose simply to grant FMLA leave to all employees regardless of domicile, employers need to be aware that such time may not be recognized as statutory FMLA leave. Employers should also pay close attention to future developments in this area as more states consider recognizing same-sex marriages.

[1]. United States v. Windsor, 133 S. Ct. 2675 (2013).

[2]. See U.S. Office of Personnel Admin., Benefits Administration Letter No. 13-203, Coverage of Same-Sex Spouses (July 17, 2013).

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Health Insurance Portability and Accountability Act/Health Information Technology for Economic and Clinical Health (HIPAA/HITECH) Compliance Strategies for Medical Device Manufacturers

Sheppard Mullin 2012

As computing power continues to become cheaper and more powerful, medical devices are increasingly capable of handling larger and larger sets of data. This provides the ability to log ever expanding amounts of information about medical device use and patient health. Whereas once the data that could be obtained from a therapeutic or diagnostic device would be limited to time and error codes, medical devices now have the potential to store personal patient health information. Interoperability between medical devices and electronic health record systems only increases the potential for medical devices to store personal information.

The concern has become so significant that the U.S. Food and Drug Administration recently issued a draft guidance and letter to industry noting concerns associated with theft or loss of medical information by cybersecurity vulnerable devices. For a more detailed discussion of this issue, see last month’s blog post.

This raises another important issue for medical device manufacturers and health care providers: medical device compliance with the Health Insurance Portability and Accountability Act (HIPAA) and the Health Information Technology for Economic and Clinical Health (HITECH) Act. Compliance with HIPAA and HITECH has become a major concern for hospitals and health care providers, and will increasingly be an issue that medical device manufacturers will need to deal with.

A medical device manufacturer needs to answer three questions in order to determine whether the collection of patient information by a medical device is subject to HIPAA and HITECH:

  • Does the information qualify as Protected Health Information?
  • Is a Covered Entity involved?
  • Does a Business Associate relationship exist with a Covered Entity?

Protected Health Information

Protected Health Information (PHI) is individually identifiable health information transmitted or maintained in any form or medium.[1] Special treatment is given to electronic PHI, which is subject to both the HIPAA Privacy Rule, and the Security Rule (which only applies to electronic PHI). To be “individually identifiable,” the PHI must either identify the individual outright, or there must be a reasonable basis to believe that the information can be used to identify the individual.[2]

“Health information” is any information (including genetic information) that is oral or recorded in any form or medium, and meets two conditions.[3] First, the information must be created or received by a health care provider, health plan, public health authority, employer, life insurer, school or university, or health care clearinghouse.[4] Second, the information must relate to the past, present, or future physical or mental health or condition of an individual, or the provision or payment of health care to an individual.[5]

If data collected by a medical device does not meet the definition of “individually identifiable,” or “health information,” it is not covered under HIPAA and HITECH. For example, a medical device that logs detailed medical diagnostic information about a patient, but includes no means by which that information may be traced to the patient, the data would likely fall outside of HIPAA and HITECH. Alternatively, a medical device, such as a mobile medical app, may request that a user provide detailed medical information about himself or herself. Provided that information is requested outside of the context of a health care provider, health plan, public health authority, employer, life insurer, school or university, HIPAA and HITECH similarly would likely not apply.

Covered Entities and Business Associates

There are two types of persons regulated by HIPAA and HITECH: “Covered Entities” and “Business Associates.” A Covered Entity is a health plan, a health care clearinghouse, or a health care provider who transmits any health information in electronic form in connection with a covered transaction.[6] A Business Associate is a person who either creates, receives, maintains, or transmits PHI for a regulated activity on behalf of a covered entity, or provides legal, actuarial, accounting, consulting, data aggregation, management, administrative, accreditation, or financial services to a covered entity, where the service involves the disclosure of PHI.[7]

Therefore, at a minimum, in order to be subject to HIPAA and HITECH a Covered Entity needs to be involved. For example, medical devices sold directly to consumers for personal use would generally not be subject to HIPAA and HITECH.

Conversely, just because a medical device manufacturer is not a “Covered Entity,” HIPAA and HITECH may apply through a Business Associate relationship. Business Associates include Health Information Organizations, E-prescribing Gateways, and others that provide data transmission services with respect to PHI to a covered entity, and that require access on a routine basis to PHI.[8] Business Associates also include persons that offer PHI to others on the behalf of a covered entity, or that subcontract with a Business Associate to create, receive, maintain, or transmit PHI.[9]

[1] 45 C.F.R. § 160.103 “Protected health information”.

[2] 45 C.F.R. § 160.103 “Individually identifiable health information” (2)(i) and (ii).

[3] 45 C.F.R. § 160.103 “Health information”.

[4] 45 C.F.R. § 160.103 “Health information” (1).

[5] 45 C.F.R. § 160.103 “Health information” (2).

[6] 45 C.F.R. § 160.103 “Covered entity”.

[7] 45 C.F.R. § 160.103 “Business associate” (1).

[8] 45 C.F.R. § 160.103 “Business associate” (3)(i).

[9] 45 C.F.R. § 160.103 “Business associate” (3)(ii) and (iii).

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White House Previews List of Incentives to Support Adoption of its Cybersecurity Framework

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As its latest step in a broader effort to prioritize cybersecurity, the White House released last week a list of possible incentives that may be offered to companies that own or operate critical infrastructure systems and assets to encourage adoption of a national Cybersecurity Framework, scheduled for release in February 2014. The list of possible incentives—which the Departments of Homeland Security, Commerce, and Treasury identified in response to a February 12, 2013 Executive Order—includes grants, liability limitation, public recognition, and cybersecurity investment rate recovery, among others. Some of the identified incentives could be created from existing federal agency authorities, while others would require legislative action from Congress. Over the next few months, agencies will seek input from critical infrastructure stakeholders in examining their preliminary lists and determining which to implement and how.

In the same February 12, 2013 Executive Order, the President directed the National Institute of Standards and Technology (NIST), an agency of the Department of Commerce, to lead the development of a national Cybersecurity Framework to reduce cyber risks to critical infrastructure. The President called for the Framework to include a set of standards, methodologies, procedures, and processes that align policy, business, and technological approaches to address cyber risks, and directed NIST to incorporate voluntary consensus standards and industry best practices to the fullest extent possible. NIST released a draft outline of the Framework on July 1, 2013, and a full draft of the Framework is scheduled for release in October.

Exactly how the Cybersecurity Framework will interact with or complement the North American Reliability Corporation (NERC) Critical Infrastructure Protection (CIP) standards is unclear. The Cybersecurity Framework is intended to provide cross-sector security standards, while the NERC CIP standards were developed by, and for the use of, the electricity sub-sector. The Administration intends for NIST to consult its peers, as the President directed the Secretary of Homeland Security to “engage and consider the advice” of sector-specific and other relevant agencies. The Secretary must also identify areas for improvement that should be addressed through future collaboration with particular sectors and standards-developing organizations, which would presumably include NERC. Whether NERC has been consulted and how their input thus far has been considered is unclear.

In its draft outline of the Cybersecurity Framework, NIST indicates that the voluntary program is intended to complement rather than to conflict with current regulatory authorities, and the draft compendium, attached to the outline, includes reference to the NERC CIP Standards. In fact, NERC submitted comments in response to NIST’s February 26, 2013 Request for Information seeking input to help shape the draft Framework. However, the content of the Framework is still unknown, and until the draft is released in October, the exact relationship between the two sets of standards remains uncertain. In the meantime, as NERC stated in its comments to NIST, NERC feels strongly that a second set of potentially conflicting or redundant standards could create undue hardship on the electricity sub-sector. NERC also stated that, “while a framework of cybersecurity standards that is applicable to all sectors is possible, the framework may need flexibility to have certain common elements to be valuable or effective. Some sectors, such as the electricity sub-sector, are far more advanced in their cybersecurity efforts; other sectors may need time to meet minimum (voluntary) standards. The framework must build on existing standards and programs to develop a comprehensive approach to cybersecurity.”

As national-level cybersecurity efforts have progressed this year, so have NERC’s efforts to improve the CIP standards. NERC Reliability Standards are generally written as performance standards; that is, they prescribe a measurable end-state or goal, and attempt to remain technology- and method-neutral. However, utilities widely criticized earlier versions of the standards as being focused primarily on compliance documentation as opposed to security principles. With input from stakeholders, NERC significantly revised its CIP standards in Version 5, which were filed with FERC on January 31, 2013. Much of industry considers the revised CIP program to be an improved framework for critical asset cybersecurity protection, with a renewed risk-based focus on security. NERC stated that it stands ready to share its industry-driven approach with NIST as it endeavors to develop the Cybersecurity Framework.