Category: Labor & Employment

NLRB’s Acting General Counsel Releases Another Report on Social Media Policies

An article by Steve L. Hernández of Barnes & Thornburg LLP recently had an article regarding NLRB’s Social Media Policies in The National Law Review:

On May 30, 2012. Lafe Solomon, the NLRB’s Acting General Counsel (the “AGC”), released a third report on social media cases brought before the Board. This report deals with seven different cases involving social media policies, covering topics such as the use of social media and electronic technologies, confidentiality, privacy, protection of employer information, intellectual property, and contact with the media and government agencies. In the first six policies reviewed, the AGC concluded that at least some of the provisions in the employers’ policies and rules were overbroad and, accordingly, unlawful, under the National Labor Relations Act (NLRA). Importantly, the Board found that the savings clauses in these otherwise unlawful policies did not save the policies. Only the final social media policy reviewed by the AGC was found to be entirely lawful. In finding the final reviewed policy lawful, the AGC pointed to the policies substantial use of examples of allowed and proscribed behavior. Specifically, the AGC stated that “rules that clarify and restrict their scope by including examples of clearly illegal or unprotected conduct, such that they could not reasonably be construed to cover protected activity, are not unlawful.”

© 2012 BARNES & THORNBURG LLP

Clash of the Generations – Age Discrimination in the United Kingdom in 2012

The National Law Review recently featured an article by Katie L. Clark of  McDermott Will & Emery regarding Age Discrimination:

In Europe, many employers are currently caught in the middle of a conflict between older and younger employees.  Many older employees want to work longer (whether by choice or necessity), while younger employees feel that an aging workforce is hampering their career progression.  Both feel that that their age is being used against them.  In the United Kingdom, the repeal of default retirement ages in April 2011 has only aggravated the problem.

UK employers may lawfully use age directly or indirectly in decision-making if “justified.”  But where is the line drawn?

Two recent English Supreme Court cases provide some much-needed clarification for employers, particularly with regard to possible justifications for direct age discrimination.

Justifying Age Discrimination

Both direct and indirect age discrimination may be justified, that is, found to be lawful, if the employer can demonstrate that the discriminatory measure is “a proportionate means of achieving a legitimate aim”.  The Supreme Court in the United Kingdom has now ruled that the “legitimate aims” that can justify direct age discrimination are narrower than those that can justify indirect age discrimination.

Legitimate Aims

Indirect age discrimination covers situations in which a workplace provision, criterion or practice puts people in a particular age group (young or old) at a disadvantage.  A requirement of obtaining a degree to gain a promotion, for example, puts older people at a disadvantage because of lesser university access for prior generations.  Keeping such a policy in place will be lawful if justified by individual reasons that are particular to that employer, such as cost reductions or improving competiveness.  This gives employers flexibility to adopt legitimate measures that are appropriate to their individual business needs.

By contrast, the Supreme Court has now stated that direct age discrimination—treating an individual less favourably on grounds of his or her age or age group—may only be justified if an employer is implementing a legitimate public interest.  The Supreme Court, in examining European case law, has identified two legitimate public interests that potentially justify direct age discrimination:

  • Inter-generational fairness—i.e., measures that promote the recruitment and retention of, and the sharing of limited opportunities between, different generations
  • Dignity—i.e., avoiding the need to dismiss older workers on the grounds of incapacity or under-performance, which may be humiliating for the employee or lead to disputes

Absent a legitimate aim that falls within one of those two categories, it is highly unlikely that an employer would be able to justify direct age discrimination, such as a mandatory retirement age forcing an individual out.

Even if an employer can point to a potentially legitimate public interest, it must establish that it is in fact pursuing the relevant interest.  For example, improving the recruitment of young people is potentially a legitimate public aim, but it will not justify discriminating against older employees if the employer, in fact, has no difficulty in recruiting younger employees.

Proportionate Means

Once a legitimate aim has been established for direct or indirect discrimination, an employer will need to demonstrate that the measure adopted is proportionate.  The Supreme Court has confirmed that to be proportionate, a measure must be both an appropriate means of achieving the legitimate aim and (reasonably) necessary in order to do so.

A measure will not be appropriate if it does not achieve the proposed aim, while a measure that goes further than is reasonably necessary to achieve the proposed aim will be disproportionate and impermissible.

It may be more difficult to show proportionality if the stated aim is to preserve the dignity of employees.  Arguably, a retirement age of 65 insinuates that once employees turn 65, they are no longer able to do the jobs that they have been doing up to their 65th birthdays.  If anything, this practice reinforces rather than dispels discriminatory stereotypes, which will make it difficult to justify.

What Does This Mean for Employers?

Direct discrimination claims are harder to defend than indirect discrimination claims.  Managers need to understand that using mandatory retirement ages, while still possible, may lead to tough challenges.

The Supreme Court has provided clarification for employers on how to justify direct age discrimination, but not a definitive one-size-fits-all answer.  The identification of legitimate aims is only half the problem, and questions of proportionality will continue to be difficult to answer.

Consequently, if imposing, continuing, or relying upon age-related criteria such as mandatory retirement ages is important to you as an employer, now is a good time to talk to us about the legitimate aim that will be relied upon and how this can be demonstrated for the particular workplace as a matter of fact.

© 2012 McDermott Will & Emery

NLRB Member Flynn Resigns From Board

The National Law Review recently published an article by Scott J. Witlin of Barnes & Thornburg LLP regarding the National Labor Relations Board:

Terence Flynn, one of two Republican members on the five member NLRB, resigned from the Board Sunday, May 27, effective July 24. Flynn has been under investigation over alleged inappropriate communications regarding the Board’s internal deliberations. Flynn’s resignation will permit President Obama to appoint another remember.

By tradition, that member should be a Republican. President Obama himself was the subject of controversy earlier this year by using his recess appointment powers to fill three vacancies on the Board. Member Flynn was one of those recess appointments. More information about the resignation is available here.

© 2012 BARNES & THORNBURG LLP

No Expectation of Privacy in Emails Sent Over Employer’s Email Account, Massachusetts Court Decides

The National Law Review recently published an article by Martha J. Zackin of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. regarding Employee Emails:

Does an employer invade an employee’s privacy by accessing and reviewing the employee’s email? A recent Massachusetts Superior Court decision, Falmouth Firefighters Union v. Town of Falmouth, answers “no.”

For a two year period, the town of Falmouth, Massachusetts, used Google Gmail for its email.  Falmouth entered into a contract with Google for use of Gmail, and the town purchased the domain names used for the email accounts.  Each town employee was given a Gmail address and was responsible for managing the email sent to his or her address.  Although Falmouth’s system did not save any emails on any computer, server, or disc, it was the administrator of the email accounts.  The Gmail accounts were widely used by Falmouth employees for personal communications.

Falmouth published an email policy stating that the town maintained the ability to access any messages on or transmitted over the email system.  “Because of this fact,” the policy stated, “employees should not assume that such messages are confidential or that access by the employer or its designated representatives will not occur.”  Although there was a dispute over whether this policy was subject to collective bargaining between the town and the union representing Falmouth employees, it was clear that employees were never told that their emails were confidential.

The emails to and from the account of a Falmouth firefighter were reviewed and copied during the course of investigating a charge of sexual harassment brought against the town by a former employee.  Some of these emails contained highly personal, intimate, and embarrassing emails.  The firefighter sued, claiming that Falmouth had invaded his privacy in violation of the Massachusetts Privacy Act, which provides that “[a] person shall have a right against unreasonable, substantial or serious interference with his privacy.”  To prevail, a plaintiff must show an expectation of privacy and an unreasonable and either serious or substantial interference with that privacy.

In a case of first impression, the Court found that the firefighter had no legitimate expectation of privacy in the emails and, therefore, no invasion of privacy.  In a very interesting analysis, the Court did not reach the issue of whether the town’s email policy was properly implemented or even relevant.  Rather, and importantly, the Court found that the firefighter “did not have a reasonable expectation of privacy in the emails he voluntarily sent over the Town’s email system absent any assurances that such communications were private or confidential.”

What does this mean for Massachusetts employers?   We continue to recommend that employers implement electronic communications policies that clearly and unequivocally state that the employer has the right to access and review any and all information sent, received, or maintained on any employer-owned or maintained electronic devices or systems.  However, at least in Massachusetts, the absence of such policies will not restrict the rights of employers to access employee emails.

©1994-2012 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

When the Sky’s the Limit, Don’t Forget the Basics: Social Media, the Internet and Your Business

The National Law Review recently published an article by Charles H. Gardner of Much Shelist, P.C. regarding Social Media and Businesses:

In today’s diverse marketplace, social media sites, as opposed to a company’s own branded website, are poised to become a primary and potentially first point of contact with current and future generations of consumers. Techrevel.com recently reported that 56% of consumers who use Facebook, as an example, say that they are more likely to recommend a brand after becoming a “fan.” With the number of Facebook users approaching one billion, a strong social media presence has become a de facto mandate for businesses.

In response, start up and established businesses are growing more reliant on the Internet, and social media in particular, for marketing and sales. According to a recent Forrester Research study cited on Statistica.com, social media marketing expenditure is expected to grow to $5 billion in 2016, up from approximately $1.6 billion in 2011.

In this context, you may be exploring the possibility of making your company website more interactive. From a business perspective, creating a user experience on your branded website that is simpatico with social media reanimates the end user’s experience and revitalizes your brand. From a legal perspective, however, you may wonder how to enter (or expand your presence in) this pioneer media. How do you balance the advantages of interactivity with the added burdens of creating, maintaining and updating essential privacy, data security and other policies?

You can start by asking―and answering―the following questions:

Does your website have a privacy policy that is compliant with all federal, state and territorial laws?

Federal law (and several state laws) mandates that companies inform their users about the personally identifiable information (PII) they collect, how the company uses it, with whom the company may share it, and how users may “opt-out” of having their PII collected and shared. PII includes information such as name, social security number, biometric records, etc., that alone or when combined with other information such as date and place of birth, mother’s maiden name, etc., can be used to trace an individual’s identity. Because many states have regulations that are more restrictive than federal regulations, you should seek to comply with the laws of the most restrictive states. These laws may apply not only to information that you collect from your own company website, but also from your company social media pages.

Every company with a presence on the internet should have a privacy policy that is compliant, proactive and forward thinking. If you have a strong international presence, it should address issues of global compliance as well.

If your company website is interactive or likely to become interactive, are you following proper procedures to shield the company from liability?

Consumers are likely to continue their use of third-party social media sites, including Facebook, as an interactive first point of contact with a company. However, as branded company sites begin to mirror the functionality of traditional social media sites, company sites are including interactive features from blogs and community chat rooms to video sharing  and personalized profile pages that allow the posting of user-generated content (UGC). If your website includes these or similar features, then you are, in fact, also an interactive website.

There are two important legal protections for operators of interactive computer services. The Communications Decency Act (CDA) provides safe harbor (immunity from liability) for Internet Service Providers (ISPs). This shields an ISP from liability arising out of civil causes of action such as defamation, invasion of privacy, trade libel, etc. As a very general rule, as long as the provider is not a publisher of the content (importantly, they merely provide a place to post the content; they do NOT contribute to or edit it), they will not be held liable for the original posting of the offending UGC. While the term ISP is traditionally applied to services such as Yahoo!, Google, and AOL, recent case law suggests that if you operate an interactive computer service, you should, for the practical purpose of maintaining safe harbor protection, consider yourself a sort of ISP.

The Digital Millennium Copyright Act (DMCA) also contains important safe harbor provisions. Under the DMCA, “an operator of interactive computer services” is immune from liability for intellectual property (primarily copyright) infringement by a third party using the service provided that the provider follows certain registration, compliance and procedural guidelines.

Do you post and require users to agree to your company website’s terms of use?

One of the most valuable policies for a website owner is a terms of use policy (sometimes called “house rules” or a “user agreement”). Your terms of use tell your users what they can reasonably expect when using your site. For example, you may prohibit certain activities, such as hate speech, personal attacks, posting materials to which the user does not have the requisite legal rights, etc. By setting the ground rules of what you will allow on your site, you can monitor UGC for violations of the policy and remove or refuse to post such material objectively based upon your site’s posted terms and preserve your safe harbor protection. Remember, if an ISP edits or modifies content, it is treated as a publisher of content and can lose safe harbor protection. However, if an ISP removes content in its entirety for violating a documented policy, the ISP is not considered a publisher and is protected under the CDA for example.

A well-crafted terms of use policy, if correctly written and agreed to, also forms a “contract” between the end user and the website operator. For example, arbitration clauses can minimize the likelihood of class action lawsuits and the potentially negative publicity of high-profile trials. A transparent policy can also set reasonable expectations, engender goodwill and protect the company website owner.

Do you have internal procedures and policies in place to address data security, data breaches and personnel practices?

As soon as reasonably possible, before or after your site goes live, you should discuss data security with your attorney and a qualified information technology (IT) representative. Like privacy policies, data security policies should comply with federal law and regulations, as well as the laws of the most restrictive U.S. state or territory. It is wise to have written procedures for data protection and breaches, which should be provided to any personnel who will be dealing with the company’s electronically stored information (ESI), particularly to the extent that the ESI contains end users’ PII.

You should also have a separate personnel policy that educates your employees and contractors about the use of company technology, social media and the Internet, and that protects your company without unreasonably or illegally restricting your employees’ activities.

As a practical matter, social media is no longer merely an optional business tool. It is a primary source of communication, information and advertising. Developing sound social media and technology policies as early as possible can reduce your liability and exposure and allow your company room to grow in this new online world.

© 2012 Much Shelist, P.C.

Unpaid Internships: Free Today . . . Costly Tomorrow

An article by Rachel D. Gebaide and Melody B. Lynch of Lowndes, Drosdick, Doster, Kantor & Reed, P.A. was published recently in The National Law Review:

With the summer season approaching, college and high school students will be looking for opportunities to improve their resumes and gain valuable experience. The prospect of hiring a talented student – or someone transitioning between careers – who is willing to work for free is enticing to many employers.

In many cases, however, the unpaid aspect of the internship violates the Fair Labor Standards Act (FLSA). Lawsuits by unpaid interns to recover wages, including liquidated damages and attorney’s fees, although still uncommon, are on the rise.

Unpaid internship programs can be an appropriate method of providing training if they are designed properly and are primarily for the benefit of the intern and not the employer. However, to paraphrase this week’s Time magazine article titled “Hard Labor: Inside the Mounting Backlash Against Unpaid Internships,” employers are not entitled to free labor just because they slap the title “intern” on the position.

The U.S. Department of Labor uses the six criteria below to determine whether an unpaid internship falls outside the employment context covered by the FLSA.

  • The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
  • The internship experience is for the benefit of the intern;
  • The intern does not displace regular employees, but works under close supervision of existing staff;
  • The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
  • The intern is not necessarily entitled to a job at the conclusion of the internship; and
  • The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

We recommend that you evaluate your internship programs against these six criteria prior to extending offers of unpaid employment to prospective interns. Interns are unlikely to be exempt employees under the FLSA. As a result, if your internship program does not meet all six criteria, you should plan to pay interns at least minimum wage, currently $7.67 in Florida, and, when necessary, the applicable overtime rate for hours worked over 40 in a work week.

© Lowndes, Drosdick, Doster, Kantor & Reed, PA

Court Invalidates Ambush Election Regulation

Mark A. Carter of Dinsmore & Shohl LLP recently had an article, Court Invalidates Ambush Election Regulation, published in The National Law Review:

On May 14, 2012, the United States District Court for the District of Columbia invalidated the controversial regulation of the National Labor Relations Board (NLRB) that would have dramatically reduced the time frame of union organizing campaigns from the filing of a representation petition to the representational election. Chamber of Commerce, et al. v. NLRB. The “ambush election” regulation, which was implemented on April 30, 2012, was roundly criticized because it limited the ability of employers to exercise their right under §8(c) of the National Labor Relations Act to communicate with employees regarding the impact of selecting a collective bargaining representative.

In an 18 page opinion, Judge James E. Boasberg granted summary judgment to the United States Chamber of Commerce (US Chamber) and the Coalition for a Democratic Workforce (CDW), agreeing that the NLRB did not have statutory authority to implement the regulation because the NLRB was not possessed of a quorum when the regulation was voted on. On December 16, 2011 the vote on the regulation was conducted by e-mail. While Chairman Mark Pearce and former Member Craig Becker both voted to implement the regulation, Member Brian Hayes did not vote. The US Chamber and the CDW argued that as Member Hayes did not “participate” in the vote, there was not a quorum of three NLRB members on the vote, and as such, the implementation was invalid. The NLRB argued that as Hayes had an “opportunity” to vote, the NLRB did have a quorum and, therefore, the regulation was validly implemented as a quorum existed.

The Court disagreed, citing a Woody Allen observation that “eighty percent of life is just showing up.” The Court held that the statutory mandate of a quorum for an administrative agency to implement a regulation was a foundational requirement. In the e-mail era, that mandate was not fulfilled simply because a Board Member received an opportunity to vote. Rather, active participation in the vote is required. The Court noted that while it was unnecessary to treat the issue of whether the failure to participate in the vote was “intentional,” the parties were well served to acknowledge that “such things happen all the time.” (citing a New York Times story reporting on the Wisconsin legislators who fled the state in an effort to deny Republican legislators the ability to form a quorum to vote on legislation limiting the rights of public unions in that state)

The Court concluded that the “ambush election” regulation was invalid, granting judgment against the NLRB, and directing that “representation elections will have to continue under the old procedures.” While the Court did not enter an injunction prohibiting the NLRB from enforcing the final rule, this opinion is a final adjudication on the merits of the case in the district where the NLRB is headquartered and willful disobedience of the Court’s judgment is unlikely. An appeal of the decision by the NLRB is likely.

© 2012 Dinsmore & Shohl LLP

Benefit News of Note For Human Resources and Finance Departments

The National Law Review featured an article by Nancy C. Brower and Kelsey H. Mayo of Poyner Spruill LLP regarding Benefit News for Human Resources and Finance Departments:

It’s April.  For those of you in a planning mode, here’s what you may  want to think about…

Your Pension Plan and Retiree Medical Costs May Be Rising.  The culprit behind the cost increase, better than expected mortality improvement after the age of 55.   The Society of Actuaries exposure draft of a new mortality improvement scale, if adopted, is expected to  result in increases in traditional pension plan liabilities of 2% to 4% and in retiree health care liabilities of 6% to 9%.  The new mortality scale may be applied by the IRS as soon as 2014, and it is possible that auditors will push for its implementation even earlier.
401(k) Safe Harbor Plans IRS Compliance Check.  Employers with 401(k) plans that utilize safe harbor designs to pass nondiscrimination testing may soon be receiving a compliance check in the mail from the IRS.    The IRS will look to see whether the safe harbor requirements are being met, in addition to plan form qualification.   Accordingly, if you have never had your safe harbor notice reviewed by counsel, now is a great time to make sure it is compliant.  Also, note that if you  receive an IRS compliance check you should not just ignore it.  The IRS will refer for audit plans that do not respond to compliance checks.  Remember that plan errors can be corrected through the IRS voluntary correction program even after receipt of a compliance check, but the less expensive  voluntary correction programs are not available once the IRS commences a plan audit.
Identifying Executive Employment Contracts and Severance Arrangements with Release Language.   It is not unusual for employment agreements and severance arrangements to contain claims release language that the IRS believes violates Section 409A.   The IRS guidance on releases was issued after 2008, meaning this issue may not have been addressed through the Section 409A review process that companies completed in 2008.  The IRS has given employers an opportunity to correct deficiencies in release language without any penalties or reporting requirements, but to be entitled to relief, agreements must be amended no later than December 31, 2012.

Utilizing  a Private Health Insurance Exchange.  Some of the nation’s largest consulting firms (Aon Hewitt and Mercer), as well as other companies in the insurance business, are rolling out private health insurance exchanges for employers.  With a private health insurance exchange, a company provides its employees with a lump sum and then lets the employees choose from an array of insurance products that can be offered by more than one insurance company.  This type of arrangement may appeal to companies that wish to provide their employees with more flexibility to choose the type of coverage they wish while fixing the company’s share of the health insurance costs in a more predictable manner.  The exchanges are expected to result in cost savings and to better contain health insurance cost increases.

© 2012 Poyner Spruill LLP

Employers Urged to File H-1B Petitions Without Delay

Increased demand over previous years could see H-1B visas exhausted by June 2012 or earlier.

U.S. Citizenship and Immigration Services (USCIS) announced that as of April 27, U.S. employers have filed for 29,000 H-1B visas subject to the regular cap of 65,000 and 12,300 H-1B visas subject to the U.S. Master’s degree cap of 20,000 for FY2013. USCIS began accepting H-1B petitions on April 1, 2012. Approved petitions would authorize the employment of H-1B workers starting on October 1, 2012, or thereafter.

H-1B visas for this fiscal year are being used at a significantly increased rate from previous years. By comparison, for FY2012, 8,000 regular cap H-1B visas and 5,900 U.S. Master’s degree cap H-1B visas had been allotted by April 27, 2011. This increased rate of usage reflects the gradual improvement of the U.S. economy, as the demand for H-1B visas rises and falls in response to current economic conditions.

Type Cap Amount Cap Petitions Filed Date of Last Count
H-1B Regular Cap 65,000 29,200 04/27/2012
H-1B Master’s Degree Exemption 20,000 12,300 04/27/2012

Implications

We recommend that employers contemplating the hire of an H-1B worker file the petition with USCIS as soon as possible. Although it not possible to predict the exact date that either H-1B cap will be reached, at the current rate of usage, H-1B visas in either category will likely be exhausted much earlier than last year, perhaps as early as this summer.

Copyright © 2012 by Morgan, Lewis & Bockius LLP

CMS, CCIO, and IRS Release Guidance Proposals on Employer Health Insurance Coverage

The National Law Review recently published an article by Gary E. Bacher and Joshua Booth of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. regarding Employer Health Insurance Coverage:

The Centers for Medicare & Medicaid Services Center for Consumer Information and Insurance Oversight (CCIIO) and the Internal Revenue Service (IRS) recently released four important documents related to the implementation of the Affordable Care Act (ACA) that address employer-provided health insurance plan reporting requirements and the availability of premium tax credits to individuals and families.  The ACA makes tax credits available to help individuals pay insurance premiums, but these credits do not apply if the individual is eligible for employer-provided coverage that is both affordable (in terms of required employee contribution to premium payments) and provides “minimum value” (in terms of overall cost-sharing).

CCIIO issued a Bulletin that describes the procedures it intends to use to verify whether an employee is eligible for employer-provided coverage, and thus precluded from claiming premium tax credits.  To help determine eligibility and availability of employer-provided coverage to an individual, the IRS issued a Notice and Request for Comment that solicits responses to how the IRS intends to determine whether coverage offered by an employer provides “minimum value,” as well as two Requests for Comment (RFC), Notice 2012-32 and Notice 2012-33, on how insurers, government agencies, and employers should be required to report insurance coverage data to implement sections 6055 and 6056 of the Internal Revenue Code, respectively.  The IRS will accept comments related to the above three issuances until June 11, 2012.

Together, all four issuances provide the government’s initial proposals of how to determine an individual’s eligibility for premium tax credits and when employers will be subject to penalties for failing to offer health care coverage.

The CCIIO Bulletin on Verification of Employer Coverage

The CCIIO Bulletin describes the process by which Health Insurance Exchanges (HIEs) will verify whether an individual is eligible for coverage through an employer. The CCIIO Bulletin recognizes that demonstrating that employer-sponsored coverage is unavailable or unaffordable requires data and documents that may not be easily obtainable by employees.  So, the CCIIO Bulletin suggests that theU.S. Department of Health and Human Services (HHS) will give applicants and employers guidance on what information will be needed, where it can be found, and the types of documentation required.  The CCIIO Bulletin also suggests that, where verification might be difficult, an HIE could initially accept an employee’s attestation that he or she is not eligible for employer-provided coverage and require the employee to provide supporting documentation of his or her ineligibility within 90 days of the attestation.  The CCIIO Bulletin anticipates that these strategies would be interim solutions to be used only until more reliable database systems can be implemented.

The IRS Notice on Calculating Minimum Value

The IRS Notice discusses approaches to determining whether employer-sponsored coverage provides minimum value.  The ACA generally states that a plan provides minimum value if it pays at least 60 percent of the enrollee’s costs for allowed expenses, thus having an actuarial value (AV) of at least 60 percent.  Minimum value is thus closely related to AV.  The Notice builds upon a bulletin regarding AV issued by CCIIO on February 24, 2012, and explicitly adopts many of its core calculation methodologies, such as basing AV on a standard population (adjusted for state or regional differences) and the methodology for evaluating employer’s contributions to an Health Savings Account (HSA).

Because the Notice applies to all employer-sponsored coverage including large group or self-insured health plans, while the February Bulletin applies only to individual and small group market plans, these plans’ distinct features required the IRS to propose an AV calculation methodology in the Notice that differs in certain ways from that proposed in the February Bulletin.  For instance, because self-insured and large group plans are not required to provide the essential health benefits (EHBs) upon which the calculations in the CCIIO Bulletin are based, the IRS has proposed that the AV for such plans would be calculated based on four core categories of benefits: “physician and mid-level practitioner care, hospital and emergency room services, pharmacy benefits, and laboratory and imaging services.” In addition, the population set on which this calculation is based will the population for a “typical self-insured employer-sponsored plan,” rather than the general population that is described in the February Bulletin.

New requirements related to employer-provided health coverage are an integral component of health care reform, so industry responses to the above-described guidance will be important in shaping how the ACA’s changes will be implemented.

©1994-2012 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.