By Paul Galligan, Gena B. Usenheimer, and Meredith-Anne Berger

Seyfarth Synopsis: Three Republicans from the House of Representatives hailing from states with paid family and sick leave laws have sponsored the Workflex in the 21st Century Act, signaling increasing frustration with the complexities of multi-state compliance. Representatives Mimi Walters of California, Elise Stefanik of New York, and Cathy McMorris Rodgers of Washington have pitched a bill that would exempt employers who offer certain amounts of paid time off from complying with state paid leave laws. In its current form, the bill would serve to drastically reduce employee access to paid leave, but would also grant employees alternative work arrangements, known as “workflex” options.

The Workflex in the 21st Century Act, H.R. 4219, was proposed on October 26, 2017 as an amendment to the Employee Retirement Income Security Act (ERISA) to “include a voluntary option for qualified flexible workplace arrangements.” Under the law, employers would be exempt from state paid leave law requirements, but since the bill only reaches employees eligible for employer-provided benefits, employers would still have to comply with state and local leave laws for employees ineligible for the company’s benefits.

Employers with a unionized workforce must incorporate the rights of employees to compensable leave and workflex options pursuant to applicable collective bargaining agreements into the plan. The bill provides that plans which meet all of these requirements will also satisfy the requirements of Executive Order 13706, or Paid Sick Leave for federal contractors. However, this law does not, on its face, amend or limit employees’ ability to use unpaid leave in accordance with the Family and Medical Leave Act.

Minimum Amount of Leave

Employers wishing to take advantage of the bill’s preemptive effects must provide a minimum amount of “compensable leave” for employees based on their years of service. Compensable leave includes any leave permitted to be used for paid time off, sick leave, personal leave, or vacation. Employers are permitted to include up to six paid holidays towards meeting the minimum amounts reflected below.

Number of Employees Employees with 5 or more years of service as of the beginning of the plan year Employees with fewer than 5 years of service with the employer as of the beginning of the plan year
1000 or more 20 days 16 days
250 to 999 18 days 14 days
50 to 249 15 days 13 days
Less than 50 14 days 12 days

The bill makes clear that employers who wish to allow employees to take leave exceeding these minimum amounts are free to do so under the law. In that vein, employers who provide unlimited compensable leave, as defined above, are deemed to comply with the minimum amount of leave requirement.

Accrual and Carryover of Leave

Employers may frontload the employee’s compensable leave at the beginning of the plan year, or allow the employee to accrue compensable leave proportionally as the calendar year progresses, and is available for the employee to use as the compensable leave accrues. It is unclear whether the employer can impose a waiting period to use compensable leave, or if there are further limits on accrual of leave based on the wording of the bill. Further, the employer has the option to offer both carryover and cash out of unused leave.

Calculation of Number of Employees

The number of employees is determined by calculating the total number of monthly employees for each month of the preceding plan year and dividing by 12. To be counted, an employee must be considered an employee for first and last day of the month. “Full-time” must be “reasonably” defined, but the bill does not give further guidelines regarding the definition. All other employees are considered “part-time,” but the method of determining how part-time employees may accrue compensable leave is not clear based on the bill.

Use of Leave

An employer may restrict the use of leave during the first 90 days of employment with the employer, and may also limit the use of leave to times when it does not “unduly disrupt the operations of the employer,” and whether to use the leave in full-day or partial-day increments.

Workflex Options

In addition to paid leave, the bill provides that an employer must offer each employee in the plan, so long as the employee meets eligibility requirements, at least one of the following “workflex” options, which are not limited in time according to the bill as written:

Biweekly work schedule: A non-exempt employee may work up to 80 hours in a two-week period. In any one week, the employee may work between 40-60 hours. Employees must be compensated at their regular rate, and may only earn overtime for any time worked over the agreed-upon biweekly work schedule, or over 80 hours in the two-week period. It is unclear how this arrangement will interact with the Fair Labor Standards Act (FLSA) or state wage and hour laws.

Compressed schedule work program: An non-exempt employee may work his or her regular weekly hours spread among fewer days, i.e., a 40-hour week over four days. Employees who choose this option earn overtime in accordance with the FLSA. Moreover, state wage and hour requirements (such as spread of hours) would also apply.

Job sharing program: An arrangement where the employer approves two or more employees to share one employment position.

Flexible scheduling: An agreement under which the employee’s regular work schedule is “altered.” This term is not further defined in the bill.

Predictable scheduling: A system whereby the employer provides a schedule to an employee with reasonable advanced notice and with as few alterations as possible.

Telework program: An arrangement where the employee is permitted to perform the duties and responsibilities of his or her position from a worksite other than where the employee would otherwise work (e., from home).

Options offered may differ depending on the particular position. Employees eligible for “workflex” options must be employed for at least 12 months for at least 1,000 hours of service during the 12-month period. An employer may estimate the number of hours worked by the employee. However, the employer may not force an employee to use workflex options. If an employee elects to use a workflex option offered by the employer, a written agreement signed prior to starting the arrangement must set forth the employee’s work schedule with a description of the workflex option.

Right to Reinstatement

Employees who elect to use a workflex option or compensable leave under the bill must be reinstated to their same or equivalent position, unless the employee has used more than 12 weeks of compensable leave in a 12-month period, or is a key employee as defined under the Family and Medical Leave Act. The bill also notes it is not intended to relieve an employer’s obligations under the Americans with Disabilities Act.

This bill, should it pass, would offer attractive alternatives to employers who find complying with various state and local paid leave regulations challenging. It would also offer flexible work arrangements to employees that could save employers money and reduce turnover of employees who would otherwise leave a job for family or personal reasons. It would ostensibly preempt paid leave laws that are popping up all over the country, including most recently paid family leave in New York and paid sick leave in various municipalities, including Cook County, Illinois, and the state of Washington. However, its overlap with various laws, including ERISA, the FMLA, and the FLSA may necessitate complex legal solutions in order to implement it. We will continue to track this bill as it moves through the legislative process.

By Mark Casciari and Meredith-Anne Berger

Seyfarth Synopsis:  The 2016 elections had the effect of hardening the Red-Blue divide in the country.  A number of Blue cities in Red States are enacting ordinances that implement the progressive political agenda, which of course includes pay equity.  Be prepared to see that the Red states in which they lie may attempt to preempt local ordinances.  Red State preemption of Blue city ordinances is yet another battle that is likely to be resolved in court.

The 2016 Presidential, state and local elections across the country reinforced the Red-Blue divide simmering for years.  As a consequence, many Red State legislatures have rushed to enact their agendas before Republican dominance wanes.  In reaction, Blue cities and counties in Red States have enacted their own progressive ordinances or rules.  One area of progressive activism is pay equity — the broad idea that employers need to do more to ensure equal pay for equal work.

Examples of Blue city/Red State progressive activism are plenty. For example, a Philadelphia ordinance bans inquiries into prospective employee salary histories.  Austin, Texas has enacted protections for prospective employees with criminal histories, in an effort to augment job earnings by enhancing equality among applicants.  St. Paul, MN, and Minneapolis, MN have recently passed employee-friendly paid sick leave laws.  It is reasonable to expect more Blue city/Red State activism in the pay equity and broader discrimination context in the Trump era.

There is, however, a movement afoot to counter Blue city and county legislation enacted to further progressive goals that conflict with the political agendas of the Red States in which the Blue cities lie. For example, Arkansas’s Act 137 prohibits a county, municipality, or any other political subdivision from adopting or enforcing any ordinance or rule that creates a “protected classification or prohibits discrimination on a basis not contained in state law.”  On February 23, 2017, the state’s highest court struck down a Fayetteville anti-discrimination ordinance that sought to extend Arkansas’s anti-bullying statute to prohibit discrimination in the workplace on the basis of sexual orientation and gender identity.  The court, however, did not address whether Act 137 is constitutional.  In North Carolina, the Public Facilities Privacy and Security Act (“HB2”) prohibits any city or municipality in the state from enacting a law that would prohibit discrimination in employment or in public accommodations on the basis of gender identity or sexual orientation.

Not to be outdone, on February 8, 2017, the Pennsylvania Senate passed S.B. 241, which seeks to preempt Philadelphia’s law prohibiting salary inquiries and further prohibitions on discrimination in pay on the basis of gender.  Proposed legislation in Minnesota, H.F. 600, seeks to preempt local laws which provide employees with paid or unpaid leave time and other employment protections.  Proposed HB 577 in Texas would preclude a city or county from adopting or enforcing ban the box legislation applicable to private employers.  Proposed legislation in Arizona would permit the State Legislature to rescind funding to local governments that passed legislation which, in the Attorney General’s view, violated state law or the state constitution.

This article does not address whether state preemption laws will be upheld after court challenge, but simply exposes that a Blue city/Red State preemption issue might arise in future pay equity litigation. Readers should be aware that a Blue city or county law mandating pay equity could be preempted by Red State law, and that such a State preemption statute may itself be subject to challenge in court.  This issue might be rendered moot, of course, if the Congress of the United States enacts further national pay equity standards, and in the course of doing so preempts all related state and local law.  ERISA includes a similar preemption provision in the private sector employee benefit plan context. See 29 U.S.C. § 1144 (a) (absent specified exceptions, ERISA preempts all state law, defined to include the law of its political subdivisions, merely “relating to” an employee benefit plan covered by ERISA).  But don’t expect the current administration in Washington to be in the mood to broaden existing preemption of the authority of the States.  A more sound expectation is further litigation in the Blue city/Red State context over Blue city ordinances addressing such progressive concerns as pay equity.

For more information on this or any related topic please contact the authors, your Seyfarth attorney, or any member of the Labor & Employment or Workplace Policies and Handbooks Teams.

 

In the fourth installment of articles looking at the employment law cases being heard by the US Supreme Court this fall term, Montanile addresses issues near and dear to every employer’s heart – ERISA plans and the reimbursement/recoupment of plan funds.  For those readers who manage and worry about these plans and issues, read on!

Supreme Court To Decide What is Required for Equitable Tracing

By James Goodfellow

On November 9, the Supreme Court will hear arguments in the Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan matter, which is up on appeal from the Eleventh Circuit. Montanile involves equitable tracing, and the question before the Court is limited solely to whether an ERISA fiduciary must identify a particular fund that is in a participant’s possession and control at the time that a fiduciary seeks to recover an alleged overpayment of benefits.

For something that seems complicated, the facts of Montanile are quite common.  The dispute arose when the ERISA plan paid the plaintiff’s medical expenses after the plaintiff was injured in a car accident. As the result of a separate personal injury lawsuit, the plaintiff received a settlement from the other driver, and the plan sought from the settlement funds reimbursement of plan medical expenses.  For the uninitiated, many ERISA plans enable the plans to recover reimbursement as the plan did here.

Practical problems arise, however, because often times, participants are not in possession of the money paid by the plan, and overpaid benefits can be significant. As such, the plaintiff in Montanile argued that in order to assert an overpayment claim, the plan needed to assert the claim against the very money that it paid to him.  The plan disagreed, stating that all it needed to do is identify that it paid the participant money, and the amount of that money that it paid. Put another way, the parties’ dispute is akin to one person loaning another person $20 by way of giving that person a $20 bill. The participant’s contention is that the plan can only seeks recover of the specific $20 bill loaned. The plan’s contention is that $20 is $20, and so long as it can show that it paid $20, it is entitled to recover $20. The Eleventh Circuit agreed with the plan.

Affirmance of the Eleventh Circuit’s decision would represent a practical solution to a common problem faced by fiduciaries and plans who attempt to recover from non-fiduciary plan participants or service providers asserting a right to plan benefits based on assignment. Often times, overpaid funds have been spent by the recipients.  And, query how a plan could equitably trace money paid by check or by wire, as so often is the case in this day and age. Additionally, should the Supreme Court reverse, non-fiduciary recipients of plan funds would be provided with a perverse incentive to spend plan money immediately upon receipt so as to avoid any repayment obligations set forth by plan terms.

Left for another day is whether the summary plan description is a plan document. The Supreme Court’s decision in Cigna Corp. v. Amara has left this open, and in Montanile, the plan’s authority to recover overpayments was found solely in the SPD.  This often is a critical question in benefits litigation that could have been addressed in Montanile.