V.G. Young Institute of County Government School for Local Government HR Professionals by. Human Resource Update: What s To Come for 2016.

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1 Presentation to V.G. Young Institute of County Government School for Local Government HR Professionals by Human Resource Update: What s To Come for Agenda Affordable Care Act Fair Labor Standards Act Independent Contractors What May Come Affordable Care Act Compliance-Reporting Who Has to Report Applicable Large Employers (ALE) 50 or more full-time equivalents This includes employers with FTEs delaying compliance with coverage requirements until 2016 (transitional relief to delay 4980H compliance) ALL employers (regardless of size) offering self-funded plans Must report participant coverage for any individual covered by the plan Self-funded HRAs that are integrated with a health plan ARE NOT required to report if medical plan is subject to reporting 3 4 Affordable Care Act Compliance-Reporting When and How to Report Filing due in 2016 for 2015 calendar year (reporting on a calendar year basis regardless of plan year) Reporting deadlines have been extended for 2016 Forms 1095 (employee statements) must be provided to employees by March 31, 2016 Form 1094 and all Forms 1095 must be filed with the IRS by May 31, 2016 if on paper or by June 30, 2016 if filed electronically Employers who file 250 or more Forms 1095 must file electronically Affordable Care Act Compliance Penalties $250 for failing to file or furnish a correct information return or payee statement; Standard annual penalty cap is up to $3 million Failure for both information return and payee statement penalties double to $500 and penalty cap also doubles to $6 million One year transition rule (no penalty) for good faith efforts to comply but file an incorrect or incomplete; however, no relief for failing to file timely 5 6 1

2 Affordable Care Act Compliance What s to Come Time for employers with FTEs to play or pay. Employers filing 250 or more W-2s must report value of group medical on W-2, box 12 (code dd) What do the *Presidential Candidates Say about ACA? Clinton (01/05/16)-defend and improve Sanders (01/21/16)- Medicare for all Trump (02/06/16)- repeal Obamacare. We are going to replace Obamacare with something better. Kasich (07/25/15)- replace with market driven system that is quality based vs quantity based. Cruz-(02/06/16)-repeal and replace, allow purchase across state lines Rubio-(08/17/15)-repeal and replace with advanceable, refundable tax credit system Cadillac Tax delayed until 1/1/20. 7 Affordable Care Act Compliance Tips and Considerations Take the time to educate employees on individual penalties Individual penalty for 2016-the greater of percentage of income or per person rate: Percentage of income-2.5% of household income to a maximum of the total annual premium for the national average price of a Bronze plan solid through the Healthcare market place (only income above the tax filing threshold counts) Per Person rate:$695 per adult; $ per child under 18; Maximum $2,085 8 Affordable Care Act Compliance What This Means for Employers? Need to be prepared for audits-with reporting IRS (and subsequently, the Department of Labor) will/should have evidence of an employer s compliance Increased scrutiny on use of Independent Contractors (more later) It s time to invest in the expertise! ERP/Payroll provider Broker HR Fair Labor Standards Act ( FLSA ) Proposed Changes 9 10 FLSA Not tied to size of the company Minimum Wage, Overtime, Child Labor, Recordkeeping Exempt vs. Non-Exempt Current Minimum Wage - $7.25 OT paid for hours worked over 40 in a 7 day period Allows deductions as long as not going below minimum wage FLSA-Exemptions Salaried Not based on the job title, but the duties Minimum salary-currently $455 per week, paid on fixed salary basis, exempt duties (executive, administrative, professional, computer professional, outside sales)

3 FLSA Significant proposed updates to the FLSA announced on June 30, Highlights of proposed changes include: Increasing the estimated salary level to $921 per week ($47,892 annually); with automatic updates. Change the annual compensation requirement exempting highly compensated employees from $100k to $122,148 annually FLSA Major campaign for DOL Heavily advertised on DOL website DOL Blog: Losing Out on Time, Money DOL states final rules to be issued in Spring Once rules are published, generally 60 days given to comply Fair Labor Standards Act-Proposed Changes Impact to Employers If finalized, any employee making less than $921 per week must be paid overtime for hours worked over 40 in a work week Pay rate cannot include bonuses Increase labor costs, increase workers compensation cost If rate will be increased annually, you will be REQUIRED to increase an employee s salary to maintain exemption Employee morale issues Increase in audits Fair Labor Standards Act-Proposed Changes The Latest: 2 Scenarios for when the rule will be final 1. New rule most likely published by July 7, 2016;Would then take effect on Labor Day, Sept. 5, New rule would be published the Friday before Labor Day and take effect on November 1, 2016 (just before Election Day) Could be overridden if a Republican President is elected. Per the Congressional Review Act, a joint resolution from both houses of Congress allows the President to undo laws and rules passed during the final 60 legislative days of the previous Congress Independent Contractors Imagine working as a drywall installer building houses as an employee one day, but the next day, while performing the same work on the same site for the same company, you re told you are now considered an independent contractor. You didn t suddenly open a business of your own. Nothing about your work changed. But now, you re told that since you re no longer an employee, you re no longer eligible for overtime pay, unemployment insurance, worker s compensation or a host of other benefits that come with employee status. US Department of Labor Blog, July 15, 2015 Independent Contractors DOL is more closely examining the economic realities of working relationships Looking at subcontractors, temporary agency arrangements, third party management Using education, outreach, strategic enforcement targeting specific industries Partnering with IRS and states (and yes, Texas has entered into a memorandum of understanding with the DOL) Worker who is economically dependent on employer=employee

4 Independent Contractors What this means for the Employers? Already seeing collaboration with agencies and in particular TWC audits Targeted IRS audits-where focus is exclusively on 1099s, 940s, 941s Correction on wages will not be negotiated 2 year look back; 3 year for willful/repeated violations Must pay in full directly to affected worker Will also have tax liability And potential obligation for violations under ACA Construction, Food Service, Hospitality are on the target list 19 Proposed enforcement guidance on retaliation and related issues released 01/21/16 More aggressive stance against retaliation; Broadens definition of participation to activity related to internal company investigations (even as a witness) prior to any involvement by the. Defines protected opposition: Advising an employer on EEO compliance, such as HR reporting EEO violations to management. Complaining about alleged discrimination against oneself or others, or threatening to complain. Providing information in an employer s internal investigation of an EEO matter. Refusing to obey an order reasonably believed to be discriminatory. Resisting sexual advances or intervening to protect others. Passive resistance, such as a supervisor refusing to carry out management s instruction to discourage subordinates from filing discrimination complaints. Requesting reasonable accommodations for a disability or religious reasons. 20 (cont d) Also specifically mentions protection under and NLRA for employees discussing compensation. Comments due by February 24, 2016 Enforcement Protection for LGBT Same sex marriage approved by Supreme Court, so same sex couples must be afforded all benefits to include FMLA, without being held to a different standard of proof Title VII of the Civil Rights Act of 1964 does not explicitly include sexual orientation or gender identity, however, the has stated that they will offer protection to all workers, regardless of sexual orientation or gender identity and investigate claims Ban the Box In 2012, the issued enforcement guidance regarding the consideration of arrest and conviction records in employment decisions Evidence of disparate treatment discrimination and criminal records Employers are required to ensure that excluding applicants based on criminal conduct is job related and consistent with business needs Can t have blanket policy, i.e., We hire no one with a felony conviction. Ban the Box Push to have employers remove box from employment applications On November 2, 2015, Office of Personnel Management was ordered to remove check box asking about applicant s criminal background from federal job applications Wal-Mart, Target, and Home Depot have banned the box This is about process, you are still permitted to disqualify a candidate because of an offense, but it has to be relevant to the position Disqualifications must come after a conditional job offer, and requires disclosure

5 What this means for Employers Banning the box isn t law, but employers are at risk for allegations of discrimination The good news is certain jobs and industries have strict rules that make the process easier However, employers need to be mindful of convictions and the relevance on the candidate s ability to perform the job Equal Employment Opportunity Commission ( ) Executive Order-Establishing Paid Sick Leave for Federal Contractors Requires paid sick leave for federal contractors, subcontractors, and lower-tier subcontractors Includes new contracts, contract-like instruments and solicitations include clause Will be a condition of payment to contractor, sub, etc. Final regulations to be issued by September 30, 2016, and within 60 days of that, must be included in the Federal Acquisition Regulation ( FAR ). Anticipate requirement in contracts issued in Executive Order-Establishing Paid Sick Leave for Federal Contractors Rules will require: Not less than 1 hour of paid sick leave for every 30 hours worked; Must permit employees to accrue at least 56 hours per year Permitted use for child, parent, spouse, domestic partner, or any other individual related by blood or affinity Carry over and reinstatement of benefit, if employee is rehired within 12 months after job separation Can t require an employee to find their replacement when needing sick leave Can t be counted towards fringe for Service Contract Act or Davis Bacon Projects What this means for Employers Someone, with human resources responsibilities needs to be reviewing contracts Contract provisions such as affirmative action and E-Verify requirements exist in government contracts (and yes, some municipal and state contracts) and are missed Start preparing now-like the changes to the FLSA, this has a significant impact on labor cost

6 What May Come What May Come Lead on Leave Tour DOL Secretary and White House Senior Advisor have been traveling the country to discuss a case for paid Family and Medical Leave Paid leave is a when question, not an if Secretary Tweet, April 1, 2015 Comparison to Canada, where women s labor force participation is higher and attributed to generous paid leave programs $2 billion in funds to help states develop paid leave programs Federal agencies required to advance up to six weeks of paid sick leave to parents with newborns What May Come Minimum Wage RT to spread the word: Raising the minimum wage would benefit more than 35 million workers across the country Secretary of Labor Retweeted, November 10, 2015 Nationwide Protests to increase minimum wage to $15/hour (state of New York has phased in pay increase for all fast-food workers statewide to raise minimum wage to $15 by 2019 and to entire state by 2021) Republican candidates generally oppose hike Clinton calls for minimum wage hike to $12/hour More to come I-9 Form-Changes to Come Current I-9 Form set to expire on 3/31/2016 New proposed changes include: Enhancements to an electronic version that will reduce errors; Requiring employees to only provide previous last names used rather than all other names; Streamlining certification for certain foreign nationals; Separating the instructions from the I-9 form Notice published in Federal Register March 28, 2016 Comments Due by April 27, 2016 Continue to use expired form! What May Come Immigration I-9 Audits will continue at least through the current administration There will be some kind of immigration reform, but nothing significant until after the Presidential election and the shape/form will depend on who is elected. Many industries need compliant options Compensation Equity Pregnancy Discrimination Push for more workplace flexibility Retirement Security Supreme Court Rulings Fisher v. Texas Affirmative Action-Texas use of affirmative action in public university admissions is constitutional Since Justice Kagan recused herself, cannot end in a tie Decision pending

7 Supreme Court Rulings Friedrichs v. California Teachers Association Whether public employees can be required to pay union fees to cover the cost of collective bargaining for a contract that covers the employee(s). Supreme Court issued a split decision Decision allows the California Teachers Association to continue to charge and collect union fees But we all know that Texas prohibits collective bargaining for public employees, with exception of Firefighters. Final Thoughts The Presidential Election will yield one of two situations for employers: 1) More of the same, with continued enforcement or 2) New rules, but minimal enforcement President Obama still has plenty of time to issue Executive Orders related to employment Questions? Contact Information Cyndi Mergele, SPHR, SHRM-SCP, PI Padgett, Stratemann & Co., L.L.P. AUSTIN 811 Barton Springs, Suite 550 Austin, Texas HOUSTON 1980 Post Oak Blvd,, Suite 1500 Houston, Texas SAN ANTONIO 100 NE Loop 410, Suite 1100 San Antonio, Texas cyndi.mergele@padgett-cpa.com