Privacy and Security Rule Violations Impacted by Rule

On Jan. 17, 2020, the Department of Health and Human Services (HHS) published a final rule increasing the civil monetary penalties for violations of the HIPAA Privacy and Security Rules. HHS is required to adjust these penalties for inflation each year. 

Effective Jan. 17, 2020, the following civil penalty amounts apply to violations of HIPAA’s Privacy and Security Rules: 

• For each violation where the covered entity does not know about the violation (and by exercising reasonable diligence, would not have known about the violation) the penalty amount is between $119 and $59,522.  
• If the violation is due to reasonable cause, the penalty amount is between $1,191 and $59,522. 
• For each corrected violation caused by willful neglect, the penalty amount is between $11,904 and $59,522. 
• For each uncorrected violation caused by willful neglect, the penalty amount is $59,522, with an annual cap of $1,785,651 for all violations of an identical requirement.  

Click here for more details.

2020 DOL Penalty Amounts for ERISA Violations Issued

The U.S. Department of Labor (DOL) has increased the penalties employers face under ERISA for group health plan reporting and disclosure failures. These new amounts apply to penalties assessed after Jan. 15, 2020, and include the following: 

• Summary of Benefits and Coverage (SBC): Failure to provide group health plan participants and beneficiaries with an SBC may now result in a penalty of up to $1,176 per participant or beneficiary.
• Employer CHIP Notice: Failure to provide a CHIP Notice to employees in states that offer group health plan premium assistance through a state Children's Health Insurance Program may now result in a penalty of up to $119 per day per employee.
• Summary Plan Description (SPD): Failure to furnish an SPD to the DOL upon request may now result in a penalty of up to $159 per day (not to exceed $1,594 per request).
• Form 5500: Failure to file an annual report with the DOL (unless a filing exemption applies) may now result in a penalty of up to $2,233 per day. 

On Jan. 12, 2020, the U.S. Department of Labor (DOL) announced a new four-factor balancing test to determine whether two or more organizations should be considered “joint employers” under the Fair Labor Standards Act (FLSA). The final rule establishing the new test becomes effective March 16, 2020. 

The final rule requires the DOL to examine whether a potential joint employer: 

• Hires or fires the employee;
• Supervises and controls the employee’s work schedule or conditions of employment to a substantial degree;
• Determines the employee’s rate and method of payment; and
• Maintains the employee’s employment records.

However, the rule also clarifies that additional factors may be considered as necessary. Please note that this final rule and new test apply only to joint employment status for FLSA compliance and do not address joint employment status under other federal employment laws.

The DOL has the authority to enforce full compliance with labor standards against one or all joint employers. To avoid violations, employers should:

• Become familiar with this final rule; 
• Evaluate whether they are in a joint employment situation; and
• Identify any potential areas of non-compliance by joint employers.

Opinion Letters Provide an Insight on How the DOL applies the Law to Specific Facts

On Jan. 7, 2020 the U.S. Department of Labor (DOL) issued two opinion letters that clarify how the Fair Labor Standards Act (FLSA) applies in specific situations. Opinion letters provide the DOL’s official opinion on how the law applies in specific situations. Employers that rely on opinion letters may be able to establish a “good faith defense” under the law. As a result, employers should become familiar with these letters and review their practices to ensure compliance with FLSA requirements.

FLSA 2020-1: Lump Sum Nondiscretionary Bonuses Must Be Included in Regular Rate

In its first letter, the DOL asserts once again that employers must include nondiscretionary bonuses in their employee’s regular wage rate calculations. In addition, the opinion letter outlines how employers may go about allocating lump sum nondiscretionary bonuses that cover more than one workweek. This guidance is important to employers calculating overtime pay for employees who received such bonuses.

FLSA 2020-2: Per-Project Pay Can Satisfy the Salary Basis Test

In its second letter, the DOL asserts that per-project payments can satisfy the fee basis test if the payments do not vary from pay period to pay period, vary based on the number of hours worked, or vary based on the quality of the work performed. The DOL also explains that occasionally, employers may increase or reduce an exempt employee’s project compensation if the changes in pay are tied to changes in the scope of the project. 

However, an employee’s exempt status may be undermined if contract or project revisions are too frequent. 

New Rate will Phase in Beginning June 30

On Dec. 31, 2019, New York amended its wage order for miscellaneous industries to eliminate the subminimum wage for tipped employees. Please note that the current tipped employee minimum wage rates still apply for the restaurant and hospitality industries. 

The minimum wage rate for tipped employees in miscellaneous industries will increase in two stages. 

• On June 30, 2020, the new rate will increase to cover 50% of the difference between the miscellaneous tipped wage and the minimum wage. 
• On Dec. 31, 2020, the miscellaneous tipped wage will increase again to become equal to the applicable minimum wage.

The miscellaneous industry wage order applies to employees who are not covered by another minimum wage order or work for a nonprofit (if the nonprofit employer has elected to be exempt under the state’s wage order for nonprofit institutions.) Employees covered by the miscellaneous industry wage order include nail and hair salon workers, aestheticians, car wash workers, valets, doormen and doorwomen, dog groomers, tour guides and tow truck drivers.

Temporary Injunction Applies Only to the Trucking Industry

A district court in San Diego has issued a temporary injunction to prevent enforcement of California’s recent AB 5 law for the trucking industry. This injunction does not affect other industries and all other employers are still expected to comply with the state’s “ABC test” for employee classification. 

California Trucking Assoc. v. Becerra

In a lawsuit brought against the state of California, the California Truckers Association (CTA) asserted that the recently enacted bill AB 5 would reclassify most drivers as employees. The CTA argued that most truck drivers it represents would prefer to retain their independent contractor classification, which allows them to set their own schedules and profit from owning their own vehicles. The CTA also argued that AB 5 is preempted by a federal law that prohibits states from regulating the price, route or service of freight-hauling motor carriers. 

The district court judge found that the CTA was likely to succeed in its case and likely to suffer irreparable damage if relief was not granted, and that the request for a temporary injunction was in the public interest. A hearing on this matter is scheduled for Jan. 13, 2020. 

While the CTA case is not the only case that has been filed against California’s AB 5, this case is the only one that has succeeded against enforcement of the new law. 

Next Steps

We will continue to monitor challenges to this law and provide updates as new developments take place. Employers should continue to review their employee status classification practices to ensure compliance with federal, state and local laws

Business Mileage, Medical and Moving Rates Decrease

On Dec. 31. 2019, the Internal Revenue Service (IRS) issued the 2020 optional standard mileage rates, which are used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on January 1, 2020, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

• 57.5 cents per mile driven for business use (down from 58 cents in 2019);
• 17 cents per mile driven for medical or moving purposes (down from 20 cents in 2019); and
• 14 cents per mile driven in service of charitable organizations (unchanged).

Click here for more details.

New Law Becomes Effective July 1, 2020

On Dec. 11, 2019, Washington amended its wage and hour laws to increase the salary threshold white collar employees must satisfy to qualify for the state’s overtime exemption. The amendments also update some white collar duties tests to conform with the federal duties test under the Fair Labor Standards Act.

The updated salary levels will depend on employer size and will be based on the applicable state minimum wage rate. As a result, the threshold for the white collar exemptions in Washington will rise as the minimum wage rate increases. 

The new threshold and duties tests become effective July 1, 2020. 

Employers should review these amendments and update their payroll practices accordingly. Preparing to comply with this threshold increase may require reviewing employee salaries and responsibilities to ensure they are classified appropriately.

New Law Takes Effect Oct. 7, 2020

A new law in Pennsylvania law will require employers in the construction industry to use the federal E-Verify system to confirm the employment eligibility of new hires. E-Verify is a federal web-based system that allows enrolled employers to confirm the eligibility of their employees to work in the United States. 

E-Verify is a voluntary program. However, Pennsylvania currently requires contractors and subcontractors hired to work on public works to enroll in E-Verify as a condition of contracting. The federal government has a similar requirement for contractors and subcontractors that work on projects paid for with federal funds. 

The new law expands the E-Verify requirement to contractors in Pennsylvania’s construction industry. The new law defines that employers are in the “construction industry” if they engage in the erection, reconstruction, demolition, alteration, modification, custom fabrication, building, assembling, site preparation, repair or maintenance of real property or premises under a contract. Covered work also includes work for public agencies and work paid for from public funds.

The new law also prescribes the penalties and exceptions state agencies must use to enforce or evaluate compliance. 

Click here for more information.

Employers Must Begin Using the New Form Jan. 1

On Dec. 5, 2019, the Internal Revenue Service released an updated version of its W-4 form, also known as the “Employee’s Withholding Certificate.” 

Employers use IRS Form W-4 to determine each employee’s federal tax withholdings. The new form is intended to harmonize tax withholding declarations with the Tax Cuts and Jobs Act, which affected individuals for the first time during the last tax filing season. Employees may complete a new W-4 each year or each time they experience a change in their personal financial situation. However, the new form does not invalidate prior versions, and employers are not expected to replace W-4 forms from previous years with the 2020 version. 

Employers should become familiar with the updates to IRS Form W-4 and make it available for all new hires and employees who wish to amend their withholding declarations in 2020.

Final Rule Clarifies What to Include in the Regular Rate

On Dec. 12, 2019, the U.S. Department of Labor (DOL), announced a new final rule that clarifies how to calculate an employee’s regular wage rate under the Fair Labor Standards Act (FLSA). If the rule is officially published in the Federal Registered as scheduled, the final rule becomes effective on Jan. 15, 2020.

Calculating the regular rate is an essential first step when determining an employee’s overtime compensation. Under the FLSA, an employee’s regular rate includes all forms of compensation paid to that employee in a workweek. The final rule clarifies what qualifies as compensation. 

The DOL’s stated objective with this rule is to provide more certainty for employers that offer additional perks to their employees, but aren’t sure of whether these benefits should be counted as income under the FLSA.

Employers should become familiar with this final rule and adjust their payroll practices to account for this new guidance on what should be considered compensation by Jan. 15, 2020.

Ordinance Was Scheduled to Take Effect Dec. 1

San Antonio’s paid sick leave law will not go into effect Dec. 1 as scheduled as a result of a temporary injunction granted Nov. 22. The indefinite stay by the District Court in Bexar County marks the latest action in litigation against the ordinance by a coalition of business owners, joined by the state Attorney General.

The original ordinance requiring all employers to provide earned paid sick time to their San Antonio employees was passed in August 2018. In July 2019, the city agreed to delay implementation of the measure until Dec. 1, 2019, pending amendments to the ordinance, which were passed in October 2019. As part of the amendments, the benefit provided under the law was renamed “sick and safe leave.”
 
Employers should monitor the status of the ordinance and be prepared to comply with its requirements should a new implementation date become effective.

Comments on Proposed Rule are Due by Dec. 5

On Nov. 5, 2019, the U.S. Department of Labor (DOL) published a proposed rule to update the “fluctuating workweek” method for calculating employee overtime wages under the Fair Labor Standards Act (FLSA). The fluctuating workweek method provides employers a cost-saving option to compensate employees who are not exempt from the Act’s overtime wage payment requirements.

If approved, the proposal would enable employers to pay bonuses, shift differentials and other incentive payments to employees who are paid under the fluctuating week method. The proposed changes were issued to clarify conflicting court rulings regarding this method. 

This publication is only a proposed rule, so it does not impose any new requirements on employers. However, the DOL is inviting employers to review this proposal and submit their comments, if any, to the DOL by Dec. 5, 2019 by mail or through the Federal eRulemaking Portal.

New Requirements Take Effect Jan. 1, 2020

The California Department of Industrial Relations (DIR) has published updates to the minimum salary threshold that computer employees, physicians and surgeons must receive in order to qualify for the state’s overtime exemptions. The DIR reviews and adjusts these rates each as necessary to reflect the cost of inflation. 

The hourly wage rate for physicians will increase from $82.72 per hour to $84.79 per hour on Jan. 1, 2020. Similarly, the minimum salary requirements for computer employees will increase from $45.41 per hour to $46.55 per hour starting Jan. 1, 2020. For the computer employee exemption, the DIR also specified a new $96,968 annual salary and an $8,080.71 monthly rate starting Jan. 1, 2020.

Click here for more information on the updated salary level for physicians and surgeons, or here for more information on the updated salary level for computer employees.

Contribution Limit to Increase $50 in 2020

The IRS has announced that the contribution limit for health flexible spending arrangements (health FSAs) will be $2,750 in 2020. For 2019, the contribution limit is $2,700.

401(k) Contribution Limit Increased to $19,500

The IRS has announced that the amounts employees can contribute to 401(k)s and some IRAs will increase in 2020. In particular:

• The employee contribution limit for 401(k) plans will be $19,500, up from $19,000 in 2019. The catch-up contribution limit for employees aged 50 and over will be $6,500, up from $6,000.
• The employee contribution limit for IRAs will remain $6,000. The catch-up contribution limit for employees aged 50 and over also remains unchanged, at $1,000.
• The employee contribution limit for SIMPLE IRAs and SIMPLE 401(k) plans will increase to $13,500, up from $13,000 in 2019.

Click here for more information.

Employers Are Not Required to Obtain HPIDs for Health Plans

In 2012, the Department of Health and Human Services (HHS) released a final rule that required certain health plans to obtain their own health plan identifiers (HPIDs) and start using them in HIPAA standard transactions. 

After issuing the final rule, HHS received feedback that the HPID’s implementation would be disruptive, costly and counterproductive. Based on this feedback, on Oct. 31, 2014, HHS delayed the enforcement of the HPID requirement until further notice. 

On Oct. 25, 2019, HHS released a final rule that officially withdraws the HPID requirement. Due to this development, health plans are not required to obtain HPIDs and the HPID is not required to be used in HIPAA standard transactions. The health care industry may continue to use its own standard payer identifier in these transactions.

For more information on this development, click here.

New Law Took Effect July 28

Last May, Washington adopted a new law requiring employers to display a poster about domestic violence. The poster was published recently by the Washington Employment Security Department (ESD) and it includes instructions employees can follow to contact help if they are dealing with a domestic violence situation. The poster also includes some blank space employers can use to add information about local resources. 

Employers will need to display this poster in a conspicuous place where other workplace posters are displayed. Click here to access the domestic violence poster and other posters published by the the ESD.

Proposal Does Not Apply to Group Health Plans

On Oct. 23, 2019, the U.S. Department of Labor (DOL) published a proposed rule that would allow plan administrators to make retirement plan disclosures available on a website.

The safe harbor would be permitted for employee pension benefit plan disclosures, such as summary annual reports or pension benefit statements, but not for any document that must be furnished upon request. The proposal would not apply to employee welfare benefit plans, such as group health plans or plans providing disability benefits.

If the proposal is adopted, plan administrators may continue to use the existing safe harbor for electronic delivery, or to furnish paper documents by hand-delivery or mail. The proposal would provide a new, optional method where plan administrators who satisfy specified conditions may furnish documents electronically, unless participants affirmatively opt out.

Click here for more information on the proposal.