Thursday, April 3, 2014

Could ObamaCare and the NLRB Combine to End College Sports as We Know Them?

Immediately after the NLRB decision providing that student athletes could very well be reclassified as common law employees we health reform geeks began shooting emails back and forth about what this means in the context of PPACA.  It could eventually be a knockout blow.  

Employers have always been concerned about the potential for worker reclassification, but health care reform and a recent NLRB decision take this issue to an entirely new level.  “Large” employers who offer coverage will be required to offer coverage to “all” of their “full-time workers,” defined as at least 95% of employees working 30 hours per week. An employer that offers coverage to only 94% of its full-time employees, and has one employee who enrolled on an exchange with a premium credit, will be subject to annualized penalties of $2,000 per full-time employee, less the first 30 employees. This draconian penalty applies to all employees, not just the percentage excluded from the offer.

Consider that the NLRB just shocked the college sector with its ruling that Northwestern University students with football scholarships are employees for purposes of the National Labor Relations Act. The immediate result is that if the players with scholarships organize themselves with a labor organization, they can collectively bargain for themselves against Northwestern University. (Of course, we presume there will be further legal challenges.) But think about what this means in the context of taxes and health care reform. Will the IRS deem the students to be employees, liable for taxes, and full-time employees of Northwestern University for purposes of the health care reform employer mandate?

Northwestern University’s website reports that the University has 3,820 full-time faculty and 6,000 full-time staff. Let’s consider a hypothetical: on January 1, 2016, the IRS reclassifies enough students and independent contractors as “full-time employees” so as to cause the University to miss the 95% mark, and at least one employee used a premium credit to purchase coverage on an exchange. It appears that after paying all the health care plan costs, the University could also be liable for a penalty in the neighborhood of $20 million, per year.

...Given the high stakes involved with a failure to satisfy the 95% test, employers need to consider their margin for error, and give serious consideration to the circumstances involving anyone who is performing services but is not being treated as an employee....