Tuesday, October 31, 2017

New California Law Prohibits Asking Job Applicants About Their Salary History

A new California law (AB 168) was signed by Governor Jerry Brown on October 12, 2017 that prohibits employers from inquiring about the salary histories of its job applicants. AB 168, which takes effect on January 1, 2018, and applies to all California employers (including state and local governments) represents an expansion of California’s fight against the gender wage gap. Gender wage discrimination is already unlawful in California, but AB 168 goes a step further by banning salary history inquiries in most circumstances. 
The Law 
AB 168 specifically provides for the following: 
  • Employers cannot seek salary history information (including compensation and benefits) for job applicants, whether it be done orally or in writing, or personally or through an agent. 
  • An employer cannot rely on the salary history information of a job applicant as a factor in determining both (1) whether to offer employment to the applicant or (2) what salary to offer the applicant.
  • Upon reasonable request, an employer must provide the pay scale for the job position to the job applicant.
Limited Exceptions 
AB 168 provides certain limited exceptions. The law does not apply:
  • To salary history information disclosable to the public pursuant to federal or state law, including the California Public Records Act or the federal Freedom of Information Act.
  • If the job applicant “voluntarily and without prompting” discloses his or her salary history information to the prospective employer.
In the latter case, the employer still cannot consider salary history information in determining whether or not to the hire applicant, but can consider salary history information in determining the applicant’s salary (if it hires the applicant). It is important to remember, however, that prior salary cannot, by itself, justify any disparity in compensation under California Labor Code Section 1197.5.

The Rationale Behind Getting Employers out of HSA-Account Selection

Whenever installing HSAs I encourage my clients to allow employees to select their own banks and set up their own accounts. Yes, if the employer is funding the HSA this is a small amount of extra work in the setup process - but no more work than setting up a person's paycheck via direct deposit.

My logic is that we nor HR needs to hear the complaints about any particular administrator or bank if and when that institution falls short of customer expectations.  (Think of the current events around Wells Fargo.) HSAs are owned by the employee themselves. So why tell them where they need to bank and/or invest their money? It is not like an HRA or an FSA for which the employer has ultimate responsibility. And it is just one less possible vendor's mistakes for which we and HR must answer.

There is now a reasonable legal argument to employe that practice so as to minimize the employer’s risk. The below is not saying an employer can't solely select one bank to use.  However, there is a very solid and practical argument to make that when an employer does select one bank that employer is necessarily restricting where and how an employee can and cannot not invest his or her money.

Hence, it would not surprise me in the least if this ultimately gets challenged by a group of aggrieved employees with an aggressive attorney. I say this especially since some HSA investment institutions are incredibly limited in how one can invest their money. Some institutions, for example, have only four mutual funds from which to choose. Well, if your employer is telling an employee that the employee can only invest in one of four funds, isn't your employer necessarily restricting investment options in such a way as to potentially run afoul of the below rules?

Maybe, maybe not. But for those of you wishing to install HSAs the way I historically have, you now have a good legal argument that doing so is the better risk management decision for the employer.

From InsuranceNewsNet.com

... HSAs often have an investment account option that allows their owners to invest in mutual funds and other investment vehicles much like they would in a 401(k) plan, EBRI said.

Employers may be impacted by the final rule if they: 1) provide investment advice to their employees concerning HSAs, or 2) benefit from such advice being given to their employees (such as revenue sharing in connection with a specific HSA investment, or compensation for directing employees towards a particular HSA vendor).

HSA mutual fund options charge annual fees and also may charge separate fees to administer the account. This could result in possible conflicts of interest can arise, and trigger liability under the DOL rule.

In a new white paper, HSA Bank, a large administrator of HSA plans, described how the DOL rule can affect employers who contract with HSA services firms. Alternatively, health insurers that administer the employer's HSA-eligible high-deductible health plan may contract with an HSA firm. In either case, the employer typically funds these accounts by transmitting employer contributions and workers’ own salary deferred dollars to the HSA administrator.

"Employers may be impacted by the [DOL's fiduciary] rule if they provide information to their employees about HSAs that crosses the line from general investment education to investment advice, or if they benefit in some way from the advice being given," said Kevin Robertson, a senior vice president at HSA Bank and the white paper's author, told SHRM. ...

7th Circuit Federal Court of Appeals Rules ADA does not Require "Extended" Leave - But 9th Circuit Still Does

Extended Leave and the ADA

The Americans with Disabilities Act (ADA) requires that employers provide “reasonable accommodations” for employees with disabilities unless the employer can demonstrate that an accommodation would cause undue hardship. The EEOC has argued that extended leave can be a reasonable accommodation and has brought suit where employers have a policy of automatically terminating employees after a specified period of leave. The EEOC also identifies leave as a potential accommodation in its regulations and enforcement guidance. This reasonable accommodation under the ADA, in the EEOC’s view, is in addition to an employee’s right to leave under the Family and Medical Leave Act (FMLA).

Severson v. Heartland Woodcraft

Our Legislative Alert covers a recent decision out of the U.S. Court of Appeals for the Seventh Circuit which disagreed with the EEOC’s position. In Severson v. Heartland Woodcraft, Seventh Circuit ruled that extended leave is not required under the ADA. The Court reasoned that the ADA was a statute that prevented discrimination and not one that mandated leave like the FMLA. The Court concluded that an ADA reasonable accommodation “is one that allows the disabled employee to ‘perform the essential functions of the employment position’” and that “not working is not a means” to that end. Therefore, in the Seventh Circuit’s view, a two to three month period of leave is not a reasonable accommodation under the ADA. The Court, however, noted that briefer or intermittent periods of leave, such as days or weeks, could be a reasonable accommodation under the ADA in some circumstances.


The Seventh Circuit’s decision only affects employers in Wisconsin, Indiana and Illinois. Employers subject to the ADA in other states should be aware that other federal court decisions may apply to them. For example, the U.S. Courts of Appeals for the First and Ninth Circuits have issued decisions holding that multi-month leave periods were reasonable accommodations under the ADA

As mentioned, the EEOC’s position is that extended leave can be a reasonable accommodation. Employers outside of the Seventh Circuit that are subject to the ADA should review federal court decisions regarding reasonable accommodations that apply in their states and confer with their legal counsel especially if they automatically terminate employees after a specified period of leave.

Our legislative alert provides an overview, action steps and considerations for employers as well as the background of Severson v. Heartland Woodcraft.

5 Ways to Keep Your Healthcare Costs Down

88% of Patients Who Sought a 2nd Medical Opinion for a Complex Condition Had a New or Refined Diagnosis & Treatment Plan

Whenever your diagnosis is anything beyond a minor matter, it pays to get a second opinion. 

From Employee Benefit News:
When an employee faces a serious health problem or is told he or she needs surgery, seeking a second opinion from another physician can, in some cases, have a significant impact on their diagnosis, treatment plan or prognosis.
But too few patients seek second opinions, and it’s causing issues for both employees and employers. 
A Gallup poll found that 49% of the 5,000 survey respondents said they never seek a second opinion when their physician diagnoses a condition, prescribes a new medication or treatment, or recommends surgery. Not seeking a second opinion in the case of a serious, complex, or rare diagnosis or recommendation for elective surgery is a missed opportunity to lower the risk of misdiagnosis and inappropriate or ineffective treatment. 
A recent study by health policy researchers at the Mayo Clinic found that as many as 88% of those who sought a second opinion for a complex medical condition at the Mayo Clinic had a new or refined diagnosis that changed their treatment plan. In contrast, only 12% of those patients received confirmation that their diagnosis was correct and complete. 
In addition to the harm caused to patients by misdiagnoses that may have been avoided if a second opinion was sought, there’s also a financial impact. The Institute of Medicine reports that approximately $750 billion is wasted each year in the U.S. on unnecessary medical services and other inefficiencies. Employers also bear the impact in the form of the absence or loss of experienced employees, lowered productivity, and increased insurance payouts. ...

Friday, October 13, 2017

Premiums in Obamacare Exchanges Now Up 10% to 20% More After Administration Ends Unlawful Insurance Bailouts/Subsidies

PPACA creates two different primary mechanisms to redistribute taxpayer dollars to insurers and enrollees to reduce the cost of insurance for Exchange enrollees.  As Josh Blackman describes over at Cato:
[W]hile the ACA funds the subsidies under Section 1401 with a permanent appropriation, to date, Congress has not provided an annual appropriation for the cost-sharing subsidies under Section 1402. Once again, where Congress would not act, President Obama did so unilaterally. The executive branch pretended that the ACA had actually funded Section 1402 all along, and it paid billions of dollars to insurers. Once again, Mr. Trump is exactly right that this is a “BAILOUT.” And, once again, the payments are a violation of the separation of powers. 
Last year, a federal court ruled that Congress did not “squeeze the elephant of Section 1402 reimbursements into the mousehole of Section 1401.” Mr. Obama’s policy “violates the Constitution,” the court concluded. “Congress is the only source for such an appropriation, and no public money can be spent without one.” 
This case, brought by the House of Representatives, now hovers in a state of limbo. The Trump Justice Department has not yet signaled whether it would continue the appeal begun by its predecessor. If the government is serious about repudiating pen-and-phone governance, it should announce that the payments are illegal and drop the appeal. This decision will no doubt trigger litigation by ACA supporters, but the far more obvious choice rests with the elected branch.
Yesterday, President Trump announced that he was stopping those cost-sharing subsidy payments.  This hastens the demise of the ACA Exchanges by further elevating premiums for those enrollees selecting Silver plans in the Exchanges by 10% to 20% more  (above and beyond the 12% to 60% premium increases already slated) in 2018.

In California, for example, Exchange plans were to increase by 12.5% in 2018, without these additional payments to reduce the cost of Silver plans (the most common Exchange plan, where about 60% of enrollees end up) will go up 25% instead.

In Idaho, Silver plans were to increase by 20%.  This change will elevate those plans now by 40%.

Other states are much worse off.  Georgia, with rates that are 57% higher than last year, tops the list.  While many of Florida's premiums will be 45% higher in 2018.  And these increases are before yesterday's announcement that the cost-sharing subsidies will be eliminated meaning Florida and George enrollees can safely tack another 10% to 20% onto the cost of their Silver Plans in 2018.

This impacts families making between 135% (or 100% in states that didn't expand Medicaid) and 250% of the federal poverty level (FPL) as only those families making 250% or less of FPL were eligible for these subsidies.  Some estimates peg that as high as half or more all Exchange enrollees even though this only impacts Silver Plans. Only Silver Plans qualify for these extra cost sharing reduction subsidies under Section 1402.

This means that in the Exchanges, families of four making approximately $33,000 to $61,000 and couples making $22,000 to $40,000 will be impacted negatively.

Constitutionalists and fiscal hawks will undoubtedly applaud this decision as it eliminates one more form of redistribution under the ACA while adhering back to the separation of powers and ending an unlawful, unilateral, executive action made by the last administration.

However, proponents of the ACA and popular media have and will pan the move as being cold-hearted, mean-spirited and outside of the intent of PPACA by increasing the costs to the very Americans who can afford it least: those at the lower end of the pay scale; but just outside of the reach of Medicaid eligibility.

This is the equivalent of tossing one more grenade into the already beleaguered foxhole of Obamacare.  To the extent that this hastens real, practical, meaningful reforms to our health insurance markets, it will ultimately lead to insurance premium relief.  But doing this days before open enrollment and knowing it will likely mean that about $2 million fewer people will be able to afford healthcare is going to make this a public relations and political nightmare if our politicians can't come together to start to put real fixes in place in the next few months.

I was on the Armstrong and Getty Radio Program this morning discussing this topic. 


For more on that comment by Senator Ted Cruz regarding the doubling of insurer profit under Obamacare, see, "Insurers' Profits Have Nearly Doubled Since Obama Was Elected."

Tuesday, October 3, 2017

Administration and Congressional Leadership Release Tax Reform Plan

On Sept. 27, 2017, the Trump administration—in conjunction with Congressional leadership—released a tax reform plan designed to make significant changes to the federal tax code. This plan is intended to serve as a template for the Congressional tax writing committees that will develop tax reform legislation.
This tax reform plan was collectively developed by the Trump administration, the U.S. House of Representatives Committee on Ways and Means, and the U.S. Senate Committee on Finance. It includes only broad policy directives, with the expectation that Congress will provide more detail when drafting its tax reform legislation.
The tax reform plan would make significant changes for businesses and employees. For example, the tax plan would:
  • Create a new lower tax rate structure for small businesses—The plan would limit the maximum tax rate for small and family-owned businesses conducted as sole proprietorships, partnerships and S corporations to 25% from 40%. It also directs committees to adopt measures to prevent the recharacterization of personal income into business income to prevent wealthy individuals from avoiding the top personal tax rate.
  • Lower the corporate tax rate—The plan would reduce the corporate tax rate from 35% to 20%, and would eliminate the corporate Alternative Minimum Tax (AMT), in an effort to make American corporations more competitive globally.
  • Allow “expensing” of capital investments—The plan would allow businesses to immediately write off (or “expense”) the cost of new investments for at least five years.
  • Repeal or restrict many existing business deductions and credits—Because the plan would substantially reduce the tax rate for all businesses, it would eliminate the existing domestic production (Section 199) deduction, and would repeal or restrict numerous other special exclusions and deductions. However, the plan explicitly preserves business credits related to research and development and low-income housing.  
The elimination of certain deductions — in favor of doubling the standard deduction (below) — could eventually cause taxes for many people to increase.  "By 2027, taxes would rise for roughly one-quarter of taxpayers, including nearly 30 percent of those with incomes between about $50,000 and $150,000 and 60 percent of those making between about $150,000 and $300,000," said a Tax Policy Center report.
  • End “offshoring” incentives—The plan would end the incentive to offshore jobs and keep foreign profits overseas by exempting them when they are repatriated to the United States. It would impose a one-time, low tax rate on wealth that has already accumulated overseas so there is no tax incentive to keep the money offshore.
  • Repealing the estate or death tax.
  • Simplifying the individual tax rate structure to 12, 25, and 35%.  
  • The other main tax cut in the plan is a doubling of the standard deduction, which would not do much for growth but would simplify the system.  
The tax reform plan provides broad flexibility to Congressional tax writing committees in implementing these changes, as well as establishing additional reforms, when drafting their legislation. As a result, it is unclear whether these reforms will be included in any future tax reform bill.

Two Republican Senators have already expressed negative sentiment over the proposal.  Senator Rand Paul of Kentucky became the second Republican senator to publicly express doubts about the plan. Sen. Bob Corker of Tennessee said Sunday that if it looked like the plan was "adding one penny to the deficit, I am not going to be for it."
We will continue to monitor the tax reform process for any future updates.

Monday, October 2, 2017

Compliance Update: Newly Adopted Wage Equity Laws

  • New York and Delaware amended current laws making salary history inquiries an unlawful discriminatory practice.  
  • Oregon, Delaware, Massachusetts and San Francisco adopt new wage equity laws.
  • A number of other states and major cities are considering similar laws.
Effective Dates
  • October 1, 2017 - New York City and Oregon
  • December 1, 2017 - Delaware
  • July 1, 2018 - Massachusetts and San Francisco
  • January 1, 2019 - Oregon (protected classes)


In an effort to close the wage gap that exists between male and female employees, a number of states and major cities have recently adopted wage equity and salary history laws. According to the Bureau of Labor Statistics, in 2016, the average female employee earned 80 cents for every dollar a man received during the same period. Statistics suggest the gap may be even greater for ethnic or racial minority employees.

When applicable, employers must comply with their state and local laws in addition to the Federal Equal Pay Act. When both federal and local laws differ, the law that provides the greater protection or benefit to the employee applies.

Employer Action Steps

  • Eliminate prohibited salary history inquiries.
  • Update job applications and other employment forms to comply with pay equity laws.
  • Train recruiters and hiring managers regarding applicable pay equity laws.

State Laws
New York City

Effective date:
Oct. 1, 2017
An amendment to the New York City Human Rights Law prohibits employers from inquiring into a candidate’s salary history as an unlawful discriminatory practice.
Covered Employers: New York City employers and employment agencies with four or more employees. Individuals employed by a parent, spouse or child, and individuals engaged in domestic service are not considered employees under this amendment.
Covered Individuals: Candidates and new hires during the hiring process, except internal transfers or promotions, when public employees’ salaries are determined by collective bargaining or when disclosure of salary history is mandated by law.
Requirements: A covered employer is prohibited from inquiring about or relying on a candidate’s salary history when determining a salary offer.
Effective dates: Salary inquiries Oct. 1, 2017
Protected classes and posting requirements    Jan. 1, 2019
In addition to prohibiting salary history inquiries, the Oregon Equal Pay Act of 2017 extends pay equity protections to nine additional protected classes.
Covered Employers: All Oregon employers.
Covered Individuals: All Oregon job applicants.
Requirements: Effective Oct. 1, 2017, employers are prohibited from inquiring about an applicant’s salary history. Effective Jan. 1, 2019, employees who perform comparable work cannot be paid different pay rates based on race, color, religion, sex, sexual orientation, national origin, marital status, veteran status, disability or age.

Effective date:
Dec. 1, 2017
An amendment to Title 19 of the Delaware Code prohibits employers from asking a candidate’s compensation history during the interview process.
Covered Employers: All Delaware employers and hiring agencies.
Covered Individuals: All Delaware job candidates.
Requirements: Employers are prohibited from making inquiries concerning a candidate’s compensation history, using that history to screen candidates or requiring that prior compensation satisfy minimum or maximum criteria.

Effective date:
July 1, 2018
The Pay Equity Act addresses equal pay for comparable work, allowable variations in wages, pay secrecy policies and using salary history in the hiring process.
Covered Employers: All Massachusetts employers.
Covered Individuals: All Massachusetts employees and candidates.
Requirements: Employers are prohibited from inquiring about or relying on a candidate’s salary history during the hiring process.
San Francisco

Effective date:
July 1, 2018
The Parity in Pay Ordinance prohibits employers from making inquiries concerning a job applicant’s salary history.
Covered Employers: San Francisco employers, those contracting with the city and their agents.
Covered Individuals: All job applicants, including temporary or seasonal workers.
Requirements: Employers are prohibited from asking an applicant’s salary history. Salary history may not be considered in the hiring process or when determining a salary offer. Employers are prohibited from disclosing a current or former employee’s salary history without prior authorization, unless the information is publicly available.

Applicable Federal Laws

In addition to the state and local laws mentioned above, employers should be aware of the following federal laws that regulate employment discrimination and other aspects of the hiring and employment processes.
Equal Pay Act
The Equal Pay Act (EPA) requires that men and women receive equal pay for equal work.
Covered Employers and Employees: Virtually all employers and employees.
Requirements: Employers are required to pay equal pay for equal work, regardless of gender. Men and woman in substantially equal jobs, those requiring equal skill, effort, and responsibility and performed under similar conditions at the same workplace, must be paid equally.
Title VII, the Age Discrimination in Employment Act (ADEA) and the Americans with Disabilities Act (ADA) prohibit compensation discrimination based on race, color, religion, sex, national origin, age or disability. There is no requirement that the jobs be substantially equal.
Covered Employers and Employees: Title VII and ADA, all employers with 15 or more employees. ADEA, all employers with 20 or more employees.
Executive Order 11246
Executive Order 11246 prohibits discrimination in employment decisions based on race, color, religion, sex, sexual orientation, gender identity or national origin.
Covered Employers and Employees: Federal contractors and federally assisted construction contractors and subcontractors, who do over $10,000 in government business in one year.

This Compliance Bulletin is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.  Published with permission for use by clients of BB&T of California. 
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