Health Care, Antitrust Whistleblowers, Criminal Backgrounds, And Federal Trade Secrets: Summer Legislative Proposals Turn The Heat Up On Employers
Despite the pressing November elections, the summer legislation in labor and employment law brought new and renewed legislation that focused, for the most part, on issues beyond the elections, such as new federal protections for antitrust whistleblowers, ex-convicts, and company trade secrets. While these issues have not exactly been making the campaign headlines, they could make it to the next President’s desk, and employers generally will not be pleased if they do. On a brighter note, for employers utilizing high deductible health plans and health savings accounts, the summer brought a renewed proposal to amend and repeal related provisions of the controversial new health care law. Finally, most of the legislation we have been following saw no progression since our last update, but a couple of developments related to social media protections and workforce raises are worth mentioning.
HELPING SAVE AMERICANS’ HEALTH CARE CHOICES ACT OF 2012 (H.R. 6137)
CURRENT STATUS OF LAW: Health savings accounts (HSAs) have grown steadily since President Bush signed them into law in 2003 (reports indicate that enrollment has doubled in the past three years). What is an HSA? An HSA is a tax advantaged savings account that can be used in connection with a high deductible health plan (HDHP) to pay for qualified medical expenses that are not covered by the HDHP or are less than the deductible. HDHPs have higher deductibles (a minimum of $1,200 for an individual and $2,400 for family coverage for 2012), but they usually provide significantly lower premiums than lower deductible health plans. Along with the lower premiums of the HDHP, benefits of a HSA include:
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Individual and employer contributions to HSAs are tax deductible.
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Individuals can exclude employer contributions to HSAs from income.
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Interest and other earnings on the assets in HSAs are tax free.
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HSAs, unlike flexible spending accounts (FSAs), permit contributions to remain in the account from year to year and be used in future years.
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Distributions from HSAs are not subject to federal income tax if used for qualified medical expenses.
Prior to retirement, distributions from HSAs for purposes other than qualified medical expenses are subject to applicable income taxes and an additional penalty tax.
After retirement, distributions from HSAs for purposes other than medical expenses are subject to applicable income taxes but no additional tax penalties.
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HSAs can be transferred from one employer to another and remain with the employee after leaving the workforce.
The Patient Protection and Affordable Care Act (“PPACA,” enacted in 2010) made several changes to the benefits associated with HSAs and HDHPs. Non-prescription medicines (other than insulin) are no longer considered qualified medical expenses, meaning that distributions from HSAs for these expenses are no longer tax free. In addition, under the PPACA, pre-retirement distributions from HSAs for purposes other than qualified medical expenses are subject to an increased tax penalty (20 percent instead of the prior 10 percent rate) in addition to applicable income taxes.
Many commentators are also concerned that one of the key advantages of the HSA/HDHP model – the lower premiums – will be affected by other provisions of the PPACA regarding what constitutes a qualified health plan that will become effective in 2014, including:
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The requirement that insurers provide an “essential health benefits package,” which some HDHP plans may not currently provide.
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The requirement that insurers cover the cost of at least 60 percent of medical benefits, which most HDHP plans do not currently provide.
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The medical loss ratio requirement – at least 80 percent (85 for large group plans) of every premium dollar must go toward the participants’ medical claims or a rebate must be given for the difference – which some HDHPs may not meet.
To meet these requirements and thus be a qualified health plan, at least some HDHPs may need to increase premiums and/or provide additional coverage, thus making the HDHP/HSA model less affordable.
WHAT WOULD CHANGE: On July 18, 2012, Republican John Fleming (who is also a physician) introduced the Helping Save Americans’ Health Care Choices Act of 2012 (similar legislation was previously introduced in 2010 as H.R. 5936). This Act would repeal or amend many of the provisions in the PPACA impacting HSAs. Of note, it would repeal the PPACA’s exclusion of non-prescription medications from the definition of a qualified medical expense, thus restoring the tax free status of HSA distributions for non-prescription medications. It would also repeal the increase in the tax penalty on distributions used for non-medical expenses (restoring it to the former 10% level). Finally, and most significantly, it would amend the definition of a qualified health plan to specifically include HDHPs, meaning that HDHPs would, for the most part, continue to operate as they have in the past.
WHY YOU CARE: The HSA/HDHP model has grown steadily in popularity over the past year, especially among individuals and small businesses. Will it continue to enjoy this popularity? This Act would make it more likely that it will.
LIKELIHOOD OF BECOMING LAW: Even if it stands little chance of short term success, this legislation highlights some of the problems that HSAs and HDHPs may face under the PPACA, and which may be addressed by the next administration through regulation, if not legislation.
BAN THE BOX ACT (H.R. 6220)
CURRENT STATUS OF LAW: There is currently no federal law that directly prohibits employers from asking employees or applicants about arrests or convictions. That said, inquiries into criminal records may subject employers to liability under other federal or state laws, as we explained in our prior article here. On the other hand, in some instances, the failure to perform a criminal background check may subject an employer to liability under various state laws that require criminal background checks for certain positions.
WHAT WOULD CHANGE: On July 26, 2012, House Democrats introduced the Ban the Box Act. This Act would make it unlawful for any employer to make inquiries of an applicant for employment (or otherwise seek information about such an applicant) relating to whether such applicant has ever been convicted of a criminal offense, subject to two exceptions. An employer can make inquiries about whether the applicant has been convicted of a criminal offense:
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after a conditional offer for employment has been extended to the applicant; or
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where the granting of employment without inquires into criminal convictions would involve an unreasonable risk to the safety of specific individuals or to the general public.
In construing the “unreasonable risk” component to the second exception, the Act grants the EEOC authority to define (a) categories of employment where an individual’s past criminal history may involve an unreasonable risk and (b) factors to be considered by employers in assessing whether an individual’s past criminal history poses such an unreasonable risk.
Employers will not be happy to learn that the Act also permits an individual or the EEOC to bring a claim for an unlawful employment practice based on a violation of the Act, using the same procedures and remedies provided for Title VII claims.
WHY YOU CARE: Do not be led astray by the catchy title. The Ban the Box Act does much more than its simple message portrays. It would create another federal action against employers that would be administered by the EEOC. That’s never good news for employers.
LIKELIHOOD OF BECOMING LAW: While both sides of the aisle have voiced concerns about the difficulties that ex-convicts have in securing employment, we do not see the current Congress uniting on this legislation as the best solution to that problem.
CRIMINAL ANTITRUST ANTI-RETALIATION ACT (S. 3462)
CURRENT STATUS OF LAW: There are many federal and state laws that protect whistleblowers – those who complain about violations of federal or state laws. In the financial industry, the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, which amended Sarbanes Oxley, extended whistleblower protections to individuals:
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who provide information to the SEC about securities law violations; or
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who provide information to the Consumer Financial Protection Bureau (“CFPB,” formed in July 2011) about violations of the Dodd-Frank Act’s consumer protection provisions or other laws or regulations enforced by the CFPB.
Some courts have also permitted whistleblowers to bring civil actions against their employers under the Racketeer Influenced and Corrupt Organizations Act (“RICO”), as explained in our prior article here. However, in the financial industry, no federal law specifically protects whistleblowers who complain about alleged antitrust violations.
WHAT WOULD CHANGE: On July 31, 2012, Senate Democrats and Republicans introduced the Criminal Antitrust Anti-Retaliation Act. This Act would prohibit any person from discriminating against a whistleblower in the terms or conditions of employment because the whistleblower files a claim, participates or assists in an investigation, or provides information to any person, including employers or the federal government, relating to:
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any violation of (or any act or omission the whistleblower reasonably believes to be a violation of) the antitrust laws; or
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any violation of (or any act or omission the whistleblower reasonably believes to be a violation of) another criminal law committed in conjunction with a potential violation of the antitrust laws or in conjunction with an investigation by the Department of Justice of a potential violation of the antitrust laws.
Under the Act, the term ‘antitrust laws’ means section 1 or 3 of the Sherman Act or a similar state law. Section 1 of the Sherman Act (which was enacted in 1890) provides that “[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is hereby declared to be illegal.” What does that mean?
Courts have interpreted Section 1’s prohibition of agreements in “restraint of trade” to make unlawful some kinds of “anti-competitive” actions or agreements, such as certain kinds of price fixing, exclusive dealing arrangements, refusals to deal, tying arrangements, patent misuse, corporate acquisitions or amalgamations, covenants not to compete, and predatory pricing, among other things. Section 3 of the Sherman Act simply extends the provisions of Section 1 to the U.S. territories and the District of Columbia.
Giving the Act its teeth, a whistleblower who alleges discharge or other discrimination in violation of the Act may seek relief by:
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filing a complaint with the Secretary of Labor; or
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filing a complaint in federal court, if the Secretary of Labor has not issued a final decision within 180 days of the filing of the complaint and there is no showing that such delay is due to the bad faith of the claimant.
Any whistleblower prevailing in any action is entitled to all relief necessary to make the whistleblower “whole,” including reinstatement with the same seniority status that the whistleblower would have had, but for the discrimination, the amount of back pay (with interest), litigation costs, expert witness fees, and reasonable attorneys’ fees.
WHY YOU CARE: This Act would add another patch in the already complicated and diverse patchwork of whistleblower protections and provide another cause of action that employees could bring against both individuals and employers.
LIKELIHOOD OF BECOMING LAW: Though already garnering support from some members of both parties, we do not expect it to pass in the midst of the elections. However, we expect that this bill or a similar version will eventually find its way to the President’s desk.
PROTECTING AMERICAN TRADE SECRETS AND INNOVATION ACT OF 2012 (S. 3389)
CURRENT STATUS OF LAW: While most states protect company trade secrets through laws modeled after the Uniform Trade Secrets Act, no federal law directly provides civil remedies for the misappropriation of trade secrets.
WHAT WOULD CHANGE: The Protecting American Trade Secrets and Innovation Act of 2012, introduced on July 17, 2012, would create a federal right to bring civil actions for disputes involving the misappropriation of trade secrets where (a) there is a “substantial need” for nationwide service of process or (b) the misappropriation is from the United States to another country. Unlike the Uniform Trade Secrets Act that is applied in most states, this Act would explicitly authorize federal courts not only to hear causes of action traditionally arising under state law, it would also give them authority to grant ex parte orders to seize property and preserve evidence in connection with misappropriation claims.
WHY YOU CARE: The federal protections would provide employers with an opportunity to protect their trade secrets through the power and procedures of federal court. Of course, it also provides yet another opportunity and venue in which to be sued.
LIKELIHOOD OF BECOMING LAW: This Act, for the most part, affords the same trade secret protections that employers can already seek in state court (or through diversity jurisdiction in federal court). Further, with the adoption of the Uniform Trade Secrets Act in 46 states, concerns about uniformity of trade secret law appear to be overplayed by the Act’s supporters. We think that these factors, along with the potential to flood federal courts with lawsuits that have traditionally been heard only under state law, make it unlikely that this Act will catch the immediate attention of many members, especially while other more pressing financial and health care related legislation remains in the headlines.
SOCIAL NETWORKING ONLINE PROTECTION ACT ("SNOPA") (H.R. 5050) UPDATE
A few months ago we reported on SNOPA – federal legislation that would make it unlawful for any employer to require or request that an employee or applicant provide the employer with their user name, password, or any other means for accessing their private e-mail account or social networking websites (see our prior update here). While SNOPA has seen no progress since our last update, in August, Illinois became the second state, after Maryland, to enact similar legislation. Stay tuned to similar laws that may be coming soon to your state.
THE REBUILD AMERICA ACT (S. 2252, H.R. 5727) UPDATE
Last update we discussed different legislative proposals that would effectively offer the American workforce a “raise.” While those bills have seen no progress since our last update, other similar legislation has been introduced. In particular, Democrats in both the Senate and House have introduced the Fair Minimum Wage Act of 2012 (S. 3453, H.R. 6211). Like the Rebuild America Act (S. 2252, H.R. 5727) discussed in our prior update here, the Fair Minimum Wage Act would increase minimum wage to $9.80 per hour over the next two years and minimum wage for tipped workers to 70% of minimum wage, or $6.85 per hour. We do not think this legislation, or the legislation discussed in our prior update, will see much action until after the November elections.
Originally published in Employment & The Law – 09/05/2012
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