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Hurry up and Spend the Money?

Hurry up and Spend the Money?

January 28, 2016

Authored by: Jennifer Stokes

Money Money MoneyIt’s like a simple set of facts on a law school exam with an answer that defies logic. And, yet, Supreme Court precedent has brought us to this illogical conclusion. Facts: Participant agrees to reimburse the plan money it has spent on his medical care. Participant sets aside money to reimburse the plan, but then spends all of the money himself before reimbursing the plan. Question: If the money cannot be traced, can the plan recover the amount it is owed from the participant’s other assets? Answer: Last week, the Supreme Court ruled in Montanile v. Bd. of Trustees of the Nat’l Elevator Indus. Health Benefit Plan that a health plan cannot enforce an equitable lien against a participant’s general assets when the participant has already spent the fund to which the lien attached.

Robert Montanile, a participant in an ERISA-health plan, was seriously injured by a drunk driver in an automobile accident and the plan paid more than $120,000 for his medical care. The plan contained a provision that required reimbursement from a participant who recovered money from a third party for medical expenses. Montanile also signed a reimbursement agreement reaffirming this obligation.

Subsequently, Montanile filed a claim against the drunk driver and received a $500,000 settlement. After settling his attorney’s fees and repayments, the participant had enough funds remaining to repay the amount due to

SCOTUS Meant What It Said & Said What It Meant: Dudenhoeffer Imposes Higher Pleading Standards

Stock DropIn a rebuke to the Ninth Circuit, the Supreme Court granted the Amgen defendants’ petition for certiorari, reversed the Ninth Circuit’s judgment and remanded the case for further proceedings consistent with its opinion in the district court. The unanimous per curiam opinion was issued without further briefing and oral argument, an unusual step in civil cases. The substance of the opinion and its handling by summary disposition sends a clear message: the Court meant what it said in Dudenhoeffer when it stressed the role of motions to dismiss in “divid[ing] the plausible sheep from the meritless goats” and crafted new liability requirements that plaintiffs must plausibly allege are met in order to state a claim. Admittedly, we steal liberally from Judge Kozinski’s dissent in Amgen in characterizing the opinion this way. But the Court’s summary handling of the Ninth Circuit’s judgment leaves no doubt that motions to dismiss must be given serious consideration and that boilerplate allegations will not suffice.

A Short Review of Amgen’s Long History

The continuing Amgen litigation began in 2007 when former employees filed a class action against Amgen defendants alleging that the fiduciaries violated the duty of prudence under ERISA. The complaint alleged that the fiduciaries knew or should have known, on the basis of inside information, that the company’s stock price was inflated. The district court dismissed the original complaint

Managing FMLA Fraud: Avoid Negative Commentary

Managing FMLA Fraud: Avoid Negative Commentary

January 26, 2016

Authored by: Christy Phanthavong and Chris Rylands

ThinkstockPhotos-496854082This last post in our three-part series on managing FMLA fraud is about how negative commentary – including emails with smiley face emoticons – can subvert an effort to show that a termination decision was based on an honest belief that the employee was misusing FMLA leave. (The first two posts in our series are available here and here.)

The case of Apatoff v. Munich Re Am. Servs., No. 11-7570, 2014 U.S. Dist. LEXIS 106665 (D.N.J. Aug. 1, 2014), involved an employee who took extended FMLA leave for asthma. Over the holidays, video surveillance showed the employee shopping on more than one occasion and carrying boxes as she moved into a new home. Based on this evidence, she was terminated for abusing FMLA leave.

During the ensuing litigation, the employee provided evidence that her physician had instructed her to engage in exercise and stay active, and had told her to remain on leave to determine whether airborne material in the workplace triggered her asthma. In its summary judgment motion, the employer argued that, even though it may have been mistaken, the employee’s FMLA retaliation claim should fail because the employer honestly believed the employee was misusing her leave.

The court rejected this argument, noting that the employer had failed to obtain information about the parameters of the employee’s medical

New DOL Guidance Regarding Joint Employment Under the FMLA

New DOL Guidance Regarding Joint Employment Under the FMLA

January 25, 2016

Authored by: Christy Phanthavong and Chris Rylands

On January 20, 2016, the federal Department of Labor (“DOL”) issued guidelines to employers on the subject of “joint employment.” Most of the buzz regarding the DOL’s publications centers around the new “Administrator’s Interpretation” of joint employment under the Fair Labor Standards Act (“FLSA”) and the resulting implications for joint liability under federal wage-and-hour laws.

However, the DOL didn’t stop with the FLSA. Instead, the DOL also issued a new “Fact Sheet”, Fact Sheet #28N, addressing joint employment principles under the Family and Medical Leave Act (“FMLA”).

Joint employment exists when an employee is employed by two or more employers, such that both employers have responsibilities under the FMLA. Fact Sheet #28N does not provide a detailed discussion of when joint employment will be found to exist for FMLA purposes, noting instead that the analysis is the same under the FMLA as under the FLSA. Importantly, however, Fact Sheet #28N provides a “staffing company” example, thereby reminding employers that joint employment will often be found to exist when a staffing company places employees at client sites.

In a joint employment situation under the FMLA, it is necessary to identify which employer is the “primary” employer and which employer is the “secondary” employer. Fact Sheet #28N discusses the factors that will be considered in this analysis, including:

  • who has authority to hire and fire, and to place or assign work the employee;
  • who decides how, when and the amount that the employee is paid;

California Court Recognizes Same-Sex Marriage a Week Prior to Windsor

Earlier this month, the U.S. District Court for the Northern District of California recognized the retroactive application of United States v. Windsor.

In Schuett v. FedEx Corporation, plaintiff and her long-time same-sex partner, Lesly Taboada-Hall were married in a civil ceremony on June 19, 2013. Taboada-Hall, a fully-vested participant in the FedEx Pension Plan, passed away the following day from cancer. As of the date of Taboada-Hall’s death, marriage licenses for same-sex couples were not available in California due to enforcement of Proposition 8, a voter-enacted ban on same-sex marriage. Six days later, the U.S. Supreme Court issued its landmark Windsor decision declaring Section 3 of the Defense of Marriage Act (DOMA) unconstitutional.

Here’s where this gets interesting. On August 6, 2013, plaintiff filed a Petition to Establish the Fact, Date, and Place of Marriage, as permitted by California Health & Safety Code Section 103450. The Sonoma County Superior Court issued a delayed certificate of marriage that showed the marriage occurred June 19, 2013 — yes, June 19, 2013, a week before the Windsor decision. So, according to the Superior Court, the plaintiff actually became Taboada-Hall’s spouse on June 19, 2013, a day before Taboada-Hall’s death, rather than June 26, 2013, a week after her death.

Plaintiff then sought a qualified pre-retirement survivor annuity under the FedEx Pension Plan as a surviving spouse. Defendant denied the claim, asserting that at the time of Taboada-Hall’s death the plan had defined “spouse” in accordance

PEOs: A remedy for ACA reporting requirements?

PEOs: A remedy for ACA reporting requirements?

January 21, 2016

Authored by: benefitsbclp

IRS AheadSigned into law in December 2014 and effective January 1, 2016, the Small Business Efficiency Act (“SBEA”) provides welcome federal statutory recognition of Professional Employer Organizations (“PEOs”). PEOs, who act as “co-employers”, are becoming popular for many small to mid-size businesses struggling to maintain compliance with an ever-increasing volume of regulations impacting human resources and benefits compliance.

In the past, many states individually recognized PEOs through licensing or registration statutes, and there were only a handful of pieces of federal guidance concerning how PEOs should be treated under federal law. The SBEA changes the federal legal landscape by instituting a voluntary certification process for PEOs. By completing this voluntary certification process, a PEO has clear statutory authority to collect and remit taxes on behalf of their clients. Businesses can breathe a sigh of relief as certified PEOs will also assume sole liability for the collection and remission of federal taxes.

In order to become certified, the SBEA requires PEOs to meet a number of financial standards, including bonding and independent financial audit requirements. The IRS has been working to determine the exact procedures and information system changes necessary to implement the new law, and the window for submitting comments on this process just closed earlier this month. At this point, it seems aggressive, but the IRS claims that it will begin accepting applications for certification on July 1, 2016 (only a year

EEOC Faces Another Defeat in its War Against Wellness Programs

The U.S. Equal Employment Opportunity Commission (“EEOC”) has steadfastly maintained that any wellness program that is not voluntary violates the Americans With Disabilities Act (“ADA”). In 2014, the Chicago District Office of the EEOC filed lawsuits against Orion Energy Systems, Honeywell International, Inc. and Flambeau, Inc. alleging that their respective wellness programs were not voluntary since employees who refused to complete a health risk assessment and/or biometric screening were financially penalized. In a case of first impression in the Seventh Circuit, the U.S. District Court for the Western District of Wisconsin granted summary judgment on December 31, 2015, in favor of the defendant in EEOC v. Flambeau.

Factual Background

Flambeau implemented a wellness program for 2011 in which employees who completed both a health risk assessment and biometric testing received a $600 credit. The health risk assessment included questions about the employee’s medical history, diet, mental and social health and job satisfaction. The biometric testing was similar to a routine physical exam involving (among other things) height and weight measurements, a blood pressure test and a blood draw. For 2012 and 2013, Flambeau eliminated the $600 credit and instead made completion of the health risk assessment and biometric testing a condition to enrolling in its health plan.

ADA Safe Harbor

Section 12112(d)(4)(A) of the ADA prohibits employers from requiring medical examinations and inquiries that are not job-related or consistent with business necessity. However, Section 12201(c)(2) of the ADA also

Managing FMLA Fraud: Investigate, Don’t Assume

Managing FMLA Fraud: Investigate, Don’t Assume

January 19, 2016

Authored by: Christy Phanthavong and Chris Rylands

ThinkstockPhotos-112707613Continuing our three-part series on managing FMLA fraud (see our initial post here), this post addresses the importance of conducting a reasonable investigation, prior to taking adverse action, to develop a supportable “honest belief” of FMLA fraud.

The case of Hosler v. Fulkroad, No. 13-cv-1153, 2015 U.S. Dist. LEXIS 80801 (M.D. Penn. June 23, 2015), provides an excellent example of this principle. The employee requested leave for surgery and recovery, and submitted a doctor’s note in support of the request. The employer purportedly doubted the need for leave and terminated the employee while she was out.

Not only did the jury find in favor of the employee on her FMLA interference claim, but the court awarded liquidated damages, finding no credible evidence that the employer had a reasonable, good faith basis for its interference with the employee’s FMLA rights.

The court pointed out that the employer could not provide any factual basis for his personal opinion that the doctor’s note was fraudulent. Indeed, despite supposedly believing that the note did not come from the doctor’s office and that someone had forged the doctor’s signature, the employer failed to make any kind of reasonable inquiry with either the employee or her doctor concerning the validity of the note. Thus, the court imposed “significant consequences” for the employer’s “arbitrary, erroneous, subjective, and uninformed” action.

The importance of asking questions was also demonstrated in

Managing FMLA Fraud: Using Your Policy To Your Advantage

Managing FMLA Fraud: Using Your Policy To Your Advantage

January 11, 2016

Authored by: Christy Phanthavong and Chris Rylands

ThinkstockPhotos-466150788This post is the first in a three-part series of posts on managing FMLA fraud with tips from recent cases. In Alexander v. Bd. of Educ. of City Sch. Dist., No. 14 Civ. 8553, 2015 WL 2330126 (S.D.N.Y. May 14, 2015), for example, the court provided guidance on how FMLA policies can help support a termination decision when an employee misuses FMLA leave.

The employee in Alexander told her employer she needed intermittent FMLA leave to take her child to physical therapy appointments. Her request was approved after a doctor’s note confirmed the need for leave. Subsequently, the child refused to attend the appointments. Rather than update her employer about the situation, however, the employee attended classes while on leave during the scheduled appointment times. Trouble arose for the employee when she submitted a tuition reimbursement request for the course, and her employment was terminated for abuse of FMLA leave after she admitted these facts during the employer’s investigation.

Summary judgment for the employer on the employee’s FMLA retaliation claim – the obvious result – was granted. In doing so, the court rejected the employee’s argument that the motivation for her termination could not have been her abuse of FMLA leave, because she was “never advised that she had to apprise her employer of the need to terminate her FMLA intermittent leave” when she no longer planned to attend the physical therapy appointments.

Changes to User Fees for Voluntary Correction Program (VCP) Submissions

On January 4, 2016, the Internal Revenue Service published its annual update of user fees Rev. Proc. 2016-8 for various letter ruling and determination letter requests. The 2016 update now includes user fees and guidance for Voluntary Correction Program (VCP) submissions under the Employee Plans Compliance Resolution System. In many cases the user fee for VCP submissions is reduced under Revenue Procedure 2016-8. The revised fee schedule for employee plan user fees (including VCP submissions) is effective February 1, 2016.

Below are the current user fees for regular VCP submissions for qualified plans and 403(b) plans as set forth in Section 12.02 of Revenue Procedure 2013-12.*

Participants Revenue Procedure 2013-12 Fee 20 or fewer participants $750 21 to 50 participants $1,000 51 to 100 participants $2,500 101 to 500 participants $5,000 501 to 1,000 participants $8,000 1,001 to 5,000 participants $15,000 5,001 to 10,000 participants $20,000 Over 10,000 participants $25,000

* User fees for VCP filings relating to certain minimum distribution or plan loan failures were revised in Revenue Procedure 2015-27.

Below are the user fees, effective February 1, 2016, for regular VCP submissions for qualified plans and 403(b) plans as set forth in Section 6.08 of Revenue Procedure 2016-8.

Participants Revenue Procedure 2016-8 Fee 20 or fewer participants $500 21 to 50 participants $750 51 to 100 participants $1,500 101 to 1,000 participants $5,000 1,001 to 10,000 participants $10,000 Over 10,000 participants $15,000

Note: Revenue Procedure 2016-8 also includes additional user fee changes

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