Leading People. Leading Organizations.

1. D HR REGULATORY & JUDICIAL OUTLOOK Leading People. Leading Organizations. Nancy Hammer, SHRM Government Affairs Pennsylvania Legislative & Legal Conference April 19, 2013

3. 2013 HR Regulatory Agenda • Health Care Implementation (IRS/HHS) • Office of Federal Contract Compliance Programs (OFCCP) • Department of Labor (DOL) • Equal Employment Opportunity Commission (EEOC) • US Citizenship & Immigration Services (USCIS)

4. Most ACA Reforms Implemented 2013-2014 March 5, 2013 Implementation Timeline for Major ACA Provisions Medicare/Medicaid Insurance Finance/Taxes Jan. 2013 Jan. 2014 • Establishment of pilot Medicare bundled payment program • Guarantee of insurance availability regardless of health status • Prohibition of annual limits on coverage • Phase-out of Medicare drug coverage gap • Enforcement of employer insurance requirements • Increase in Medicare Part A (hospital insurance) tax rate • Implementation of health insurance exchanges • Increase in Medicaid coverage of preventive services • Provision of health insurance premium and cost sharing subsidies • Increase in Medicaid payments for primary care • Imposition of fees on health insurance sector • Elimination of tax-deduction for employer retiree coverage subsidy • Creation of essential health benefits package • Creation of 2.3% excise tax on medical devices • Requirement of health insurance (individual mandate) • Cap on flexible spending accounts • Requirement of minimum 85% medical loss ratio for Medicare Advantage plans April 2013 • Expansion of Medicaid coverage • Requirement to disclose financial relationships between health entities and manufacturers/ distributors July 2013 July 2014 • Establishment of wellness programs participation incentives • Creation of Consumer Operated and Oriented Plan (CO-OP) for member-run health insurance companies Oct. 2013 Oct. 2014 • Reduction in Medicare and Medicaid Disproportionate Share Hospital (DSH) allotments • Reduction in Medicare payments to hospitals for hospital-acquired conditions by 1% Source: The Henry J. Kaiser Family Foundation; HealthCare.gov; Deloitte.

5. Focus on Medicare and Medicaid Reform in 2013 March 5, 2013 Key Provisions Implemented in 2013 Medicare/Medicaid Insurance Finance/Taxes Jan. 2013 Establishes national pilot program to make bundled payments for health services • Establishment of pilot Medicare bundled payment program • Phase-out of Medicare drug coverage gap Phases-in subsidies for brand-name prescriptions filled in Medicare Part D coverage gap • Increase in Medicare Part A (hospital insurance) tax rate • Increase in Medicaid coverage of preventive services Increases Medicare Part A (hospital insurance) tax rate on wages by 0.9% on higher earners • Increase in Medicaid payments for primary care • Elimination of tax-deduction for employer retiree coverage subsidy Increases federal matching payments for preventive services in Medicaid for states eliminating cost-sharing • Creation of 2.3% excise tax on medical devices • Cap on flexible spending accounts Increases Medicaid payments for primary care to 100% of the Medicare payment rate for 2013 and 2014 April 2013 • Requirement to disclose financial relationships between health entities and manufacturers/ distributors Eliminates tax-deduction for employers receiving Medicare Part D retiree drug subsidy payments July 2013 • Creation of Consumer Operated and Oriented Plan (CO-OP) for member-run health insurance companies Oct. 2013 Reduces Medicare DSH payments by 75%, then increases payments based on uninsured population and care provided • Reduction in Medicare Disproportionate Share Hospital (DSH) allotments Reduces states’ Medicaid DSH allotments; Secretary determines how to distribute reductions • Reduction in Medicaid Disproportionate Share Hospital (DSH) allotments • Source: The Henry J. Kaiser Family Foundation; • HealthCare.gov; Deloitte.

6. Focus on Health Insurance Expansion in 2014 March 5, 2013 Key Provisions Implemented in 2014 Medicare/Medicaid Insurance Jan. 2014 Insurance companies prohibited from refusing coverage or charging more due to individual’s gender or health status • Guarantee of insurance availability regardless of health status • Prohibition of annual limits on coverage Dollar limit on coverage prohibited • Enforcement of employer insurance requirements • Implementation of health insurance exchanges Certain larger employers must pay fee if they don’t provide affordable coverage to employees • Provision of health insurance premium and cost sharing subsidies • Individuals and small businesses can compare and shop for insurance plans in competitive marketplace • Small business tax credit increased to 50% of employer’s contribution for insurance to employees • Imposition of fees on health insurance sector • Creation of essential health benefits package • Requirement of health insurance (individual mandate) Individuals with incomes 100-400% of federal poverty level (FPL) eligible for tax credits to buy insurance through exchanges; cost-sharing subsidies available to those with incomes up to 250% of FPL • Requirement of minimum 85% medical loss ratio for Medicare Advantage plans • Expansion of Medicaid coverage Individuals are required to have basic health insurance or pay a fee, with certain exemptions July 2014 • Establishment of wellness programs participation incentives Individuals with incomes up to 133% of FPL are eligible for Medicaid if states opt in to Medicaid expansion Oct. 2014 • Reduction in Medicare payments to hospitals for hospital-acquired conditions by 1% Source: The Henry J. Kaiser Family Foundation; HealthCare.gov; Deloitte.

7. Final ACA Provisions Implemented Through 2018 March 5, 2013 Implementation Timeline for Major ACA Provisions, 2015-2018 Medicare/Medicaid Insurance Jan. 2015 Increase in CHIP match rate up to a cap of 100% • Increase federal match for Children’s Health Insurance Program (CHIP) Reduces Medicare payments to providers for not successfully reporting measures • Physician Quality Reporting System • Basic Health Plan Operational States have option to create Basic Health Plan for individuals with incomes 133-200% of FPL Jan. 2016 Permits states to form health care choice compacts and allows insurers to sell policies in any state participating • Health Care Choice Compacts Jan 2018 Imposes excise tax on employer-sponsored coverage that costs over $10,200 for individuals and $27,500 for families • Tax on high-cost insurance Source: The Henry J. Kaiser Family Foundation; HealthCare.gov; Deloitte.

8. Half of States Opted for Federal Exchanges in 2012 State Exchange Second Most Popular Option Source: Center for Budget and Policy Priorities March 29, 2013

9. Health Care Reform IssuesEmployer Shared Responsibility • IRS issued proposed rule on January 2, 2013. Comments were due March 18, 2013. • Applies to large employers (50+ ees) subject to penalty if (1) fails to offer FTEs minimum essential coverage or (2) employer offers coverage but one or more FTEs qualifies for tax credit to buy insurance on the exchange. • SHRM comments include suggestions on: • Safe harbor for new employers setting up benefit package. • How FTEs are measured including exempting certain types of employees from the count (i.e. minor dependents, employees covered under policy of another family member).

10. Health Care Reform IssuesVerification on Employer Sponsored Coverage • HHs issued proposed rule on January 14, 2013. Comments were due March 15, 2013. • Exchanges must verify whether applicants seeking tax credits to buy coverage on an exchange are enrolled or eligible for an employer-sponsored plan. • Proposed rule defines how regulators will do that; how employers will be notified; and process for appealing determination. • Key for employers because penalties are measured on a “per employee” basis.

11. Health Care Reform IssuesRegulations Open for Comment • 90-day waiting period health plan mandate • Navigators for exchanges • $500,000 deductible for high value plans

12. Online Health Care Resources • DOL’s Employee Benefits Security Administration: http://www.dol.gov/ebsa/consumer_info_health.html • US Department of Health and Human Services: http://www.healthcare.gov/ • SHRM’s health care implementation timeline: http://www2.shrm.org/revised_timeline/timeline.html

13. Labor-Management / Civil Rights IssuesOffice of Federal Contract Compliance Programs (OFCCP) Policy Directive 307 on Pay Discrimination • In February, the OFCCP rescinded both the Standards for Systemic Compensation Discrimination and the Voluntary Guidelines for Self-Evaluation of Compensation Practices that have been in place since 2006. • Under this new directive effective February 28, federal contractors can no longer rely on the standard analytical criteria laid out in the Compensation Standards. • Instead, the new directive provides that the analytical method to be used is case-specific and includes the use of a range of investigative and analytical tools. • OFCCP indicated it will investigate possible systemic, small group and individual compensation discrimination.

14. Labor-Management / Civil Rights IssuesOffice of Federal Contract Compliance Programs (OFCCP) Affirmative Action & Nondiscrimination – Disability (section 503 of Rehab Act) • OFCCP issued a proposed rule on nondiscrimination and affirmative action requirements for individuals with disabilities on December 9,1012 • Proposed rule places numerous data collection and record-keeping requirements on federal contractors without showing that these requirements will help employers increase their disability hiring. • Key HR concerns with these proposed regulations include: • Encouraging employees to self-identify as disabled during pre- and post offer and annual survey; • Requiring employers to have a goal of 7% for each job group composed of individuals with disabilities;

15. Labor-Management / Civil Rights IssuesOffice of Federal Contract Compliance Programs (OFCCP) Affirmative Action & Nondiscrimination – Disability (section 503 of Rehab Act) • Requiring annual staff training that must include information on the benefits of employing individuals with disabilities, appropriate sensitivity, and legal responsibilities including reasonable accommodation; • Requiring an annual review of all physical and mental job qualifications including providing a written explanation as to why each requirement is related to the job and; • Creating personnel logs to track reasons for rejecting individuals with disabilities for vacancies and training programs, and a description of considered accommodations. • SHRM submitted comments on February 7, 2012; stakeholder letter to Secretary Solis.

16. Labor-Management / Civil Rights IssuesOffice of Federal Contract Compliance Programs (OFCCP) Affirmative Action & Nondiscrimination – Protected Veterans (VEVRAA) • OFCCP issued a proposed rule on nondiscrimination and affirmative action requirements for protected veterans on April 26, 2011. • Proposed rule details mandatory actions by contractors in the areas of recruitment, employee training, recordkeeping, and the dissemination of their affirmative action policies. • Key HR concerns include employer requirements to: • collect and maintain several measurements and comparisons related to protected veterans; • establish annual hiring benchmarks; and • engage in a minimum of three specified types of outreach and recruitment efforts.

17. Proposed rule published February 15, 2012 and final rule issued February 5, 2013. Primarily covers statutorily-required clarifications of military leave created in the National Defense Authorization Act for FY 2010 and flight crew provisions enacted in the Airline Flight Crew Technical Corrections Act. The final rule emphasizes that DOL is not returning to a system requiring employers to track FMLA leave in smallest increment allowed by payroll. Instead, rule specifically mentions that employers were “universally opposed” to eliminating varying increments and, therefore, DOL retained the current system. SHRM, the National Coalition to Protect Family Leave, and hundreds of SHRM members submitted comments. Final rule notes that approximately 90% of comments received were from SHRM members. Labor-Management / Civil Rights Issues Family & Medical Leave Act

18. Labor-Management / Civil Rights Issues “Persuader” proposed rule • Proposed rule published June 21, 2011 and comments submitted Sept. 21. • For more than 50 years, DOL has distinguished between “direct” and “indirect” contact with employees, requiring direct contacts to be reported but NOT requiring the following types of advice to be reported: Providing draft speeches to an employer; training supervisors, drafting policies, etc. • DOL states that “the current interpretation of "advice" has resulted in significant underreporting of employer and consultant persuader agreements. • HR concern: Expanded definition is too broad and may drive consultants and law firms from the marketplace.

19. Labor-Management / Civil Rights Issues Wage and Hour Division Misclassification Survey • Proposed rule published January 11, 2013 and comments submitted March 12. • DOL proposes to collect data on whether employees understand their classification (employee vs. independent contractor) and whether they understand what that classification means for pay and benefits. • Survey designed, administered and results analyzed over a 30 month period ending March 2014. • Part of larger ‘Right to Know’

20. Labor-Management / Civil Rights Issues Current Commission Members: • Jacqueline Berrien, Chair (D) • Constance Barker (R) • Chai Feldblum (D) • Victoria Lipnic (R) • Jenny Yang (D)—nominated January 22, 2013 • Referred to Senate Health, Education, Labor & Pensions Committee; • Was key lawyer representing 1.5 million women in Wal-Mart Stores Inc. v. Dukes sex discrimination class action.

21. Labor-Management / Civil Rights Issues • Equal Employment Opportunity Commission (EEOC) • Strategic Enforcement Plan (SEP) • On December 28, 2012, EEOC approved its SEP that highlighted six high priority areas: • Eliminating Barriers in Recruitment and Hiring • Protecting Immigrant, Migrant and Other Vulnerable Workers • Addressing Emerging and Developing Issues • Enforcing Equal Pay Laws • Preserving Access to the Legal System • Preventing Harassment Through Systemic Enforcement and Targeted Outreach • SEP is aimed at having a common enforcement and litigation strategy throughout EEOC.

22. Labor-Management / Civil Rights Issues • Equal Employment Opportunity Commission (EEOC) • Criminal Background Checks in the Employment Process • Agency issued guidance on the use of criminal background checks in the employment process on April 25, 2012. • Guidance reiterates current requirements and adds new requirements, suggested “best practices” and information about state law: • Best Practice to exclude from job applications questions about convictions; • Best Practice to conduct an individualized assessment of an individual when considering criminal record; • Develop a narrowly tailored written policy and procedure for screening applicants and employees for criminal conduct; and • State law provisions. • .

23. Immigration Issues

24. Immigration Issues Deferred Action for Childhood Arrivals (DACA) • June 15 – President Obama announced policy to permit qualified young people brought to the U.S. illegally as children to remain in the country – and work – for two years until June 2014 • August 15 – U.S. Citizenship and Immigration Services began accepting requests for consideration of deferred action for childhood arrivals • Individual must: • be under age 31 • have arrived in U.S. before 16th birthday • be currently in school, graduated or obtained GED, or honorably discharged veteran of the U.S. Armed Forces

25. Immigration Issues Revised Form I-9 • The new Form I-9 is now available at www.uscis.gov/i-9; • As of May 7, 2013,no previous versions of I-9 may be used; • The new form is 3 pages including the list of acceptable documents.  With instructions, full document is now 9 pages; • You may still print the form on one piece of paper, front and back, for the file.  The list of acceptable documents does not need to be attached to each I-9 kept by the employer for inspection; • Additional data fields include the employee’s foreign passport information (if applicable) and telephone and e-mail addresses;

26. Key Supreme Court HR-Related Cases • U.S. Airways, Inc. v. McCutchen (11-1285) • -Appeal from Third Circuit • -Subrogation and use of equitable remedies under ERISA • -HR: ERISA preemption results in certainty for employers • Vance v Ball State University (11-556) • -Appeal from Seventh Circuit • -Scope of Title VII Supervisor Liability • -HR: Will affect training; liability exposure

27. Key Supreme Court HR-Related Cases • Genesis Healthcare Corp. v Symczyk (11-1059) • -Appeal from Third Circuit • -Whether FLSA settlement moots underlying case • -HR: Reliance on legal settlements; exposure to class actions

28. Key Supreme Court HR-Related Cases Sandifer v. United States Steel (12-417) -Appeal from 7th circuit -Whether union workers can be compensated for the time it takes to change in and out of safety gear even if not covered by Collective Bargaining Agreement -HR: Affects whether courts will defer to the collective bargaining process.

29. Key Supreme Court HR-Related Cases United States v. Windsor (12-307) -Appeal from 2nd circuit -Whether DOMA violates the Fifth Amendment’s guarantee of equal protection -HR: DOMA defines marriage under federal law and, therefore, affects employee benefits under ERISA, Internal Revenue Code, and other federal laws that impact employee benefit plans.

30. Nancy Hammer Senior Government Affairs Policy Counsel Government Affairs nancy.hammer@shrm.org 703-535-6030 “It’s a baby. Federal regulations prohibit our mentioning its race, age or gender.”