As expected, with a Democratic administration, we are quickly seeing pro-labor and pro-employee regulations and legislation. President Obama in February, 2009 issued three Executive Orders affecting federal government contracts, which reversed former President Bush’s anti-labor Executive Orders. The Democratically controlled Congress also did its part in helping employees, by passing a COBRA subsidy as part of the Stimulus Package, and a CHIP Reauthorization Act which requires health benefit plans to provide certain special enrollment rights for children and notice provision in plans. If nothing else, this creates more work for HR professionals and their lawyers (never leave home without one).
Executive Order 13494, “Emergency In Government Contracting” makes the cost of activities to persuade employees to be union free as “unallowable”, i.e. not reimbursed by the government. Thus, if a government contractor spends money on an anti-union campaign, those expenses can not be charged against a government contract.
Executive Order 13495, “Non-displacement of Qualified Workers Under Service Contracts”, deals with federal contracts which are subject to the Service Contract Act of 1965 and are primarily for provision of services (as opposed, for example, a construction contract or a supply of goods contract). While there are some statutory and regulatory exemptions, this Executive Order applies to service contracts over $2,500, where one contractor replaces another contractor. The successful bidder who takes over the new contract must offer the predecessors’ contractor’s employees, who would otherwise be laid off or discharged, a right of first refusal of employment under the new contract for positions they are qualified. Managers and supervisors are excluded, as are employees with job performance issues.
The third of the trilogy is Executive Order 13496, “Notification of Employees Rights Under Federal Labor Laws.” For contracts above the Simplified Acquisition Threshold (currently $100,000), contractors must post notices of employees’ rights under the National Labor Relations Act (“NLRA”), in conspicuous places, including all places where notices to employees are customarily posted, both physically and electronically.
While the Executive Orders were limited to government contractors, Congress’ efforts applied to all employers with benefit plans. As we all know, COBRA allows terminated employees to purchase health care insurance from their former employer for 102% of cost, for 18 months and under some circumstances, longer. The Stimulus Package which Congress just passed contains a COBRA subsidy provision. Eligible individuals will now only have to pay 35% of their COBRA premium, and the remaining 65% will be paid by the Federal Government by means of a payroll tax credit to the employer (or where applicable, multi-employer or insurer).
Eligible persons are those who were involuntarily terminated from employment from September 1, 2008 through December 31, 2009, and for the full subsidy, have adjusted gross income under $125,000 for a single person, and $250,000 for joint tax filers. There is a reduced subsidy for those between $125,000 and $145,000 for individuals ($250,000 to $290,000 for joint filers). The subsidy applies to spouses and dependents as well.
The subsidy is available for 9 months, or the COBRA limit, whichever is less, and of course, eligible persons must be given notice of its availability. There can also be an option for selection of a less expensive plan.
Lastly, Congress, in reauthorizing the State Children’s Health Insurance Program (CHIP), has allowed states to subsidize employees who switch from individual coverage to family coverage, if they have a CHIP or Medicare covered child. In addition, beginning April 1, 2009, group health plans must permit employees and dependents who are “eligible but not enrolled for coverage” under an employer plan to enroll in two additional circumstances: 1) the employee’s or dependent’s Medicaid or CHIP coverage is terminated as a result of loss of eligibility; and 2) the employee or dependent becomes eligible for a Subsidy under Medicaid or CHIP. Although the notice requirements have a later effective date, group health plans will have to notify all employees of their potential eligibility for the new subsidies. Group health plans will be required to distribute notices when an employee becomes eligible for enrollment under the plan, with the open enrollment materials, or in the summary plan description. Model notices are to be developed by the Department of Labor (DOL) and the Department of Health and Human Services (HHS) by February 4, 2010. Plans will be required to distribute notices during the first plan year beginning after the date on which model notices are first issued (i.e., January 1, 2011 for calendar year plans).
If you have any questions, you can e-mail Mr. Postol at Lpostol@seyfarth.com.
