High Court Agrees Pension Plans Sponsored by Church-Affiliated Hospitals Are ERISA-Exempt and Upholds Decades of IRS, PBGC and DOL Guidance

In a much-anticipated decision, on June 5 the U.S. Supreme Court held that a pension plan sponsored by a religious affiliated nonprofit hospital qualifies as an ERISA-exempt church plan even though the plan was not initially established by a church. In this decision the Court reversed three consolidated decisions by the Third, Seventh and Ninth Circuits holding that defined benefit pension plans initially established and sponsored by church affiliated nonprofit hospitals and healthcare facilities were not ERISA-exempt church plans specifically because they were not initially established by a church.  These courts held that since the church plan exemption did not apply, the plans must comply with ERISA’s funding, participation, vesting, reporting and disclosure rules.  In doing so, the Court affirmed long-standing guidance by the Internal Revenue Service, the Department of Labor, and the Pension Benefit Guaranty Corporation that ERISA’s church-plan exemption applies to plans sponsored and maintained by religious affiliated nonprofit hospitals regardless of whether a church initially established the plans.  Advocate Health Care Network v. Stapleton.

The Court focused on the plain meaning of ERISA’s church plan exemption and noted that while the term “church plan” was initially defined in ERISA to include only those plans “established and maintained . . . for its employees . . . by a church or by a convention or association of churches,” the definition was later amended to include additional plans.  The Court found that Congress specified that “for purposes of the church-plan definition, an ‘employee of a church’ would include an employee of a church-affiliated organization (like the hospitals here)” which the Court referred to as principal-purpose organizations. The Court found that Congress supplemented ERISA’s definition of church plan with the following provision: “A plan established and maintained for its employees . . . by a church or by a convention or association of churches includes a plan maintained by an organization . . . the principal purpose or function of which is the administration or funding of a plan or program for the provision of retirement benefits or welfare benefits, or both, for the employees of a church or a convention or association of churches, if such organization is controlled by or associated with a church or a convention or association of churches.”  In effect, the Court held, “The church-establishment condition thus drops out of the picture.”

While the benefit plans at issue in this case were defined benefit pension plans, this holding has broad application to all benefit plans that are established by a principal-purpose organization and would otherwise be subject to ERISA’s funding, participation, vesting, reporting and disclosure rules.

For more information about this decision and its impact on your organization and your employee benefit plans, please contact Patrick W. McGovern, Esq., pmcgovern@nullgenovaburns.com or Gina M. Schneider, Esq., gmschneider@nullgenovaburns.com in the Firm’s Employee Benefits Practice Group.

PERC Decision Lays Groundwork for Negotiations Once Chapter 78 Contributions are Fully Implemented

New Jersey’s Public Employee Relations Commission (“PERC” or the “Commission”) has weighed in on the issues of (1) when health insurance contributions become negotiable once the fourth tier of contributions under Chapter 78 is completed and (2) at what level of contributions do negotiations commence once the contributions are negotiable. In Clementon Board of Education v. Clementon Education Association, P.E.R.C. NO. 2016-10, Docket No. SN-2015-041, August 13 2015, PERC agreed with the school board, ruling that the teachers’ union cannot  negotiate premium contributions for the successor agreement until the next collective negotiations agreement after Chapter 78 contributions become fully implemented.

To review, in 2011, the legislature passed a pension and health benefit reform act, P.L. 2011, c. 78, commonly referred to as “Chapter 78” which required a four-tiered implementation of health care contributions based on employee salary. Although the law went into effect on June 28, 2011, for unionized employees, Chapter 78’s implementation date was tied to the expiration of the collective negotiations agreement. Thus, once an agreement expired after June 28, 2011, the four-year implementation period began.  For many public employers the implementation date for Chapter 78 contributions varied with each bargaining unit.

In Clementon, the final year of the four-year phase-in of higher health insurance contributions overlapped with the first year of a new agreement. The teachers union argued that as soon as full implementation of Tier 4 has occurred, health benefit contributions should become immediately negotiable for the successor agreement even if full implementation occurs mid-term in the agreement. The school district disagreed, arguing health benefits should remain as is under Chapter 78 until the next round of negotiations for a new contract. The Commission sided with the school board, deciding negotiations of health benefit contribution should not occur until the next contract is negotiated.

PERC found that Chapter 78 expressly, specifically and comprehensively sets forth that health benefit contribution levels become negotiable in the “next collective negotiations agreement after … full implementation” of the four-tiered level of employee contributions is achieved. In so deciding, PERC laid the groundwork for handling negotiations of health insurance contributions once Chapter 78 is fully implemented.

For example, if Tier 4 payments are fully implemented on December 31, 2015 and the collective negotiations agreement does not expire until December 31, 2016, then health insurance contributions do not become negotiable until January 1, 2017.  This is true whether or not the collective negotiations agreement is expired or not.  Negotiations are tied to when Chapter 78 contributions are fully implemented, i.e. the full year of Tier 4 payments are completed, regardless of term.

Additionally, PERC determined that health insurance contributions shall be negotiated from the Tier 4 structure once negotiations are permitted.  Therefore, once negotiations begin on this issue pursuant to the timeframe explained above, the parties shall treat contributions as if the Tier 4 payments are part of the collective negotiations agreement.

According to the New Jersey Education Association’s (“NJEA”) website, NJEA plans to appeal the Commission’s decision in Clementon.

For more information on the Commission’s decision and how it will affect a public employer’s existing and future contracts, please contact Joseph M. Hannon, Esq. at jhannon@nullgenovaburns.com or Jennifer Roselle, Esq. at jroselle@nullgenovaburns.com.

 

N.J. Supreme Court Finds Chapter 78 Did Not Create an Enforceable Contract Right

In Burgos v. State of New Jersey, the New Jersey Supreme Court held that the 2011 pension and health benefit reform statute, known as Chapter 78, did not create an enforceable contract that was binding on the State to make the pension payments required by that legislation.

The decision is the result of multiple actions filed by individuals and unions, on behalf of New Jersey State employees, after the fiscal year 2015 budget included contributions that were less than 1.57 billion dollars that Chapter 78 required.  The Law Division accepted the Unions’ argument that Chapter 78 created a contractual right to the payment and failure to do so was an impairment of that contract.  The Supreme Court reversed.

The plain language of Chapter 78 set forth a clear statement that the failure to make the required pension contributions results in a contractual impairment.  Although the Supreme Court recognized the good intentions of the legislature in passing Chapter 78, the Court simultaneously rejected the legislature’s authority to do so.  The Court’s rationale was largely based upon two clauses within the New Jersey Constitution.

First, the Debt Limitation Clause of the New Jersey Constitution prohibited such action.  The intention of Chapter 78 could not set aside the broad, clear language contained in the Debt Limitation Clause.  In sum, this provision limits the amount of debt or liability the Legislature may incur on a year to year basis without a vote of public.  The Court found that the contributions required by Chapter 78 surpassed the permissible boundaries of the Debt Limitation Clause and therefore would require a vote of the public in order to pass constitutional muster.

Second, the Court reasoned that the mandates of Chapter 78 failed to meet the requirements of the Appropriations Clause of the New Jersey Constitution.  The Court reasoned that the legislature retains the power to annually appropriate funds as necessary.  The required contribution in Chapter 78 did not retain the legislature’s authority to annually appropriate such funds.

These two constitutional clauses were the linchpin in the Court’s decision to uphold the State’s failure to make the required Chapter 78 contributions.  While the Court explained the legal rationale for its decision, it also highlighted the practical imports of its decision as well, among which was the damage to the public trust.  In addition, the Court recognized the significant difficulties facing the pension system.  However, rather than fashion a judicial remedy, the Court called upon the public noting “it is the people’s responsibility to hold the elective branches of government responsible for their judgment and for their exercise of constitutional powers.”

The Court’s decision in Burgos negated the required State contributions of Chapter 78 to the pension system.  The issue of how to fund the depleted public employee pension system will continue to be at the forefront of future public debate.

For more information, or if you have any questions, please contact Joseph M. Hannon, Esq., at 973.535.7105, jhannon@nullgenovaburns.com, or Jennifer Roselle Esq., at 973.646-3324, jroselle@nullgenovaburns.com.

N.J. Business Groups Vow To Fight Paid Sick Leave Law in Trenton

A group of six business organizations—including the New Jersey Business & Industry Association and the New Jersey State Chamber of Commerce—has filed a lawsuit against the City of Trenton, New Jersey, demanding the delay of a voter-approved measure requiring Trenton employers to provide their workers with paid sick leave.

The coalition is asking the Mercer County Superior Court to overturn the measure, arguing that it is unconstitutional, and preempted by state statutes.  The Ordinance, No. 14-45, become law on Wednesday, March 6th –120 days after 5,989 Trenton voters approved the measure in a November 2014 referendum.

In its papers, the coalition argues that the City lacks legal authority to implement the Ordinance.  More specifically, the group contends that the measure is a direct violation of the police powers granted to municipalities, which are subject to constitutional limits. In addition, the measure “substantially impairs” employer-employee contracts, in violation of the Contract Clause.  The group further argues that the city is over-stepping its powers and cannot reach beyond its municipal boundaries to require employers located outside of Trenton to provide paid sick leave for employees who work at least 80 hours a year in the City.  Christopher Gibson, the attorney for the group, said “Trenton’s mandatory paid sick leave ordinance is vague, ambiguous and contrary to New Jersey law and impossible to interpret, administer or implement.”

Notably, Trenton’s law is modeled after a similar ordinance successfully implemented in Newark. The Newark law requires employers with 10 or more workers to provide up to 40 hours—accruing one hour for every 30 hours worked – of paid sick time annually. Employers with fewer than 10 workers only have to provide up to 24 hours of paid sick time. Those in the child care, home health care and food service industries are required to provide the full 40 hours regardless of their size.

The referendum forced Trenton to join eight other municipalities within the state to pass such a measure. Over the past two years, local legislators in Jersey City, Newark, Passaic, East Orange, Paterson, Irvington and Montclair have passed their own versions of this ordinance. Earlier this month, Bloomfield joined the movement and passed its own paid sick leave law. Montclair, whose referendum was approved in November along with Trenton, also ushered in paid sick leave Ordinance on March 4th.  Notably, a State Assembly panel passed a statewide version of the bill in December.

For questions related to Trenton’s paid sick time ordinance, or compliance with your local paid sick leave laws, please contact Dina M. Mastellone, Esq., Director of the Human Resource Practices Group and Counsel in the Employment Law & Litigation Group, at dmastellone@nullgenovaburns.com, or Eileen Fitzgerald Addison, Esq., Associate in the Human Resource Practices Group, at eaddison@nullgenovaburns.com.

Philadelphia Signs Paid Sick Leave Law

Yesterday, Philadelphia Mayor Michael Nutter signed mandatory paid sick leave into law, a law that is expected to benefit up to 200,000 Philadelphians.

Taking effect in just 90 days – or no later than May 13, 2015 – the Promoting Healthy Family in the Workplace Law will require businesses within the City of Philadelphia with 10 or more employees to provide workers with at least one hour of paid sick leave for every 40 hours worked – approximately five days per year.  Sick time may be used for an employee’s health care, the care of a family member, and time needed to seek support in dealing with domestic violence or sexual assault.

The new law also creates exceptions for independent contractors, seasonal workers or those hired for fewer than six months, adjunct professors, interns and government employees.  The law also specifically exempts unionized workers working under collective-bargaining agreements, due to the powerful building trades unions in the city opposed having unions included.  Failure to comply can result in fines, penalties, and restitution.

The law intended to be the minimum requirement, allowing businesses to implement more generous benefits for their employees.  Businesses that already provide sick pay meeting or exceeding the law’s requirements need not change their policies. Employers that violate the ordinance will be subject to fines, penalties, and restitution.  An employer who wilfully violates the notice and positing requirements of the new law are also subject to a civil fine in an amount not to exceed $100 for each separate offense.

Seven years after the initial push by Councilman William K. Greenlee, Philadelphia finally joined the coalition of 16 cities and three states which have similar laws in its books. Mayor Nutter previously vetoed similar bills in 2011 and 2013, citing concerns about the economic recession.  Passage of the law makes Philadelphia the 17th city in the US to mandate paid sick leave, and it is the second largest city in the country after New York City to do so. During his recent State of the Union address, President Obama called on Congress to pass federal-sick leave legislation.

In New Jersey, a number of Municipalities have enacted similar laws, and a bill is currently pending in the state Assembly that would expand the initiative state wide. In its current form, the N.J. bill would require employers with fewer than 10 employees to offer at least 40 hours of sick time per year, while businesses with more than 10 employees would have to offer at least 72 hours of paid sick time per year.

For questions related to Philadelphia’s paid sick time ordinance, or compliance with your local paid sick leave laws, please contact Dina M. Mastellone, Esq., Director of the Human Resource Practices Group and Counsel in the Employment Law & Litigation Group, at dmastellone@nullgenovaburns.com, or Eileen Fitzgerald Addison, Esq., Associate in the Human Resource Practices Group, at eaddison@nullgenovaburns.com.

Obama Continues to Push For Federal Sick Leave

During his 2015 State of the Union address, President Obama continued his push for a mandatory paid sick leave law by calling on Congress to act and send him a bill.

The White House first announced its plans last week in a post published on LinkedIn.  Stating that the United States’ failure to require employers to provide paid family is “shameful,” Senior White House Adviser Valerie Jarrett advised that the President would call on Congress to require companies to give workers up to seven days of paid sick leave a year. The proposal, called the “Healthy Families Act,” would allow employees to earn a minimum of seven paid sick days per year.

In addition to pushing Congress to act, President Obama followed up on a promise made during his 2014 State of the Union address by signing a presidential memorandum (a tool similar to an executive order used to direct federal agencies to implement a White House policy), giving federal employees access to six weeks of paid parental leave by allowing new parents to advance their sick time.  While the Family Medical Leave Act (“FMLA”) already provides workers with the ability to take time off to care for their own health or that of certain family members, the leave is unpaid.

In order to promote change and action in the state level, the President has proposed $2.2 billion in new funds in the 2016 budget to encourage states to adopt their own paid leave programs. In New Jersey, a bill that would require paid sick time for all employees, including part-timers, was advanced by state legislators in December. In its current form, the NJ bill would require employers with fewer than 10 employees to offer at least 40 hours of sick time per year, while businesses with more than 10 employees would have to offer at least 72 hours of paid sick time per year.

For questions related to this legislation or compliance with local paid sick time laws,please contact Dina M. Mastellone, Esq., Director of the Human Resource Practices Group and Counsel in the Employment Law & Litigation Group, at dmastellone@nullgenovaburns.com, or Eileen Fitzgerald Addison, Esq., Associate in the Human Resource Practices Group, at eaddison@nullgenovaburns.com.

NJ Employees may soon be able to stay home during States of Emergency

During weather-related states of emergency, many businesses remain open and expect employees to report to work. Employees are then faced with a choice between commuting in potentially dangerous road conditions, or staying home and being docked a day’s pay.

A N.J. state lawmaker believes that staying home in such a situation should be a penalty-free option. A bill introduced by State Assemblyman Benjie Wimberly (D-Passaic), which was recently referred to the Assembly Labor Committee for a hearing, would protect employees from having to brave the weather to get to work.

Under the Bill (A3958), employers would be banned from taking retaliatory action against an employee who is unable to get to work during states of emergency.  The bill does not, however, require employers to provide a paid day off. Employers would not be required to pay employees who do not work, and those unable to get to work would have to notify their supervisors in a timely manner. Returning to work at the end of the declared state of emergency would also be expected, provided that it is safe to do so.

The bill carves out exceptions which include emergency personnel and those needed to provide other essential services, such as healthcare or utility workers. Additionally, the benefit would only be extended to employees who live in areas affected by the emergency.

A similar measure (1717) in the Senate, introduced by Peter Banes, III (D-District 18) and Linda Greenstein (D- District 14), was advanced out of committee in September.

If you have any questions or concerns regarding payment of wages during weather-related states of emergency, delayed openings or closures, please contact Dina Mastellone, Esq., Director of the Human Resources Practice Group and Counsel in the Employment Law & Litigation Group, at dmastellone@nullgenovaburns.com, or Eileen Fitzgerald Addison, Esq., Associate in the Human Resources Practice Group, at eaddison@nullgenovaburns.com.

NJ Requires Many Notifications to Employees in 2015

As New Jersey employers ring in the new year, they should be mindful of the New Jersey Department of Labor’s notice distribution requirements.  The DOL publishes several important notices which, in addition to posting, must be individually distributed to employees as follows:

New Jersey Security and Financial Empowerment Act (“NJ SAFE” Act)

  • In addition to a posting requirement, the NJ SAFE Act regulations require employers to “use other appropriate means to keep its employees so informed.”
  • Employers should include a written policy on the NJ SAFE Act in the employee handbook and/or distribute a copy of the notice to all current employees and to new employees upon hire.

Employer Obligation to Maintain and Report Records

  • Any new employee hired after November 7, 2011, must be provided a written copy of the notice at the time of hiring. The notice may be distributed to employees by hard copy or via electronic mail.

 New Jersey Family Leave Act (“NJ FLA”)

  • In addition to a posting requirement, the NJ FLA regulations require that if an employer has an employee handbook, “information concerning leave under the Act and employee obligations under the Act must be included in the handbook.”
  • If an employer does not have an employee handbook, it must “provide written guidance to each of its employees concerning all the employee’s rights and obligations under the Act.”
  • The DOL states that employers may duplicate and provide employees with a copy of the NJFLA Fact Sheet to provide such guidance.

New Jersey Family Leave Insurance

  • Employers must provide employees with a written copy of the notification: (i) at the time of the employee’s hiring; (ii) whenever an employee provides notice of a potential claim; and (iii) upon the first request of the employee. Written notification may be electronically transmitted to employees.

 New Jersey Conscientious Employee Protection Act

  • The notice must be distributed annually to all employees.

NJ Gender Equity

  • Employers must provide a written copy of the notice to each employee who is hired after January 6, 2014 at the time of his or her hire.
  • Annually, on or before December 31 of each year, employers must provide each employee a written copy of the notice.
  • Employers also must provide each employee a written copy of the notice upon request.
  • The required written notice can be distributed electronically or in hard copy form.
  • In every instance in which a written notice is required to be provided to an employee, the written notice must be accompanied by an acknowledgment that the employee has received it and has read and understands its terms. This acknowledgment must be signed by the employee (in writing or by means of electronic verification) and returned to the employer within 30 days of the employee’s receipt of the notice.

It is important to note that, for some of these notices, merely posting will not fulfill the DOL’s distribution requirements.  Nor will merely including notices in your workplace Employee Handbook.  Each law sets forth unique notice requirements.  Moreover, the inclusion of required notices in an Employee Handbook is not recommended – only critical employment law and HR policies should be set forth in Employee Handbooks.

MINIMUM WAGE INCREASE REMINDER!

Effective January 1, 2015, the hourly minimum wage in New Jersey is $8.38 per hour.

For more information on employer obligations in 2015 and beyond, please contact Dina Mastellone, Esq., Director of the Human Resources Practice Group and Counsel in the Employment Law & Litigation Group, at dmastellone@nullgenovaburns.com, or Eileen Fitzgerald Addison, Esq., Associate in the Human Resources Practice Group, at eaddison@nullgenovaburns.com

Court Denies EEOC’s Requested Preliminary Injunction to Block Wellness Plan Biometric Testing

On November 3 U.S. District Court Judge Ann Montgomery gave Honeywell International a victory in Round One of the EEOC’s legal challenge to Honeywell’s wellness program, by refusing to grant the EEOC preliminary restraints barring Honeywell from imposing monetary penalties on employees who refuse to submit to biometric screening. Judge Montgomery reasoned that she was not prepared to decide whether the EEOC would prevail on the merits, and it would be easier to require Honeywell to reimburse employees for monetary penalties they suffer as opposed to blocking the penalties for now and assessing the penalties later if the wellness program is determined to be lawful. So for now, Honeywell’s biometric screening may continue.

If you have any questions about whether your company’s wellness program is compliant with the Affordable Care Act, HIPAA, the ADA or GINA, please contact Patrick W. McGovern, Esq., in our Employee Benefits Group at 973-535-7129, pmcgovern@nullgenovaburns.com.

EEOC Asks Court To Halt Biometric Testing Features of Corporate Wellness Program

On October 27, 2014 the Equal Employment Opportunity Commission asked the U.S. District Court in Minnesota to temporarily restrain Honeywell International’s wellness program from performing biometric testing on employees. The EEOC claims preliminary court relief is needed to prevent employees from suffering irreparable harm due to submitting to wellness program requirements. Employees can choose not to submit to biometric testing, which requires taking a blood sample, but making this choice will result in monetary penalties, ranging from a $500 surcharge to $1500 in extra premium contributions. A court hearing on the EEOC’s request for a preliminary injunction is scheduled for November 3 at the U.S. Court House in Minneapolis.

The EEOC claims that Honeywell’s biometric testing includes drawing blood, measuring body mass indexes, and screening for high blood pressure, diabetes, and smoking and therefore is an involuntary medical exam prohibited by the Americans with Disabilities Act (ADA). The EEOC also claims that the biometric testing violates the Genetic Information Nondiscrimination Act (GINA) by requiring disclosure of spousal medical history, and therefore family medical history.

On October 30 Honeywell filed its opposition to the EEOC’s petition and argues that its wellness program is voluntary and permissible under ADA provisions that allow employers to request medical examinations in connection with voluntary wellness programs. Honeywell also claims its program is covered by the ADA’s insurance safe harbor provision. It denies any violation of GINA since its wellness program makes no inquiry about family health industry, and argues that GINA expressly authorizes its biometric screening program.

If you have any questions about whether your company’s wellness program is compliant with the Affordable Care Act, HIPAA, the ADA or GINA, please contact Patrick W. McGovern, Esq., in our Employee Benefits Group at 973-535-7129, pmcgovern@nullgenovaburns.com.