Hiring and firing and the latest legalities along the way

In the HR world, two activities demand a lot of your time and attention – bringing new people on board, and letting people go. And not surprisingly, the recent recessionary crunch and temperamental job market have led to some legal changes that affect your hiring and firing practices. Here are some of the latest legal considerations – and the paperwork you need to stay on track.

Hiring – Claiming the payroll tax exemption under the HIRE Act

In a move to encourage recession-weary employers to hire again, President Obama signed the Hiring Incentives to Restore Employment (HIRE) Act on March 18, 2010. Under HIRE, qualified employers will receive two important tax breaks for hiring and holding onto previously unemployed workers:

A payroll tax exemption — An exemption from the 6.2% share of Social Security tax on wages paid to qualifying employees from March 19, 2010 through December 31, 2010

A new hire retention credit — A general business tax credit, up to $1,000, for each qualified employee retained for at least a year

You can now use the recently issued “HIRE Act Employee Affidavit,” or “Form W-11” to claim the payroll tax exemption. The main purpose of this form is to get qualified employees to state, by a signed affidavit and under penalties of perjury, that they have not been employed for more than 40 hours during the 60 days prior to beginning employment with you.

Take advantage of this exemption for newly hired, eligible employees with our Downloadable Form W-11.

For more information about the HIRE ACT, check out our HIRE Act FAQs.

Firing - Another short-term COBRA subsidy extension is in effect

In a now-familiar move with the COBRA subsidy, President Obama pushed out the eligibility date again. The bill extends the 15-month, 65% federal premium subsidy to employees laid off from April 1 through May 31, 2010. (The previous extension expired March 31.)

At the same time, President Obama urged lawmakers to pass legislation that would extend the COBRA premium subsidy to eligible individuals through the end of the year. While the Senate has cleared such a measure (Tax Extender Act of 2009), the House has not yet acted on it.

Inform employees of their COBRA rights with our Downloadable ComplyRight™ Initial Notification.

Hiring and firing and the latest legalities along the way

Making COBRA available for domestic partners, too

Losing a job is difficult enough. But even more disruptive is losing your health coverage. That’s why many people opt for COBRA to maintain their coverage after termination – protection and peace of mind for you, your spouse and your dependent children.

But what if you’re in a gay relationship? Under current COBRA law, continuation coverage would not apply to your same-sex spouse or partner, even if you worked for a company that offered this level of health coverage.

Senator Barbara Boxer of California wants to do something about that. She recently introduced legislation – the Equal Access to COBRA Act of 2010 - that would allow many domestic partners the same access to COBRA health coverage that married couples currently have.

COBRA coverage would apply to those companies that already offer health benefits to domestic partners and their children. (Currently, that amounts to more than half of Fortune 500 companies.) Domestic partners could also tap into the 65% COBRA premium subsidy that has been extended a couple of times under the Obama administration.

On her website, Barbara Boxer states:

“This is a question of fairness: Every family deserves access to health insurance, especially in this tough economy. This bill ensures that domestic partners and their families will have equal access to health coverage after a job loss.”

Boxer’s proposed bill is now with the Senate Committee on Health, Education, Labor and Pensions.

Making COBRA available for domestic partners, too

Under new proposal, COBRA premium subsidy would be extended again

As part of its proposed federal budget for fiscal year 2011, the Obama administration is recommending another extension to the COBRA health insurance premium subsidy – a move that Congress will most likely support.

If approved, employees laid off from March 1 through December 31, 2010, would be eligible for the 65% premium subsidy for up to 12 months. (Currently, employees who are involuntarily terminated from September 1, 2008, through February 28, 2010, can receive the premium subsidy for up to 15 months.)

“As long as unemployment remains at high levels and access to health insurance coverage remains spotty, the willingness to extend COBRA assistance will remain strong and persistent,” says Frank McArdle, a consultant with Hewitt Associates Inc. in Washington. workforce.com

More and more employees are opting for COBRA as a result of the 65 percent premium subsidy – part of a broad economic stimulus package Congress approved nearly one year ago. In fact, Hewitt discovered in a survey of 200 large employers that the number of employees choosing COBRA more than doubled to 39 percent during a nine-month period last year.

According to the Society for Human Resource Management (SHRM), only laid-of workers who could not get coverage under another group health plan (such as a spouse’s plan or Medicare) would be eligible for the subsidy. In addition, premium assistance is only available for individuals with incomes under $145,000 and families filing jointly with incomes under $290,000.

If you’re a little bewildered about the various extensions and how to communicate them to employees, you’re not alone.

"… as originally passed, the subsidy was provided for a period up to nine months. In December 2009, the period was extended to a total of 15 months, and under the latest proposal it would be 12 months," says Karen Frost, health and productivity solutions leaders at Hewitt Associates in Chicago. "That's three different time frames and three different provisions." shrm.org

As far as what this means to you as an employer, Frost suggests that the hardest part – adjusting to the original subsidy – is over.

"For the first extension, we just had to modify what we were already doing in terms of the subsidy. And the efforts around a second extension would be very similar. It's a modification; it's not a brand new game."

Until a possible second extension is approved, G.Neil recommends that you display a poster informing employees of their COBRA subsidy benefits to date.

Under new proposal, COBRA premium subsidy would be extended again

Looks like we made it - Saying goodbye to 2009 and hello to 2010

So here we are, ushering in 2010 … a fresh, unspoiled year … a blank slate waiting to be filled with new experiences and opportunities. The year ahead feels like that shining, new employee you just hired, coming to you with impeccable credentials and a winning personality. Will the new year, like that new employee, be everything you hoped for?

In addition to wishing you a "Happy New Year" in this first blog post of 2010, I feel like I should express my congratulations, too. Congratulations on enduring a year that was anything but dull, thanks to a lingering recession, the swearing in of a new, Democratic president and heightened labor law enforcement under the Obama administration. Many of you successfully kept your businesses afloat with fewer employees, fewer resources and budgets that were cut to the bone.

Lest you forget your strength and resilience during such trying times, let us take a quick walk down memory lane to revisit the changes that hit employers the hardest in 2009 (and that were covered in HR Forum):

=> New Family and Medical Leave Act (FMLA) rules become effective in January, with expanded military coverage and revised guidelines on determining FMLA eligibility and handling leave requests.

=> In his first piece of legislation as President, Barack Obama signs the Lilly Ledbetter Fair Pay Act into law in late January, an equal-pay bill designed to make it easier for employees to sue for pay discrimination.

=> In response to the nation’s dire economic situation, President Obama signs a $787 billion stimulus package that includes a COBRA subsidy for laid-off workers, hiring incentives via tax credits for certain types of workers and other new HR requirements.

=> Just as most businesses are preparing to update their employment verification practices to incorporate newly updated I-9 Forms, the Department of Homeland Security (DHS) pushes back the scheduled update by two months (to April 3).

=> In late April, Secretary of Homeland Security Janet Napolitano urges employers to aggressively prepare for another outbreak of swine flu to prevent it from becoming a full-fledged pandemic.

=> The U.S. Immigration and Customs Enforcement (ICE) launches a bold initiative in early July as part of its stepped-up enforcement, alerting 652 businesses nationwide that ICE agents will be inspecting their hiring records.

=> Beginning September 8, all federal contractors and subcontractors are required to use E-Verify, a free, web-based system, that compares employee information from the Form I-9 against federal databases to verify a worker’s employment eligibility.

=> Also in September, all businesses covered by HIPAA - or that offer products or services that interact with protected health information – must notify individuals when their health information has been breached, along with updating their HIPAA policies and procedures.

=> In October, OSHA announces a national emphasis program (NEP) on recordkeeping to assess the accuracy of injury and illness data recorded by employers, largely due to unusually low incidence rates in traditionally high-rate industries.

=> The provisions of the Genetic Information Nondiscrimination Act (GINA) go into effect in November, which includes an updated EEOC “Equal Employment Opportunity is the Law” poster – the fifth federal-level posting change in five years.

Awareness and action in 2010

While the new year is starting on a high note – with many experts indicating that the recession is lifting – we can most likely expect a similar level of labor law reform and increased enforcement under the Obama administration in 2010. Check back here often for insights on the latest legal and HR issues affecting your business, including solutions to help you meet every challenge like a seasoned pro.

Looks like we made it - Saying goodbye to 2009 and hello to 2010

IRS answers more pressing COBRA questions

If you’re an employer struggling with COBRA questions, the Internal Revenue Service (IRS) has published added guidance on the federal premium subsidy to help answer some of the most common issues.

The new COBRA regulations, which were part of President Obama’s American Recovery and Reinvestment Act of 2009, contain specific changes to COBRA health benefit requirements that affect former employees, their employers and COBRA coverage providers.

Under the subsidy, involuntarily terminated employees must pay 35 percent of the COBRA premium and employers must front the money for the remaining 65 percent. After paying insurers directly, employers can then claim the payment as an offset against payroll tax liabilities using the updated Form 941.

The IRS published information earlier this year to answer major questions from the public regarding eligibility for the COBRA subsidy. Information has been added to the question-and-answer style document as new questions develop.

Last week, the IRS updated the online document with additional information including guidance on whether an employee who is a reservist would be eligible for the subsidy if called to active duty.

Q. Does an involuntary termination of employment occur if a member of a military Reserve unit or the National Guard who is employed by a civilian employer is called to active duty?

A. Yes. This is the case regardless of whether the civilian employer otherwise treats the employee’s absence as a termination of employment or a leave of absence.

The IRS also added information in response to questions regarding elected officials and employees hired for a limited period of time.

Q. In the case of an employee who is hired only for a limited period, such as a seasonal worker, or a teacher hired only for one school year, can the end of employment at the end of the period be considered an involuntary termination?

A. Yes. Under Notice 2009-27, Q&A-1, an involuntary termination may include the employer’s failure to renew a contract at the time the contract expires, if the employee was willing and able to execute a new contract providing terms and conditions similar to those in the expiring contract and to continue providing the services. Thus, if an employee hired for a limited period works to the end of the period, is willing and able to continue employment, and terminates employment because of the failure of the employer to offer additional work, an involuntary termination occurs for purposes of the premium subsidy.

For more answers to questions on COBRA continuation health coverage read the IRS FAQs for employers.

IRS answers more pressing COBRA questions

DOL issues model COBRA notices for employers

Late last week the Department of Labor (DOL) issued four model notices that employers can use to explain federal premium subsidies available under COBRA.

As part of the economic stimulus plan President Obama signed into law in February, employees who were involuntarily terminated between September 1, 2008, and December 31, 2009, are eligible to retain their group health coverage for a period of up to nine months by paying a portion of the COBRA premium.

Involuntarily terminated employees must pay 35 percent of the COBRA premium and employers must front the money for the remaining 65 percent. Employers will pay the insurer directly, then claim it as an offset against payroll tax liabilities. Payroll will then report any subsidies and take the offset on an updated Form 941.

"Our action today gives workers and their families useful information on their right to receive the COBRA subsidy and makes it easier for employers and plans to meet their notice obligations. Given the current economic situation facing dislocated workers and their families, it is very important that individuals do not lose their group health coverage," said Alan D. Lebowitz, deputy assistant secretary of labor for the department's Employee Benefits Security Administration (EBSA).

Employers can send the DOL’s model notices to COBRA beneficiaries advising them of the subsidy and how they can enroll for coverage.

Designed to fit different situations, the four COBRA model notices include:

• A general or “full” notice to be given to beneficiaries who lost group coverage between September 1, 2008, and December 31, 2009.
• An abbreviated general notice that would be for beneficiaries who are currently receiving unsubsidized COBRA.
• An alternative notice explains the right of individuals working in states with continuation coverage laws, or “mini-COBRA” laws, which apply to employers with fewer than 20 employees.
• A notice of extended election periods for eligible individuals who lost their jobs before the stimulus plan was signed into law, between September 1, 2008 and February 16, 2009, and declined or discontinued COBRA coverage at the time.

Each package includes information of the premium reduction provisions, a series of questions and answers, and which forms to use in requesting the premium reduction or COBRA coverage.

More information on the COBRA subsidy:

• Stimulus plan subsidizes COBRA, expands unemployment insurance
• IRS releases info to help employers claim COBRA credit

DOL issues model COBRA notices for employers

IRS releases info to help employers claim COBRA credit

The Internal Revenue Service (IRS) has released detailed information that will help employers claim credit for the COBRA medical premiums they pay for their former employees, a measure contained in President Obama’s economic stimulus package passed last month.

Employers will find a comprehensive set of questions and answers at IRS.gov, in addition to a revised version of the quarterly payroll tax return employers must use to claim credit for COBRA medical premiums paid for former employees.

Beginning with the first quarter of 2009, the Employer’s Quarterly Federal Tax Return, Form 941, is the form used to claim the new COBRA payments credit.

“This is the first step in our effort to provide employers with information on this important health benefit for people who have lost their jobs,” said IRS Commissioner Doug Shulman. “We will continue our work in the weeks ahead to help employers implement this crucial change for the nation’s unemployed.”

In February, President Obama signed the American Recovery and Reinvestment Act of 2009. The new law contains specific changes to COBRA health benefit requirements, changes that affect former employees, their employers and COBRA coverage providers.

Under the new law, eligible former employees, enrolled in their employer’s health plan at the time they lost their jobs, are required to pay only 35 percent of the cost of COBRA coverage. Employers must treat the 35 percent payment by eligible former employees as full payment, but the employers are entitled to a credit for the other 65 percent of the COBRA cost on their payroll tax return.

The IRS notes that employers must maintain supporting documentation for the COBRA credit claimed, including:

• Documentation of receipt of the employee’s 35 percent share of the premium.
• In the case of insured plans: A copy of invoice or other supporting statement from the insurance carrier and proof of timely payment of the full premium to the insurance carrier.
• Declaration of the former employee’s involuntary termination.

Visit the Department of Labor for more information about COBRA payments and read another HR Forum post on the subject: Stimulus plan subsidizes COBRA, expands unemployment insurance.

IRS releases info to help employers claim COBRA credit

Stimulus plan subsidizes COBRA, expands unemployment insurance

President Barack Obama signed the $787 billion stimulus package into law yesterday hoping to provide a boost to the nation's continuing recession.

"I don't want to pretend that today marks the end of our economic problems, nor does it constitute all of what we're going to have to do to turn our economy around," said Obama, who signed the bill at the Denver Museum of Nature & Science, underscoring its hope of creating environmentally-friendly jobs.

"But today does mark the beginning of the end; the beginning of what we need to do to create jobs for Americans scrambling in the wake of layoffs; the beginning of what we need to do to provide relief for families worried that they won't be able to pay next month's bills; the beginnings of the first steps to set our economy on a firmer foundation, paving the way to long-term growth and prosperity." Read the full Boston Globe story.

The stimulus plan contains specific measures that will effect most businesses across the country, including a COBRA subsidy for laid-off workers, hiring incentives and new HR requirements.

Roughly $21 billion of the stimulus package is available to help workers who have been laid off to keep their employer-provided health insurance through COBRA, the federal law that gives unemployed workers the right to maintain their employer health insurance after a layoff.

The federal government will pay 65 percent of COBRA premiums for a period of nine months for employees who are laid off from September 1, 2008 through December 31, 2009. Employers will receive a payroll tax credit to offset the subsidy. Employers must notify former employees who are eligible for the new subsidy by March 1.

Documents will have to be updated as the new rule requires that information on the COBRA subsidy is to be included in employers' COBRA notices.

The stimulus also outlines tax benefits for hiring certain types of workers. If your company hires an unemployed military veteran or a person who didn’t finish high school, you could receive a $2,400 per employee tax credit as part of the Work Opportunity Tax Credit. The two new classes of qualified workers were added to the “target group” of disadvantaged workers.

Other HR requirements included in the stimulus plan:

• An increase of weekly unemployment benefits by $25.
• An extension of the temporary emergency unemployment compensation program through December 2009. The program provides up to 33 weeks of extended unemployment benefits.
• Unemployment compensation to workers who leave an employer for "compelling family reasons," such as domestic violence, illness or disability of an immediate family member.

As the Department of Labor releases more information on the compete details of the stimulus plan and what will be required of businesses, G.Neil's legal team will be there to help make sure your organization is fully compliant.

Please check back often or subscribe to our blog for the latest updates on how the stimulus plan impacts your business.

For more on how the stimulus package will impact your business, read:

USA Today - Employers fear cost of health insurance for jobless workers

HR Morning - Obama stimulus package contains 6 big paperwork changes for you

Boston Globe - Stimulus is signed as storm builds

About.com: Human Resources - Economic stimulus package and COBRA

Stimulus plan subsidizes COBRA, expands unemployment insurance