Recent Legal Developments

Employer Obligations Under Affordable Care Act Delayed One Year

The U.S. Treasury Department announced that enforcement of the provisions of the Affordable Care Act requiring employers with at least 50 full-time employees to offer healthcare to all full-time employees or face penalties will be delayed one year. The employer shared responsibility mandate was originally set to take effect on January 1, 2014. Citing the complexity of the requirements and the need for more time to implement them effectively, the Treasury Department stated that it was delaying implementation of employer obligations until January 1, 2015.

This delay only affects the employer mandate provisions of the Affordable Care Act. All other provisions of the Affordable Care Act will still take effect as planned, including the 90-day cap on waiting periods, prohibition of annual benefit limits, and capping of deductibles. Individual access to tax credits through health insurance exchanges will still become effective on October 1, 2013, and individuals are still required to have health insurance by January 1, 2014.

Employers who have been reorganizing in an effort to fall below the 50 full-time employee threshold now have more time to consider their workforce makeup. Employers who are over the 50 full-time employee threshold – “applicable large employers” – will be able to reconsider their health plan options or prepare to pay the associated penalties. Additionally, employers whose employees work irregular schedules will have more time to implement a system by which they can track working hours to determine who qualifies as a full-time employee entitled to health insurance.

Formal guidance regarding the delay is expected to be published shortly.

U.S. Supreme Court Holds that Defense of Marriage Act Violates Constitution

The Defense of Marriage Act (DOMA) bars same-gender married couples from being recognized as “spouses” for purposes of federal law. On June 26, 2013, the Supreme Court held in United States v. Windsor that the definition of “spouse” in DOMA violates the Constitution by depriving individuals of equal protection.

Numerous federal laws confer benefits or obligations on married individuals, including federal tax laws, Social Security and Veterans Administration survivor benefits laws, the Employee Retirement Income Security Act and the Family and Medical Leave Act. As such, the Windsor decision will impact employer-sponsored benefits, likely including:

• Cessation of taxing employer-subsidized health coverage for same-gender spouses to the employee
• Access for same-gender spouses to pre-tax treatment under an employer’s section 125 plan (“cafeteria plan”)
• Reimbursement from flexible spending accounts for medical expenses of same-gender spouse
• Qualification of same-gender spouses as beneficiaries eligible for COBRA coverage
• Pension and retirement plan survivor rights
• Entitlement to FMLA leave in order to care for a same-gender spouse

However, the provisions of DOMA allowing states to refuse to recognize same-gender marriages performed in other states are not affected by the ruling. Because state laws may have different definitions of “spouse,” multistate employers who maintain benefit plans may encounter difficulties. For example, it is unclear what state law would control in determining whether a same-gender spouse is recognized as a spouse – the law of the state of the marriage or the state law controlled by the benefit plan. Currently, thirteen states (including Minnesota beginning August 1, 2013) and the District of Columbia recognize same-gender marriage.

Unfortunately, the Court’s decision leaves many fundamental questions unanswered, which will have to be addressed by regulatory or Congressional action. It is expected that in the coming months, such guidance will be issued.

U.S. Supreme Court Defines “Supervisor” For Purposes of Workplace Harassment Claims

In Vance v. Ball State University, the Supreme Court clarified employer liability for workplace harassment under Title VII of the Civil Rights Act. According to the decision, a supervisor is an employee “empowered by the employer to take tangible employment actions against the victim,” which includes hiring, firing, failing to promote, reassigning the employee with significantly different responsibilities, or making a decision causing a significant change in benefits. The Court set forth three circumstances in which an employer may be liable for workplace harassment:

1. An employer is liable if the harasser is a supervisor and the harassment culminates in a tangible employment action;
2. If the harasser is a supervisor but the harassment does not culminate in a tangible employment action, the employer is liable unless it can prove that it exercised reasonable care to correct any harassing behavior and the victim failed to take advantage of the preventive or corrective opportunities the employer provided; or
3. If the harasser is the victim’s co-worker but not the victim’s supervisor, the employer is liable only if it was negligent in controlling working conditions.

The Court’s clarification of the law may provide better defenses for employers when employees claim harassment in the workplace. Employers should continue to protect themselves from liability for workplace harassment by having a clear written policy prohibiting harassment, distributing the policy to employees, implementing internal complaint procedures for employees to report harassment, investigating all complaints, taking appropriate corrective action in harassment situations, and documenting all stages of a harassment complaint. Reviewing the descriptions to clarify supervisory responsibilities or the lack thereof is even more important now.

Retaliation Claims Subject to Higher Standard of Proof

The U.S. Supreme Court determined in University of Texas Southwestern Medical Center v. Nassar that plaintiffs claiming retaliation for protected employee conduct under Title VII of the Civil Rights Act must demonstrate that retaliation was the principal, or “but for,” reason for the employer’s action. Title VII prohibits an employer from taking adverse action in retaliation against an employee for opposing or complaining about workplace discrimination. Previously, a plaintiff merely had to show that retaliation was a “motivating factor” in the employer’s decision to take adverse action. However, the Supreme Court concluded that a plaintiff asserting a claim for retaliation must present proof that the adverse employment decision would not have happened absent the employer’s unlawful retaliatory motive.

The Nassar decision means that employees have a more difficult standard of proof when bringing retaliation claims, and could possibly lead to a reduction in the number of retaliation claims filed. This is particularly helpful for employers, since such claims can be brought even if there is no meritorious underlying discrimination charge.

If you have questions regarding any of these developments, please feel free to contact the author with questions at 952.921.4618 or at