Jointly Employed? New NLRB Ruling Has Major Implications

Jointly EmployedDoes your business include employees who are jointly employed (meaning that they work for you and another employer), as well as employees who work only for you? If the answer is yes, a new ruling from the National Labor Relations Board (NLRB) may complicate how your company handles collective bargaining.

In the case of Miller & Anderson, Inc., the NLRB was faced with the issue of whether workers who are solely employed by one employer can collectively bargain alongside jointly employed workers without the permission of their employers. It does not mark the first time the NLRB has ruled on the jointly employed issue. In 2000, in the case of M.B. Sturgis, Inc., the NLRB ruled that employer consent was not necessary. In 2006, however, the NLRB took the opposite approach in Oakwood Care Center, 348 N.L.R.B. No. 37, and held that Sturgis was incorrect.

The ruling in Miller & Anderson is a return to the Sturgis standard. It holds that jointly employed workers in this situation can bargain collectively, regardless of whether their employers approve.

A Return to the Old Standard

This issue involves Section 9(b) of the National Labor Relations Act. Section 9(b) refers to different types of bargaining units, such as “employer units,” “craft units,” and “plant units.” The NLRB has long held that when employer units contain employees who work for multiple employers, these “multi-employer” units can only bargain collectively with the consent of all parties – meaning all of the employers involved have to give their permission.

But what happens when some of the employees are employed by a “supplier” employer (such as a temp agency) and perform work for a “user” employer? (The NLRB refers to these types of units as “Sturgis” units.) Does a Sturgis unit constitute a multi-employer unit?

In Oakwood, the NLRB ruled that Sturgis units are multi-employer units. However, Miller & Anderson reverses this holding. It states that multi-employer units are created “without regard for any preexisting community of interest among the employees of the various separate employers.” According to the ruling, a traditional multi-employer unit contains employees whose employers have nothing to do with one another, aside from being in the same industry.

A Sturgis unit, on the other hand, contains employees who are all employed by the same employer (even though some of the employees are joint employees, who also work for a different employer). The Miller & Anderson ruling states that because workers in Sturgis units share an employer, Sturgis units are not multi-employer units, and that they meet Section 9(b)’s definition of an employer unit – which does not require employer consent to bargain collectively. [Read more…]

SB 358: Equal Pay for Substantially Similar Work

equal payThe concept of paying men and women equal pay for equal work should be familiar to California employers but under new legislation, wage equality requirements no longer apply only to employees with identical job descriptions. Employers are now required to pay male and female employees equal wages for doing “substantially similar” work.

The legislation in question, California Senate Bill 358, was signed into law on October 6, 2015 by Governor Jerry Brown at the Rosie the Riveter National Historical Park in Richmond. The new legislation amends Section 1197.5 of the California Labor Code.

What Does the equal pay Bill Say?

SB 358 states that an employer may not pay any of its employees at lower wage rates than employees of the opposite sex for work that is substantially similar, when viewed “as a composite of skill, effort, and responsibility and performed under similar working conditions,” unless the employer can demonstrate that:

  • The wage differential is based upon one or more of the following factors: a seniority system, a merit system, a system that measures earnings by quantity or quality of production, and/or a bona fide factor other than sex (such as education, training or experience.)
  • Each factor is relied upon reasonably, and
  • The factor or factors relied upon account for the entire wage differential.

The legislation clarifies that if an employer cites a “bona fide factor other than sex,” it must not be based on, or derived from, a sex-based differential in compensation. In addition, the factor must be related to the job in question, and it must be consistent with a business necessity.

Other aspects of the legislation include:

  • The Division of Labor Standards Enforcement, which is in charge of administering and enforcing the legislation, may supervise the wages that are due to employees when a violation takes place.
  • Employers must maintain records of the wages and wage rates, job classifications, and other terms of employment of their employees. The records must be maintained for at least three years.
  • When an employee files a complaint with the Division of Labor Standards Enforcement, the name of the employee will be kept confidential until the Division establishes the validity of the complaint. (There is an exception to this, however, if abridging the employee’s confidentiality prevents the Division from investigating the complaint.) If the employee withdraws the complaint before his or her confidentiality is abridged, then the Division will maintain the employee’s confidentiality.

Your Equal Pay Responsibilities Under the New Law

If you run a business in Sonoma County, Mendocino County or Lake County California, and you have not monitored whether there is a gender gap in your employee’s wages, it is time to start. Consulting an attorney to ensure your wages meet the standards of this legislation may be far less expensive than dealing with a gender discrimination lawsuit. [Read more…]

Will Mandatory Arbitration Agreements Become a Thing of the Past in California?

binding arbitration, arbitrationIn a previous blog post, we discussed a decision by the Ninth Circuit regarding mandatory arbitration agreements for employees. A major change to this area of law may be on the way in the state of California, if Assembly Bill 425 is signed into law. This bill would altogether prohibit employers from requiring their employees to sign arbitration agreements as a condition of their employment.

AB 425 was passed by the California Assembly and Senate in August 2015. If it is signed into law by Governor Jerry Brown, it will take effect on January 1, 2016. The bill would become Section 925 of the California Labor Code.

What Does the Bill Require?

AB 465, if enacted, will prohibit any employer from requiring an employee, as a condition of employment, to agree to the waiver of “any legal right, penalty, forum, or procedure for any employment law violations.” It also prohibits employers from threatening, retaliating against, or discriminating against employees for refusing to sign such waivers. In addition, it stipulates that if a waiver of this type will be unenforceable if it is required from an employee (or a potential employee) as a condition of employment or continued employment.

You may be wondering how, under those regulations, an employee’s agreement to arbitrate would be legally valid. The statute stipulates that any waiver of employment rights (such as an agreement to arbitrate) must be “knowing and voluntary and in writing, and expressly not made as a condition of employment.” If the employer seeks to enforce the waiver, then the employer would have the burden of proof to show that the waiver was knowing and voluntary.

There are several other important aspects of AB 465:

  • If the bill is enacted, it will apply only to waivers that were signed on or after January 1, 2016 – so you do not have to worry that this legislation will render any current contracts invalid.
  • It authorizes reasonable attorney’s fees to the prevailing claimant.
  • It exempts organizations that are considered self-regulatory under the Securities Exchange Act of 1934, and it does not apply to regulations adopted under that Act pertaining to any requirement of a self-regulatory organization that a person arbitrate disputes between an employer and an employee.
  • It does not apply to employees who were individually represented by legal counsel when negotiating the terms of an agreement to “waive any right, penalty, remedy, forum or procedure for a violation of this code.”

Binding Arbitration and Preparing for the Future

If AB 465 is passed into law, it will have major ramifications for employers who require their employees to sign arbitration agreements. If you are an employer in California, and you would like your employees to commit to arbitration, it may be in your best interests to begin thinking now about how you will revise your policies if the bill is enacted. [Read more…]

The Public Policy Exception for At-Will Employment

at will employmentIf you ask an employer what “at-will employment” means, there’s a good chance they’ll tell you that it means an employer can fire the employee for any reason they want – or for no reason at all.

This is a very common definition of at-will employment, but it isn’t quite accurate. An employer can fire an at-will employee for almost any reason – but there are exceptions.

The best known of these exceptions is that certain forms of discrimination can be illegal grounds for firing an employee. (In California, these forms include discrimination based on race, national origin, gender, religion, age, sexual orientation, pregnancy status, marital status, genetic information, and disability).

There are other reasons for firing an employee that are prohibited by statute. These reasons include firing an employee for filing a claim for workers’ compensation, or for taking leave that is guaranteed to them under federal or state law, or for engaging in protected union activity.

Another exception is that it is illegal to fire an employee for a reason that is in opposition to public policy. This means that an employee cannot be fired for:

  • refusing to violate a statute;
  • performing a statutory obligation;
  • exercising a statutory right or privilege;
  • reporting a violation of a statute of public importance.

If an employee files a claim against an employer for wrongful termination in violation of public policy, he or she will have to demonstrate that:

  • He or she was an employee of the employer;
  • That he or she was discharged by his or her employer;
  • That the alleged violation of public policy was a motivating reason for the discharge;
  • That the discharged caused the employee harm.

Yau vs. Santa Margarita Ford

A good example of these circumstances can be found in the case of Yau vs. Santa Margarita Ford, Inc. It involved an employee of an auto dealership, who became aware that some of his coworkers were submitting fictitious warranty repair claims. He chose to notify the owner of the dealership about what was happening, and his coworkers responded to the accusation by falsely accusing him of being the mastermind of the scheme. He was later told that he was being fired for alleged warranty fraud, and then was promptly led out of his office by sheriff’s deputies.

The employee filed a complaint against his employer for wrongful termination. He argued that the motivation for his firing contravened public policy set forth in several different laws (such as laws prohibiting criminal conspiracy, theft, fraud and deceit). A California Court of Appeal held that these statutes were statutes of public importance, and that his allegations were properly tethered to the statutes.

Have Your Rights Been Violated?

If you’ve been fired from a job in Sonoma County, Mendocino County or Lake County California and believe that the reason for your firing was in opposition to public policy, don’t let anyone tell you that your employer had the right to fire you “for any reason they wanted.” You may very well have a case against your employer, even if you were an at-will employee.

It may be well worth your time to contact an attorney. Our experienced Beck Law P.C. labor and employment law attorneys in Santa Rosa can evaluate your individual situation, and help you decide how to proceed. Contact our office today for a consultation.

Mental Health Related Disabilities and the Americans with Disabilities Act

mental health related disabilitiesMental health related disabilities. There are employers who will gladly provide accommodations for an employee who uses crutches or a wheelchair – but are unwilling to consider the needs of an employee with a mental illness. However, the Americans with Disabilities Act (ADA) applies to mental conditions as well as physical ones.

In fact, mental health-related disabilities are mentioned in the first line of the ADA. It states, “The Congress finds that physical or mental disabilities in no way diminish a person’s right to fully participate in all aspects of society, yet many people with physical and mental disabilities have been precluded from doing so because of discrimination.”

What Mental Illnesses are Considered Disabilities Under the ADA?

There is no definitive list of which conditions (mental or otherwise) are covered by the ADA. The ADA defines a disability as “a) a physical or mental impairment that substantially limits one or more of the major life activities of (an) individual, b) a record of such an impairment, or c) being regarded as having such an impairment.” There are a variety of mental health conditions that meet those requirements.

The Equal Employment Opportunity Commission (EEOC) has provided examples of mental conditions that can be considered mental impairments under the ADA. These include:

  • Major depression;
  • Bipolar disorder;
  • Anxiety disorders (which include panic disorder, obsessive compulsive disorder, and post-traumatic stress disorder);
  • Schizophrenia; and
  • Personality disorders.

To qualify as a disability under the ADA, the mental impairment must substantially limit a major life activity. And just as there is no definitive list of disabilities, there is also no definitive list of major life activities. However, the EEOC’s Enforcement Guidance on the Americans with Disabilities Act and Psychiatric Disabilities states that all of following activities are considered major life activities:

  • Learning;
  • Thinking;
  • Concentrating;
  • Interacting with others;
  • Caring for oneself;
  • Speaking;
  • Performing manual tasks;
  • Working; and
  • Sleeping.

California Disability Law

The state of California has its own legislation that requires accommodations for employees with mental disabilities. The Fair Employment and Housing Act (FEHA) states that a mental disability includes, but is not limited to, all of the following:

  • Having any mental or psychological disorder or condition, such as an intellectual disability, organic brain syndrome, emotional or mental illness, or specific learning disabilities, that limits a major life activity.
  • Any other mental or psychological disorder or condition not described in paragraph 1 that requires special education or related services.
  • Having a record or history of a mental or psychological disorder or condition described in paragraph 1 or 2 that is known to their employer.
  • Being regarded or treated by the employer as having, or having had any mental condition that makes achievement of a major life activity difficult.
  • Being regarded or treated by the employer as having, or having had, a mental or psychological disorder or condition that has no present disabling effect, but that may become a mental disability as described in paragraph 1 or 2.

Note that unlike the ADA, FEHA does not require that the condition “substantially” limit a major life activity. It only requires that the condition limit a major life activity.

Mental Health Disability Legal Questions

If you believe that your employer has discriminated against you on the basis of a mental disability – or if you are an employer, and a claim has been filed against you– it is important that you seek the advice of an attorney. You can call or email the employment and labor law attorneys at Beck Law P.C. in Santa Rosa, who have many years of experience in workplace discrimination cases.

Is It Discriminatory to Fire an Employee for Substance Abuse?

fire and employee for substance abuseIs it discriminatory to fire an employee for substance abuse? Most employers and employees would probably agree that it’s reasonable to fire an employee for getting drunk on the job. But what about firing an employee because you learned that she belongs to Alcoholics Anonymous?

Under both the Americans With Disabilities Act (ADA), and California’s Fair Employment and Housing Act (FEHA), the latter would be considered a form of employment discrimination. It is discriminatory to fire an employee (or subject an employee to any adverse employment action) because of the employee’s alcoholism and/or drug addiction. However – and this is a very important “however” – these statutes only apply if the employee is in recovery. They do not apply if the employee is currently abusing drugs and/or alcohol.

Past Substance Abuse vs. Current Substance Abuse

Generally speaking, these statutes prohibit employment discrimination that is based on an employee’s past substance abuse. This may sound simple and straightforward – but like so many aspects of the law, it can get rather complicated.

For example, can an employee be fired for legally using medical marijuana? What if an employee fails an employer’s drug test, and then applies for a position later? What if an employer finds out that an employee used drugs a few weeks ago – does that count as current substance abuse? Or could the employee argue that he’s now in recovery, and he was fired for his past substance abuse? These are the kinds of issues that federal courts, and California courts, have been trying to resolve for years.

Medical Marijuana: While California allows the use of medical marijuana, the language of the FEHA makes it clear that it does not prohibit employers from discriminating on the basis of medical marijuana use. The ADA does not protect the use of medical marijuana, either.

Discrimination Based on Previous Failure of an Employer’s Drug Test: The Court of Appeals for the Ninth Circuit (which includes California) ruled on this issue in the case of Lopez vs. Pacific Maritime Association. The case involved a man who applied for a job in 1997, and was given a drug test. He failed the test, and wasn’t hired. In 2004, after becoming sober, the man applied for a job with the same employer, and was rejected because of the drug test he failed in 1997. The employer had a “one strike” rule, meaning that it refused to hire anyone who had ever failed a company drug test.

The Court ruled that the employer was within its rights to reject the applicant. The ruling held that the discrimination was based on his failure of the drug test, not his drug addiction itself.

How recent “current” drug use can be: The Equal Employment Opportunity Commission has clarified that the ADA has no specific rule regarding how much time must elapse before an employee’s substance abuse can be considered “past” substance abuse. These matters must be decided on a case by case basis. However, substance abuse that has taken place less than a month ago is generally considered to be current.

Ensuring Compliance

If you are an employer, and you ask your employees if they have ever been treated for substance abuse, you may be violating both state and federal law. If you have any concerns that you may not be in full compliance with the ADA and the FEHA, you may wish to speak to an attorney. The employment and labor law attorneys at Beck Law P.C., in Santa Rosa, will be able to answer your questions. You can call or email our office today.

California Job Retaliation and Wrongful Termination Laws

job retaliation, wrongful terminationCalifornia job retaliation and wrongful termination laws. Under California state law, it is illegal for an employer to retaliate against any employee who has provided information to law enforcement or government agencies, or engages in other protected activities. Employment retaliation can take a variety of forms including an employer’s decision to demote, terminate, fire or conduct some other negative act against an employee because that employee has exercised an activity protected by federal or state law. Most often employment retaliation occurs when an employee becomes a whistleblower by reporting an employer’s activities that are in violation or public policy or law, or is otherwise considered illegal. Under the California Labor Code, an employer is prohibited from taking any adverse, negative action, or any other form of discrimination in response to an employee:

  • Reporting discriminatory acts and other illegal activity that have occurred in a workplace controlled by the employer;
  • Participating in a labor union and other activities related to collective bargaining and/or an employee’s right to freedom of association and expression;
  • Complaining about the state of the workplace facilities and/or working conditions;
  • Participating in investigations and/or filing suit against an employer;
  • Filing a complaint against an employer with California’s Division of Labor Standards and Enforcement (DLSE).

CA Law Regarding Job Retaliation and Wrongful Termination

The most common form of employer retaliation is the wrongful termination of an employee who has engaged in activities protected by the federal and state government. Here in California, employment relationships are presumed to be at will, which means that the employment relationship can be terminated by both the employer and employee at any time without the consent of the other party. However, there does exist an exception to the at-will employment presumption, which provides that employers can be found guilty of wrongfully terminating an employee when that employee has been discharged for “performing an act that public policy would encourage or for refusing to do something that public policy would condemn.” Under this exception, a California employee who is discharged because of these reasons can bring suit against the employer in order to receive damages and compensation for the wrongful discharge. However, this exception does not apply when the parties have a pre-existing employment contract that allows employment termination based on cause or because of specific reasons previously outlined in the employment contract.

An employee can bring a wrongful termination claim by asserting that the employment discharge violated federal law, public policy or California state law. Typically, wrongful termination suits are brought under the California Fair Employment and Housing Act (FEHA), which allows employees to bring suits against employers. However, the FEHA cannot be used to bring suit against an organization’s managers, supervisors and other employees. A complaint alleging discrimination or retaliation in the workplace must be filed within six months following the occurrence of the alleged activities. However, complaints filed under California Labor Code section 230.1 and 230 (c) can be filed within one year following the alleged retaliation or discrimination. Complaints of employment retaliation and discrimination are filed with the DLSE.

If you believe you have been the victim of employment retaliation or discrimination you should contact one of the labor and employment attorneys here at Beck Law P.C. here in Santa Rosa, California today.

The Nightmare of Missed Breaks and Unpaid Overtime

missed breaks and unpaid overtime, missed breaks, unpaid overtime, labor lawThe nightmare of missed breaks and unpaid overtime. A key and trusted employee gives notice. He was well liked and you give him a special going away party.

Ten months later that key and trusted employee files an overtime and missed breaks violation complaint against you with the Labor Board. At first you are shocked because you really liked him and he left on good terms! He never said a word to you about any of this. You wonder, when and how could this have happened? Why was this was never brought to your attention during all his years of employment?

Missed Breaks and Unpaid Overtime

You review his time cards. They show no missed breaks or unpaid overtime and you continue to believe that this must be some sort of mistake. All you have to do is show the employee’s time cards to the Labor Board and all this will be cleared up, right?

You attend the Labor Board hearing, and show the commissioner your records. At this time that key and well liked employee produces another set of time sheets. A “secret” set of time sheets personally kept for years by the employee, showing that he worked a lot more that what he reported on his official time cards. This secret set of time cards documented hours and hours of “missed overtime and breaks” over a period of, well years – he even shows overtime for work he says he performed late at night when your office was closed. All you can think is what is going on? At this point, you go completely numb.

The employee tells the commissioner that he wanted to do a really good job but there wasn’t enough time in the day to keep up without working late at night or from home and tells the commissioner that you as his employer “should have known this.” You can’t remember ever asking your ex-employee to work late at night or from home (off the clock) ever. What was this extra work? What did he do for all those years of overtime?

How will the Labor Board Rule?

More often than not the Labor Board will side with the employee. It is imperative that employers seek the counsel of an experienced Labor Law attorney prior to attending a Labor Board hearing.

Employer’s Case: The employer believed that the company time cards were an accurate record of the the time worked and is therefore completely caught off guard by the extra set of time sheets produced. It must be some kind of mistake. But, at the Labor Board hearing the employee testifies that he never told his employer about the “secret” overtime he worked because he wanted to do a good job, to get everything done, and he didn’t want to lose his job to an assistant who was pining for the title.

Neither the employer nor the employee could document the actual work produced during these years of “overtime” but the Labor Board commissioner was satisfied that in spite of this lack of concrete evidence, the employee seemed earnest and appears sincere in his belief that he did something beneficial for the employer.

Department of Labor Decision: Employee was granted the full amount of his claim, with all penalties and interest. In addition the employer was required to pay back taxes to the IRS for these wages. Further, the Department of Labor included even more interest and penalties due to the employee wait time. This exacerbated the cost to the employer even further, escalating the dollars in interest and penalties (per day for a 30 day period).


It is essential that all employers:

  • Include a mandatory Declaration Under Penalty of Perjury on each time card, signed by the employee, that clearly states the employee swears that the time submitted on the card is accurate, honest and includes ALL time worked for that pay period
  • Mandate in your Policy Manual that non-exempt employees with pre-approved overtime must clock in and clock out, remotely, via e-mail prior to commencing and ending any work performed.
  • Ensure that time sheets are legible, professional and clearly written
  • Ensure employees initial all notes and changes and provide reasons and copies of email approvals for overtime, late, sick and vacation days, in their own handwriting
  • Outline Employee Manuals with language that non-exempt employees are never permitted to work “off clock” for any reason whatsoever, unless pre-approved by management in writing
  • Ensure all non-exempt employees are not permitted to sit at their desks during breaks and/or meals
  • Train management to post break/meal schedules in a public work area and to monitor them accordingly, and ensure breaks and meals are taken timely and in a manner that complies with current labor regulations
  • Provide recurrent reminders to management and employees to never talk about work to an employee that is on a break or meal period
  • Provide a separate defined space for employees to take breaks and meals that is free from work
  • Install time clocks within sight of management to monitor that employees clock in and out in a timely manner and do not clock in and out for another employee
  • Keep up to date employee records that are stored in a locked file or a password protected computer file
  • Seek a professional employment/labor law attorney, such as Beck Law P.C., to prepare and annually update all employee manuals, policies, procedures and employment documents

Can An Employer Fire An Employee For Discussing A Raise?

fire an employee, california labor lawCan an employer fire an employee for discussing a raise? You have a great Office Supervisor that deserves additional compensation for her dependable work. You decide to reward her with a fantastic performance review and an excellent raise. But, because not all of your your employees are exceptional and you have only so much money to go around, you would prefer that the Office Supervisor keep her raise to herself and not share this information with her co-workers. As she leaves your office, you tell her: By the way, I would prefer you not tell anyone about your raise. If you do, it may cause a lot of disruption in the office, and hurt other employee’s feelings. Actually, I need to trust that you will not tell anyone in this office or you may lose your job over it.

From an employer’s point of view, this statement may seem like a good reminder, given what you think about the other employees, how fairly you want to compensate the other employees, and how much you appreciate the hard work and dedication of this particular employee over the others, given that cash flow is tight. You know your business and what your limits are, and you just don’t want to deal with all the other employees’ complaints. The bottom line is you want the raise to go to the person who earned it, you believe it is reasonable to ask that some things remain private, and frankly, you don’t want to have to explain yourself.

Can you say this to your employee? The answer is: NO. In fact, it is illegal.

Under the National Labor Relations Act, employers cannot prevent employees from discussing wages, salaries, raises, evaluations, cuts in pay, bonuses, benefits, or anything related to their employment among themselves. Employees may discuss ALL WORKING conditions among themselves and they are free to organize, share information and band together as a group. As taken from the NLRB website:

“The law we enforce gives employees the right to act together to try to improve their pay and working conditions, with or without a union. If employees are fired, suspended, or otherwise penalized for taking part in protected group activity, the National Labor Relations Board will fight to restore what was unlawfully taken away. These rights were written into the original 1935 National Labor Relations Act and have been upheld in numerous decisions by appellate courts and by the U.S. Supreme Court”

More specifically, Section 7 of the National Labor Relations Act clearly states:

“Employees shall have the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection, and shall also have the right to refrain from any or all such activities.”

You may then wonder, can I as an employer discuss one employee’s raise with another employee? The answer is again: NO.

Whereas employees can discuss all work related information with each other, you as an employer must protect the privacy of every employee, and you are not allowed to discuss information regarding one employee with another employee, unless that employee is a supervisor; and even then, information can only be shared that is relevant/necessary for the supervisor to do the job, and nothing more. For example: An employer and a supervisor may discuss an employee’s bonus only if that employee is working directly under that supervisor. An employer may not “tell” an employee anything about another employee’s bonus. [Read more…]

Employers Warned Against Providing Financial Incentives to Buy Non Employer Health Coverage

affordable care act, non employer health coverageWhy is the Government warning employers against providing financial incentives to buy non employer health coverage? The implementation of the Affordable Care Act (ACA) has effectively revolutionized the U.S. healthcare insurance system. Now there is no longer an emphasis primarily on employers sponsoring the bulk of workers’ health insurance plans. In fact, there are now online exchanges where employees can shop for and purchase their own medical coverage instead of paying into their existing employment based plan. Some employers have welcomed this shift in burdens. However, some employers may be taking it too far, and the federal government has gone on record warning employers against providing financial payments to their high-cost employees as incentive for them to leave their employer’s medical plan in favor of purchasing their own individual market policy.

Non Employer Health Coverage, Rising Costs and Employer Incentive

From the employer standpoint, the costs associated with providing employee healthcare have risen so much since the ACA’s implementation that they are looking for any way to lessen their financial burdens. Some employers are finding it cheaper to pay their high-cost workers in exchange for the worker agreeing to exit their existing benefit plans, so that the employer does not have to continue making contribution payments on that employee’s behalf.

A November 14, 2014 memo released by the U.S. Department of Labor, Treasury, and Health and Human Services (the “Departments”) stated that providing payments in exchange for employees purchasing individual market policies is considered unlawful discrimination against employees on the basis of their health status. In fact, according to a May Kaiser Health news report, health insurance consultants and brokers have been advising employers to shift workers with expensive health conditions into individual market policies as a cost-cutting mechanism. Such practices are in direct opposition of the ACA, which requires that health insurance exchange plans accept all applicants, regardless of their existing illnesses or health conditions. This acceptance must be at prices that have been pre-established before acceptance.

The reality is that the costs associated with implementing the ACA have resulted in some companies’ health insurance liability costs increasing by over 100 percent. As a result, large, self-insured employers are looking for any way to cut costs. Employers are finding that the removal of just one high-cost employee from the group insurance plan can result in annual savings of hundreds of thousands of dollars. For some, a one-off lump sum payment to an employee is well worth the future financial benefits associated with that employee’s exit from the group policy.

Both the federal government as well as consumer advocates are concerned about this practice because it could erode the effectiveness of employer-based coverage, while creating higher costs and premiums for the entire insurance marketplace. If employees who would be better suited in employer-based plans are incentivized to switch to individual market policies, the entire marketplace would be forced to absorb the costs associated with the employee’s sickness instead of the employers, which are the one’s with the actual vested interest in the employee’s well being.

Employer payments in exchange for a worker exiting their existing employment based insurance policy is a violation of the ACA, and is considered unlawful discrimination. If an employer has propositioned you about switching to an individual market policy in exchange for payment, you should contact the Santa Rosa, Ukiah, Lake County California employment law attorneys at Beck Law P.C. today.


The information on this website should not be considered to be legal advice, nor construed to be the formation of any manner of attorney client relationship. Prior to taking any form of legal action, please consult with an attorney experienced in the appropriate area of law germane to your situation. Case results and testimonials presented on or any of its related websites are germane to the facts present for each individual case and is not a promise of similar outcomes for any other cases. This website is not intended to solicit clients for matters outside of the State of California.