Taking a Chance on Individuals with a Past Criminal History

State legislatures are making new laws to make it easier to hire people with criminal histories.   Low unemployment is great for society, but it is a problem for employers looking to fill positions within their companies.  And according to the Dept of Justice there are more than 650,000 prisoners released each year that could help with this problem, but hiring people with criminal records is a concern when considering matters of privacy and workplace safety.  There is also concern over the business’s reputation and not to mention legal and financial concerns.  In some states it is illegal for the employer to disclose an individuals criminal history to other employees and in some states it is even illegal for the employer to ask about criminal history when hiring a candidate.  Employers who choose to hire from this candidate pool need to take some well informed steps to navigate this hiring practice.

The State of South Carolina just passed legislation to allow individuals with certain criminal records to have these records expunged after petitioning the court to do so.  Once expunged they would no longer be required to disclose this history on job applications and it would not be included in background checks.  The new law, Act No. 254, becomes effective Dec. 27.

There are some economic advantages to hiring people with a past criminal history such as WOTC (Work Opportunity Tax Credit) credits which may offset an ex-offender’s wages by up to $2,400.  And similar to the common arguments heard when justifying the hiring of migrants, these candidates may also be more willing to fill jobs that others will not

For businesses who do decide to recruit from this candidate pool, steps should be taken to ensure success in this decision.

  1.  Seek help!  There are support organizations and designated people in law enforcement/corrections who will help guide you through these types of decisions.  These organizations also coach and train people to help them be better prepared for the job opportunities that may come.  They also work with the employer to help better manage people in this situation and to set expectations from both sides of the table.  Employees are encouraged to go beyond what the employer is asking of them and employers are asked to be less quick to terminate due to workplace issues.  The approach seems to work as demonstrated by a report from the University of Las Vegas stating that one such program saw that 64% of the people studied found long term employment while only 6% were re-incarcerated.
  2. Make your case!  Simply saying “It’s the right thing to do.”, will not in most cases make your argument to management or the rest of your workforce.  Explore the financial impact of the WOTC credits and how they may effect the bottom line.  Also, concerning safety or other legal concerns, know that the criminal justice system imposes an extra level of accountability on the employee.  Making conditions like arriving at work sober or even random drug testing a condition of parole.  This helps in establishing good work behaviors.  Between the WOTC credits and the extra behavioral incentives most employers are able to make a case to hire.  And reportedly, these employees have an exceptional attitude, affirming that former prisoners are likely not to be a liability or a disruption.
  3. Stay compliant!  As with anything HR, there are regulations you must follow when hiring an employee.  28 states and more than 150 cities and counties have adopted “ban-the-box” legislation that prohibits employers from asking about applicants’ criminal histories early in the hiring process.  And the EEOC is closely watching for company policies which prohibit or discourage hiring former prisoners.  On the other hand if another employee is later assaulted and it was found the employer knew that they knowingly hired the assailant with a violent criminal history, then the employer may be accused of “negligent hiring” and may find themselves liable for the injuries.  Also, be careful that the requirements of the job do not conflict with the criminal background of the individual.  For example, you should not allow an individual with a DUI in their history to drive a company vehicle, but they may be fine working in other job positions.
  4. Who needs to know?  This is a difficult and sticky question to answer.  Of course HR and the owner should know, but what about supervisors or coworkers?  One approach is to limit this information strictly on a need to know basis.  Vet if each person you would consider telling really needs to know.  Unless there is a safety concern or some other valid concern, does the supervisor really need to know?  Do the coworkers?  Another way to address this is to have it documented in the company policies that the company may hire individuals with criminal histories as a broad statement.  This wont stop employees from googling each other, so be prepared to justify hiring choices if needed.

There are advantages and disadvantages to the decision to hire individuals with a prior criminal history.  We work in an environment of legislation meant to protect the individual’s right to privacy by expunging criminal history and restricting employers from even asking such questions in the hiring process.  This is truly a challenging area of HR to navigate.  Be sure to ask for help when needed, be prepared to justify your decisions to management and to coworkers when asked and always stay compliant with local, state and federal rules and regulations.  Good luck!

The taxman cometh, just a little later. ACA 1095 deadline extended to March 4th

On November 28th, my latest article,  “Got ACA Compliance?  The taxman cometh!” I advised that employers should be ready to report to their employees by the end of January.  The IRS yesterday, November 29th extended this date to March 4th, 2019 for the 2018 tax year.  So we have about another month to accomplish the mailing of the 1095-B and 1095-C reports to our employees.

Still check out my last article for 10 tips on ACA reporting and compliance.  https://hrnutsandbolts.com/got-aca-compliance-the-tax-man-cometh/

The notice text is below:



Notice 2018-94


This notice extends the due date for certain 2018 information-reporting requirements for insurers, self-insuring employers, and certain other providers of minimum essential coverage under section 6055 of the Internal Revenue Code (Code) and for applicable large employers under section 6056 of the Code. Specifically, this notice extends the due date for furnishing to individuals the 2018 Form 1095-B, Health Coverage, and the 2018 Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, from January 31, 2019, to March 4, 2019. This notice also extends good-faith transition relief from section 6721 and 6722 penalties to the 2018 information-reporting requirements under sections 6055 and 6056.


Sections 6055 and 6056 were added to the Code by sections 1502 and 1514 of the Patient Protection and Affordable Care Act (ACA), enacted March 23, 2010, Pub. L. No. 111-148, 124 Stat. 119, 250, 256. Section 6055 requires health insurance issuers, self-insuring employers, government agencies, and other providers of minimum essential coverage to file and furnish annual information returns and statements regarding coverage provided. Section 6056 requires applicable large employers (generally those with 50 or more full-time employees, including full-time equivalent employees, in the previous year) to file and furnish annual information returns and statements relating to the health insurance, if any, that the employer offers to its full-time employees. Section 6056 was amended by sections 10106(g) and 10108(j) of the ACA and was further amended by section 1858(b)(5) of the Department of Defense and Full-Year Continuing Appropriations Act, 2011, Pub. L. No. 112-10, 125 Stat. 38, 169.

Section 36B, which was added to the Code by section 1401 of the ACA, provides a premium tax credit for eligible individuals who enroll in coverage through a Health Insurance Marketplace. Section 5000A, which was added to the Code by section 1501(b) of the ACA, generally provides that individuals must have minimum essential coverage, qualify for an exemption from the minimum essential coverage requirement, or make an individual shared responsibility payment when they file their federal income tax return. The Tax Cuts and Jobs Act, Pub. L. No. 115-97, 131 Stat. 2054, 2092, reduced the individual shared responsibility payment to zero for months beginning after December 31, 2018.

Section 6721 imposes a penalty for failing to timely file an information return or for filing an incorrect or incomplete information return. Section 6722 imposes a penalty for failing to timely furnish an information statement or for furnishing an incorrect or incomplete information statement. Section 6721 and 6722 penalties are imposed with regard to information returns and statements listed in section 6724(d), which includes those required by sections 6055 and 6056.

The regulations under section 6055 require every person that provides minimum essential coverage to an individual during a calendar year to file with the Internal Revenue Service (Service) an information return and a transmittal on or before the following February 28 (March 31 if filed electronically) and to furnish to the responsible individual identified on the return a written statement on or before January 31 following the calendar year to which the statement relates. See Treas. Reg. § 1.6055-1(f), (g)(4); see also § 6055(c)(2). The Service has designated Form 1094-B, Transmittal of Health Coverage Information Returns, and Form 1095-B, Health Coverage, to meet the requirements of the section 6055 regulations.

The regulations under section 6056 require every applicable large employer or a member of an aggregated group that is determined to be an applicable large employer (ALE member) to file with the Service an information return and a transmittal on or before February 28 (March 31 if filed electronically) of the year following the calendar year to which it relates and to furnish to full-time employees a written statement on or before January 31 following the calendar year to which the statement relates. See Treas. Reg. § 301.6056-1(e), (g); see also § 6056(c)(2). The Service has designated Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns, and Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, to meet the requirements of the section 6056 regulations.

The regulations under sections 6055 and 6056 allow the Service to grant an
extension of time of up to 30 days to furnish Forms 1095-B and 1095-C for good cause shown. See Treas. Reg. §§ 1.6055-1(g)(4)(i)(B)(1), 301.6056-1(g)(1)(ii)(A). In addition, filers of Forms 1095-B, 1094-C, and 1095-C may receive an automatic 30-day extension of time to file these forms with the Service by submitting Form 8809, Application for Extension of Time To File Information Returns, on or before the due date for filing those forms. See Treas. Reg. §§ 1.6081-1, 1.6081-8. Under certain conditions, filers who submit Form 8809 before the automatic 30-day extension period expires and explain in detail why the additional time is needed may also receive an additional 30-day extension of time to file Forms 1095-B, 1094-C, and 1095-C with the Service. See id.

The preambles to the section 6055 and 6056 regulations (T.D. 9660, 2014-13 I.R.B. 842; T.D. 9661, 2014-13 I.R.B. 855) provided that, for reporting of 2015 offers and coverage, the Service would not impose penalties under sections 6721 and 6722 on reporting entities that could show that they made good-faith efforts to comply with the information-reporting requirements. This relief applied only to furnishing and filing incorrect or incomplete information reported on a statement or return, and not to a failure to timely furnish or file a statement or return. Notice 2015-87, 2015-52 I.R.B. 889, reiterated that relief, and Notice 2015-68, 2015-41 I.R.B. 547, provided additional information about that relief with regard to reporting under section 6055. The preambles also noted the general rule that, under section 6724 and the related regulations, the section 6721 and 6722 penalties may be waived if a failure to timely furnish or file a statement or return is due to reasonable cause. To establish reasonable cause, the reporting entity must demonstrate that it acted in a responsible manner and that the failure was due to significant mitigating factors or events beyond the reporting entity’s control. In addition, proposed regulations under section 6055 published on August 2, 2016, proposed additional rules for reporting. 81 Fed. Reg. 50671.

Notice 2016-4, 2016-3 I.R.B. 279, extended the due dates for the 2015 information-reporting requirements under sections 6055 and 6056 (both for furnishing to individuals and for filing with the Service). In particular, the notice provided that the furnishing deadline for the 2015 Forms 1095-B and 1095-C was extended from February 1, 2016, to March 31, 2016, and that the filing deadline for the 2015 Forms 1094-B, 1095-B, 1094-C, and 1095-C was extended from February 29, 2016, to May 31, 2016, if not filing electronically, and from March 31, 2016, to June 30, 2016, if filing electronically. In addition, the notice provided that the provisions regarding an automatic and permissive 30-day extension of time for filing information returns and a permissive extension of time (of up to 30 days) for furnishing statements would not apply to the extended due dates.
Notice 2016-70, 2016-49 I.R.B. 784, extended the due dates for the 2016 information-reporting requirements under sections 6055 and 6056 for furnishing statements to individuals. In particular, the notice provided that the furnishing deadline for the 2016 Forms 1095-B and 1095-C was extended from January 31, 2017, to March 2, 2017. Notice 2016-70 did not extend the deadline for filing information returns with the Service, nor did it affect any extension that would otherwise be applicable to the deadline. The notice also extended good-faith transition relief from section 6721 and 6722 penalties to the 2016 information-reporting requirements under sections 6055 and 6056.
Notice 2018-06, 2018-2 I.R.B. 300, extended the due dates for the 2017 information-reporting requirements under sections 6055 and 6056 for furnishing statements to individuals. In particular, the notice provided that the furnishing deadline for the 2017 Forms 1095-B and 1095-C was extended from January 31, 2018, to March 2, 2018. Notice 2018-06 did not extend the deadline for filing information returns with the Service, nor did it affect any extension that would otherwise be applicable to the deadline. The notice also extended good-faith transition relief from section 6721 and 6722 penalties to the 2017 information-reporting requirements under sections 6055 and 6056.


A. Extension of Due Date for Furnishing to Individuals under Sections 6055 and 6056 for 2018
Following consultation with stakeholders, the Department of the Treasury (Treasury) and the Service have determined that a substantial number of employers, insurers, and other providers of minimum essential coverage need additional time beyond the January 31, 2019, due date to gather and analyze the information and prepare the 2018 Forms 1095-B and 1095-C to be furnished to individuals. Accordingly, this notice extends the due date for furnishing the 2018 Form 1095-B and the 2018 Form 1095-C, from January 31, 2019, to March 4, 2019.

1 In view of this automatic extension to March 4, 2019, the provisions under Treas. Reg. §§ 1.6055-1(g)(4)(i)(B)(1) and 301.6056-1(g)(1)(ii)(A) allowing the Service to grant an extension of time of up to 30 days to furnish Forms 1095-B and 1095-C will not apply to the extended due date. Notwithstanding the extension provided in this notice, employers and other coverage providers are encouraged to furnish 2018 statements as soon as they are able.

Treasury and the Service have determined that there is no similar need for additional time for employers, insurers, and other providers of minimum essential coverage to file with the Service the 2018 Forms 1094-B, 1095-B, 1094-C, and 1095-C. Therefore, this notice does not extend the due date for filing with the Service the 2018 Forms 1094-B, 1095-B, 1094-C, or 1095-C, which remains February 28, 2019, if not filing electronically, or April 1, 2019, if filing electronically. However, this notice does not affect the provisions regarding an automatic extension of time for filing information returns; the automatic extension remains available under the normal rules for employers and other coverage providers who submit a Form 8809 before the due date. See Treas. Reg. §§ 1.6081-1, 1.6081-8. This notice also does not affect the provisions regarding

1 This notice extends the due date for furnishing 2018 Forms 1095-B and 1095-C to March 4 (instead of to March 2, as was done in Notice 2016-70 and Notice 2018-06, to provide a 30-day extension), because March 2, 2019, is a Saturday. additional extensions of time to file. See id.

Employers or other coverage providers that do not comply with the due dates for furnishing Forms 1095-B and 1095-C (as extended under the rules described above) or for filing Forms 1094-B, 1095-B, 1094-C, or 1095-C are subject to penalties under sections 6722 or 6721 for failure to timely furnish and file, respectively. However, employers and other coverage providers that do not meet the relevant due dates should still furnish and file. The Service will take such furnishing and filing into consideration when determining whether to abate penalties for reasonable cause.

The extension of the due date provided by this notice applies only to section 6055 and 6056 information statements for calendar year 2018 furnished in 2019 and does not require the submission of any request or other documentation to the Service. Because the extension of the due date to furnish granted in this notice applies automatically and is as generous as the permissive 30-day extension of time to furnish 2018 information statements under sections 6055 and 6056 that have already been requested by some reporting entities in submissions to the Service, the Service will not formally respond to such requests.

Because of the extension granted under this notice, some individual taxpayers may not receive a Form 1095-B or Form 1095-C by the time they are ready to file their 2018 tax return. Taxpayers do not need to wait to receive Forms 1095-B and 1095-C before filing their returns and may rely on other information received from their employer or other coverage provider for purposes of filing their returns, including determining eligibility for the premium tax credit under section 36B and confirming that they had minimum essential coverage for purposes of sections 36B and 5000A. Although taxpayers need not send the other information relied upon to the Service when filing their returns, they should keep that information with their tax records.

B. Extension of Good-Faith Transition Relief from Section 6721 and 6722 Penalties for 2018

The preambles to the section 6055 and 6056 regulations provided transition relief from penalties under sections 6721 and 6722 to reporting entities that could show that they made good-faith efforts to comply with the information-reporting requirements for 2015. This relief applied only to incorrect and incomplete information reported on the statement or return and not to a failure to timely furnish or file a statement or return. Notice 2016-70 and Notice 2018-06 extended this relief for the information-reporting requirements under sections 6055 and 6056 for 2016 and 2017, respectively. Treasury and the Service recognize the ongoing challenges involved in complying with these reporting requirements and have determined that this relief is also appropriate for 2018.

Specifically, this notice extends relief from penalties under sections 6721 and 6722 to reporting entities that report incorrect or incomplete information on the return or statement when these entities can show that they made good-faith efforts to comply with the information-reporting requirements under sections 6055 and 6056 for 2018 (both for furnishing to individuals and for filing with the Service). This relief applies to missing and inaccurate taxpayer identification numbers and dates of birth, as well as other information required on the return or statement. No relief is provided in the case of reporting entities that do not make a good-faith effort to comply with the regulations or that fail to file an information return or furnish a statement by the due dates (as extended under the rules described above). In determining good faith, the Service will take into account whether an employer or other coverage provider made reasonable efforts to prepare for reporting the required information to the Service and furnishing it to employees and covered individuals, such as gathering and transmitting the necessary data to an agent to prepare the data for submission to the Service or testing its ability to transmit information to the Service.

C. Future Years
Because the individual shared responsibility payment is reduced to zero for months beginning after December 31, 2018, Treasury and the Service are studying whether and how the reporting requirements under section 6055 should change, if at all, for future years.

The principal author of this notice is Danielle Pierce of the Office of the Associate Chief Counsel (Procedure and Administration). For further information regarding this notice contact Danielle Pierce at (202) 317-6845 (not a toll-free call).


Bada Boom Bada Binged in New Jersey

The individual mandate instituted by the Patient Protection and Affordable Care Act has been in effect since 2014 and continues to be in effect today and for the foreseeable future.  The news and everyone concerned has reported that the Individual Mandate was repealed but to be clear the actual mandate is still the law of the land now and in the future.  This is seen to be true as the state of Ohio has requested a waiver from the Individual Mandate despite the passing of the Tax Cuts and Jobs Act of 2017 which many believe repealed the mandate.  Ohio Department of Insurance Director Jillian Froment said in a March 30 letter to HHS Secretary Alex Azar that the reason why the state was requesting the waiver was that “the (tax) legislation zeroed out the penalty that is associated with the individual mandate … but … did not eliminate the mandate itself.”

Not having enough votes in the U.S. Senate to change the Affordable Care Act, Republicans did the next best thing, remove the teeth from the mandate by temporarily removing the penalties associated with the law.  Through reconciliation the changes may only be in effect for 10 years so the individual mandate is due to return in 2027 unless the law is changed before then.

In the mean time the elimination of the penalty effective in 2019 will have some negative effects on coverage rates of individuals.  As an example of this, in the same waiver application to HHS, Ohio actuaries predicted individual market enrollment will fall from 307,000 people this year to 248,000 enrollees in 2022, and average monthly premiums will increase from $493 to $600 in the same time frame.

With similar actuarial analysis being performed in other states, legislatures in Vermont and New Jersey were quick to act to restore the individual mandate at the state level.  So as the federal individual mandate penalties drop off in 2019, they are being restored in New Jersey at the same penalty amounts as would have been in effect at the federal level.  And just to be sure, in case by some miracle the federal mandate is restored, the New Jersey law also allows for a tax credit equal to the federal penalty, if imposed again.    Vermont’s individual mandate is not scheduled to begin until 2020.

New Jersey’s actuaries feel that by retaining the individual mandate penalties they will keep enrollment rates higher and as such they have approved a 9.3%  average cost reduction on insurance premiums in the New Jersey healthcare marketplace.  This is much better than the 20% plus increase expected by the Ohio actuaries.

Along with the individual mandate, insurers and self-insured employers in New Jersey will have new requirements to report coverage data at years end, 2019.  The reports are currently undefined, but is expected to be in line with IRS Section 6055 which requires Part III on ACA form 1095-C and part IV of the ACA form 1095-B.  Basically an individual is covered for a given calendar month when enrolled in MEC coverage for at least one day in the month.

Rules and guidelines governing the actual reporting requirements and methods in New Jersey are pending and when established they are expected to be very similar to the IRS Section 6055 requirements.

In summary, in 2019, the Federal government requires reporting of individual coverage by insurers and self-insured employers via IRS Section 6055.  This is unchanged from years past.  In addition, states such as Massachusetts and New Jersey have existing laws in effect requiring reporting coverage on individuals.  Vermont has passed legislation requiring the same in 2020 and in other states such as Maryland, California, Connecticut, Hawaii, Minnesota, Rhode Island and Washington, as well as the District of Columbia, legislators are considering similar proposals.  As such, the requirements for employers and insurers to report coverage will be increased in the coming years.  And if the savings seen in New Jersey’s market place premiums are seen in other early adopting states , the other states will likely soon follow.  And ultimately, if nothing changes in the next 10 years, we will see the return of the individual mandate penalties associated with the original ACA law which were temporarily suspended by reconciliation measures in 2017.


Quite Honestly, it doesn’t have to be a struggle like that.

Cimplx’s Matt Mikkelson being  interviewed by Gregg Stebben of Forbes Books for the SBE Council.  Great interview, we are very proud of Matt and you can hear his pride for Cimplx and all we do!

This is a follow up interview associated with our previous blog article, Cimplx Invited by White House to Executive Order Signing in Charlotte – Multi-Employer Retirement Plans .  The interviewer, Gregg Stebben, was connected by Karen Karrington, CEO, SBEC, to the Trump EO signing and afterwards had requested to interview some of the attendees.  I dont know how the interview could have turned out better.  Matt and Gregg did a great job and we are proud to play it for you in the video below.


Cimplx Invited by White House to Executive Order Signing in Charlotte – Multi-Employer Retirement Plans

Stephen Schram, COO (left), Trey Parrish, President, Encompass Machines (middle) and Matt Mikkelson, Director Customer Success (right thumbs up) were invited by the White House to Presidents Trumps signing of a new Executive Order establishing Multi-employer Retirement Plans.


On Friday this week, President Donald Trump stopped in Charlotte, NC to sign a new Executive Order establishing Multi-employer Retirement Plans.  A number of small business executives and owners from the area were invited by the White House to be present to the signing and to hear first hand the announcement.  The actual order may be read here.

“Such a big thing—they’ll be banding together,” said President Trump. “Small businesses will be able to pool their resources so that they can have the same purchasing power or even more, frankly, as large businesses.”  In the video below President Trump introduces a few key executives, Robert Cresanti, CEOof the International Franchise Assoc., Jerry Howard, CEO of the National Association of Home Builders and Bob Morgan, CEO of the Charlotte Chamber of Commerce.  The president then gives a brief description of the EO and signs.

Before this EO, small businesses did not have the purchasing power to create 401k plans like the ones in place at larger employers, giving the larger employers a competitive advantage when attracting talent.  Now small employers will be able to pool their purchasing power through associating together.  This also allows established associations such as a Chamber of Commerce or economic development groups to do the same and offer a more robust 401k plan to their associated members or community.

In the video below, the EO is further explained by Alex Acosta, Sec of Labor, Linda McMahon, Administrator of the SBA and comments by Jerry Howard.

Special thanks to Karen Kerrigan, CEO of the Small Business Entrepreneur Council for arranging for Cimplx and other small businesses in the area to be invited to this event.  Karen is a great advocate for small business  and is at the front of much of the legislation and executive actions which help small businesses everyday.  If you are a small business owner and you are not a member of the SBEC you need to look into this organization and join, it is looking out for small business everyday.

More pictures below… (scroll left and right on the first panorama photo)

Chris Garvey, Director, Stephen Gould Charlotte (left) and Stephen Schram, COO, Cimplx (right)
Stephen Schram, COO, Cimplx
Stephen Schram (waiving) Chris Garvey (to Stephens right) Trey Parrish and Matt Mikkelson (to Stephen’s left) Photo taken from the stage by one of the key executives Trump invited to the stage, Robert Crescanti, CEO, IFA. We had just met prior to the President’s arrival and he mentioned he would take the photo while on stage, true to his word, here we go.
Seth Zamek, Owner/Exec. Director, Senior Helpers. One of the small business owners invited by the White House to the event. Such a pleasure to have him there with us.
Seth Zamek (front row fifth from right) pictured from the stage. Photo by Robert Cresanti


President signing the Executive Order! Photo by Seth Zameck, Owner/Exec. Director, Senior Helpers.

HR Compliance 101: The Affordable Care Act’s Employer Mandate

Despite a great deal of effort and a good amount of news coverage about making changes to the Affordable Care Act, the act’s Employer Mandate has not changed at all.   Employer’s today must be aware of the mandate’s requirements and take steps to ensure they are properly safe harbored from the potential tax assessments (penalties) it may generate.

First and foremost employers need to come to terms that the mandate is a tax issue, not a healthcare issue.  There are aspects of the law which require certain benefits to be offered in order to qualify a plan, but IRS tax section 4980h sets forth rules and regulations governing the assessment of a tax in response to an Employer Shared Responsibility Assessment.  Employers are not required to offer healthcare to remain compliant, they are simply assessed a possible tax when they choose to pay versus play.  There are compliance requirements and associated penalties under Section 6055 & 6056,  if employers fail to file and/or report information to the IRS and employees.

In addition to the tax assessments and penalties, the ACA also made changes and enhanced other laws which introduced new compliance issues.  Employer’s are expected to comply with the ACA while also weaving in related rules and requirements from ERISA (which regulates employee benefits) as well as ensuring plans meet coverage standards set by HHS for minimum essential coverage (MEC) and minimum value (MV).  There is also new emphasis on soliciting social security numbers for dependents as well as employees.

To fully comply, applicable large employers should accurately complete form 1095-C and timely report the information to employees and file the returns with the IRS to avoid 6055/6056 penalties.  Also, in order to avoid being assessed taxes based on section 4980h, employers must look for safe harbors and properly document them or be prepared to pay the assessed taxes.  All the while taking care to fully comply with ERISA and coverage standards set by HHS.

The first safe harbor is to keep your company below 50 FT+FTE and thus not be subject to the tax assessment at all.  So we need to determine if the employer is considered an Applicable Large Employer or A.L.E.

Section 4980H applies only to applicable large employers. If the employer is not an ALE, then it cannot be assessed a tax under 4980h.  In order to make an ALE determination, a company will look back at the number of hours worked by common law employees in the previous year to determine if the company has  averaged at least 50 or more full time or full time equivalents.     A quick method for doing this is to cap every employees hours each month at no more than 120 hours.  After capping the hours, sum the hours for each employee in a given month and divide by 120.  This will give the number of FT+FTE for each month.  Total all twelve months and then divide by 12, this is the number that must be greater than or equal to 50 to be considered an ALE.  Be sure to research which employee’s hours may be excluded, there are a number of exceptions.   Some quick exclusions may include 2% partners in an S-corp, Statutory Employees , Statutory NonemployeesTricare recipients…  Also if a businesses employee count spikes above 50 FT+FTE for less than 120 days due to seasonal workers, then the seasonal workers may also be excluded for those days.

If a business is new, the owners would make a self assessment as to whether they expect to have more than 50 FT+FTE employees the first year and then simply declare themselves an ALE or not.

One important note… given that all the facts needed to determine if your business is an ALE are based on the previous year, then there is nothing that can happen in the current year that will effect this determination.  Your business is either an ALE all year or it is not, it does not move in or out of ALE status throughout the current year.  The current years status is determined every year by January 1 and it does not change all year.

If an employer is determined to be an ALE, then the next concern is whether the employer may be assessed a tax for any employee in a given month.  4980H(a) is the first possible tax assessment.  In order to safe harbor this assessment the company would need to offer MEC coverage to at least 95% (70% in 2015) of the full time employees or in the case there is less than 100 FT employees total, the employer must offer to all but 5 full time employees in a given month.

This raises one of the most complicated issues with the employer mandate, determining which employees are full time or more accurately which employees are eligible to be assessed a tax.  There are two methods outlined in the final regulations.  The first is the monthly method, the second is the look back method.

The monthly method seems simple on the surface but has it’s challenges.  Simply, if an employee works 130 hours or more in a given month, the employee is full time, if they work less than 130 hours then they are not.  The first challenge is summing the hours from the first day of the month to the last day of the month.  This requires a time and attendance system that can record hours by month, not by week or by pay period which is the most common way hours are recorded.  The second issue is that an employer does not know for sure if an employee was full time in a given month until the employee completes the month.  If the employee was not previously considered full time and offered coverage, as such, then the employee may have just triggered a tax assessment for the employer.  Basically, the problem here is the monthly method is like driving using the rear view mirror instead of the windshield.  You are always looking behind you, not fully aware of what is coming at you.  I will say that if you feel all your employees are full time and you offer coverage to everyone, then this is a good method to use. The worst that can happen in this scenario is that an employee may test part time and you offered coverage, not a big deal unless you are looking to avoid offering coverage.

The look-back method is a way for employers to look through the windshield and see what is coming.  By looking back over a number of months (measurement period) the employer can then designate an employee as full time (or not) for the same number of months going forward (stability period).  The look back period can be up to 12 months or as little as three months, but the stability period must be at least 6 months.  Between the measurement period and the stability period, there is an administrative period which may be up to 90 days.  The administrative period is used to calculate the results from the measurement period and then make an offer of coverage if needed.  The offer of coverage would need to be effective by the first day of the stability period, which is always the first day of the month.

This is where the ACA and ERISA start to meet.  The ACA works in months as the employee’s safe harbor is applied bt the calendar month, but ERISA works in days and the delay (waiting period) from determining eligibility and offering coverage can be no more than 90 days under ERISA.  The ACA offers related non-assessed periods to sync up with the ERISA waiting period and keep the company in compliance throughout the offer process.  You can start to see why this is a complicated law and why most companies should seek help.

Given you properly applied one of the two measurements above then you have determined which months an employee is full time and which months they are not.  Then the employer decides if they will play (offer coverage) or pay the tax.  This is referred to as “pay or play”.

2A Safe Harbor – Qualified Offer

The safest and most expensive route is to offer a fully qualified MV plan at a rate to the employee that is less than the IFPL (Individual Federal Poverty Line) safe harbored amount and is offered to no less than 95% of all employees.  This IFPL safe harbor amount is determined by multiplying the IFPL by the affordability factor, both are indexed each year so one must look these up for each year.  For 2019, the IFPL is $12,140.  The affordability factor is 9.86%.  So simple math would indicate the employee’s share of the premium must be less than $99.75 per month in 2019.  The employer would pay any remaining premium each month.  This safe harbor is referred to as a Qualified Offer and is indicated with a 2A on line 16 of the form 1095-C for the employee for all the months in the plan year.  The employer who uses this safe harbor is not required to complete line 15 (the employee cost) and the employer may also choose to use an alternative form when communicating with the employee.  Otherwise this safe harbor is exactly the same as 2G safe harbor described below.

2B Safe Harbor – Not Full Time

Another method of safe harboring an employee for a given month is to ensure that the employee is not full time by reducing their hours below 30 hours per week such that they do not qualify as full time using one of the two measurement methods described above.  Given an employee is not full time in a given month then this would be indicated on the 1095-C as a 2B on line 16.

2C Safe Harbor – Employee Enrolled

If for any reason the employee is offered coverage and is enrolled in at least MEC coverage then the employer is safe harbored for that month and would indicate a 2C on line 16.  The interesting part of this safe harbor is it does not take in to account affordability or if the coverage was qualified as MV, it only needs to be MEC.  Therefore if an employer enrolls an employee then they are safe harbored regardless of cost or MV requirements and may use a 2C on line 16.

2D Safe Harbor – Non-Assessed

The safe harbor code 2D would be applied during any month the employee was in a non-assessed month.  There are 5 situations where this may apply.

  1. If an employee is a new full time hire, then they are non-assessed for the first three full calendar months and the first partial month if it was not a full month as long as they are offered coverage effective by the first day of the fourth full month after hire.
  2. If an employee is hired into a non-full time position and the employer is using the look back method then the employee would be non-assessed during the initial measurement period and the associated administrative period that follows as long as the total period of the non-assessed months is less than 14 full calendar months.
  3. An employee who is in the initial measurement period, but is promoted to a full time position during the initial measurement period would continue to be non-assessed but must be offered coverage within the normal waiting period and the end result must be no longer than they would normally have been offered coverage they were to fully complete the initial measurement period without the promotion.
  4. If using the monthly method to determine full time status, then the employee is also non-assessed for the first full month they measured 130 plus hours and the next two full months.  The total is three full months non-assessed including the month that triggered the event.  This also requires an offer effective by the first day of the month following.
  5. If an employer is a new ALE for the current calendar year (they were not an ALE in the previous year), then all full time employees are non-assessed until April 1st as long as they are offered coverage beginning on April 1st.

2E Safe Harbor – Multi-employer Agreement

In the event a workforce is engaged in a multi-employer collective bargaining agreement and the employers in the agreement are required to contribute to a welfare fund which provides affordable MV coverage to the employee and their dependents, then the employers would indicate a 2E for the months applicable on line 16 of the 1095-C.

2F, 2G & 2H Safe Harbors – Affordability

The next three safe harbors are 2F, 2G and 2H.  These are affordability safe harbors and they do not necessarily indicate the premiums are actually affordable to the individual, specifically.  The employer really has no way of knowing what is actually affordable in any given employee’s finances.  So the IRS provides 3 ways to safe harbor the employer, regardless of the actual affordability to the employee.  The coverage must be MV and meet one of the three conditions below.

  • 2F indicates the monthly premium is less than 9.86% of the employees w-2 box 1 wage divided by the number of months worked.
  • 2G indicates the monthly premium is less than 9.86% of the federal poverty line ($12,140) divided by 12
  • 2H indicates the monthly premium is less than 9.86% of the employee’s hour wage times 130 hours (30 hours per week)

No Safe Harbor Applies

If none of the safe harbors mentioned above (2A-2H) apply then the employer is not safe harbored for the employee for that month and the box on line 16 is left blank.

If the box is left blank for more than 5 FT employees and also more than 5% of the all FT employees for any given month and just one full time employee receives a premium assistance subsidy, then the employer would be assessed the 4980H(a) penalty.  The tax assessed is $193.33 times the number of total FT employees minus 30 employees for the month indicated.

If the employer is not eligible for the 4980H(a) penalty but the box on line 16 is still blank and the employee with the blank month receives a premium assistance subsidy in that same month, then the employer would be taxed $290 for that employee for that month.

IRS Letters are going out in Waves

The IRS has taken some time to crunch all the data they have received from 2015 and then resolve which employers owe taxes.  The first assessments just began to roll out in Q4 of 2017 for the tax year 2015.  The letters are going out in rounds, with the first round assessing penalties on employers suspected of being an ALE, but not filing a return for 2015.  The penalty for this is $50 per employee-not-filed up to $512 per employee-not-filed depending on how quickly the employer corrects the error and if the IRS feels it was willful neglect.

The second round of letters went out for ALE’s who filed as required, but indicated on the form that they did not meet the 4980H(a) requirement of offering MEC to at least 70% (2015 percentage required).  These assessed amounts are usually quite large and this is referred in ACA circles as the “sledgehammer” penalty.  Many employers actually indicated that they offered MEC, but due to a glitch in the IRS software, the IRS did not register the indicator properly.  This is quickly solved by resubmitting a corrected 1094-C.

The third round of letters went out for ALE’s who filed as required, and also offered MEC coverage as required by 4980H(a), but some or all employees still received a subsidy and the employer was not safe harbored (line 16 is blank) for the same months.  The letter assesses  a tax for 4980H(b).

The fourth round of letters have now started and are penalizing employers who the IRS feels are ALE in 2016, but did not file a 1095-C in 2016.  You can see the pattern here and the next rounds are for 4980H(a), 2016… 4980H(b), 2016…

In conclusion

This is a lengthy article to read and it is because it is a complicated issue.  The ACA requires a great deal of record keeping, integration of data from multiple sources and a strong knowledge of all the rules to properly safe harbor your company.  Of all the compliance laws, this one is truly one you will want to seek help on.


HR Compliance 101: Charlie the Tuna and the Fair Labor Standards Act (FLSA)

When the FLSA was enacted it’s intention was to provide minimum standards for employees in the U.S. and it’s territories.  One such territory is American Samoa. American Samoa is famous for two things it produces NFL football players and canned Tuna.  It is also an interesting micro-economy that was greatly effected by minimum wage laws.

As the story goes, in 2007 the U.S. passed changes to the FLSA requiring U.S. employers to pay their employees $5.85/hour, but there was an exception made for American Samoa tuna workers which kept their minimum wage at $3.55/hr.  The reason for this is that the island’s tuna canning industry paid a wage that was good when compared to the surrounding island economies, but obviously well below the U.S. standard $5.85.  An increase of this proportion would make the canning operations on American Samoa comparatively too expensive and could drive this industry out.  The non-voting congressional representative from American Samoa had a study performed by the U.S. DOL which stated that increasing the minimum wage to $5.85 in American Samoa would be the same effect as increasing the minimum wage in the main land to $16.50/hr.  The report went on to state that there is concern the increase would cause tuna canneries to close and production would likely be moved outside the U.S.  You can reference the study here.

Despite the study’s warning, in 2009, the U.S. Congress voted to remove the exemption with scheduled increases to take place every few years in $0.40 increments.  In 2009, the minimum wage was increased to $4.36 in American Samoa.  Two years later, Chicken of the Sea closed it’s cannery and moved it’s production.  Sunkist and others have tried to keep the industry going over the past 9 years, as the minimum wage was again increased in 2012 to $4.76 and again in 2015 to $5.16.  The next scheduled increase is in September of 2018.  Currently, there are less than a couple hundred cannery jobs in American Samoa and these are just skeleton crews to maintain the properties and to operate refrigeration units for tuna canneries in  These increases seem like small changes based on our mainland U.S. economy, but it has wreaked havoc in American Samoa’s economy with tuna job losses making up to 45.6% of the total jobs in American Samoa.  It has also had the effect of increasing the cost of living for all citizens of the island.  Ships who before carried tuna off the island are now nearly empty and as such the cost to ship to the island has went up significantly which has increased the cost of all imports.

Minimum Wage

As an employer one of our most important priorities is to properly pay our employees.  This is actually the reason our employee/employer relationship exists.  The employee agrees to work for a period of time for the employer’s interest and the employer agrees to pay the employee.  If either side fails this agreement the relationship will sour and end quickly after. The Fair Labor Labor Standards Act (FLSA) requires employers to meet certain minimum standards when paying employees.  Employers who ignore it will expect a visit from the Department of Labor (DOL) in a short time.

The FLSA is administered by the Wage and Hour Division (WHD) of the DOL.  It establishes a national Minimum Wage, rules for Overtime, defines Hours Worked, requires Recordkeeping and rules for Child Labor.  These rules apply in the private sector as well in Federal, State and local governments.  As with many government regulations there are exceptions and exemptions, so it is good to know when these may be applied as well.

The FLSA has been challenged as unconstitutional in United States v. Darby Lumber Co, 1941 stating the federal government does not have the right to regulate wages in businesses local to one State.  But, the FLSA was upheld by the Supreme Court as constitutional under the Commerce Clause, stating that the U.S. Congress has  the power to regulate employment conditions in both interstate and intrastate operations.

When the FLSA Applies

With that said, the FLSA still does not apply to all businesses.  Basically the FLSA applies to your business if you employee at least two people and you are an “Enterprise” with an annual dollar volume of $500,000 or if your business provides medical or nursing care for residents, schools/preschools or is a government agency.  The odd thing from the previous sentence is that although any school or preschool must pay a minimum wage, the teachers themselves are exempt from this law.  There is no minimum wage for teachers under the FLSA.  You can reference this exemption here.

Otherwise, the FLSA only applies to individual employees who engage regularly in Interstate Commerce.  Examples of employees who are involved in interstate commerce include those who: produce goods (such as a worker assembling components in a factory or a secretary typing letters in an office) that will be sent out of state, regularly make telephone calls to persons located in other States, handle records of interstate transactions, travel to other States on their jobs, and do janitorial work in buildings where goods are produced for shipment outside the State.

If you do not, as a company, have a dollar volume of $500,000 and you do not have employees engaged in Interstate Commerce, then the FLSA does not apply to your employees.  But then, you still have to consider State and local laws as well.  For example in North Carolina, there is a State minimum wage as well as a Federal.  The correct amount is which ever is larger of the two.  Some states do not have a minimum, for example South Carolina does not.  In South Carolina the FLSA is the only minimum wage law referenced.  Some cities even have minimum wage laws, such as San Francisco where the minimum wage is currently $15/hr.

There are also employees who are exempt from the FLSA minimum wage requirement.

The following are examples of employees exempt from both the minimum wage and overtime pay requirements:

  • Executive, administrative, and professional employees (including teachers and academic administrative personnel in elementary and secondary schools), outside sales employees, and certain skilled computer professionals (as defined in the Department of Labor’s regulations)
  • Employees of certain seasonal amusement or recreational establishments
  • Employees of certain small newspapers and switchboard operators of small telephone companies
  • Seamen employed on foreign vessels
  • Employees engaged in fishing operations
  • Employees engaged in newspaper delivery
  • Farm workers employed on small farms (i.e., those that used less than 500 “man days” of farm labor in any calendar quarter of the preceding calendar year)
  • Casual babysitters
  • Persons employed solely by the individual receiving services (not an agency, non-profit, or other third party employer) primarily providing fellowship and protection (companionship services) to seniors and/or individuals with injuries, illnesses, or disabilities

The current minimum wage is $7.25/hour (except in American Samoa) and has been the same since July 24th, 2009.  This is the national minimum, but your local state, county or city may increase this through local laws, so it is important to know what the minimum is in your location.  Some jurisdictions in California have more than doubled this to $15/hour in a few locations.  If there are no local or State regulations, the FLSA applies at the Federal level.  This is actually the case in most of the U.S.

An interesting concept when considering minimum wage, is one of Cash Wages.  In some scenarios, an employee may make some portion of their wages from the employer and some other portion of their wages from other sources such as, in the case of a waiter or waitress, tips.  Minimum cash wages refer to the employer’s portion of the wages  the employee must receive.  The minimum wage is still $7.25, but the employer is only required to pay $2.13/hour with the other wages ($5.12/hr) expected to come from tips.  The employee is still required to be compensated at $7.25, so if the tips fall short the employer must pay more than $2.13 to make up the difference so the employee realizes the full $7.25/hr in earnings.

Another “piece” to consider is when when employee’s are compensated in ways other than by the hour.  Employees may be paid by the piece or by the mile as long as the rate being paid is compliant to the minimum wage they would make in the same amount of time using hourly  compensation.  For example, an employee paid $1 per piece would need to work at a rate of at least 7.25 pieces per hour or the the employer would have to make up the difference for slow production work.


‘I wish you could do something to help us girls… We have been working in a sewing factory… and up to a few months ago we were getting our minimum pay of $11 a week…. Today the 200 of us girls have been cut down to $4 and $5 and $6 a week.’   This note was passed to President Roosevelt while he was campaigning and he later commented to a reporter, ‘something has to be done about the elimination of child labor and long hours in starvation wages.’  Seventy years later it is still the law of the land and it firmly established a ‘living wage’ which has been changed nearly 30 times since it was enacted in 1938.



HR Compliance 101: Know the Rules

The IRS Office suspected a fishing boat owner wasn’t paying proper wages to his deckhand and sent an agent to investigate.
IRS Auditor: “I need a list of your employees and how much you pay them.”
Boat Owner: ” Well, there’s Sam, my deckhand, he’s been with me for several years. I pay him $1,000 a week plus free room and board.
Then there’s the crazy one… He works about 18 hours every day and does about 90% of the work around here.
He makes about $10 per week, pays his own room and board, and I buy him a case of beer every Saturday night so he can cope with life… He also gets to sleep with my wife occasionally.”
IRS Auditor: “That’s the guy I want to talk to – the crazy one.”
Boat Owner: “That would be me. What would you like to know”?

Ask many business owners about HR compliance and most will refer you to their outsourced HR service or their internal HR director/manager down the hall.  Although this is a common practice, owners and corporate chiefs should also know that ultimately this is actually their responsibility and pointing down the hall or hiring a third party wont serve as an excuse when violations happen or pay judgments, penalties or fees when assessed.  As business owners and leaders, we need to know and have a basic understanding of the rules.

Compliance regulations which employers should have a general understanding include the following laws and associated regulations.

  • FLSA The Fair Labor Standard Act of 1938 established a minimum wage, overtime rules, record keeping requirements and youth employment standards.
  • Title VII of the Civil Rights Act of 1964 is a federal law that prohibits employers from discriminating against employees on the basis of sex, race, color, national origin, and religion. It generally applies to employers with 15 or more employees, including federal, state, and local governments.
  • PPACA Patient Protection and Affordable Care Act ‘s employer shared responsibility provision of the Affordable Care Act penalizes employers who either do not offer coverage or do not offer coverage that meets minimum value and affordability standards. These penalties apply to firms with 50 or more full-time equivalent employees.
  • ERISA The Employee Retirement Income Security Act’s purpose is to protect the interests of employees (and their beneficiaries) who are enrolled in employee benefit plans, and to ensure that employees receive the pensions and group-sponsored welfare benefits that have been promised by their employers.
  • FMLA The Family Medical Leave Act of 1993 is a federal law that guarantees certain employees up to 12 workweeks of unpaid leave each year with no threat of job loss. It also requires that employers covered by the law maintain the health benefits for eligible workers just as if they were working.
  • COBRA The Consolidated Omnibus Budget Reconciliation Act generally requires that group health plans sponsored by employers with 20 or more employees in the prior year offer employees and their families the opportunity for a temporary extension of health coverage (called continuation coverage) in certain instances where coverage under the plan would otherwise end.

In addition to Federal compliance concerns, many states, counties and cities are test beds for new employer regulations where smaller governmental legislatures pass increased employee protections and minimums.  For example minimum wages in some California cities are currently set as high as $15/hour which is more than double the federal minimum wage of $7.25.  Some local governments even require additional wages over 8 hours in a given day or increased wages on Saturday and Sunday.  More than 40 cities and counties now have minimum wage rules that exceed the federal minimum requirement.

State and local jurisdictions have also started to pay attention to rules and regulations as a form of union substitution.  For example, there are new local  laws in some cities protecting an employees right to discuss their wages with their peers.  This is noteworthy as this same law is having the effect of preventing employers from asking job applicants about their wage history during the application or job interview process.   Some jurisdictions have even become involved in paid sick leave regulations and other benefits and now require employers to provide benefits beyond the paycheck.  These regulations often increase the burden to track and record employee data which was not required in years past.

And in addition to federal, state, county and city regulations, some employers impose a form of regulatory responsibility on themselves through internal policies.  If a company’s internal  policy is not applied fairly and equally applied across all employees, the employer opens themselves up to civil judgments from employees who were not treated the same as others in the same situation and as a result were financially effected.

Compliance is not a one and done project, it is an ongoing effort.  An employer’s ability to answer compliance questions today does not guarantee that the organization will be in compliance next month.  New and changing regulations can cause mistakes, but so can changes in HR management staff with tribal knowledge and who have been administering compliance from spreadsheets, manual processes and/or  unconnected data systems.   Data must be kept in a reliable system capable of providing forensic data for audits purposes and defending compliance issues when needed.

In this series of articles, HR Compliance 101, we will look at some of these laws in a little more detail.  We will discuss, what questions to ask and where to look for state and local regulation concerns.  We will also look at information systems and best practices that will help you establish a clear compliance audit trail, which should be the basis on which any HR system is built.  And finally, we will look at workflows and procedures to ensure that your company’s policies and procedures are applied consistently and fairly across your organization.


Supreme Court Rules in Favor of Employment Arbitration Agreements Which Forbid Class Actions

On May 21st, 2018 the Supreme Court of the United States ruled in a 5-4 decision to uphold employment contract provisions that require employees to honor arbitration agreements to settle disputes as individuals rather than as a class. This is important as these arbitration agreements are also required in many cases as a condition of employment. Basically, as a condition of employment an employee agrees to waive their option of suing the employer in court as an individual or as part of a class. Given others are willing to accept the employment if one is not, then the arbitration is basically a take it or leave employment option. Much like credit card agreements or EULA agreements, you basically agree by accepting the employment.

Many times, employees often have disputes that result in low dollar amounts. In many of these cases it would be difficult to find an attorney who would be interested in taking a case which would result in a very low award. Before the Supreme Court ruling and absent an arbitration agreement, employees could work together in a class given it is found that the employer has wronged many employees and as such the attorney could represent many similar small claims as one class which may result in a bigger collective award.

In 2012, an appellate court decided that forbidding a legal class action violated the National Labor Relations Act which protects employees rights to collectively participate in “concerted activity”. The 6th, 7th and 9th circuits began to find that restricting class actions violates the NRLA (National Labor Relations Act) and are unenforceable under the Federal Arbitration Act. This decision was in dispute as other appellate courts in the 2nd, 5th and 8th Circuits continued to uphold the legality of employers to require their employees to waive the right to class actions by requiring arbitration agreements as a condition of employment.

In April 2014, Epic Systems emailed it’s employees that all employee claims would now be subject to individual arbitration. Not wanting to find another job employees consented by choosing to remain on the job. An employee later tried to file suit in a collective action and was stopped due to the arbitration agreement at Epic Systems. This decision was appealed all the way to the Supreme Court who upheld that the employees were bound by the arbitration agreement. This Supreme Court decision makes it clear that the NRLA does not protect employees in legal actions as it does in other collective activities which are protected by the NRLA.

This decision will not likely cause many employers to run out and set up arbitration agreements. Employers already considered these agreements as legal and already assumed that the Supreme Court would likely rule in their favor. As a result, employers may protect themselves from class actions by requiring, as a condition of employment, that all disputes be settled in arbitration. Disputes such as wage and hours, age discrimination, sexual discrimination… are limited to one-by-one arbitration cases.

Arbitration basically limits the parties involved to the arbitrator, the employee and the employer. The results and findings are typically required to be confidential and as such the employer is protected from bad publicity as well.

The pro’s of arbitration for the employer include:

  • Informal Procedings
  • Faster and less expensive
  • More confidentiality
  • More fact based outcomes rather than emotional jury type outcomes

The con’s of arbitration include:

  • Inability to appeal
  • Less discovery
  • Job candidates may choose not to work for employers who make such agreements required

Employers may find that arbitration is a viable solution in resolving employee disputes. They need to be mindful that the arbitration agreements do not restrict the rights of employees to bring up concerns or to be made whole if the employer is found at fault. Employers must also be sure that there are no concerns of duress due to enrollment related circumstances which would cause an employee to lose benefits if they do not agree. If done properly the agreements should be fair and benefit both sides by preventing issues from being dragged through the legal system and possibly taking years to resolve.

There may also be further legal disputes related to this decision by the Supreme Court. As a result of the #MeToo movement states have either recently enacted or have pending legislation forbidding mandatory arbitration in cases of sexual harassment. These new laws may be challenged on the grounds that they are preempted by the Federal Arbitration Act given this weeks decision by the Supreme Court.