Changing Compliance Obligations for Employers Continue into 2021

The Legal Intelligencer

(by Molly Meacham)

Even in ordinary times, keeping up with an ever-changing employment law landscape is a compliance challenge for businesses.  The extraordinary circumstances of the COVID-19 pandemic sparked unprecedented compliance challenges for employers, including workplace safety issues, additional temporary leave requirements, and interpreting existing obligations through the lens of COVID-19.

Compliance obligations for employers are continuing to evolve in 2021.  Presidential administration change and a change in the majority party in the U.S. Senate each typically cause new and revised legislation and regulations.  Combined with the ongoing pandemic, the result is continued significant alteration to the legal and regulatory framework that will impact employers in 2021 and beyond.  These developing issues include worker classification under the Fair Labor Standards Act (FLSA), a temporary expansion of the Consolidated Omnibus Budget Reconciliation Act (COBRA) under the American Rescue Plan Act of 2021 (ARPA), and COVID-19 workplace safety issues relating to fully vaccinated employees.

FLSA Independent Contractor Rule Withdrawn

One of the most important baseline employment-related determinations a business can make is whether a worker is properly classified as an employee or an independent contractor under the FLSA.  Worker misclassification is a frequently-litigated issue that represents significant legal exposure for businesses, as damages for misclassification can include retroactive application of minimum wage and overtime requirements, the value of employee benefits that were not provided, any legally-mandated sick time, or self-employment tax paid by the worker.

In the last weeks of the Trump administration in early 2021 the Department of Labor (DOL) issued a Final Rule seeking to clarify the independent contractor test and make it easier to identify workers covered by the FLSA.  The traditional independent contractor test contains six non-exclusive factors which the DOL’s Wage and Hour Division and the federal courts evaluate on a case-by-case basis to determine whether a worker is, as a matter of economic reality, dependent on the employer for work or in business for themselves, with no single factor considered dispositive.  The Rule’s new test elevated two of those factors to “core factors” intended to carry the most weight in the analysis: (1) the nature and degree of control over the individual’s work, and (2) the worker’s opportunity to earn profits or incur losses based upon their contributions.  Only if those factors were inconclusive were other traditional factors to be considered, in particular the worker’s level of skill or expertise, the permanency of the relationship, and whether the workers are an integral part of the business.

Two months into the Biden administration, in March 2021 the DOL delayed the Final Rule’s implementation and proposed its withdrawal, which was finalized on May 6, 2021.  See 86 FR 24305-6.  The DOL received multiple comments both in favor of and opposed to withdrawing the Rule, and decided to withdraw the Rule on the basis that it is “inconsistent with the FLSA’s text and purpose,” and would depart “from longstanding judicial precedent.”  Id. at 24307.  The DOL also disagreed with the Rule’s elevation of two core factors over other potential factors, which it believed could cause confusion and disruption for businesses and workers and lead to inconsistent outcomes.  Id. at 24308.  The DOL stated that it does not currently intend to propose or issue replacement regulatory guidance.  As the Rule never actually took effect, following its withdrawal, businesses should not alter their analysis of independent contractor issues based upon the “core factors” approach of the Rule.  Instead, businesses should continue to be guided by the application of existing judicial precedent, regulations and Wage and Hour Division guidance to their specific facts and circumstances.

COBRA Extension and Premium Assistance

Several laws have been passed to provide temporary relief relating to the economic impacts to businesses and individuals caused by COVID-19, including the ARPA.  The ARPA included an extended period to elect COBRA coverage and a period of COBRA premium assistance, each for qualifying individuals.  There are several aspects to qualification, but an individual may qualify if their employment was involuntarily terminated (except for gross misconduct) or their hours were involuntarily reduced.  Eligible individuals must be notified of both the election extension and premium assistance.

For qualifying individuals first eligible for COBRA coverage on or after November 1, 2019, the ARPA allows a second extension period during which to elect COBRA coverage, beginning on April 1, 2021 and ending 60 days after a special election notice was provided to the qualifying individual.  The special election notice was required to be provided to eligible individuals by May 31, 2021.  The ARPA only extends the time to elect coverage and does not extend the COBRA coverage period, which is typically 18 months.

The ARPA also provides COBRA premium assistance for eligible individuals from April 1, 2021 through October 31, 2021. Employers are required to provide the premium assistance to eligible individuals, and then claim a tax credit for reimbursement.  Standard COBRA notices should be updated for this period to provide information about premium assistance, and eligible individuals must also be notified when their premium assistance will expire.  Again, this premium assistance does not extend the COBRA coverage period.

Businesses should coordinate with their group health plan administrators to identify which individuals are eligible for extended COBRA coverage and premium assistance, and to ensure their COBRA notices to eligible individuals are compliant during these temporary ARPA changes.  The DOL has issued model revised notices on its website, including a temporary update to the standard COBRA election notice for use through October 31, 2021.

OSHA, the CDC and Vaccinated Workers

In its existing guidance related to the COVID-19 pandemic posted in January 2021, the Occupational Safety and Health Administration (OSHA) expressly recommended that employers maintain the same protective measures for both vaccinated and unvaccinated employees.  That guidance is advisory only, and that same month President Joseph R. Biden Jr. issued an executive order directing OSHA to revise its guidance on COVID-19, including considering an emergency temporary standard to provide OSHA-enforceable workplace safety rules on COVID-19.

OSHA’s emergency temporary standard related to COVID-19 was drafted but not yet finalized or publicized in May 2021 when the Centers for Disease Control and Prevention (CDC) updated their recommendations to allow people who are fully vaccinated to cease wearing a mask or physically distancing except as where required by federal, state, local, tribal, or territorial laws, rules, and regulations, including local business and workplace guidance.  Although an emergency temporary standard relating to COVID-19 is still expected at some point, its release has been delayed while OSHA reviews the new CDC guidance.  In the interim, the only guidance OSHA has provided to employers is that employers should refer to CDC guidance for information on measures appropriate to protect fully vaccinated workers.

CDC guidelines continue to evolve, and it is uncertain whether OSHA will wholly adopt CDC guidelines or place additional requirements on employers.  Before making changes to workplace COVID-19 safety measures employers should consider any relevant state, local or other restrictions, remembering that those restrictions set a minimum standard that must be met.  In addition, employers should evaluate how the CDC’s guidelines and the unique circumstances of their workplaces interact with OSHA’s General Duty Clause, which requires employers to provide their workers with a workplace free from recognized hazards that are causing or likely to cause death or serious harm.  OSHA’s silence to date on a COVID-19 emergency temporary standard is not likely to go on indefinitely, and employers should remain prepared to implement updated safety measures in the coming months.

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Reprinted with permission from the June 3, 2021 edition of The Legal Intelligencer© 2021 ALM Media Properties, LLC. All rights reserved.