Employers, Watch Out: ACA-Related Retaliation Claims Are Coming
Since the passage of the Affordable Care Act (ACA) in 2010, employers have grappled with the law’s web of rules and requirements. By now, most are familiar with the Act’s “play or pay” mandate, which requires certain employers to offer minimum essential coverage that is affordable and provides minimum value to a sufficient number of full-time employees (and their dependents) or pay penalties. However, many employers are not as familiar with the Act’s related whistleblower protections—an additional source of risk for the unwary.This article briefly summarizes the ACA’s employer mandate and highlights the anti-retaliation provisions applicable to complaints of ACA violations. Next, this article summarizes the “Break Time for Nursing Mothers” law added to the Fair Labor Standards Act (FLSA) by the ACA and highlights the anti-retaliation provision applicable to this law. Last, this article suggests ways for employers to reduce the risk of employee retaliation claims.
The ACA’s “Play or Pay” Mandate
Under the ACA’s complex “play or pay” mandate, two types of penalties may be imposed on noncompliant employers. The Act’s anti-retaliation provisions are designed in part to protect employees whose actions may trigger such penalties for their employers.As of January 1, 2015, employers with 100 or more full-time employees, including full-time equivalents, were required to offer compliant health insurance coverage to 70% (95% in 2016) of their full-time employees (and dependents) in order to avoid a “no-coverage penalty.” If an employer fails to do so and any full-time employee purchases health insurance on an exchange and receives a subsidy or tax credit, the IRS may assess a penalty of $2,000 per year per full-time employee. To calculate the penalty, the first 30 full-time employees are not included. (For 2015, the first 80 full-time employees are not included in this calculation.)
Further, if an employer offers coverage to enough full-time employees but the coverage is unaffordable or does not provide minimum value, a penalty may be imposed of $3,000 per year for each full-time employee who receives a tax credit or subsidy for coverage purchased through an exchange.
As of 2016, the Act’s “play or pay” mandate will also apply to employers with at least 50, but less than 100, full-time employees, including full-time equivalents.
Section 218c Retaliation Claims
One source of ACA whistleblower protection is Section 218c of the FLSA, as added by the ACA. Section 218c prohibits employers from retaliating against employees who receive a tax credit or subsidy for purchasing health insurance through an exchange. According to the Department of Labor, because an employee’s receipt of subsidized coverage may trigger tax penalties for his employer, this could create an incentive for employer retaliation. Therefore, Section 218c is designed to protect whistleblowing employees from such retaliation.Section 218c’s broad provisions include protections for whistleblowing employees who report (or are about to report) violations of title I of the ACA to their employers or the federal government. (Title I includes various insurance reforms such as the prohibition on lifetime limits for coverage, the requirement that most plans must cover preventive services with no cost sharing, and protections allowing individuals with pre-existing conditions to obtain coverage.) Significantly, even if there was no actual ACA violation, the employee may still be protected under Section 218c if he has a reasonable, though mistaken, belief that there was a violation.
Similar to other anti-retaliation provisions, Section 218c also prohibits retaliation against employees who testify (or are about to testify) or participate (or are about to participate) in a proceeding concerning such violation. Further, Section 218c covers employees who object to or refuse to participate in any activity, policy, or practice the employee reasonably believes violates title I of the ACA.
According to guidance issued by the Department of Labor on February 27, 2013, prohibited types of retaliation include termination, intimidation, threats, blacklisting, and discipline with respect to the employee’s compensation, terms, conditions, or privileges of employment. In addition to current employees, the law also prohibits retaliation against former employees and applicants for employment.
Section 218c stacks the deck against employers in several other ways. For example, an employee must only show that his protected activity was a “contributing factor,” as opposed to the only reason, for the adverse employment action taken against him. According to the Department of Labor, this means that the protected activity, alone or in combination with other factors, in some way affected the employer’s decision. Moreover, the law grants employees a low burden of proof to establish that the protected activity was a contributing factor to the adverse action but demands that employers meet a much higher burden to defend against such claims, making it easier for employees to prevail.
The law also provides generous remedies to prevailing employees, including reinstatement to the employee’s former position, back pay, compensatory damages, and costs and expenses, including attorney’s and expert witness fees.
In its February 2013 guidance, the Department of Labor explained the administrative and judicial processes that govern Section 218c retaliation claims. First, an employee must file a complaint with OSHA within 180 days of the alleged violation. OSHA then notifies the employer of the filing of the complaint, as well as the complaint’s allegations, and the employer may respond within 20 days. Employers should take note of this quick deadline, as the guidance makes no mention of extending this 20-day response period.
If the employee establishes a plausible argument that his protected activity was a contributing factor to the adverse employment action, OSHA may investigate. For the employee to establish a prima facie case of unlawful retaliation, he must show that he engaged in protected activity, that his employer knew or suspected that he engaged in protected activity, that he suffered an adverse employment action, and that his protected activity was a contributing factor in the employer’s decision to take the adverse action. For example, an employee may be able to meet this burden by showing that the adverse action occurred shortly after his protected activity.
If the employee fails to establish a prima facie case, OSHA must dismiss the complaint. Even if the employee has a plausible argument that retaliation occurred, OSHA still must dismiss the complaint if the employer sufficiently proves it would have taken the same adverse action regardless of the employee’s protected activity. However, the employer’s burden of proof to show this by “clear and convincing evidence” is very onerous, making it difficult for employers to defeat such claims. If OSHA decides to dismiss the complaint without investigation or without complete investigation, the agency’s decision is not subject to review.
OSHA has 60 days from the complaint’s filing to investigate and issue written findings as to whether it believes actionable retaliation occurred. If the agency determines that retaliation occurred, it may order the remedies described above, including immediate reinstatement (barring exceptional circumstances). According to the Department of Labor, a preliminary order of reinstatement may be delayed only if the employer satisfies a burdensome test by showing, among other things, that such reinstatement would cause irreparable injury.
The parties have 30 days from receipt of OSHA’s findings and preliminary order to file objections and request a hearing before an administrative law judge (ALJ). If neither party objects, OSHA’s findings and preliminary order become final and are not subject to review by a court.
If either party requests a hearing before an ALJ, the case must be heard “expeditiously.” Within 14 days of the ALJ’s decision either to deny the complaint or grant relief, the parties may request review of the ALJ’s decision before the Department of Labor’s Administrative Review Board (ARB). If the parties fail to request such review or the ARB denies the request, the ALJ’s decision becomes final. The ALJ’s decision is not reviewable by a court if the parties fail to timely request review by the ARB.
If the ARB accepts the case for review, it may dismiss the complaint or order relief within 120 days of the hearing. The parties have 60 days from the issuance of the ALJ or ARB’s final order to file an appeal with the appropriate United States Court of Appeals.
Under certain circumstances, an employee may withdraw its complaint from the administrative process and seek review by a federal district court. The law allows an employee to seek such review if (1) OSHA fails to issue a final decision within 210 days of the complaint’s filing or (2) no final decision has been issued and the employee files the complaint in federal court within 90 days of receiving OSHA’s written findings following its investigation.
Section 215(a)(3) Retaliation Claims by Nursing Mothers
Among other changes made by the healthcare law, the ACA also added Section 207(r) to the FLSA. The “Break Time for Nursing Mothers” law generally requires employers to provide breaks, typically unpaid, for nursing mothers to express breast milk in a private location other than a bathroom. The provision requires employers to allow such breaks for up to a year following the birth of the child. However, the law provides an exemption for employers with less than 50 employees if the breastfeeding requirements would impose an undue hardship by causing significant difficulty or expense, taking into consideration factors such as the employer’s size and financial resources and the nature of the business.The “Break Time for Nursing Mothers” law does not appear to allow an employee to sue in court for non-compliance with the law. Rather, it appears that employees alleging violations of the law are limited to filing complaints directly with the Department of Labor’s Wage and Hour Division.
However, retaliation claims related to the “Break Time for Nursing Mothers” law are handled differently than claims alleging direct violations of the law. Both the Department of Labor and at least one court have indicated that an employee may sue in court under Section 215(a)(3) of the FLSA for retaliation related to complaints that her employer violated the law. Salz v. Casey's Mktg. Co., No. 11-CV-3055-DEO, 2012 WL 2952998 (N.D. Iowa July 19, 2012). Section 215(a)(3), which existed long before the ACA, is the FLSA’s anti-retaliation provision that prohibits retaliation against employees who assert their FLSA rights.
In Salz v. Casey's Marketing Company, the court concluded that the plaintiff could not sue her employer for a direct violation of the nursing mothers’ law, but she could sue for retaliation in relation to complaints about her employer’s breastfeeding policy, including complaints about a video camera in the office where she expressed milk. (A more recent case also addresses this issue and cites Salz, but the decision appears to include a typographical error leading to ambiguity. See Ball v. Ohio Ambulance Sols., LLC, No. 1:14 CV 355, 2015 WL 5165451 (N.D. Ohio Aug. 28, 2015)).
Unlike Section 218c retaliation claims, an employee alleging retaliation in connection with the nursing mothers’ law is not required to first pursue administrative remedies with OSHA. Rather, according to Department of Labor guidance issued in December 2010, she may choose either to file a retaliation complaint with the Department’s Wage and Hour Division (which does not entail the same administrative process described above applicable to Section 218c claims) or sue in court.
It is significant that Section 215(a)(3), not Section 218c, applies to retaliation claims by nursing mothers, because different legal frameworks and burdens apply to Section 218c and Section 215(a)(3) claims. Generally, the standards applicable to Section 215(a)(3) claims are more favorable to employers, and therefore such claims are presumably easier to defeat. Initially, to rebut a Section 215(a)(3) retaliation claim, an employer must only articulate a legitimate, non-discriminatory reason for the adverse employment action. This is generally easier for employers to demonstrate compared to Section 218c’s requirement that an employer show by “clear and convincing evidence” that unlawful retaliation did not occur.
Minimizing Risk
So what can employers do to minimize risk?To avoid ACA “play or pay” penalties in the first instance, employers who are subject to the Act’s employer mandate should make sure to offer compliant health coverage to a sufficient number of their employees (and their dependents). This complex analysis includes a variety of issues, including determining whether the employer is part of a “controlled group” and correctly counting the number of full-time employees. Further, this analysis overlaps with a related area of wage and hour law currently under intense scrutiny by the Department of Labor—the proper classification of workers as either employees or independent contractors. Employers who improperly classify employees as independent contractors are at increased risk for penalties under the ACA.
Further, employers should revise their policies to include protections for ACA whistleblowers and also train supervisors and Human Resources professionals on these issues. Employers may also choose to keep separate, confidential files for information related to an employee’s receipt of subsidized health coverage or an employee’s complaints of alleged ACA violations.
Moreover, to avoid substantive violations of the “Break Time for Nursing Mothers” law, employers should revise their policies and procedures to provide breaks as may be required by the law. To minimize the risk of retaliation claims by nursing mothers, employers should take similar measures to train supervisors and Human Resources professionals on these issues and keep separate files about employee complaints where appropriate.
Last, in the event a Section 218c or Section 215(a)(3) retaliation claim is filed, employers should immediately seek the assistance of qualified counsel and remain cognizant of the extremely short response deadline (20 days) applicable to Section 218c retaliation claims.
In light of these developments concerning complicated legal issues, employers should consult with experienced labor and employment counsel to minimize their risk of liability under the Affordable Care Act and related Fair Labor Standards Act provisions.