Compliance Memos: July 2017

DMEC Staff@Work

Compliance Memos_July 2017By John C. Garner, CEBS, CLU, CFCI, CMC

Chief Compliance Officer
Bolton & Co.

Supreme Court Expands Reach of ERISA Exemption

In June, the Supreme Court overturned three lower-court rulings that church-affiliated hospitals were subject to the Employee Retirement Income Security Act (ERISA). ERISA obligates private employers offering benefit plans to adhere to an array of rules related to reporting, disclosure, and fiduciary responsibility.

The Supreme Court unanimously ruled that a plan maintained by a “principal-purpose organization” (controlled by or associated with a church) qualifies as a church plan, regardless of who established it, and is therefore exempt from complying with ERISA. The case is Advocate Health Care Network et al., v. Stapleton et al.

Justice Sotomayor wrote a concurring opinion in which she noted that church-affiliated hospitals are some of the largest healthcare providers in the country, operate for-profit subsidiaries, and compete in the market with hospitals that must comply with ERISA. Congress may note these concerns and act to narrow the definition, but for now, church-affiliated organizations should be safe in claiming ERISA pre-emption. This ruling might also apply to church-affiliated schools.

State and Local Law Updates

Arizona. Paid Sick Leave began on July 1; paid sick time must be carried over to the following year, subject to usage limitations based on employer size. Non-Arizona employees are not included in total employee count. New York. Paid Family Leave: The NY Department of Financial Services has issued its regulations for the NY PFL, providing payroll deduction rates for employers. The program began funding on July 1 and begins paying benefits on Jan. 1, 2018. Pennsylvania. Pittsburgh Paid Sick Days: The City has announced it will appeal a recent court decision that the City did not have the authority under state law to enact its Paid Sick Days Ordinance.

California. Day of Rest: In Mendoza v. Nordstrom, California’s Supreme Court held that employees who are fully notified of their rights may voluntarily forego the legally required day of rest. Minimum Wage: Several jurisdictions increased their minimum wage on July 1, including: Emeryville, Los Angeles (City and County), Pasadena, Sacramento, San Francisco, and San Leandro. San Francisco Paid Parental Leave: New FAQs clarify that to receive the City benefits, employees must also apply for the California Paid Family Leave benefits. To learn more about any of these state and local laws, visit http://dmec.org/2017/06/02/june-2017-state-and-local-law-update/.

10th Circuit: FMLA Notice Requirements Reduced in Some Cases

In Branham v. Delta Airlines, the 10th Circuit Appeals Court found that Delta successfully proved the plaintiff was dismissed for reasons unrelated to any Family and Medical Leave Act (FMLA) entitlement. The case had two employer-friendly findings: the more an employee exercises FMLA rights, the more she is expected to know those rights, so notice requirements will be enforced less strictly on the employer; and, an employee on a final warning who violates a notice-of-absence policy cannot use the FMLA to avoid discipline. This gives employers some cover in regard to FMLA notices inside the10th Circuit, but employers may be able to avoid litigation altogether if they comply with all the notice requirements. To learn more about this case, visit http://dmec.org/2017/05/25/10th-circuit-holds-employee-fmla-experience-high-standard/.