One aspect of the recently approved federal stimulus bill – the American Recovery and Reinvestment Act -offers eligible terminated employees a 65 percent discount on COBRA coverage.  Enacted in 1986, COBRA allows former employees to continue their health insurance coverage for up to 18 months after they are terminated.

 The issue facing business owners is that they must pay 65 percent of the COBRA premium and then file for reimbursement through a payroll tax credit.  Employees pay the other 35 percent.  This discounted rate could potentially cause a dramatic increase in COBRA election by former employees.

 To avoid substantial penalties, employers were required to mail out COBRA notices by April 18, 2009 to eligible employees who had been laid off since September 1, 2008.  This new regulation affects most companies with 20 or more employees.

Some companies are worried that the federal requirement could cause cash flow problems because of the up-to-three-month delay for reimbursement.  And cash flow problems could cause some financially strapped companies to lay off more employees, freeze or cut salaries, or eliminate some benefits.

How the new COBRA rules work:

• The federal government will provide a 65 percent subsidy for up to nine months of the COBRA premium retroactive to March 1 for certain terminated employees.
• To be entitled to the subsidy, employees must have been involuntarily terminated between September 1, 2008, and December 31, 2009, and must be eligible for COBRA.
• A special election period exists for individuals involuntarily terminated on or after last September 1 who had not elected COBRA.  They will have 60 more days after receiving the notice to elect coverage, which is retroactive to March 1 if they lost their jobs before then.
• The employer pays the 65 percent on the employee’s behalf and is then reimbursed through a payroll tax credit.  Large companies may be reimbursed either weekly or monthly, but smaller employers must file for the credit with their quarterly payroll taxes.
• The employee must pay 35 percent of COBRA before the employer can request reimbursement of the other 65 percent.  Employers that do not charge the full COBRA premium will not be entitled to reimbursement of 65 percent of the maximum COBRA premium.

 For more information, visit www.irs.gov/pub/irs-drop/n-09-27.pdf or www.dol.gov/ebsa/cobra.html

From USCIS Website
The applicability date of the final rule requiring federal contractors and subcontractors to begin using U.S. Citizenship and Immigration Services’ (USCIS) E-Verify system has been pushed back by six weeks to June 30, 2009.

The Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council (collectively known as the Federal Acquisitions Regulatory Councils) will publish an amendment in the Federal Register tomorrow postponing the applicability of the final rule until June 30, 2009. The rule requiring federal contractors and subcontractors to agree to electronically verify the employment eligibility of their employees was first published on Nov. 14, 2008, and went into effect on Jan 19, 2009.

The extension provides the Administration an adequate opportunity to review the entire rule prior to its applicability to federal contractors and subcontractors.

For more information on E-Verify, visit www.uscis.gov/everify.

Related Document at Applicability Date for E-Verify Federal Contractor Rule Extended (27KB PDF)

Staff One and our Client Companies are at-will employers in all states where applicable. This means that, in the absence of a union contract or other employment contract limiting an employer’s right to discharge or stating a specific term or duration of employment, the employer is free to hire and fire at any time for any reason – or for no reason at all. However, court decisions and new statutes in recent years have created a more complex employment situation.

Federal and state laws may limit what can be considered in making an employment decision. You cannot base an employment decision on race, sex, religion, national origin, disability, veterans’ status, filing a workers’ compensation claim, use of benefit plans, serving on a jury, etc.

Courts have also expanded potential liability for employers who discharge employees in violation of “Public Policy” reasons.  For example, if an employee accuses his employer of firing him for refusing to carry out some unlawful request or claims he was fired for reporting allegedly unlawful acts on the part of his employer, that person could be considered as a “whistleblower” and can bring a wrongful discharge lawsuit.

While employment lawsuits arise out of all sorts of circumstances, the event which causes most legal actions is a discharge or termination of employment. Therefore, we must be increasingly sensitive to what can and cannot be done in connection with a termination. The manner in which a termination is handled is critical.

Successful supervisors avoid having to discipline employees by treating them in a fair and reasonable way. Once employees understand what is expected of them, they will usually do their jobs effectively. Do not be afraid to ask for the kind of action you expect from individuals. How else will they know?

Progressive Discipline System

If discipline becomes necessary, Staff One advocates a progressive discipline system to deal with problem employees and minimize the possibility of wrongful discharge and discrimination claims.  The system basically imposes goals, timetables, and progressively greater disciplinary measures upon an employee whose performance continues to be unacceptable. The system also recognizes that certain infractions or misconduct will be sufficient for immediate discharge. It is absolutely mandatory that this system be used uniformly with all employees.

 Below are the steps to an effective progressive discipline system.

Step 1: Verbal Warning

A verbal warning is usually adequate for a first offense. Be sure to discuss the problem in private with the employee, explaining what was done wrong and what will happen if another violation occurs. Be sure to document the warning in writing, and send a record of the conversation to Staff One to be placed in the employee’s personnel file.

Step 2: Written Warning

If after receiving a verbal warning the offense is repeated, a written warning should be used.

Review the facts of the case with the employee and in the presence of another supervisor at your level or above. Tell the employee what action will be considered if another violation occurs. A limit should be set on the number of written warnings allowed before other action is taken. Make a record of the meeting, stating the facts that were reviewed with the employee and the action taken (use Staff One’s Employee Written Warning Notice). Have the employee sign the notice, after allowing him or her to enter comments. If the employee refuses to sign, have the supervisor sign the notice attesting to the employee’s refusal. Send the warning to Staff One to be placed in the employee’s personnel file.

Step 3: Suspension

A suspension without pay may be considered for employees as deemed necessary. Contact your Staff One Client Service Executive or Staff One’s Corporate HR Department for guidance.

Step 4: Discharge

Terminating an employee can present a difficult and sometimes hazardous situation. A recent nationwide survey showed that half of all companies that fired anyone had a suit or legal charge brought against them. You can help minimize this risk by considering the effects of any termination. It is always unpleasant to terminate an employee, but try to carry out the termination in a rational manner, not out of anger and never on the spur of the moment.

Call Staff One Client Services Department or your Client Service Executive before proceeding with any termination action. Together, we will discuss your plan and the reason(s) for the termination.

Many times, you may overlook the “protected activities” an employee might say are the real reasons for the termination. For instance, has the employee recently filed a workers’ compensation claim (a “protected activity”)?

Termination Meetings

This is a crucial step in the process. Terminating an employee is never easy, and the very fact that it is such an uncomfortable situation may cause you to be nervous or make a mistake. So, before you terminate an employee, contact your Staff One Client Service Executive or Staff One’s Corporate HR Department for guidance.