With a new administration and a dismal economy, new and amended laws are on the horizon to transform the ever-changing world we call human resources.  Among these changes, Michelle Obama is making work/family balance a top priority in her role of first lady.  So what does this mean?

For the first time, the government is attempting to mandate paid sick days and paid leave for businesses.  It is proposed that employers with 11 or more employees provide nine paid sick days for full-time workers and smaller businesses provide five days.  While these particular mandates are still in the early stages, activists predict quick action on the Healthy Families Act, which would require employers with at least 15 employees to provide seven paid sick days per year.

Milwaukee, San Francisco, and Washington D.C. have already voted to make their cities require employers to provide sick days.  Those opposing these mandates state that they discourage people from opening new businesses and that employers are already struggling as it is.  Those in support of the new mandates state that the U.S. currently ranks behind other nations and this would give relief to working families.  For example:

The U.S. is one of only four countries out of 173 that does not guarantee some form of paid maternity leave; the other countries are Liberia, Swaziland, and Papua New Guinea.  Sixty-six other countries ensure that fathers either receive paid paternity leave or have a right to paid parental leave.

At least 145 countries provide paid sick days, with 136 providing a week or more annually, while the U.S. has no federal law providing for paid sick days.

By NAPEO Staff
A little-discussed provision of the American Recovery and Reinvestment Act (ARRA) substantially expands whistleblower protections with regard to any activity by entities involved in the stimulus funds. Known as the McCaskill Amendment, Section 1553 extends to those contracting with entities receiving stimulus funds, even when only a portion of the activities are covered by the funds. The protection covers any disclosure by a person to a newly created oversight board, an inspector general, a government agency, a court, or a grand jury if the employee reasonably believes there is gross mismanagement of any agency contract or grant involving the funds, a gross waste of the funds, a substantial danger to public health or safety, an abuse of authority, or a violation of law, rule, or regulation. Protected disclosures will include those made in the ordinary course of an employee’s duties. The law prohibits waivers or releases of the rights and remedies in any agreement (including any pre-dispute arbitration agreement). Covered employers will be required to post notice of these rights.

On February 17, 2009, President Obama signed into law H.R. 1, the American Recovery and Reinvestment Act of 2009 (ARRA). Among many other provisions designed to encourage economic recovery, Title III of ARRA expands the federal Consolidated Omnibus Budget Reconciliation Act (COBRA) Continuation Coverage to provide a federal subsidy toward an eligible worker’s COBRA premium.

• The provisions in ARRA providing this subsidy are effective as of the date of the President’s signing.
• Eligible workers may receive a 65% subsidy toward their COBRA continuation premium for up to 9 months. Previously any individual enrolling in COBRA was responsible for 100% of the cost of the coverage, plus a 2% administrative fee.
• The Treasury Dept. will administer the subsidy, providing employers or health plans, if they administer COBRA benefits, with a credit against payroll taxes for the cost of the subsidy.
• The subsidy terminates the date the individual becomes eligible for any new employer-sponsored health plan or Medicare coverage.
• Individuals involuntarily terminated from employment between September 1, 2008 and December 1, 2009 and who have annual incomes less than $125k (single) or $250k (joint filers) for the taxable year in which the subsidy is received are eligible for the COBRA assistance, along with their families.
• Qualified individuals who initially decline COBRA coverage prior to ARRA will be given an additional 60 days after they receive notice of the special election period to elect to receive the subsidy.
• The special election opportunity is also available to a qualified beneficiary who elected COBRA coverage but who is no longer enrolled on the date of enactment of ARRA, for example, because the beneficiary was unable to continue paying the premium.
• COBRA notices must include information on the availability of the premium assistance and must be provided to all individuals who terminated employment during the applicable time period, not just individuals who were involuntarily terminated.

The Department of Labor has 30 days after the enactment of ARRA to issue model notices for use by employers.

Effective January 16, 2009, the new FMLA rules will have an impact on companies in PEO relationships. In addition to other changes, these rules make FMLA compliance optional to employer with less than 50 employees.  At a high level, the new rules require that HR professionals master 10 key changes to the regulation:

• Military caregiver leave: Implements the requirement to expand FMLA protections for family members caring for a covered service member with a serious injury or illness incurred while on active duty. These family members are able to take up to 26 workweeks of leave in a 12-month period.
• Leave for “qualifying exigencies” for families of National Guard and Reserve members: The law allows families of National Guard and Reserve personnel on active duty to take FMLA job-protected leave to manage their affairs – “qualifying exigencies.” The rules define “qualifying exigencies” as situations involving: 1) short-notice deployment, 2) military events and related activities, 3) childcare and school activities, 4) financial and legal arrangements, 5) counseling, 6) rest and recuperation, 7) post-deployment activities and 8 ) additional activities where the employer and employee agree to the leave.
• New employer notice obligations: The final rules consolidate all employer notice requirements into a “one-stop” section of the regulations to clear up some conflicting provisions and time periods. Further, they clarify and strengthen employer notice requirements so employers can better inform employees about their FMLA rights and obligations, and allow for a smoother exchange of information between employers and employees.
• New employee notice rights: The final rules modify the current provision that had been interpreted to allow some employees to notify their employers of their need for FMLA leave up to two full business days after an absence, even if they could provide notice sooner. Under the final rules, the employee must follow the employer’s normal and customary call-in procedures, unless there are unusual circumstances.
• New medical certification process: The final rules recognize the advent of the Health Insurance Portability and Accountability Act (HIPAA) and the applicability of HIPAA’s medical privacy rule to communications between employers and employees’ health care providers. Responding to concerns about medical privacy, the rules add a requirement that limits who may contact the health care provider and bans an employee’s direct supervisor from making the contact.
• Clarification of waivers of rights: The DOL has finalized its longstanding position that employees may voluntarily settle their FMLA claims without court or departmental approval. However, prospective waivers of FMLA rights will continue to be prohibited.
• Definition of “serious health condition”: While the rules retain individual definitions of “serious health condition,” they add guidance on some regulatory matters. If an employee is taking leave involving more than three consecutive calendar days of incapacity plus two visits to a health care provider, the two visits must occur within 30 days of the period of incapacity. The rules define “periodic visits to a health care provider” for chronic serious health conditions as at least two visits to a health care provider per year.
• Clarification of light-duty FMLA rules: At least two courts have held that an employee uses up his or her 12-week FMLA leave while on a “light-duty” assignment. Under the final rules, time spent in light-duty work does not count against an employee’s FMLA leave entitlement, and the employee’s right to job restoration is held in abeyance during the light-duty period. If an employee is voluntarily doing light-duty work, he or she is not on FMLA leave.
• Application of FMLA leave to awarding perfect attendance awards: The final rules change how perfect attendance awards are treated to allow employers to deny a “perfect attendance” award to an employee who does not have perfect attendance because he or she took FMLA leave-but only if the employer treats employees taking non-FMLA leave in an identical way.
• Clarification of “leave stacking” rules: The updated rule contains technical changes to be consistent with the U.S. Supreme Court’s decision in Ragsdale v. Wolverine World Wide Inc. The court ruled that the regulation’s so-called “categorical” penalty (requiring an employer to provide 12 additional weeks of FMLA-protected leave after the employee had already taken 30 weeks of leave ) was inconsistent with the statutory limit of only 12 weeks of FMLA leave and contrary to the law’s remedial requirement that an employee demonstrate individual harm. The new rule removes these penalties and clarifies that if an employee suffers individual harm because the employer did not follow the notification rules, the employer may be liable.

The new employer notice obligation will be the most critical to follow.  There are new FMLA forms and deadlines for the notification.

A number of programs were included in the Act, which focus on providing tax relief to both individuals and businesses. Some of the more notable provisions are:

“Making Work Pay” Tax Credit
The Making Work Pay credit, which is available in 2009 and 2010, is worth up to $400 for an individual and $800 for spouses filing jointly. This credit begins to phase out for taxpayers with adjusted gross incomes in excess of $75,000 for individuals and $150,000 for married couples filing jointly. This credit can either be claimed on tax returns or by reducing the amount of taxes that are withheld from paychecks.

“American Opportunity” Education Credit
This credit renames and expands the HOPE education credit. It allows a taxpayer to receive a credit of 100% for the first $2,000 in qualifying tuition and related expenses, and 25% for the second $2,000 of such expenses, for a maximum of $2,500. This credit is subject to a phase-out for individual taxpayers with an adjusted gross income in excess of $80,000 or $160,000 for married couples filing jointly.

Alternative Minimum Tax Patch
The Alternative Minimum Tax exemption is increased to $46,700 for individuals and $70,950 for married couples filing jointly, and allows personal credits against the Alternative Minimum Tax. This patch protects an estimated 26 million taxpayers from becoming subject to the AMT.

Above the Line Deduction for Automobiles
This is a new tax deduction for state and local sales tax paid on the purchase of new cars, from the effective date of the Act, February 17, 2009, through December 31, 2009. This deduction begins to phase out for taxpayers earning $125,000 per year for individuals and $250,000 for joint returns.

Extension of Bonus Depreciation
The bonus depreciation rules, which were set to expire after 2008, are extended for one year. The extended rule allows a 50% bonus depreciation for certain property placed in service by businesses in 2009, allowing businesses to deduct from their taxes 50% of the value of that property in addition to amounts that may otherwise be claimed under depreciation rules, after the item’s value is adjusted to account for the bonus depreciation.

Small Business Capital Gains
The law allows for a 75% exclusion for individuals on the gain from the sale of qualified stock held for more than five years. This applies to stock issued between February 17, 2009 and January 1, 2011. This exclusion is limited to individual investments and not the investments of a corporation.

Five-Year Carryback of Net Operating Losses
Businesses are allowed to “carryback” certain operating losses for up to five years, as opposed to the two year limitation previously allowed. Once a business opts to use the extended period, it becomes irrevocable.

Advanced Energy Investment Credit
A 30% investment tax credit is established for manufacturing advanced energy property, such as facilities that manufacture components for the production of renewable energy, energy conservation and other green technologies.

Non-Business & Residential Energy Property Credit
The tax credit for non-business energy property is increased to 30%. This credit may be claimed against expenses for certain energy-efficient improvements to existing homes, such as new furnaces, energy-efficient windows and doors, or insulation. To qualify, such expenses must occur in 2009.

New Markets Tax Credit
The dollars available for the New Markets Tax Credit increase to $5 billion for 2008 and 2009.

In addition to using tax policy as a method of stimulating the economy, the Act allocates substantial funding for a number of public infrastructure projects. The following is a sample of such projects.

Highway Funding
Highway and bridge construction projects will receive $27.5 billion. After amounts are pulled for particular expenditures such as park roads, technology training and bonding assistance, the remaining funds will be allocated to states and territories using an existing formula from the 2008 appropriations law for the Department of Transportation. Priority will be given to projects that can award funds on or around June 15, 2009 with project completion expected by June 15, 2011.

The State Fiscal Stabilization Fund
The Act provides $53.6 billion for a State Fiscal Stabilization Fund, of which $39.5 billion shall be used to enhance school budgets. States are given the discretion to use a portion of this fund for school modernization projects for K – 16 facilities.

Transit and Rail
New construction, repair and modernization of transit and rail systems will be given $17.7 billion. Of this amount, $8.4 billion is available for mass transit projects, $1.3 billion is available for Amtrak capital projects and $8 billion is available for Intercity Passenger Rail Service.

Clean Water
The Act appropriates $4 billion for grants to states for wastewater treatment facilities. Additionally, $2 billion has been appropriated to states for drinking water infrastructure projects.

Environment Restoration
EPA Superfund Program projects are allocated $800 million, and $200 million for the EPA Leaking Underground Storage Tanks Program.

Federal Building Modifications
One aspect of energy efficiency is the appropriation of $5.5 billion for federal building and repair projects, $4.5 billion of which must be directed toward projects that achieve the highest levels of energy efficiency. Examples of qualifying projects include installation of photovoltaic cells, smart lights, energy efficient mechanical systems and occupancy sensors.

Low-Income Housing Weatherization
The Weatherization Assistance Program receives $5 billion, which is intended to cover a portion of costs associated with insulating low income residences. The Act also raises the eligibility limit to 200% of the federal poverty line, up from 150%.

Energy Efficiency Block Grant
These Block Grants provide $3.2 billion to state, local and tribal governments to fund public facility renovation projects that emphasize energy efficient building technologies and materials, as well as energy efficient technology demonstration projects.

State Energy Program
The states collect $3.2 billion, which shall fund state energy technology research and development programs.

On January 29, 2009 President Obama signed into law the Lilly Ledbetter Fair Pay Act.  This act overrules the U. S. Supreme Court’s decision in the Ledbetter v. Goodyear Tire & Rubber Company, Inc. opening the door for employees file claims at a much later date than originally ruled.

 This act raises many questions for employers that have yet to be addressed or answered.  Let’s first talk about the areas of this law that we do know about.  First, this law is retroactive to May 28, 2007 meaning that employees that have been, or may have been, discriminated against since this date can file a claim.  Congress believed the previous decision unduly restricted the time period an employee had for filing pay discrimination claims.

 Under Ledbetter an unlawful employment practice occurs when:

• The discriminatory pay decision is made
• An individual becomes subject to the discriminatory pay decision, or
• An individual is affected by the discriminatory compensation decision or other practice.

In short, what this means to employers is that each time an employee receives a wages, benefits or other compensation tainted by the discriminatory pay decision the deadline starts over.

Now, let’s talk about the questions that Ledbetter brings up.  What records should a company examine and retain?  How long should they be retained?  Should they do a self audit?

Since this is a new law there are no court cases or rulings on any of these questions.  However, initial analysis by most law firms says you should retain pertinent records indefinitely.  Outside of the IRS regulations on record retention the only real guidance comes out of federal contracting regulations which require that all records be retained for a period of 2 years for companies with over 150 employees and 1 year for companies fewer than 150 employees.  However, there is no evidence that these regulations will be used in governing Ledbetter.

With this in mind companies may consider conducting a self audit of their records.  There are no provisions under Ledbetter where a company avoids penalties due to accidental, unintentional or uncovered violations.  A violation is a violation.

Self audits would involve an examination of written policies relating to pay decisions in starting pay, promotional pay and merit pay increases.  For companies without a formal pay structure this could particularly dangerous under Ledbetter since managers would have wide discretion in setting pay.