Together, the Patient Protection and Affordable Care Act  (PPACA) and Health Care and Education Tax Credit Reconciliation Act of 2010 represents widespread health care reform which will be implemented over a number of years to come. Moreover, given the law's 2,500 pages, there are many questions that will not be answered until the implementing federal regulations are issued. Nonetheless, employers should understand that several PPACA provisions were immediately effective, or effective six months from the date of enactment (March 23) and take note of what is in store in 2014.

A. W-2 Reporting Requirements

For taxable years beginning after December 31, 2010, employers must report on their employee's W-2 form the full premium value of their employee health coverage, including but not limited to, the value of prescription drug plans and employee assistance programs. This means that payroll systems need to be updated for this change by January 2011.
 

B. Mandatory Break Periods for Nursing Mothers

Effective immediately, employers must provide reasonable break time for an employee to express breast milk for her nursing child for one year after the child's birth; and a place, other than bathroom, that is shielded form view and free from intrusion from coworkers and the public to express breast milk. Employers with less than 50 employees are exempt if compliance imposes an undue hardship.
 

C. HSAs, FSAs, and HRAs

Unless prescribed by a doctor, over-the-counter drugs other than insulin will no longer qualify for reimbursement under a health reimbursement account or flexible savings account (FSA) or under a health savings account (HSA) or an Archer medical savings account (MSA). Starting December 31, 2010, the tax on distributions from HSAs and MSAs that are not used for qualified medical expenses is increased to 20%.
 

D. Grandfathered Plans

The PPACA places new requirements on group health insurance plans relating to coverage, often referred to as market reforms. Examples include: expanded non-discrimination requirements, limitations on when insurance can be rescinded, no lifetime limits on the dollar value of essential health benefits, choice of primary care physician, no pre-existing limitations for children under 19, coverage of preventive health services without any cost-sharing and new appeals processes.

Significantly, grandfathered health plans (GHP) are exempt from many of these new requirements. A GHP is a plan in which an individual was enrolled on the date of enactment (March 23, 2010). Having a GHP gives employers some breathing room with respect to the PPACA's market reform provisions, but it is not a free pass. Even GHPs must comply with the following:
 

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EEOC Targeting Employers Who Do Not Hire Muslim Applicants Who Decline To Remove Head Scarves.

 The EEOC appears to be focusing on alleged religious discrimination of Muslim women who are denied employment. In two lawsuits brought by the EEOC, female Muslim applicants refused to remove their head scarves and were denied employment.

EEOC v. Kelly Services, Inc., 598 F.3d 1022 (8th Cir. 2010).

EEOC v. White Lodging Services, Corp., W.D. Ky., No. 3:06-CV-353 (March 31, 2010).

These cases highlight the importance of adequately training all hiring personnel on discrimination. Hiring personnel should be made aware that accommodations may be necessary to employees who have sincerely held religious beliefs, including Muslim women who wear head scarves. A neutral dress policy, by itself, may be an insufficient reason to deny employment to a female Muslim applicant who declines to remove her head scarf without conducting a more detailed analysis as to whether an accommodation is possible.

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Internships and Federal Law -- Are Interns Employees?

Employers cannot avoid the requirements of federal law by simply labeling employees as "interns" or "trainees." As a general rule, those engaged in legitimate internships or training programs are not covered by federal employment law. But if the would-be intern or trainee is actually an employee by another name, an employment relationship exists, and the intern or trainee is entitled to all the benefits and protections of federal law. Including the rights to minimum wage, overtime, and a discrimination free workplace.

Employers cannot avoid the requirements of federal law by simply labeling employees as "interns" or "trainees." As a general rule, those engaged in legitimate internships or training programs are not covered by federal employment law. But if the would-be intern or trainee is actually an employee by another name, an employment relationship exists, and the intern or trainee is entitled to all the benefits and protections of federal law. Including the rights to minimum wage, overtime, and a discrimination free workplace.

The issue, then, is whether an employment relationship in fact exists; whether, despite the title, the would-be intern or trainee is actually an employee. Unfortunately, none of the primary federal employment laws, specifically the Fair Labor Standards Act and the anti-discrimination statutes, provide any meaningful guidance on the distinction between employees and interns or trainees. Thus, the question has been left to the Department of Labor and the federal courts. And as is normally the case in such situations, the DOL and the courts have developed a highly fact specific analysis, and even then, whether an employment relationship exists is not always clear. Instead, whether an intern or trainee is entitled to such things minimum wage and overtime compensation will often depend upon whether the individual is receiving training without displacing other employees or providing any real benefit to the employer.

If an intern or trainee is not an employee under the FLSA, then he or she is not entitled to minimum wage, or indeed any compensation. And if the intern or trainees is not compensated, then he or she is likely not an employee for purposes of the federal anti-discrimination laws. If, however, an intern or trainee is compensated, then the courts will apply the thirteen factors set-forth by the Supreme Court in Darden to determine whether an employment relationship exists. It is entirely possible that an individual may be an employee for purposes of the FLSA, but not for purposes of the anti-discrimination laws.

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Updates to the Hire Act  of 2010.

Two tax credits are available to employees who hire certain previously unemployed workers under the Hiring Incentives to Restore Employment Act ("HIRE Act"), which was enacted on March 18, 2010.

The first tax benefit provides employers with an exemption from the employer's 6.2 percent share of social security tax on wages paid to qualifying employees. This tax credit is available for wages paid from March 19, 2010 through December 31, 2010.

The second tax benefit provides that for each qualified employee employed at least 52 consecutive weeks, companies will be eligible for a federal business tax credit of 6.2 percent of wages paid to qualified employees, up to a maximum credit of $1,000.00.

On April 7, 2010, the IRS released a new Form W-11 to help employees claim the special payroll tax exemption under the HIRE Act. Most employees use Form 941(Employer's Quarterly Federal Tax Return) to claim the payroll tax exemption for the new hires. The IRS intends to release a revised Form 941 this month.

Although employers need these forms to claim both the payroll tax exemption and new hire retention credit under the HIRE Act, they do not file these forms with the IRS. Instead, employees must retain them along with other payroll and income tax records.

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DOL Proposes Sweeping Record-Keeping and Notice Change

It is no secret that the Department of Labor is ramping up its enforcement arm. In the past year, DOL's budget was substantially increased, and several new investigators were hired to enforce various wage and hour laws. Now, in the wake of hundreds of lawsuits filed across the country alleging FLSA violations on the part of businesses small and large, DOL issued a Notice of Proposed Rulemaking which would dramatically alter the recordkeeping requirements under the Fair Labor Standards Act.

Specifically, DOL proposes to require covered employers to notify workers of their rights under the FLSA and to provide information regarding hours worked and wage computation. In addition, DOL also seeks to require any employer who classifies an employee as exempt to perform a "classification analysis," disclose that "analysis" to the employee, and retain the "analysis" in the event of a wage and hour investigation by DOL. Keep in mind that a wage and hour investigator can come knocking on your door with little or no evidence of any violations, and oftentimes, disgruntled former employees are the reason an investigator comes around. This "classification analysis" would be a new requirement under the law and incredibly burdensome to employers. If adopted, it will likely be used as a tool by plaintiffs and their lawyers to support further lawsuits against companies under the FLSA.

At this point, the Notice is still subjected to public review and comment, and will likely be subjected to strong opposition by the business community. Even if it fails to pass, however, employers must be aware that DOL is paying close attention to wage and hour issues in the workplace and continues to receive funding to fuel its enforcement objectives.