One year into the COVID-19 pandemic, U.S. courts are wrestling with a growing number of new legal theories related to COVID-19.  Not surprisingly, California – the most populous state with some of the most employee friendly laws and courts – leads the way with the most COVID-19 employment lawsuits filed. See Jackson Lewis COVID-19 Employment Litwatch.  Nonetheless, a Northern District of California decision, dismissing an attempt by an employee and his wife to hold an employer liable for COVID-19-related injuries, provides employers with some welcome relief.

In Kuciemba v. Victory Woodworks Inc., husband and wife Robert and Corby Kuciemba alleged that Robert worked at a construction site in San Francisco and that, in July 2020, Robert’s employer transferred employees from the company’s Mountain View, California job site to the San Francisco site, despite knowing the transferred employees had likely been exposed to COVID-19 in Mountain View.  No. 3:20-cv-09355-MMC (N.D. Cal. Feb. 22, 2021).  Once in San Francisco, the transferred employees allegedly worked closely with Robert, without adequate safety precautions being put in place.  Soon thereafter, both Robert and Corby tested positive for COVID-19 and were hospitalized.  Corby, a high-risk individual, was hospitalized for an extended period.

The Kuciembas sued Robert’s employer in state court, alleging claims for negligence and violation of public nuisance laws (that resulted in Corby contracting COVID-19), and loss of consortium (suffered by Robert because of Corby becoming sick).  All of these claims were rooted in the assertion that the employer knew or should have known that the transferred employees had been exposed to COVID-19, and that the employer failed to follow local and federal guidelines and orders for maintaining a safe workplace.

The employer successfully removed the case to federal court on diversity jurisdiction grounds (because the company is based in Nevada), and then moved to dismiss all claims. On February 22, 2021, the district court dismissed the case, without prejudice.  First, the court ruled that Corby’s public nuisance claim failed for lack of standing.  Next, the court ruled that Corby’s various negligence claims, as well as Robert’s loss of consortium claim, were all barred by California workers’ compensation provisions, which provide the sole and exclusive remedy for the employee and the employee’s dependents. See Cal. Labor Code §§ 3600, 3602.

The court’s ruling is gratifying for management-side defense attorneys who have been arguing that states’ workers compensation laws preempt most allegations of COVID-19-related injuries or damages resulting from exposure to the virus in the workplace. The combination of worker’s compensation protections (which here extended to the spouse) and the myriad of states that have passed various forms of immunity for COVID claims – including, but not limited to, Georgia, Ohio, Indiana, Wisconsin, and South Carolina – provide employers with their own form of vaccine to the onslaught of litigation created by COVID-19.

Many COVID-19 employment lawsuits raise novel legal issues, so it is important for employers to monitor COVID-19 employment litigation trends. Fortunately, Jackson Lewis has a dedicated team tracking and responding to these developing issues.  Please contact Jackson Lewis if you have questions or need assistance regarding any COVID-19 workplace concerns.

When President Joe Biden revoked the immigrant visa ban, but not the nonimmigrant visa ban or 14-day travel restrictions, it seemed there might be problems ahead. New restrictions on National Interest Exceptions (NIEs) to the 14-day travel restrictions for the United Kingdom, Ireland, and Schengen Area have been issued, and many individuals currently in the United States in E, H, L, O, or P status should not travel abroad to a restricted country unless they are prepared to remain there for some time.

On March 2, 2021, the Department of State (DOS) issued new guidance severely limiting the prior guidance for NIEs from the 14-day travel restrictions for the United Kingdom, Ireland, and the Schengen Zone. Previous categorical exceptions for professional athletes and treaty investors or traders no longer apply. The exception that previously covered certain technical experts and specialists, as well as senior-level managers and executives (those applying for H and L visas), has been rescinded. The only exceptions remaining are for those seeking to enter for humanitarian purposes, the public health response, national security, or “vital support” for a critical infrastructure sector. However, previously granted NIEs remain valid and will not be revoked due to the new policy.

A week earlier, on February 24, 2021, DOS updated its guidance regarding NIEs to the nonimmigrant visa ban, not to be confused with the 14-day United Kingdom, Ireland, and Schengen Area travel restriction. That update limited NIEs by requiring specific evidence, particularly for H-1B, H-2B, J-1, and L-1 visa applicants. As an example, a technical specialist, senior level manager, or other worker requesting an H-1B visa whose travel is necessary to facilitate the immediate and continued economic recovery of the United States must prove at least two of the following five indicators:

  • The employer has continued need for the services as evidenced by a Labor Condition Application (LCA) approved during or after July 2020. If the job can be performed remotely, then there is no continued need.
  • The applicant will provide significant and unique contributions to an employer meeting a critical infrastructure need and must hold a senior level placement, have job duties that are both unique and vital to the management and success of the overall business, or have specialized qualifications.
  • The wage rate meaningfully exceeds the prevailing wage rate by at least 15 percent.
  • The applicant’s education, training, or experience demonstrates unusual expertise.
  • Denial of the visa will cause financial hardship to the extent that the employer will be unable to meet financial or contractual obligations, continue in business, or create an impediment to the employer’s ability to return to its pre-COVID-19 level of operations.

Based on this guidance from DOS, it is possible that an individual may be eligible for an NIE to the nonimmigrant visa ban, but still be precluded from travel to the United States due to the tightened constraints on NIE eligibility for the United Kingdom, Ireland, and Schengen Area 14-day travel restriction.

Please reach out to your Jackson Lewis attorney for assistance in determining whether an employee or prospective employee is likely to meet the new eligibility requirements for an NIE.

Notwithstanding federal, state, and local privacy and cybersecurity laws that may apply, employers may generally use artificial intelligence, data analytics, and other software and technologies to track remote workers.

The COVID-19 pandemic has resulted in, if not required, the vast majority of businesses to adopt remote work and virtual workplaces as a means of operational necessity, and to promote the health and safety of its employees and clientele. With these shifts, employers have expeditiously looked to new and alternative means for tracking employee performance, monitoring productivity, and ensuring the security of their networks and computer systems. Artificial intelligence, machine learning, and data analytics are useful tools that employers can, and should, utilize to accomplish these, and other employment-related objectives.

To illustrate, a standard time-keeping application can serve as a virtual substitute for a physical timeclock. However, there are other methods for tracking employee performance, activity, and working time that can and should be considered if no other reason but to serve as a way to verify a remote employee’s time report. Employers that use a virtual private network (“VPN”) or remote/cloud computing can cross-reference a remote worker’s network connection and activity data to confirm the start and stop times reported on a separate timeclock application. Artificial intelligence and machine learning can be deployed to passively acquire login and other activity data that can help employers track employee work activity, and identify patterns, abnormalities, etc. on an enterprise-wide basis.

Employers and their IT professionals should take a holistic approach when evaluating available technologies and data sources to identify the systems, data, and metrics that are most appropriate, and effective, for accomplishing their needs. By properly designing and monitoring these technologies, employers can successfully minimize the potential liability stemming from a myriad of issues associated with remote work and ensure compliance with company policies. For example, potential liability stemming from irregular work schedules, overtime issues, and violations of work and leave-related restrictions, including prohibitions on non-exempt employees sending/reading work-related emails after clocking out or outside working hours.

Of course, businesses should also consult with legal counsel to ensure that their employee monitoring and tracking abilities are compliant with applicable law, and do not result in unintended biases that could potentially cause a disparate impact on protected classifications.

Flexibility in completing I-9 Employment Verification Forms has been continued until March 31, 2021, and it may be extended beyond that. Under that flexibility, employers have been allowed to inspect Section 2 Form I-9 documents virtually (e.g., over video link, by fax, or by email).

Nevertheless, as companies “return” to worksites and show their own flexibility in remote working scenarios, it is time to start planning and preparing for how to do the required in-person verifications and for the ultimate end of ICE’s flexibility. The rule is that once “normal operations resume,” in-person verification must be completed within three business days. ICE has not provided much guidance on what constitutes that resumption.

There are so many variations in the way companies have been working remotely. Here are a few ways the end of the flexibility policy could play out.

First, where ICE decides to end flexibility on a date certain and requires in-person verification within three days or by a certain date, employees who were verified virtually will have the specified number of business days to report for in-person verification. The hope is that ICE will provide sufficient notice before ending the policy or will give employers at least 60 days to re-verify their employees.

Second, where some employees, but not all, are returning to the worksite before the end of the policy, employers should ask employees who are returning and were verified virtually to report within three business days of their return for in-person verification.

Third, where the employer is continuing remote operations due to COVID-19 concerns even after the end of the flexibility policy, ICE might consider the circumstances on a case-by-case basis. How the agency will ultimately respond to an employer’s continuation of virtual verification is unknown.

Given the uncertainty, advance planning will be important, especially if a large number of employees have been verified virtually. Consider the following:

  • Make sure you have maintained a list of all employees who were verified virtually, when they will be returning to work, and the deadline for their in-person verification.
  • Determine who will be conducting the in-person verifications and how and when they will be reaching out to the affected employees. Remember that using authorized representatives to do the in-person review, as always, continues to be an option. Any person can be an authorized representative. Remember: the employer remains liable for any mistakes made by the representative and representatives should not be biased.
  • Train staff on how to update I-9 forms after the in-person review. After the physical inspection, the employer or authorized representative should note “COVID-19” as the reason for the delayed in-person inspection and “documents physically examined” with the appropriate date and the name of the person who conducted the review in the “Additional Information” field in Section 2 of the I-9 or in Section 3 (for reverification) as is appropriate.

Jackson Lewis attorneys are available to answer questions and help to develop strategies to deal with the uncertainties regarding the continuation of Form I-9 flexibility.

Though employers may feel like California just wrapped up its legislative session for 2020, the 2021 legislative session is already in full swing. February 19 was the last day for the proposal of new bills. However, Assembly members and Senators have until September to revise and amend proposed bills before submitting them to the Governor.

It is hard to predict which bills will make their way to Governor Gavin Newsom’s desk in the Fall, however here are bills relating to leave that employers should be watching.

Assembly Bill 85 and Senate Bill 95 – COVID-19 Supplemental Paid Sick Leave

While Statewide supplemental paid sick leave that was passed last year for food sector and other workers expired on December 31, 2020, the legislature has bills pending to resurrect this leave.

These bills would extend the COVID-19 food sector supplemental paid sick leave for food sector workers as well as the COVID-19 supplemental paid sick leave for other covered workers, if those workers are unable to work or telework due to certain reasons related to COVID-19 and meet specified conditions.

Assembly Bill 95 – Bereavement Leave

This bill would require an employer with 25 or more employees to grant an employee up to 10 business days of unpaid bereavement leave upon the death of a spouse, child, parent, sibling, grandparent, grandchild, or registered domestic partner. AB 95 also would require an employer with fewer than 25 employees to grant up to 3 business days of unpaid bereavement leave.

Assembly Bill 995 – Paid Sick Day Accrual and Use

For employers that grant paid sick leave and avoid California state sick leave accrual and carryover requirements, this bill would increase the annual grant allotment from 3 days or 24 hours to 5 days or 40 hours.

Employers that accrue paid sick leave under state law would be required to increase the accrual cap, from 6 days or 48 hours to 10 days or 80 hours. In addition, the bill would raise the employer’s authorized limitation on the employee’s use of carryover sick leave from three days or 24 hours to 5 days or 40 hours.

Assembly Bill 1041 – Expansion of the Definition of Family Member

This bill seeks to expand the definition of “family member” for purposes of leave under the California Family Rights Act and the Healthy Workplaces, Healthy Families Act (paid sick leave) to include other individuals related by blood or whose “close association with the employee is equivalent to a family relationship.”

Assembly Bill 1179 – Employer-Provided Backup Childcare

This bill would require an employer to provide an employee with up to 60 hours of paid backup childcare benefits, to be accrued and used under certain conditions. “Backup childcare” is defined as childcare provided by a qualified backup childcare provider to the employee’s child when the employee’s regular childcare provider cannot be utilized.

This bill would apply to employers with 1,000 or more employees, the state, political subdivisions of the state, and municipalities, including charter cities.

* * * *

Jackson Lewis tracks state and local legislation relevant to employers. If you have questions about these pending bills or other employment law legislation, contact a Jackson Lewis attorney to discuss.

Long-term care facilities have been hit hard by COVID-19. As we approach the one-year anniversary of this national emergency, many facilities have grown accustomed to the additional reporting and scrutiny. However, this climate has also made it easier for OSHA to target long-term care facilities. One of OSHA’s common tactics is using public records (e.g., newspapers and other media) as well as facility reports to the National Healthcare Safety Network (NHSN) to support requests for information about employee deaths (often without opening an inspection). These inquiries come in a variety of forms, from written requests to cold calls. The knee jerk reaction to respond in full is not always the only option, and it can open up the facility to an unnecessary inspection. Most facilities simply do not need that type of disruption or distraction during these trying times.

Unlike the reports to NHSN, which requires nursing homes to report all staff deaths, employers are only required to report work-related deaths to OSHA. This can be a difficult determination with COVID-19 infections. In the spring of 2020, OSHA issued guidance that provided some insight into making such determinations, which we blogged about here.

It is important to remember that OSHA’s right to conduct an inspection is not absolute. OSHA must have specific evidence of an existing violation or show of administrative reasonableness. The fact of a COVID-related employee death does not necessarily meet these standards, particularly given the prevalence of community spread in many areas of the country. The lawfulness of an OSHA request for information or inspection must be determined on a case-by-case basis, and facilities should consult with counsel before refusing to provide information to OSHA.

OSHA’s efforts also underscore the importance of evaluating COVID-related employee deaths and hospitalizations to ensure compliance with OSHA’s reporting requirements.

It has been three months since California approved the Division of Occupational Safety and Health’s (“Cal OSHA”) COVID-19 Emergency Temporary Standard (“ETS”). The rushed implementation of Cal OSHA’s ETS, which imposed new and confusing obligations on employers, left many scratching their heads and resulted in several legal challenges to the ETS. For example, some agricultural employers challenged the ETS on grounds that it was ambiguous, imposed overwhelming compliance obligations on employers, and did not consider costs or feasibility.  Other employers continued to raise concerns over requirements in the ETS in public forums, through written questions to Cal OSHA, and directly with their representatives.

Cal OSHA responded to the concerns raised by employers and business associations by publishing a series of online FAQs at the beginning of January 2021. Following the initial series of FAQs, and largely in response to more employer questions, Cal OSHA quietly updated and revised the FAQs on January 26, 2021, and February 26, 2021. In its most recent rounds of FAQ updates, Cal OSHA has added new guidance on testing and the ETS’s scope of coverage.

Testing

A main area of confusion for employers since the ETS was adopted has been around the requirements for COVID-19 testing. This is because Cal OSHA’s ETS uses inconsistent language to discuss requirements (e.g., “offer” vs. “provide” in the context of required testing). The ETS also explicitly conveys that “all employees in the exposed workplace shall be tested and then tested again one week later,” raising questions as to whether an employer must require employees to undergo testing or exclude them from the workplace if testing is refused when required. Employers also struggled with understanding how testing should be provided to employees (e.g., on-site testing using a third party or requiring employees to get tested by a health plan provider). From the original FAQ, it is clear Cal OSHA views the testing provisions as requiring an employer to inform its employees on how they can obtain COVID-19 testing at no cost and during working hours or paid time when testing is required (i.e., following a work-related exposure if working in an exposed workplace during a minor or major outbreak). The original FAQ confirmed that employers had these same notification and testing obligations whenever testing is required under the ETS. But the FAQ largely did not explain how the employer could arrange for this testing beyond simply stating that employers were free to use state or local testing services, arrange testing with a third party, or use health plan provider testing options.

Recent updates to the FAQ clarify that employers have two primary options: the employer can (1) partner with a medical provider to establish a testing program; or (2) use the free testing services provided by the state or county health department. To locate county testing facilities, the employer should check the local county or city health department’s website.  To locate the correct website, employers may visit the California Department of Public Health or the National Association of County and City Health Officials website, and click on the applicable county or city health department. Although not mentioned in the updated FAQs, the state also maintains a website on COVID-19 testing locations that employers can use to find testing locations. Cal OSHA’s FAQ updates also convey that employers who need to test a large number of employees on a regular basis can partner with the State of California Valencia Branch Laboratory (“VBL”) to set up on-site testing of employees.

While the updates signal to employers that they may use many different resources to satisfy testing obligations under the ETS, the updates fail to address some of the practical and feasibility challenges that employers are facing. Cal OSHA’s FAQs, in particular, fail to address whether employees that refuse to undergo testing when required or directed under the ETS need to be excluded from the workplace. Instead, Cal OSHA states only that employees may refuse and do not need to sign a declination form. The FAQs are similarly silent on how an employer can effectively manage some of the costs related to testing, such as travel costs, testing time, and out-of-pocket expenses. This can be especially difficult for employers that have employees working in remote areas where there are limited testing locations, such that the use of available testing centers to achieve testing is impracticable or can result in substantial costs in paid time or travel expenses. Further, while Cal OSHA’s FAQs make a determination that employers can arrange for testing with a third-party medical provider, Cal OSHA’s FAQs and guidance do not even attempt to advise employers on where to start in setting up a workplace testing plan. As a result, employers lack clear direction on how to arrange for workplace testing in a way that will satisfy Cal OSHA’s requirements under the ETS and be consistent with workplace testing considerations from the Centers for Disease Control and Prevention (“CDC”). This, in turn, leads to more questions on the employer’s obligations for management of testing records, selection of COVID-19 tests to be used in their workplace testing plan, and coordination of testing with employees.

Scope of Coverage

Cal OSHA’s ETS applies broadly to California workplaces and has only a few limited exceptions. Cal OSHA’s ETS, for instance, does not apply to employees when covered by the Aerosol Transmissible Diseases (“ATD”) standard. In attempting to clarify the scope of this exception, Cal OSHA’s original FAQs conveyed that an employee in a single workplace could not be subject to both the ETS and ATD standards at the same time. This exception is critically important for employers in the healthcare space, as well as emergency responders, as these employees often have ongoing occupational exposures to COVID-19, such that compliance with the ETS would be untenable. In addition, these employees are protected against COVID-19 exposures in the workplace through the ATD’s strict preventive measures and mandatory use of personal protective equipment.

To illuminate the exception further, Cal OSHA’s updated FAQ confirms that emergency responders that are protected by the ATD standard are exempt from the ETS. This is shown by Cal OSHA’s example that firefighters cannot be subject to both the ETS and ATD standards at the same time. Simply put, the firefighter must be protected from COVID-19 under one of the standards, but not by both.  If the employer’s ATD Prevention Plan does not identify the firefighter as having occupational exposure to aerosol transmissible diseases, or if the firefighter is not protected under that plan, the ETS will apply. Employers in healthcare and emergency response will therefore need to carefully evaluate COVID-19 exposures in their workplaces and operations, and ensure that employees are protected by the preventive measures under either the ETS or ATD standard. Under this guidance, however, an employer cannot take the position that its entire workplace or operations are exempt from the ETS if only some of its employees are covered by the ATD standard. Employers in healthcare and emergency response may therefore need to comply with both the ATD and ETS in different areas of their operations.

Given the expedited roll-out of Cal OSHA’s ETS and the ongoing litigation surrounding the ETS, the agency will likely continue issuing new FAQs and guidance to employers.  If you need assistance in complying with the ETS or other Cal OSHA safety regulations, please reach out to the Jackson Lewis attorney with whom you often work or any member of our Workplace Safety and Health Team.

Despite the California Grocers Association lawsuits pending against four cities over hero pay ordinances, more cities and counties have passed or are considering premium pay ordinances for grocery store and similar workers. The laws all vary in both scope and applicability so affected employers with locations throughout California should be mindful of the distinctions. Of the laws passed, some are effective immediately, others are effective after 30 days and in South San Francisco it is retroactive.

Thus far the following localities have passed premium pay ordinances in response to the ongoing COVID-19 pandemic:

Location Covered Employers Amount
Berkeley

Grocery stores that employ 300 or more employees in the state of California

 

 $5.00
Coachella

Agricultural operations, grocery stores, restaurants, and retail pharmacy that employee 300 or more employees nationally and 5 employees per location in the city of Coachella

 

 $4.00
Irvine

Retail establishments including grocery stores, drug stores, or certain large retail stores that employ 20 or more employees at the location and who employ 500 or more employees nationally.

 

 $4.00
Long Beach

Grocery stores that employ 300 or more employees nationally and employ more than 15 employees per location in the City

 

 $4.00

County of Los Angeles

(applies to unincorporated areas only)

Grocery stores and employ 300 or more employees nationally and employ more than 10 employees per location.

 

 $5.00
Montebello

Grocery stores and drug stores that employee over 300 employees or more nationally and 15 employees per store within the City

 

 $4.00
Oakland

Grocery stores that employ 500 or more employees nationally.

 

 $5.00
San Jose

Grocery stores that employ 300 or more employees nationally.

 

 $3.00
San Leandro

Retail food establishments that employ 300 or more employees nationally.

 

 $5.00

County of Santa Clara

(applies to unincorporated areas only)

Grocery and drugstores that either (a) employs 300 or more employees nationally and 15 or more employees in the unincorporated areas of the county, or (b) is a franchise that is associated with a Franchisor that employees more than 300 employees nationally and operates at least 10 locations in California

 

 $5.00
South San Francisco

Large Grocery Store or Large Drugstore that employs 500 or more employees nationwide

 

$5.00*

 

*Notably this increase is retroactive
West Hollywood

Grocery stores that employ 300 or more employees nationally and 15 employees per location in the City.

 

 $5.00

 

While the ordinances proceed forward, so too do the lawsuits against some of the cities that were the early adopters. On February 25, 2021, the judge presiding over the lawsuit against the City of Long Beach denied the California Grocers Association’s (“CGA”) request for a preliminary injunction against the city’s ordinance. CGA has appealed the decision. If reversed on appeal, it would mean that covered employers would not be required to comply with the ordinance until a final decision was made in the case.

Jackson Lewis continues to monitor local, state, and federal legislation pertaining to COVID-19. If you have questions about premium pay ordinances or other employment concerns related to COVID-19, contact a Jackson Lewis attorney to discuss.

We recently provided an update on the looming end date for COBRA and other deadline extensions and the uncertainty that continues to add to the administrative burdens without more clarity from the DOL and IRS.  Message received, apparently.

On behalf of the IRS, the DOL has now released Disaster Relief Notice 2021-01 that attempts to resolve a potential conflict with other statutory guidance under ERISA Section 518 and Code Section 7508A, which technically limits the allowable deadline extension period to a maximum of 1 year.  Unfortunately, this now results in new deadlines that can apply immediately and will differ based on individual events.  Fortunately, the DOL recognizes this will be complicated and burdensome to many so they also offer welcomed commentary that will provide relief to employers and plan administrators who take reasonable steps to comply.

Under the new guidance, COBRA, HIPAA Special Enrollment, claims and appeals timeframes, and other applicable deadlines that were previously extended indefinitely are now subject to a deadline that ends as of the earlier of: (1) one year from the date the deadline would have occurred on or after March 1, 2020, absent the previous extension guidance, or (2) the end of the Outbreak Period as previously defined.  The Notice provides a helpful example: if a qualified beneficiary would have originally been required to make a COBRA election to continue health insurance coverage by March 1, 2020, that person now technically will need to have made this election by March 1, 2021.  If the individual was to have made an election (or COBRA payment) by May 15, 2020, they will still have until May 15, 2021, (provided the Outbreak Period has not ended).  If that individual was recently terminated and ordinarily (by statute) would be required to make a COBRA election by April 1, 2021, that person will still have the ability to defer the election until the end of the Outbreak Period (or April 1, 2022, if that were to come first).  Employers have the same rolling 1-year maximum period to issue any required notifications.

The Notice also provides in part, “plan fiduciaries should make reasonable accommodations to prevent the loss or undue delay in payment of benefits…and should take steps to minimize the possibility of individuals losing benefits because of a failure to comply with pre-established time frames.”  This opens up the possibility for additional extensions of deadlines where facts and circumstances would argue for additional flexibility.  The Notice helpfully notes that enforcement “will be marked with an emphasis on compliance assistance and includes grace periods and other relief”, as long as the plan administrators and other “fiduciaries…have acted in good faith and with reasonable diligence under the circumstances.”

What This Means to Employers and Plan Administrators

While the above language from the Notice acknowledges that the agencies understand and appreciate the complications this latest guidance creates for plan administrators to immediately restart the clock of daily COBRA, HIPAA, and other deadlines and for individuals who now must immediately catch up monthly COBRA premium obligations to maintain health insurance under the employer’s plan, the reality is that plan sponsors need to address administrative compliance with all deadlines now.

Plan sponsors should discuss next steps with counsel and third-party administrators to weigh all options and obligations. To be considered as acting in “good faith and with reasonable diligence,” we recommend following these steps:

  • Contact all COBRA and other third-party administrators to execute a plan of action for notification to all existing and COBRA eligible individuals regarding any applicable deadlines.
  • For individuals who have deferred making a COBRA election for any periods on or after March 1, 2020, consider whether new notices should be issued with updated coverage and rate options, and current election and payment deadlines. Consider starting the deadlines from the date that notice is mailed so the individual has a fair opportunity to evaluate the need for coverage.
  • For those who are already enrolled in COBRA but who have been deferring payment for coverage, provide initial notice and demand payment of all prior months’ premiums that may be owing. Where this involves many months, consider providing a period over which such individuals can make installment payments with a “grace period” for full and complete payment before COBRA coverage terminates.
  • Establish and communicate claims run-out periods for Flexible Spending Accounts and other applicable benefits.
  • Consider additional communications reminding all affected individuals of the availability of coverage via healthcare.gov, which may be a less expensive option for many and does not require retroactive enrollment to the date coverage was lost as required under COBRA.

We are available to help employers and plan administrators evaluate how this new guidance impacts their employee benefit plans.  Please contact a team member or the Jackson Lewis attorney with whom you regularly work if you have questions or need assistance.

I – Overview of the Butch Lewis Emergency Pension Plan Relief Act

The much-heralded Butch Lewis Emergency Pension Plan Relief Act of 2021 (the “Butch Lewis Act of 2021”) is closer to becoming a reality as part of the COVID-19 relief bill, which is set for a vote in the House of Representatives on February 26, 2021. The Butch Lewis Act of 2021 strives to address the plight of multiemployer and single-employer pension plans in the wake of COVID-19. Here we discuss only the multiemployer pension plans.  Representative Richard Neal (D-MA), chairman of the Ways and Means Committee of the House, proposed this bill. The bill has been fast-tracked.

Specifically, the proposed legislation offers several forms of relief to struggling multiemployer plans, including:

  1. Retention of a plan’s zone status at the beginning of the 2019 plan year for the plan years beginning in 2020 or 2021 (meaning that plans in “endangered or critical status” could delay updating the plan or schedules until the plan year beginning March 1, 2021);
  2. Extension of rehabilitation period by five years for plans in “endangered or critical status” for plan years beginning in 2020 or 2021 (effective for plan years beginning after December 31, 2019);
  3. Permission for plans to use a thirty-year amortization base to spread out losses (effective for plan years ending on or after February 29, 2020); and
  4. Freeze of the cost of living adjustment.

No provisions provide any monies to pension funds.

Rather, under the Special Financial Assistance Program for Financially Troubled Multiemployer Pension Plans, a portion of the Butch Lewis Act of 2021, monies will be provided to aid approximately 10 million Americans that participate in multiemployer pension plans, 1.3 million of whom are stuck in quickly sinking plans.

  1. What does this Program do? Through this program, the Pension Benefit Guaranty Corporation (the “PBGC”) would send payments directly to eligible multiemployer pension plans. It also would raise the PBGC multiemployer plans premium rate to $52 per participant as of 2031.
  2. Which multiemployer pension plans are eligible? These plans are eligible:
    • Plans in “critical and declining status” (within the meaning of section 305(b)(6) of ERISA) in any plan year beginning in 2020 through 2022.
    • Plans with a modified funded percentage of less than 40% with more retirees than active workers (less than 2:3 ratio) in any plan year from 2020 through 2022. Under the Act, modified funded percentage means “the percentage equal to a fraction the numerator of which is current value of plan assets and the denominator of which is current liabilities.”.
    • Plans that became insolvent (under section 418E of the Internal Revenue Code of 1986) after December 16, 2014, and have remained insolvent.

Eligible funds must apply to the Program no later than December 31, 2025.

  1. How much will eligible plans be receiving? After a plan’s application is approved, the PBGC will make a single, lump-sum payment in the amount required for the plan “to pay all benefits due during the period beginning on the date of enactment and ending on the last day of the plan year ending in 2051 with generally no reduction in a participant’s or beneficiary’s accrued benefit.” Essentially, the PBGC would be paying all pension benefits owed to retirees. There is no cap on this payment, and the funding predictions will be performed on a “deterministic basis.”
  2. Do the payments come with any obligations? Plans would have to reinstate benefits that were suspended and invest the monies in investment-grade bonds or other investments allowed by the PBGC.
  3. Does this Program affect employers? Not immediately. An employer’s withdrawal liability will still be calculated without consideration of the payment received under the Program until the plan year beginning 15 calendar years after the effective date of the special financial assistance. Eligible plans would have to provide employers with an estimate of the employer’s share of the plan’s unfunded vested benefits (accounting for any payment under the Program) as of the end of each plan year.

II – Practical Application of the Butch Lewis Emergency Pension Plan Relief Act

The Butch Lewis Act of 2021’s lofty goals seem promising, but employers and pension beneficiaries should be wondering how this Act will operate. Questions regarding how many pension plans will require relief, and practical considerations about how the PBGC will secure the funding to relieve the eligible plans, remain up in the air.

Interestingly, there may be fewer eligible funds than predicted. Milliman’s December 2020 Multiemployer Pension Funding Study concluded that the aggregate funded percentage for all multiemployer pension plans as of December 31, 2020, was 88%, the highest percentage it has been since before the 2008 market crash. However, this study relies predominately on data from Form 5500s from the 2018 and 2019 plan years. Per Milliman, the impact of COVID-19 is thus only reflected on investment returns, and not plan participation or contribution levels.

But the study provides valuable insight into the potential number of pension plans eligible for the Special Financial Assistance Program. Only 124 pension plans were designated as “critical and declining” as of December 31, 2020. These plans are projected to remain underfunded through 2025. From these figures, at least 124 pension plans will be eligible for the Special Financial Assistance Program.

The PBGC’s 2020 Annual Report reflects the looming insolvency of its Multiemployer Program by 2027. While federal funding from the Bipartisan American Miners Act of 2019 to the United Mine Workers of American 1974 Pension Plan staved off PBGC’s insolvency for an extra year, the reality remains dire. When the Multiemployer Program becomes insolvent, the PBC can no longer provide financial assistance to pay the current level of guaranteed benefits in insolvent plans.

This projected insolvency directly conflicts with the goals of the Butch Lewis Act of 2021, which would cause the PBGC to pay essentially all pension benefits owed to retirees from the date of the Act’s enactment to the last day of the plan year ending in 2051.

If the PBGC Multiemployer Program is on the brink of insolvency, how can it pay such hefty lump-sum payments to roughly 124 pension plans? The text of the Act does little to answer this question. The text of the Butch Lewis Act of 2021 provides that “an eighth fund shall be established for special financial assistance to multiemployer pension plans,” and that funds will be appropriated from the general fund to provide for the costs of providing financial assistance. And this eighth fund will be “credited with amounts from time to time as the Secretary of Treasury, in conjunction with the Director of the PBGC, determines appropriate, from the general fund of the Treasury.” Thus, the practical application of the Butch Lewis Act of 2021 remains unclear.

Please contact a team member or the Jackson Lewis attorney with whom you regularly work if you have questions or need assistance.