New Health Care Plan Notice Requirements are Effective in October - Is Your City Prepared?

As most Oregon cities should be aware, many portions of the Federal Patient Protection and Affordable Care Act (ACA) become effective January 1, 2014.  While not all cities are directly impacted by the ACA (depending on the number of employees), they are impacted by a change to the Fair Labor Standards Act (FLSA), specifically the addition of Section 18B, which was added through provisions in the ACA.  Section 18B is designed to enhance employer notice to employees of health care coverage options available through the health insurance exchange or marketplace as labeled by the U.S. Department of Labor (DOL).  The marketplace will offer a choice of plans that meet standards for health care coverage and provide information to consumers and employers to assist them in making educated choices about the policies they are purchasing. Background

In May, the DOL issued Technical Release 2013-02, which provides temporary guidance on health care reform notice requirements now contained in the FLSA.  All employers covered by FLSA, which includes local governments, must meet the new notice requirements beginning October 1, 2013.  These guidelines are temporary until such time as DOL promulgates regulations and/or additional guidance.

The technical release also provides an updated model election notice for group health plans for purposes of the continuation coverage provisions under Title X of the Consolidated Ombnibus Budget Reconciliation Act of 1985 (COBRA) to include additional information regarding health coverage alternatives offered through the marketplace.  While COBRA requirements will not change under the ACA, DOL has long provided a model election notice that plans may use to satisfy COBRA requirements  and it is this model election notice that has been updated to make qualified beneficiaries (under COBRA) aware of other coverage options that are available in the marketplace.

The Notice Requirements

The required written notice under the new FLSA provisions must be provided to every employee, regardless of whether or not they are enrolled in a health plan of the employer or whether they are a part-time or full-time employee.  The notice must inform the employee of the following:

  1. The existence of the marketplace (referred in the statute as the exchange), including a description of the services provided as well as contact information.
  2. If the employer plan’s share of the total allowed cost of benefits provided under the plan is less than 60 percent of such costs, the employee may be eligible for a premium tax credit under Section 36B of the Internal Revenue Code if the employee purchases a qualified health plan through the marketplace.
  3. If the employee purchases a qualified health plan through the marketplace, the employee may lose the employer contribution (if any) to any health benefits plan offered by the employer and all of a portion of such contribution may be excludable from income for Federal Income tax purposes.

Beginning October 1, 2013, employers must provide this notice to each new employee at the time of hire.  Current employees as of October 1, 2013 must be given notice before that date.

DOL has created model notice language to comply with the new FLSA provision which can be found at www.dol.gov/ebsa/healthreform.  This web page has a model notice for employers who do not offer a health plan and another for employers who offer a health plan to some or all employees.  The new COBRA model notice can be found at www.dol.gov/ebsa/cobra.html.

The Impact on Local Governments

It is important to note that these new requirements apply to all local governments regardless of the impact of the ACA because these are new requirements under the FLSA.  These requirements will also apply regardless of whether the ACA marketplace is operational by January 1, 2014.  Local governments would be wise to begin revising these notices now with the appropriate employer offered health care plan information.  It is also advised that cities consult with their plan administrator and city attorney to ensure that any changes to the model notice are appropriate and also to ensure all notices are accurate.

Retiree Health Benefits – Act V – Doyle v. City of Medford

In Doyle et al v. City of Medford (A147497 May 15, 2013), the Oregon Court of Appeals has written the latest chapter in the ongoing litigation regarding whether ORS 243.303(2) requires cities to provide health care insurance coverage to retired employees. Background – ORS 243.303(2) and the Duty to Provide Coverage to Retirees

ORS 243.303(2) requires cities that make health care insurance available to their officers and employees to make that same coverage available for any retired employee of the city, his or her spouse and his or her dependent children “insofar as and to the extent possible.”  The statute permits cities to “prescribe reasonable terms and conditions of eligibility and coverage” and permits cities to elect to pay all, some or none of the cost of making such coverage available.

The City of Medford provided health care insurance to some of its employees under a contract with the Oregon Teamster Employer Trust.  Under the contracted policy, retiring employees who were previously covered could not elect to continue health care coverage after retirement.  Several retired employees sued claiming that the City violated ORS 243.303(2) by failing to make health care coverage available to them in a case that has gone through the federal district court, the United States Ninth Circuit Court of Appeals, the Oregon Supreme Court, the Jackson County Circuit Court and now the Oregon Court of Appeals.

When the Oregon Supreme Court issued its decision, 347 Or 564 (2010), the Court held that “[w]hether a local government has complied with ORS 243.303(2) will depend on whether it has made health insurance coverage available to retirees ‘insofar as and to the extent  possible,’ in light of all the facts.”  The Court further explained that “[t]he responsibility to demonstrate that it was not possible, under the statutory standard, to make coverage available to retirees rests with the local government, and we emphasize that the local government cannot make that showing, as the city attempts to here, by pointing solely to the fact that its chosen provider does not offer retiree health insurance coverage.”

After the Supreme Court’s decision, the case eventually made its way to the Jackson County District Court, where the plaintiffs were awarded monetary damages for the City’s violation of ORS 243.303(2) as well as breach of contract and age discrimination claims.

The Decision

The Court of Appeals reversed the circuit court’s decision and dismissed all of the plaintiffs’ claims for damages.  The Court dismissed the age discrimination and breach of contract claims on procedural grounds and dismissed plaintiffs' claim that the City violated ORS 243.303(2) on the basis that the statute does not provide a private right of action for monetary damages.

The issue before the Court of Appeals on the claim of a statutory violation was whether the City’s failure to comply with the duty imposed upon it by ORS 243.303(2) gave rise to liability for monetary damages that could be enforced privately by the retired employees.  Because the statute does not expressly provide a right for retired employees to sue for monetary damages, the Court of Appeals analyzed whether the legislature intended to provide for such a right.  The Court of Appeals concluded that the legislature never contemplated such a right as there were “no textual or contextual clues from which [the court could] infer that the legislature contemplated the possibility of a private right of action or civil liability for the failure of a municipality to make available to its retirees the same insurance coverage that it provides to its employees.”  In part, the Court reached its decision because “the degree of flexibility and discretion accorded to the local government is inconsistent with an intention that the statute be enforceable through a private action for damages.”

The Impact

As we complete this latest chapter in the saga of ORS 243.303(2), cities must remain aware that the statute places an affirmative obligation on them to make health care coverage available to their retired employees “insofar as and to the extent possible.”  In addition, cities who choose not to follow this obligation will shoulder the burden of demonstrating that it was not possible to make such coverage available to retired employees.  The good news, however, is that future litigation claiming a violation of this statute may not include demands for monetary penalties unless the law is amended by the Legislature or the Oregon Supreme Court reverses the decision of the Court of Appeals.

Transgender Applicants Protected from Discrimination Under Title VII

The Equal Employment Opportunity Commission (EEOC), the federal agency responsible for enforcing federal laws that make it illegal to discriminate against a job applicant or an employee because of the person's race, color, religion, sex, national origin, age, disability or genetic information, ruled that Title VII of the Civil Rights Act of 1964 (Title VII), protects against discrimination based on gender identity, change of sex, and transgender status.

The ruling on transgender discrimination came after a transgender woman, Mia Macy, was denied employment with the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) prompting her to file a complaint with the EEOC.  In that case, Macy v. Holder, Macy, applied for a job with ATF while she was in the process of transitioning to a woman.  After interviewing for the job, she was assured a position pending the completion of a background check.  While the background check was in progress, Macy relayed to the ATF that she was in the process of changing her gender.  Shortly thereafter, she was told the position was no longer available; only to find out later that the position was indeed still open and another individual had been chosen to fill it.

As required under federal law, she filed a complaint with the EEOC alleging discrimination based on sex, gender identity, and sex stereotyping.  The EEOC accepted her claim of sex discrimination, but did not recognize her claims of gender identity discrimination and sex stereotyping as something prohibited by Title VII.  Macy appealed that decision.  In the interest of resolving the confusion regarding discrimination based on gender identity including differing court interpretations, the EEOC clarified that Title VII protects against discrimination based on gender identity, change of sex and transgender status.  All of Macy’s claims are now being processed by the EEOC under Title VII.

Individual City Councilors Do Not Have Independent Authority

Linn County Circuit Court recently issued a decision that, although only binding on the parties, has significance for local governments statewide.  The decision directly addresses the question of the scope of an individual city councilor's authority with respect to access to city records and, by extension, other city functions. The question frequently arises when an individual city councilor requests (sometimes demands) access to records that are generally exempt from disclosure, arguing it is necessary for the councilor to make informed policy or budget decisions, or simply by virtue of the councilor’s position on the city council.  At BEH, we have long taken the position that a city council can only act as a whole, and that individual councilors do not have any authority beyond that of a member of the public when it comes to viewing or receiving copies of protected materials.

In this case, the city placed a police officer on administrative leave for work-related misconduct; almost a year later, the officer retired.  Apparently, some time later the Assistant City Manager made a statement to the press that the officer could have been fired had he not retired.  Shortly thereafter, City Councilor Weldon sought copies of the officer's personnel file, tort claim notice, severance agreement and related documents.  The City Manager declined to provide the records and, ultimately, the entire City Council voted to deny Councilor Weldon access to the records.  Weldon then sought a writ of mandamus directing the city to provide him access to the records.

There were a number of peripheral procedural issues, including whether the court had jurisdiction (it does) and whether the City should be a party (it should), but on the core question, the court ruled that "individual city councilors have no authority to take actions or make decisions on behalf of the city. *  *  *  The right of the council to oversee the integral details of municipal government exists only in a majority of the council."  Accordingly, an individual councilor does not have authority to review documents that are protected from disclosure solely by virtue of the person's position on the city council.

While, as noted, the decision is only binding on the parties, the decision is likely to have statewide implications because of the court's extensive opinion.  The court surveyed the history of municipal corporations to determine the scope of an individual councilor's authority vis-a-vis the entire council.  The court’s discussion of the merits begins:  "When settlers from Europe made their way to the American continent . . ."  Clearly, this judge is leaving nothing to chance.  Councilor Weldon argued that he has a fiduciary duty to inspect all records of the municipal corporation in order to determine whether the City Administrator is doing his job.  Surveying over 400 years of U.S. history, the court found no such duty.  Councilor Weldon primarily relied on cases that deal with the rights of minority shareholders in a private corporation, which the court found do not apply to a municipal corporation, for which the corporation's duties are set out in ORS chapters 221 and 222.

It is important to note that this is not directly a case about public records.  Because the case involved a police officer, the city relied on ORS 181.854 (3) which provides:  "A public body may not disclose information about a personnel investigation of a public safety employee of the public body if the investigation does not result in discipline of the employee."  Here, the City and the public safety official reached a settlement, the officer resigned and no discipline was ever taken.  Accordingly, the city was prohibited from disclosing the requested information.

 Nonetheless, the court's reasoning would seem to apply equally to information protected under the public records laws or, for that matter, any time an individual city councilor attempts to direct action by the city or city employee.  The court’s final thought are worth remembering:

 "Finally, the court must address the underlying concern raised by Mr. Weldon.  He says that without oversight by the City Council, government in Lebanon could run amok.  While there may be truth in that assertion, Mr. Weldon must recognize that his position as an elected city official in the City of Lebanon brings with it the mantle of leadership.  This air of authority cannot be sustained by blind pronouncement or show of authority.  It is sustained by purpose, longsuffering, and by persuasion.  Mr. Weldon may well prevail in this matter if he convinces a majority of the council that his position is correct and that additional oversight is necessary.  Mr. Weldon may convince the City Council to call hearings on these matters in executive session.

"If the City Council disagrees, as they have in the past, Mr. Weldon may call for public hearings.  If the people of City of Lebanon agree with him, they may deliver a majority to him at the ballot box.  If the people disagree with Mr. Weldon, they may deliver disappointment to him at the ballot box as well."

HB 4016 Creates Broad New Class of Mandatory Reporters

House Bill 4016, sometimes called the “Jerry Sandusky Bill,” was passed this month by both chambers of the Oregon Legislature.  The bill establishes a new, broader list of employees or volunteers of organizations providing child-related services or activities that are now subject to child abuse reporting requirements.  Some highlights include employees of higher education institutions, coaches, assistant coaches or trainers of child athletes and individuals who provide guidance, instruction or training in youth development activities.

The precise language of the Bill is being interpreted in different ways by different groups, but at least one fair reading of the Bill seems to make clear that any employee of an organization or entity which provides child-related services or activities is now a mandatory reporter.   Because the new language doesn’t apply to an “Employee of Department,” but rather uses the phrase “public organization,”   the new law potentially casts a rather wide net.  It could mean that everyone from city planners to secretaries, maintenance folks to city managers, as well as everyone in between, may now be responsible for reporting suspected child abuse.

The League of Oregon Cities is working with the legislature to clarify the language of the Bill, which doesn’t go into effect until 2013.  In the interim our firm is providing legal guidance to cities on the new law and how it affects their employees, in an attempt to help cities navigate what is being heralded as a confusing and sticky piece of legislation.

Stay tuned for more information – we plan a more detailed article in the summer issue of the firm’s newsletter, Gov-law Connection.

New Prevailing Wage Law Effective in Oregon

On June 7, 2011, Oregon’s governor signed SB 178 into law. A copy of the bill is available for review here. The bill amends Oregon’s existing prevailing wage laws, codified at ORS 279C.800 et seq. The changes were effective on June 7, 2011. While SB 178 makes a number of housekeeping amendments to the prevailing wage statutes, the bill also includes some substantive changes as well. The biggest change concerns public works contracts that are subject to federal prevailing wage rates.

For public works contracts advertised on or after June 7, 2011, agencies must now specifically require in the contract that the general contractor pay the higher of the applicable state or federal prevailing rate of wage to all workers. Previously, the agency was only required to identify which rate was higher. In addition, the bill requires that “every contract and subcontract must provide that workers on the public works must be paid not less than the higher of the applicable state or federal prevailing rate of wage.” This provision essentially requires the general contractor to ensure that its obligation “flows down” to any subcontractors on the project.

The Oregon Bureau of Labor and Industries has adopted temporary rules to implement SB 178. A copy of those temporary rules is available for review here.

Unlawful employment practice: use of one’s credit history

By Courtney Lords, Associate Senate Bill 1045, approved during the 2010 Special Session, made it unlawful for an employer to obtain or use an applicant’s or employee credit history for employment purposes. Employment purposes include hiring, firing, promotion, demotion, suspension, compensation and retaliation.

However, the new law provides exceptions for when a credit history may be used for employment purposes. These exceptions include:

(a) employment of a public safety officer who is a member of a law enforcement unit; (b) employers who are federally insured such as banks or credit unions; (c) employers who are required by law to use individual credit; or (d) when one’s credit history is “substantially job-related” and the employer discloses the use of such history to the applicant or employee in writing.

Based on this new law, employers should revise any existing practices and/or policies that use or refer to use of credit history for employment purposes, unless one of the above exceptions applies.

Local Government Liability for Adverse Employment Actions Could Be Affected by U.S. Supreme Court Case

The U.S. Supreme Court granted a petition for certiorari to hear a case that could have far-reaching consequences for state and local governments.  The question presented is whether the Third Circuit Court of Appeals erred in holding that state and local government employees may sue their employers for retaliation under the First Amendment’s Petition Clause when they petitioned the government on matters of purely private concern, contrary to decisions by all ten other federal circuits and four state supreme courts that have ruled on the issue. The facts of the case involve the Borough of Duryea, Pennsylvania’s dismissal of Police Chief Guarnieri.  After filing a union grievance he was reinstated to his position but upon his return to work, the Borough Council issued eleven directives to Guarnieri regarding things he could and could not do on the job.  Again, Guarnieri filed a union grievance whereby an arbitrator directed Duryea to modify or abandon some of the directives.  Eventually, Guarnieri filed suit against his employer alleging unconstitutional retaliation under the First Amendment for filing grievances against the City.   His grievances included the issuance of the directives, delay in issuing health insurance benefits and withholding of overtime pay.

The Third Circuit found that a public employee who has petitioned the government through a formal mechanism such as the filing of a lawsuit or grievance is protected under the Petition Clause of the First Amendment from retaliation for that activity even if the petition concerns a matter of solely private concern.   Every other federal circuit court has held the opposite – that the matters must be of public concern to be protected.  For example, the Ninth Circuit has held that where an employee grievance related only to refuting false charges of an employee’s ineptitude, those were matters only of a personal interest and as such the employee could not invoke First Amendment protection.  See Gearhart v. Thorn 768 F2d 1072 (9th Cir. 1985).

The ruling will impact local governments if in fact employees are allowed to invoke First Amendment protections for matters of private concern.  While it will negate the need to distinguish between matters of public and private concern where grievances are concerned, it could also result in increased liability for public entities when subjecting employees to adverse employment actions.  Local government employers will need to be much more cautious when disciplining employees who have filed grievances.

Briefing is scheduled to be completed in early 2011, after which time an oral argument date will be set.  Stay tuned for updates on this important case.