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Staying on top of employment law: Taking care of employees while avoiding lawsuits

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Imagine this: A manager at a nationwide health care organization asks one of her employees to help get ready for a fellow employee's birthday by decorating her cubicle with balloons. The manager, knowing some employees don't celebrate birthdays or holidays due to religious reasons, specifically tells the employee, "You don't have to do this, only do it if you want to," to which the employee responds, "No, it's fine, I don't mind doing it at all."

A few days later, the manager is called into the human resource director's office because said employee had lodged a formal complaint against the manager because she felt pressured to participate in a birthday celebration, and doing so ran counter to her religious beliefs.

While this may seem like an extreme example, lawsuits are filed all the time against employers over scenarios such as this.

From administering benefits to making sure your employees take lunch breaks, staying on top of the ever-changing landscape of employment law is a challenge. Each year, changing employment laws and regulations need to be understood by an employer, implemented and communicated to employees.

So what's been happening lately with employment law? Below is a rundown of hot topics that have been addressed by the courts and legislature that could affect employment law in the coming year.

Flexible rules on meal breaks

On July 23, the 4th District Court of Appeals in California found that employers aren't required to ensure employees take their meal and rest breaks (see Brinker Restaurant Corp.). Rather, employers are only required to make available such breaks. Appeal of this decision is likely.

Pursuant to California law, employees are entitled to at least one half-hour meal period for every five hours worked, and a 10-minute rest period for every four hours worked.

Department of Labor pushes for fee disclosures

The Department of Labor revealed proposed rules meant to lay out fees and expenses tacked onto 401(k) costs. If adopted, these regulations would be effective for plan years beginning on or after Jan. 1, 2009.

The proposed rules would require companies offering 401(k) to disclose to participants the investment options available, fee and expense information, past performance data, comparable benchmark returns and a Web site address. Retirement plan providers would be required to describe the fees and expenses charged to participants for plan administrative services, as well as how the fees are allocated to the individual accounts. Such disclosures would be required when the participant becomes eligible to participate in the plan, and then annually thereafter. In addition, a quarterly accounting of actual dollar amounts charged to the accounts must be disclosed by the plan fiduciaries.

Reporting requirements increased for 403(b) plan sponsors

Sponsors of 403(b) plans have only been required to complete a limited number of line items on the annual form 5500. But, as of Jan. 1, 2009, 403(b) plan sponsors have enhanced reporting and audit requirements.

403(b) plans for churches, schools, hospitals or other nonprofit organization will be required to operate in accordance with a written plan document containing all material terms and conditions for eligibility, benefits, limitations, contracts available under the plan, and the time and form under which benefits are distributed.

Additionally, 403(b) plans must file the full form 5500 return. If the plan also has 100 or more eligible participants, it must also comply with the form 5500 annual audit requirements.

HEART Act enhances benefits for military

The Heroes Earnings and Assistance and Relief Tax Act of 2008 (HEART Act) provides enhanced benefits to those in military service. The HEART Act builds upon the Uniformed Services Employment and Re-employment Rights Act (USERRA).

Effective June 17, 2008, cafeteria plans allow reservists called to active duty to receive distribution of unused flexible spending account (FSA) funds to prevent the "use it or lose it" rule from forcing the reservist to forfeit his or her FSA funds. This rule is permissive but not required. This distribution must be a "qualified reservist distribution":

¥ an individual who is a member of a military service unit called to active duty for a period in excess of 179 days or for an indefinite period; and

¥ distribution occurs no later than the end of the plan year.

Effective Jan. 1, 2009, a tax-qualified plan may permit a participating active military duty person for more than 30 days to receive distribution of elective deferrals. The right to deferrals will be suspended for six months following distribution.

Mandated paid sick leave too costly for California

On Aug. 7, 2008, the California bill that passed the House vote and threatened to mandate paid sick leave if it passed the Senate was killed. AB 2716 would have granted employees of California small businesses up to five days of paid sick leave annually, and nine days annually for employees of large businesses. Small businesses successfully fought against the bill, resulting in the bill being dropped.

Maine and Connecticut state Legislatures also recently killed similar paid sick leave bills. Alaska, Minnesota, Vermont and West Virginia had similar legislation fail when lawmakers did not take up the vote before legislative deadlines passed. Ohio has placed an initiative on the November ballot. This issue may be raised on the federal level, as both presidential candidates have weighed in on the matter.

Medical leave coverage for college students may be extended

On July 30, 2008, the U.S. House approved bill HR 2851 that would allow college students to continue their medical leave on the their parent's health insurance policies.

Many health insurers allow children of covered parents to receive coverage under their parents' policies until age 25 if they remain enrolled in college. However, there is no current federal regulation requiring this practice.

If this bill were to pass the Senate and become law, college students would be able to continue receiving medical coverage under their parents' policy for one year while on medical leave from college.

Federal minimum wage increases

The federal minimum wage increased from $5.85 to $6.55 per hour effective July 24, 2008. The Fair Minimum Wage Act of 2007 provides for phased-in increases ultimately reaching $7.25 per hour effective July 24, 2009.

Note that this increase in the federal minimum wage will not affect the wages of California employees, who are entitled to a minimum wage of $8 per hour. In San Francisco, the minimum wage is $9.15 per hour.

The Department of Labor offers employers 'elaw' assistance

The Department of Labor (DOL) has enacted a new "elaw" (Employment Law Advisor) interactive site to assist employers with federal recordkeeping, reporting and notice requirements. The DOL's elaw advisers can be found on the Web at www.dol.gov/elaws/firststep/.

Are you ready for changes in employment law in 2009? A good employee benefits insurance adviser can assist you with understanding what laws you need to implement and communicate to your employees. With your broker as your partner, you can adhere to the employment laws that help keep your company protected.

Pannier is a senior client executive and Lisa Nelson is the director of regulatory affairs for Barney & Barney LLC, a California-based company that provides a wide range of insurance and risk-management solutions.

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