Benefits & Compensation

Our colleagues at Epstein Becker Green have a post on the Hospitality Labor and Employment Law blog that will be of interest to our readers in the technology industry: “Mayor de Blasio Proposes Mandatory Paid Personal Time Law.”

On January 9, 2019, Mayor Bill de Blasio announced his plan to make New York City the first city in the country to mandate that private sector employers provide paid personal time (“PPT”) for their employees. Under the proposal, employers with five or more employees would be required to grant their employees 10 days of PPT to use for any purpose, including vacation, religious observance, bereavement, or simply to spend time with their families. It is unclear whether the proposed legislation would apply to only full-time workers, or whether, similar to the Earned Safe and Sick Time Act (“ESSTA”), it would include many part-time employees as well. The Mayor said he would work with the New York City Council to develop the legislation, and several Council members have already voiced their support for the proposal. …

Read the full post here.

There is a visceral and palpable dynamic emerging in global workplaces: tension.

Tension between what is potentially knowable—and what is actually known.   Tension between the present and the future state of work.  Tension between what was, is, and what might become (and when).  Tension between the nature, function, and limits of data and technology.

The present-future of work is being shaped daily, dynamically, and profoundly by a host of factors—led by the exponential proliferation of data, new technologies, and artificial intelligence (“AI”)—whose impact cannot be understated.  Modern employers have access to an unprecedented amount of data impacting their workforce, from data concerning the trends and patterns in employee behaviors and data concerning the people analytics used in hiring, compensation, and employee benefits, to data that analyzes the composition of the employee workforce itself.  To be sure, AI will continue to disrupt how virtually every employer views its human capital model on an enterprise basis. On a micro level, employers are already analyzing which functions or groups of roles might be automated, augmented, or better aligned to meet their future business models.

And, yet, there is an equal, counterbalancing force at play—the increased demand for accountability, transparency, civility, and equity.  We have already seen this force playing out in real time, most notably in the #MeToo, pay equity, and data privacy and security movements.  We expect that these movements and trends will continue to gain traction and momentum in litigation, regulation, and international conversation into 2019 and beyond.

We have invited Epstein Becker Green attorneys from our Technology, Media & Telecommunications (“TMT”) service team to reflect and opine on the most significant developments of the year.  In each, we endeavor to provide practical insights to enable employers to think strategically through these emergent tensions and business realities—to continue to deliver value to their organizations and safeguard their goodwill and reputation.

Continue Reading <i>Take 5</i> Newsletter – The Present-Future of Work: 2018 Trends and 2019 Predictions

James D. Schutzer is the Vice President at JDM Benefits, a consulting group that provides strategic benefits services to small and mid-size employers. His career in healthcare spans over 20 years and has included leadership roles in employee benefits and insurance sales. He spent 10 years working in sales for carriers like Wellpoint and Oxford Health Plans. Jamie frequently presents and lectures to many organizations on the topic of the Affordable Care Act and sat on the New York State Health Benefit Exchange Regional Advisory Council. In addition, Jamie is the Immediate Past President of New York State Association of Health Underwriters (NYSAHU) as well as Legislative Co-Chair, and is an Executive Committee member of the Business Council of Westchester, and currently serves as Treasurer. In December 2015, Jamie was named in the Employee Benefit Adviser as one of the 14 politically active brokers to know across the U.S.

While attempts to fully repeal and replace the Affordable Care Act in 2017 did not come to fruition, several developments are taking on momentum which will surely shape the ability of employers to sponsor insured health plans for their employees in the future. From the repeal of the individual mandate penalty, expansion of association health plans, State proposals to increase taxes on insurers, referenced-based pricing and new “blockchain” models to purchase services directly for employees, the insured markets will be under increasing stress to survive. It is possible that these trends will accelerate the collapse of the insurance markets and usher in a government provided single payer system, and/or self-directed mode of procuring healthcare via blockchain technology.  I recently sat down with James Schutzer to discuss the evolving landscape in employer-provided group healthcare and obtain his insights regarding how these changes will impact costs and the future of employer-provided health insurance.

Michelle Capezza: How do you see the repeal of the individual mandate impacting the insurance markets and the ability of employers to obtain affordable insurance plans for their employees?

James Schutzer: For starters, the individual mandate penalty lacked the teeth from the beginning and I think it is still difficult to ascertain how many people enrolled in health insurance to avoid the penalty. There are different reports out in the market which argue the point from both sides. As an employee benefits advisor, I have seen a slight uptick in enrollment in employer sponsored coverage for the reason that employees want to avoid the individual mandate penalty. Therefore, I do not see the elimination of the individual mandate having a significant impact in the employer sponsored market. Plus, the employer mandate still exists as of this time and Applicable Large Employers are required to offer insurance or pay a penalty.

MC: For employers that seek to utilize the new rules expanding the ability to form association health plans (AHPs), how will this increase the adverse selection issues already straining insurance markets?

JS: One concern related to AHP’s is that they can possibly siphon off the “perceived” good risk leaving the older and sicker members in the small group market. This will certainly create a death spiral. Another concern is that employers can jump in and out of the small group market based on medical needs. I believe the proposed regulations try to address and prevent this type of behavior. I know the National Association of Insurance Commissioners has come out in opposition to AHP’s.

MC: How do you see these developments impacting an employer’s decision to sponsor a high deductible health plan with access to a health savings account for its employees versus self-funding a plan? Are these still viable modes of delivering employer-sponsored health coverage to employees?

JS: High deductible health plans with a health savings account are still growing but I have seen the pace slow down the last couple of years. One important piece which is still not readily available is the price transparency tools which enable people to be better healthcare consumers. On the other hand, we are seeing more employers testing the waters with partially self insured plans. There are many benefits to this strategy but it does come with risks. It is critical that the employer completely understands the inner workings of being partially self insured. Picking the right individual and aggregate stop loss, provider network, pharmacy benefit manager among other things is vital to the success of the plan.

MC: What is your view regarding the viability of referenced-based pricing models for employer-provided health insurance?

JS: Referenced based pricing (RBP) is a newer concept that is starting to break into the Northeast. This market is generally slower to adapt to change but RBP is proving to save employers money in other parts of the country. Hospital and major surgical costs have exploded and RBP is trying to tackle this issue head on by identifying the true cost basis and providing payment based on this data. Employers with a partially self funded plan rely on a “leased” network for their discounts when their employees utilize healthcare. This contracted rate is what the employer is responsible to pay (outside of the employee’s copay, deductible, etc). RBP looks to further peel back layers of hospital and high cost surgical claims and offer a more “fair” payment. In return, the employer’s costs are lowered. The one challenge to RBP is the potential for balanced billing but there are RBP vendors employers can work with to assist in defending the payment.

MC: Given the complexities of these markets and programs, it is no wonder blockchain is being applied to healthcare, and household name employers are beginning to develop models to contract directly with healthcare service providers and pharmaceutical companies and use their own technology to administer claims. It seems that if more transparency in pricing can be obtained, this would lend itself to blockchain purchases. How do you see this evolving, and do you think an AHP could operate this way?

JS: Yes, the blockchain phenomenon is creeping into healthcare. As I mentioned before, transparency is so badly needed in healthcare and blockchain might be the right conduit to deliver it. Healthcare is the only area I can think of where you do not know the cost of the service until after it has been performed. Although some progress has been made over time, there is still plenty of work to be done. Can you imagine needing a hip replacement and having the ability to price out the surgery in advance? But something which cannot be overlooked are the outcomes and the data to support this is sorely needed as well. Blockchain can definitely have an impact here as well as data can be easily accessible.

MC: As more individual data is collected via electronic medical records, and through direct blockchain purchasing developments, and other technology based tracking and healthcare delivery systems, do you see such Big Data being collated, analyzed and utilized to drive value based pricing initiatives and influence certain healthy behaviors?

JS: As I mentioned above, data is a key to bending the healthcare cost curve. I recently bought a new television and the research I was able to do online was remarkable. Brand, dimensions, reviews, prices…all at my fingertips. It would be a game changer if this type of data becomes available in the healthcare industry.

MC: Given these developments, do you see a potential for the pendulum to swing to a U.S. government-provided system of healthcare, requiring all employers and individuals to pay into such a system with increased payroll and income taxes, and perhaps requiring individuals to use blockchain technology to self direct their allotted government healthcare dollars to purchase healthcare services?

JS: I believe we must leave healthcare in the hands of the free market system as opposed to the government. I believe we are in the very early stages of a sea change in the healthcare industry. The current system is just not sustainable in the long run and although we can put band aids on the problem ultimately, there must be some major changes in the delivery system. We have the tools….now we have to figure out how to use them to our advantage.

MC: Thank you. Clearly there are many approaches to providing and obtaining health insurance. As cost pressures increase and the desire for transparency rises, it will be important to monitor which path stands.

When deliberations began regarding the first tax reform legislation in over thirty years, many raised concerns that tax reform measures would adversely affect retirement savings programs such as the 401(k) plan.  Now, as the tax reform proposals have become further vetted, the 401(k) approach to pre-tax retirement savings appears to remain intact and may actually survive “Rothification”.  The IRS also recently increased the 401(k) pre-tax savings contribution limit to $18,500 for 2018.  Despite the confirmed importance of retirement savings vehicles such as the 401(k) Plan, many eligible participants for these employer-sponsored programs do not enroll in the plans, fail to contribute as much as they could, or do not fully understand how to maximize their benefits or select their investment options.  Multigenerational employees also have different financial needs and perceptions, and receive communications differently.   Plan sponsors should take this opportunity, as passage of tax reform legislation appears imminent, to provide eligible employees and participants with an enhanced communications program touting the benefits of 401(k) plan participation.

What Enhancements Can be Made to Existing 401(k) Plan Communications?

As plan sponsors know, certain plan communications are required and are already provided to plan participants through specific channels such as direct mail or e-delivery.   These materials include summary plan descriptions, summary annual reports, and participant fee disclosures.  In addition, there may be safe harbor notices, 404(c) plan disclosures, automatic contribution notices, qualified default investment alternative notices, fund change notices, blackout notices, and perhaps even investment education or advice materials distributed to participants.  A re-occurring debate is that participants do not read, understand, or cannot even locate all of these materials.  Plan sponsors might be well-served by considering the following when enhancing their otherwise required communications:

  • Incorporate tools into a traditional communications program such as mobile applications that can deliver understandable information to those on-the-go, in short snippets, regarding the benefits of plan participation
  • Issue periodic email, text message or other digital/social media reminders regarding increasing savings rates during the year and how a percentage increase can impact retirement savings over time
  • Offer online short videos or podcasts (5 to 15 minutes) that explain 401(k) features and benefits in digestible segments
  • Provide generic plan enrollment assistance either through on-site meetings, video-conference or on-line software
  • Strategically time the issuance of communications well before the due date of a summary of material modification that will allow participants to fully maximize the benefit of a plan design change
  • Connect the messaging with relevant events (such as passage of new legislation; a corporate acquisition)
  • Consider a financial wellness program that can educate employees regarding their whole financial picture, including managing debt and how to allocate available compensation to employer-provided benefit programs

The foregoing suggestions are a starting point and should be tailored to the organization’s needs and employee demographics.  The idea is to develop a strategy that supplements the required communications, and does so in a brief and engaging manner without contradicting plan terms.  The messaging can also refer the employees back to the longer, required communications and documentation which might be located on a company intranet for easy access.  Further, these types of communications do not need to be personalized and should not include personally identifiable information, unless the mechanisms are fully compliant with cybersecurity policies including password protection and encryption.  Also, these particular communications should avoid being fiduciary or advice-oriented in nature.  Instead, the goal is to highlight, and educate employees regarding, the important plan benefits and encourage them to participate in a language they understand.  This approach can also be duplicated for other types of employee benefits (i.e., the ones that survive tax reform).

Our colleague Michelle Capezza of Epstein Becker Green authored an article in Confero, titled “Managing Employee Benefits in the Face of Technological Change.”

Following is an excerpt – click here to download the full article in PDF format:

There are many employee benefits challenges facing employers today, from determining the scope and scale of traditional benefits programs to offer that will attract, motivate and retain multigenerational employees, to embracing new models for defining and providing benefits, while simultaneously managing costs. In the midst of these challenges is the wave of technological change that is impacting all areas of the workplace, including human resources and benefits. In recent years, many new technological tools have emerged to aid in the administration of benefit plans, delivery of participation communications, as well as provide education and advice. These tools often require collection of sensitive data or allow employees to provide personal information in an interactive environment, such as:

  • Benefits, HR and payroll software, and plan recordkeeping, systems
  • Online and mobile applications for benefits enrollment and benefits selection assistance
  • Social media tools and applications for benefits information and education
  • Online investment allocation tools, robo advisors, financial platforms
  • Telehealth and wellness programs

These and other advancements are a sign of the times. While they appeal to employees, reduce burdens on employers, and assist in driving down program costs, organizations must be mindful that cyberattacks on benefit plans and participant information have occurred and measures should be taken to protect against such data breaches.

Our colleague Sharon L. Lippett, at Epstein Becker Green, has a post on the Financial Services Employment Law blog that will be of interest to many of our readers technology industry employers and plan sponsors: “Plan Sponsors: Potential Targets for IRS Compliance Examinations.”

Following is an excerpt:

The IRS recently released the Tax Exempt and Government Entities FY 2018 Work Plan (the “2018 Work Plan”) which provides helpful information for sponsors of tax-qualified retirement plans about the focus of the IRS’ 2018 compliance efforts for employee benefit plan.  While the 2018 Work Plan is a high-level summary, it does address IRS compliance strategies for 2018 and should assist plan sponsors in administering their retirement plans.…

Read the full post here.

On April, 24, 2017, the New York State Department of Labor (“NYSDOL”) has filed an appeal to the February 16, 2017 decision by the New York State Industrial Board of Appeals (“Board”). The Board’s ruling held that the NYSDOL’s regulations regarding employer payments via payroll debit cards and direct deposit were invalid, thereby revoking the regulations, which were set to become effective on March 7, 2017. While the regulations remain ineffective, we will continue to provide updates on New York’s payroll debit card and direct deposit rules.

In the latest HR headline from the start-up world, the offending executive doesn’t fit the typical mold, but the lesson remains the same: don’t ignore human resources.

Miki Agrawal, the self-proclaimed “SHE-eo” of THINX, and her “boundary pushing” workplace demeanor are the focus of a New York City Commission on Human Rights complaint by the former head of public relations, Chelsea Leibow. Leibow alleges that Agrawal created a hostile work environment through her constant discussion of sex, nudity around employees, and inappropriate touching of employees’ breasts.

THINX, the “period underwear” company that seeks to disrupt the menstrual products world, intentionally pushes boundaries with its marketing strategies. In her role, Leibow was responsible for PR emails, which were the subject of media attention highlighting the emails’ casual, “millennial-speak.” According to Leibow in an interview with New York Magazine, the company also pushed internal boundaries of professionalism.  Leibow alleges that, just a few months after she joined THINX Agrawal, “helped herself” to Leibow’s breasts and engaged in a variety of other sexualized conduct.  Leibow asserts that Agrawal drove a casual culture, and that many employees engaged in more casual (and often sexually-inappropriate) conversations out of fear of losing their jobs.

Leibow alleges that she made multiple internal complaints, including to the CFO and CCO, about Agrawal’s behavior, but those complaints were ignored. Rather than establish a formal HR function, Agrawal introduced “Culture Queens” to manage internal disputes. Neither of these individuals had HR experience, and the reporting line brought all complaints back to Agrawal – even those complaints about her. In fact, Leibow alleged that it was ingrained into the culture that the employees and the executive team “operated on different planes.”

In response to Leibow’s complaint and subsequent publicity, Agrawal published a blog acknowledging that THINX failed to appropriately establish a human resources function early enough in the formation of the company. Like many start-ups, when THINX had only 15 employees, Agrawal did not make hiring an HR professional a priority.  She acknowledges that the failure to address human resources was a “problem area,” but “to sit down and get an HR person and think about [health insurance, vacation days, benefits, and maternity leave] were left to the bottom of the pile of things to get done.” THINX has commissioned an employment law firm to investigate these claims, along with several other allegations being anonymously reported to various news outlets.

Following the complaint, Agrawal has stepped down as CEO, and THINX is hiring a new CEO and a HR manager. Our attorneys have seen a continuing pattern of successful start-up companies ignoring human resources functions in favor other responsibilities to launch the business.  But as this example teaches, start-ups and other small businesses should not leave HR-planning to the end. Although managing the HR function early on seems less important than getting the business off the ground, failing to establish basic workplace rules, including a harassment complaint procedure, can lead to major problems.

Our colleagues Judah L. Rosenblatt, Jeffrey H. Ruzal, and Susan Gross Sholinsky, at Epstein Becker Green, have a post on the Hospitality Labor and Employment Law Blog that will be of interest to many of our readers in the technology industry: “Where Federal Expectations Are Low Governor Cuomo Introduces Employee Protective Mandates in New York.”

Following is an excerpt:

Earlier this week New York Governor Andrew D. Cuomo (D) signed two executive orders and announced a series of legislative proposals specifically aimed at eliminating the wage gap in gender, among other workers and strengthening equal pay protection in New York State. The Governor’s actions are seen by many as an alternative to employer-focused federal policies anticipated once President-elect Donald J. Trump (R) takes office. …

According to the Governor’s Press Release, the Governor will seek to amend State law to hold the top 10 members of out-of-state limited liability companies (“LLC”) personally financially liable for unsatisfied judgments for unpaid wages. This law already exists with respect to in-state and out-of-state corporations, as well as in-state LLCs. The Governor is also seeking to empower the Labor Commissioner to pursue judgments against the top 10 owners of any corporations or domestic or foreign LLCs for wage liabilities on behalf of workers with unpaid wage claims. …

Read the full post here.

Gene ZainoGene Zaino, a nationally recognized expert in the contract workforce market, launched MBO Partners to re-invent the way independent consultants and organizations work together. MBO Partners provides technology solutions and personal service that both simplify and expedite business processes for self-employed professionals including: incorporation, contract setup, billing, financial management, payroll, tax compliance, and health and retirement benefit programs. MBO Partners also provides access to the largest network of “engagement ready” enterprise companies, as well as portable benefits to independent workers.  Zaino is a major force in the independent workforce movement, committed to making it easier for self-employed professionals and their clients to work together.

The meaning of the “workplace” continues to evolve in the Digital (also referred to as the “gig,” sharing or on-demand) Economy. From shared workspaces, to the introduction of machines, artificial intelligence and robots into the workplace, traditional employer-employee relationships that we have known in our lifetimes are being reconfigured at a rapid pace. I caught up with Gene Zaino to explore some of his thoughts in response to the following questions regarding a growing segment of the workforce-the self-directed or independent worker.

How do you define independent or contingent workers, and are they one broad category or would you classify them into different segments?

MBO Partners defines independent workers as adult Americans aged 21 and over of all skill, education, and income levels who turn to consulting, freelancing, contract work, temporary assignments, or on-call work regularly each week for income, opportunity, and satisfaction.

The entire contingent workforce is a broad category. Anyone working in a nontraditional job – that is, outside a 9 to 5 desk job – could be considered a contingent, temporary, or “gig” worker.  But the ride-share driver you frequently see on the road faces different challenges than the independent consultant working for a major accounting firm, so it’s important to make distinctions between these groups when discussing issues like providing portable benefits and meeting their business needs.

How much of the American workforce is currently comprised of independent workers, and how do you think that will change in the next 5 years?

There are just under 40 million independents in the American workforce, which includes 16.9 million in full-time positions, 12.4 million who work part-time, and 10.5 million in occasional independent roles. Based on our latest State of Independence report – the longest running annual survey of the independent workforce in the nation – we expect the number of independents to grow to an impressive 48.9 million by 2021. By this time, nearly one in two people will work independently, or will have done independent work at some point in their careers. Suffice it to say, the independent workforce is rapidly growing and the workforce we knew even five years ago will look vastly different in another five years.

What do you see as the main drivers behind the rise of the independent worker?

The numbers and testimony from our annual survey show that independents overwhelmingly find independent work is a satisfying, and self-determined, choice. Both full and part-time independents say their career choices stem from a desire to have greater flexibility, freedom, control, and purpose. In terms of flexibility, 63 percent of independents cite control of their schedule as a top reason to work independently, and 59 percent say their top motivator is the increased flexibility independent work provided not only in their careers but across all aspects of their lives.

Forty-seven percent of full-time independent workers report making more money on their own than they would in a traditional employment setting. Specifically, three million independents earned more than $100,000 last year, a 50 percent increase from the two million who earned the same just five years ago.

Generationally, Baby Boomers now constitute 31 percent of the independent population, driven in part by the desire to supplement retirement benefits that are facing sharp declines over the next decade. But the independent workforce is also growing younger, millennials accounting for 40 percent which is higher than their makeup among the labor force at large. In contrast to Baby Boomers, Millennials see independence as an opportunity to get a toehold in the labor force and as a resume-builder.

What are the main needs of independent workers?

One of the major needs of independent workers is the ability to maintain a robust network of clientele for future work. MBO ConnectTM, considered the industry’s leading preferred talent network and direct sourcing product for engaging independent workers, is just one platform through which independents might find future projects and connections.

Like all workers, independents also need benefits to support themselves and their family, including retirement/401(k) and health insurance. Since those benefits are often employer-provided, it can be difficult for independents to find security working on their own. MBO Partners helps by providing access to group plans for its qualifying associates as well as by educating independents on how to acquire portable benefits.

Do you find that independent work is more appropriate for experienced workers in their field of expertise, or can those new to the working world successfully embark upon independent work arrangements?

The independent workforce is diverse – it includes Americans of all ages, skill, and income levels who turn to independence for income, opportunity and satisfaction. We’ve seen a growth in the experience level thanks to the continuing commitment of more seasoned workers primarily from the Baby Boomer generation. Many independents report getting work assignments because they offer a specialized skill that requires certification, special training, or education. This often means added experience in the form of years on the job.

However, millennials just entering the workforce also represent a growing percentage of the independent workforce – up to 6.76 million last year from 1.9 million in 2011.

Are employers in particular industries more inclined to engage independent workers currently and will this change in the next 5 years? 

As the workforce continues to change, employers across nearly every industry are engaging and hiring independent workers, and we see the flow between traditional and alternative work arrangements increasing in numbers and growing in momentum over the next five years. By 2021, almost half of the private workforce is forecast to have spent time as independent workers at some point in their work lives. As a result, savvy companies are already competing to become a Client of Choice for top independent talent. Forward-thinking companies are already thinking of the best ways to engage independent workers compliantly and efficiently, often using a company such as MBO Partners to do so.

Does the proliferation of the independent worker erode the promise of the so-called social compact or “model social safety net” or do you see ways that these workers can obtain retirement savings security, and other necessary employee benefits? 

The growth of the independent workforce has changed the way we think about providing employee benefits, and companies like ours have adapted to that change. MBO Partners has provided portable benefits to independents for over a decade, giving our associates access to the power of their group purchasing to access healthcare, disability and business insurance, as well as 401(k) options for retirement savings.

Moving forward, the government will need to take steps to help the independent workforce. This may involve further discussion of portable benefits, the creation of a new classification of worker to help independents work compliantly with clients, or something else entirely. MBO Partners is proud to work closely with top leaders in Washington and on Capitol Hill to remain a part of these vital ongoing conversations, now and in the new administration.

 

Editor’s note: As the workplace continues to change, employment arrangements will evolve.  It will become increasingly important for employers to monitor changing employment -related laws and regulations and to ensure that adherence is given to current laws, especially with regard to worker classifications, overall workplace management, employee benefits and immigration issues.   As the nature of the very workers retained to perform services changes in unprecedented ways, new ways of thinking about these issues and regulating them will surely come to pass.