Tag: Affordable Healthcare – ACA Smart

Co-Employment – An Over Used Scare Tactic or a Must See Reality Show?

by Jeanne Knutzen | November 24, 2014

0 ACA Affordable Healthcare, Blog, Hiring.Best Practices Affordable Care Act, Affordable Healthcare – ACA Smart, Co Employment, Employee Benefits, Employee Hiring Decision, Employee Placement, flexible workforce strategies, Workplace Harassment

With the launch of the employer mandates of the Affordable Care Act in January 2015, staffing agencies and their clients have one more reason to worry about co-employment. While the ACA clearly states that only the “common law” employer is responsible for “offering insurance,” and case law strongly supports the notion that the staffing agency is the “common law” employer, what happens if your staffing agency doesn’t offer ACA mandated benefits as required by law. Is there any way you might be liable for fines or penalties? Questions about co-employment get triggered any time two parties share rights and responsibilities inside the traditional employer relationship which is the case with all staffing arrangements involving a third party staffing company and their clients.

  • Most staffing companies recruit and screen candidates, conduct background and reference checks, pay wages, calculate and pay wage related taxes and benefits, complete required reports, and retain at least some right to hire and fire an employee.
  • Most of their employer clients take on the responsibility of supervising, directing, and controlling the employee’s daily activities.
What creates confusion is when the client starts to specify pay rates, directs the hire or fire of employees, or involves themselves in administrative processes that should only be performed by the staffing agency. Since I’ve been in the staffing business, I’ve heard it countless times, “Don’t do ______________, or you will create an issue with co-employment.” And the “what we can’t do” has ranged from “allow our temporary employees to attend a client’s company meeting” to “allow an employee to work on an assignment for no longer than a (year, six months, or other time period “du jour”). Some of these “rules” have blurred the fact that co-employment covers many different types of overlapping liabilities—some that need to be avoided; some requiring co-management and partnership. Here are some of the co-employment scenarios we see on a regular basis and our somewhat common sense approach to how we look at each: Employee Placement/Hiring Decisions “I’m Perfect” (IP) Staffing Agency recruits and screens candidates for “I’m Even More Perfect” (IEMP) client for a 3-month technical help desk role. IEMP refuses to interview Julie, an African American female who appears to meet most, if not all, screening requirements. IEMP chooses instead to interview and hire Andrew, a Caucasian man. Julie believes she has been discriminated against because her application was not considered. Without IP’s awareness, Julie files a complaint with the EEOC. What will the investigator want to know about the roles of IP and IEMP?
  • What reasons were given to IP about why IEMP didn’t interview Julie? Were those reasons valid? Staffing companies who do not ask their client to disclose reasons for considering or not considering each candidate submitted for a job and employers who do not provide those reasons, often leave themselves open to charges of (unfounded) discrimination.
  • What screening requirements did IEMP give to IP? Were all of IEMP’s screening requirements job relevant? Screening requirements that aren’t clear or are so broad that everyone is lead to believe they are qualified, are asking for trouble. Establishing job relevant screening criteria is a joint responsibility of the staffing agency and their client.   
If IEMP’s hiring manager requested only male Caucasians and IM complied with that request, both parties are liable for that violation. If IM rejected IEMP’s illegal screening request and refused to work their request, only IEMP is liable. If IM rejected IEMP’s illegal screening request, but continued to work the request even when the client was discriminating, IM would be considered complicit. In today’s world, claims of discrimination rarely stem from overt acts of discrimination. Usually, they stem from perceptions of impropriety created by poorly designed or improperly executed screening processes. Both the staffing agency and their clients should be reviewing all recruiting and selection processes regularly to ensure that what they are doing is free of unintended consequences. Claims of Workplace Harassment… …often happen because employees don’t know who to talk with about things bothering them at work. George is 60-year-old Caucasian male working for IM, but being supervised on a daily basis by Andrea, a “20-something” supervisor who works for IEMP. Andrea is constantly harassing George about how he doesn’t fit in, and accuses him of “being slow” even though he is meeting all production requirements. George is frustrated but doesn’t know who to talk with about his concerns. He can’t go to Andrea; he goes to the Washington State Human Rights Commission. Who’s at fault? Clearly any staffing agency who doesn’t set up a formal process to receive and manage employee “concerns” is asking for a problem that can impact both themselves and their client. Most investigators consider the question “did they know” less important than “should they have known” and if IM doesn’t have clear communication policies for their employees, they are subject to liabilities stemming from workplace harassment. If, on the other hand, IM went to IEMP with George’s issue and IEMP chose not to do anything about it, it is only IM who would have a valid defense, not IEMP. Access to the Client’s Benefits As we learned from the early 90’s Microsoft settlement (90 million+ paid to its temporary and contract workers), if employers don’t adequately spell out the employees who will and will not be covered under their benefit plans, they can face serious and unexpected benefit liabilities. But avoiding unwarranted claims of benefit entitlement is not about shortening assignment lengths or requiring “breaks in service”—it’s about making sure benefit plans clearly spell out who is and is not eligible for benefits, specifically excluding employees from all third party employers. Unfortunately the core reasons behind the Microsoft settlement were never fully understood by the business community and ended up putting a whole lot of Microsoft staffing policies into mainstream HR policy without a clear understanding of what might have been an easier, less costly, solution.    Co-Employment and the Affordable Care Act… …should be as simple as making sure all contracts with staffing providers clearly state (affirm) the agencies role as the common law employer and their responsibility to administrate all ACA related requirements. This means that while it may be of interest to an employer whether or not their staffing agency is “playing or paying,” and who they would be offering benefits to (or not) they would not want to involve themselves in those decisions.    I-9. Immigration. Privacy Issues. Your staffing agency is responsible to administer the I-9 process. If they purposefully or thru negligence place an illegal employee into your workforce, they are liable for that violation. If an employer becomes aware of this practice, and fails to take action, they would be complicit in the violation and fined accordingly. If an employer stipulates that only US citizens work for them, they would be subjecting themselves to claims of discrimination based on national origin. Additionally, if they require copies of I-9 documents or any materials that include social security numbers, they incur risks of violating certain “privacy” requirements which could result in significant and costly damages (ex. identity theft, etc.). In general, employers should stay at arms length from any administrative process used by their staffing agency including how they administrate qualifications to work, pay and benefits. FMLA. ADA. Accommodation Issues. The co-managed version of co-employment is definitely alive and well when it comes to most FMLA and ADA requirements. If an issue or need comes up, particularly on a long term assignment, both staffing agency and their client are responsible for providing employees with time off to address a medical issue (FMLA) or to provide an accommodation (ADA).  Safety. All employers, both the staffing agency and their client, are responsible to provide a safe and hazard-free work environment for their employees. While the lion’s share of that accountability lies with the client, a staffing agency cannot knowingly assign its employees to work in environments where there are known violations of OSHA standards. As a matter of routine, staffing agencies should be inspecting their client’s worksites, ensuring that OSHA standards are being followed; that the work is being properly described and that employees are being issued the appropriate clothing, equipment, and instruction to ensure their safety. An employer’s safety record is a matter of public record and should be reviewed by the staffing agency before assigning an employee to begin work. Staffing agencies and their clients will typically work together to address any and all safety issues as they are revealed. Staffing agencies, who are concerned about an employer’s safety practices and repeated failures to act to remedy known issues are duty bound to remove employees from those assignments. Property Damages Frank is working in an IEMP warehouse, placed by IM. Frank drives a forklift and accidentally drives it into a wall, destroying $25,000 in product and doing another $10K in damages to the wall and the forklift. Who pays for the damages—IM or IEMP? Here are the factors that will likely make a difference to the final outcome:
  • What does the contract between IM and IEMP say should happen? Typically these contracts indemnify the other from acts of negligence—so who’s at fault? Which party was negligent?
  • Did IEMP require that IM screen Frank be a qualified forklift driver? Did they disclose that he would even be driving a forklift?
  • What training or instruction did IEMP provide Frank before asking him to drive a forklift?
  • How closely did IEMP supervise Frank’s work on the forklift?
If Frank was in an administrative or professional role, his damages might be different (ex. a violation of confidential information), but the considerations are the same:
  • Did IM screen Frank for a job that required him to handle confidential information?
  • Did IEMP properly protect the information they needed to be kept confidential?
  • Did IEMP properly instruct and supervise Frank on how to handle confidential information?
For more information on co-employment or how to implement flexible workforce strategies that minimize the impact of unforeseen co-employment liabilities, contact PSN at infodesk@pacestaffing.com or by calling 425-637-3312 to arrange a complimentary consultation with a member of our Partnership Development Team. jeanneThis article is intended for general informational purposes only and in no way is intended to provide legal advice or to circumvent the need each employer has to seek competent legal counsel. This article was written by Jeanne Knutzen, founder and CEO of the PACE Staffing Network.          

Countdown to ACA Compliance – Part III

by Jeanne Knutzen | October 28, 2014

0 ACA Affordable Healthcare, Blog, Legal Issues - Staffing, Management.Supervision ACA and Temporary Staffing, ACA compliance, Affordable Healthcare – ACA Smart, Employment Agency Bellevue, Employment Agency Everett, Employment Agency Kent, Employment Agency Seattle, Employment Agency Tacoma, Employment Agency Washington State, Hiring Bellevue, Hiring Everett, Hiring Seattle, Hiring Tacoma, Temporary Staffing Bellevue, Temporary Staffing Everett, Temporary Staffing Kent, Temporary Staffing Seattle, Temporary Staffing Tacoma, Temporary Staffing Washington

The PACE Staffing Network has been preparing for the employer mandates of the ACA for well over two years. As members of the American Staffing Association (ASA), we provided input into several areas of proposed regulation, and attended countless hours of ACA related training. With the ACA’s employer mandates ready to launch January 1 2015, we wanted to share information on the specifics of how the ACA impacts your use of temporary/contract employees. For ideas on how to better manage your needs for staff in light of new ACA mandates, contact a member of our Partnership Development team by contacting infodesk@pacestaffing.com or calling 425-637-3312.

In what ways has the ACA already impacted your temporary and contract workers?  

The Individual Mandate has been in effect since 2014, requiring all temporary and contract workers to purchase ACA qualified insurance for themselves and their dependent children. While we do not know what percentage of temporary/contract employees complied with these mandates in 2014, we suspect that number will increase in 2015 as penalties for non-compliance increase.

What changes go into play in 2015?

The Shared Responsibility component of the ACA, known as the Employer Mandate, goes into effect on January 1, 2015. This provision requires that all staffing companies employing 100 or more employees offer affordable and ACA qualified insurance to 70% of its eligible employees or pay significant fines and penalties. The taxes/fines/penalties for not offering insurance are $2K/year ($167/month) per eligible full time employee—excluding the first 80; if the insurance offered does not meet ACA requirements or isn’t affordable, the fine/tax penalty is $250/month (up to $3K annually) for any employee going to the exchange for insurance and receiving a subsidy. This mandate will impact most but not all staffing companies in 2015.

Are most staffing agencies already offering insurance?

The short answer is YES. PACE along with most staffing agencies has been offering some form of health insurance for well over a decade. Unfortunately these health insurance products do not meet ACA requirements, so new products for our industry had to be developed over the last year.

What requirements must be met in order for a temporary or contract employee to become eligible for ACA benefits on January 1st, 2015?

There are several ways an employee can be qualified for coverage as of January 2015. Using a look-back period, any temporary or contract worker of a “large” staffing agency who has been on assignment through their staffing agency for at least 1560 hours during 2014 must be offered insurance. These look-back periods will continue on through 2015 so that all employees meeting the full-time requirement must be offered insurance within 30-days of the end of their look-back. For all full-time employees hired after October 1, 2014 they will become eligible for insurance on the first day of the month following the completion of their administrative period—no later than the first day of the fourth month from date of hire. Full-time employees are considered any employee intended to work 30-hours per week or more at the point of hire.

What must a staffing company contribute to the employee’s insurance costs in order to ensure “affordability?”

Staffing firms must contribute to the employees’ premium so that no employee is required to pay more than 9.5% of their base pay for their own personal coverage. For example, if an employee earning $10/hr. is offered an ACA compliant insurance plan that costs $400/month, the employee cannot be required to pay more than $123.50/month for their own coverage, requiring their staffing firm employer to pay $284.80.

How will newly assigned temporary and contract employees become eligible for coverage in 2015?

Starting in October, 2014, PACE will categorize all new hires as one of the following:
  • Full-time – working 30 or more hours per week and projected to work at least 1560 hours in the coming 12 months,
  • Part-time – working less than 30 hours a week, or
  • Variable hour – employees whose status as either full- or part-time can’t be determined at point of hire.
  • Seasonal – employees working 6 months or less at specific times throughout a calendar year.
While you might assume that all the employees we hire are either Variable Hour or Seasonal, there are very specific rules staffing companies must follow to put an employee into those categories. What’s at stake is that for employees categorized as Variable Hour, they are allowed to work for their employer for a defined “measurement period” (typically 12 months) without the benefit offer requirement. The IRS is not going to give this classification away easily.

How will most staffing companies decide to become compliantwill they pay or play?

To be ACA compliant, a staffing agency can either offer benefits or pay the $2000 per employee “did not offer” penalty. They can also offer a qualified benefit but not participate in its costs, running the risk of incurring the $3000 per subsidized employee penalty for not making their plan “affordable.” Each approach to ACA compliance has offsetting costs and risks, requiring each staffing agency to choose a strategy that meets their customer’s needs for cost containment and their positioning in the marketplace.  The American Staffing Association commissioned a study by Towers Watson (2014) which provides insight into the choices likely to surface over the next 60 days. According to the TW study, 54% of staffing companies will be offering some level of insurance to its eligible temporary and contract workers. The remaining 46% are either planning to pay penalties or are too small to be covered during the transition year. A popular compliance strategy used by many staffing agencies, including PACE, will be to offer two insurance options:
  • A plan that meets both the “minimum value” (MVP) and the “minimum essential coverage” (MEC) definitionswith a 60% actuarial value covering core services. This plan will meet all the requirements of the employer mandate.
  • A plan that meets only the “minimum essential coverage” (MEC) definition – A less costly plan that meets only individual mandate requirements.
This strategy provides a low cost way for our employees to become compliant with the individual mandate (avoiding their own fines and penalties), while protecting PACE from penalties stemming from employees taking subsidies because our plans don’t meet ACA requirements or are unaffordable.

Do you need to know if and how a company providing temporary or contract staff to your organization is ACA compliant?

Theoretically no. Provided you have the right contracts and agreements in place you will have no responsibility for your staffing vendor’s decisions regarding how they will get and stay compliant with ACA mandates. Thinking more pragmatically, the expertise your staffing vendor brings to the table to not only ensure their own compliance with the ACA but to help you with yours, can be invaluable. First of all, a vendor who hasn’t prepared to become compliant can easily find themselves facing fines and penalties of a size that can end their business. Secondly, like most overly ambitious legal undertakings, the ACA contains opportunities for smart employers to use the provisions in the ACA to create new and more competitive ways of doing business. If staffing agency does not understand the ACA and its nuances, they likely won’t be able to offer fresh ideas on ways to lower your ACA related costs!

What will be the” added costs” for staffing agencies to become compliant with the ACA in 2015?

There are two categories of costs associated with ACA compliance:
  • The increased costs of ACA related administration which will be considerable—starting with changes in point of hire administration, monthly reporting, annual reporting to both employee and the IRS, etc.
  • The increase in direct costs associated with either offering the required insurance coverage or paying the penalties associated with not offering.
The direct cost increases will be agency specific, depending on several factors:
  • How many "full-time" employees they have in their workforce relative to their total workforce?
  • What percent of their eligible full-time employees will take the insurance once offered?
  • The eligible employees rate of pay to arrive at the costs the agencies will incur to make their plan "affordable."
  • The costs of the insurance products they are offering.
Based on the costs we are currently projecting, PACE is anticipating a 3-5% increase in our direct costs with another 15% increase in our current administrative costs.

For staffing companies who elect to “pay,” are they subject to taxes/penalties on all their temporary employees?

No. The application of taxes and penalties for “not offering insurance” only applies to full-time employees (minus 80 in 2015). Excluded from penalties for unaffordable insurance are employees who either reject an offer of coverage, elect coverage that isn’t affordable or delivering minimum value, or who are enrolled in state Medicaid programs.

What ACA related costs are still unknown/unclear?

Historically, the staffing industry has faced serious challenges finding a health insurance product that will serve their high turnover, low participation workforces. Six months ago there were no insurance products available to the staffing industry that would meet ACA actuarial standards. We now have insurance products, but it is not clear if these products will be attractive enough to our temporary and contract workers to incent their participation. We’ll all know much more in six months than we know now about what percent of the people being offered insurance will chose to take it.

How will the individual staffing company deal with their cost increases?

There are as many different pricing philosophies and strategies as there are staffing companies—with the key factors being geography, local business and government taxes, employee type, market positioning, and service offerings. While the pricing structures of staffing companies providing long term professional staff typically have room for premium level healthcare benefits, for staffing companies working in more competitive markets, there is little room to absorb any increased in direct costs. Some staffing companies will offer only the low cost MEC plans, taking the chance that the employees electing their insurance will not go out to the exchange and seek subsidies for better plans. We consider this strategy risky. The ASA study by Towers Watson study revealed that 91% of the staffing firms polled are planning on passing their ACA costs (penalties or insurance costs) back to their clients in the form of across the board increases in bill rates. Most (38%) are planning 2-5% increases. 9% are looking to increases of 16% or more. 19% are still not yet sure how much they will increase bill rates.

How will the price increase be handled?  

Most of the pricing programs we have viewed are designed to smooth out the costs of providing insurance to all eligible employees and spreading those costs across an entire workforce and customer base.
The Towers Watson study indicates that employers can expect their price increase to come in a number of forms. Some will simply do an across the board increase in bill rate; others will see increases in mark ups; some will be adding a line on each invoice for ACA Costs.

How will the increased costs of temporary and contract workers compare with the increased costs associated with the ACA for other types of employees?    

Since the passage of the ACA, actuarial firms have been predicting increases in overall employee costs to be in the area of 5-8%. If this projection plays out, the per hour increase in costs for a temporary or contract employee may end up being much less than the increase in costs associated with the same employee, hired directly. For example, an employee earning $15/hr. hired directly may cost an additional $3.25-3.75/hr. in healthcare benefit costs in 2015 compared to 2014. The same employee provided by a third party staffing agency, might cost $.45-.70 more per hour than they did in 2014. For a more detailed discussion of ACA related “staffing math” and to compare the relative costs of employees hired directly with employees placed through a third party employer, contact our Partnership Development Team at 425-637-3312.

What other cost increases will employers experience in 2015?

We anticipate ACA related cost increases will touch just about every part of our customers’ businesses in 2015. Administrative cost increases alone could be staggering.
Part of the services and costs savings we are delivering to customers in 2015 and beyond is full administration of ACA related compliance.

When it comes to managing staffing providers, are there other elements of the ACA that employers should be paying attention to?

Yes. It may be time to review your staffing contract or agreements. The ACA has its own common law provisions, reinforcing the notion that it is the common law employer who is responsible to offer and pay for ACA mandated benefits. In most temporary or contract staffing arrangements, there is clear legal precedence for the staffing company to be the common law employer, accountable for ACA compliance. That said, we recommend that employers consider adjusting agency contracts to clearly spell out each party's respective roles in managing ACA mandates. PACE is happy to provide language recommendations upon request. For employers purchasing payroll services from their staffing provider, the law is less straight forward and the need for contractual adjustments more important. Again, we recommend that the role of your third party payroll service provider be spelled out clearly and contractually in any ongoing payroll services agreement. We recommend that specific indemnifications related to the ACA liability should become standard clauses of all payroll service agreements and contracts. NOTE: A nuance of the ACA regs specifically requires that if there is a chance or a reason for a payroll agent to not be considered the common law employer, the costs of providing insurance to an ACA benefit eligible employee should be passed back to that client as an increase in rate for the particular employee. Between now and early January, PACE will be speaking with all clients to ensure the proper ACA compliant contracts are in place.

Do we need to be concerned about “abuse” clauses?

The IRS has been very clear that it will be looking closely at staffing firms and their clients to ensure that ACA benefit requirements are not purposefully skirted. For example, an employer who turns their entire 50 person workforce over to a staffing firm, so as to avoid falling into the “large employer” category, would be highly suspect. An employer who employees 48 people and regularly uses a staffing company to provide 5-10 employees for its peak busy periods, on the other hand, is likely not suspect, even though their use of temporary staff keeps them below the 50 employee benchmark. The difference? Their temporary staffing strategy was designed to address a business need—not to avoid offering benefits. Splitting employees between a staffing company and their client or between two staffing companies so that no one “employer” reaches the 50 employee benchmark has been specifically prohibited. While PACE will continue to be strong advocates for all of the business reasons to use more flexible staffing strategies, we will only recommend changes that are based on business need, not ACA avoidance.

Is there future ACA stuff that we should be thinking about for 2016 and beyond?

Yes.
  1. Discrimination Issues. Current thinking is that all the ACA specific regulations related to discrimination will come out in 2015 and be implemented in 2016. The ACA is clear that any plan or employer contribution that provides a differential benefit in favor of highly compensated employees will be specifically disallowed. This means that once discrimination regulations have been written and put into play, employers will no longer be able to provide special plans or higher levels of contribution to their higher paid employees—short of making them available via post-tax dollars.
  2. Special tax on Cadillac Plans. In 2018, employers will be taxed on Cadillac benefit that cost more than $10,200 ($850)/month per individual. The tax on Cadillac plans is 40%—making these plans prohibitive for most employers. Employers with Cadillac plans will likely look for alternative approaches.
We hope you have benefited from reading this primer on the ACA and how it will impact your use of temporary and contract workers after January 1, 2015. For more personalized consultation, please contact our infodesk@pacestaffing.com or by calling 425-637-3312 to arrange an appointment with one of our ACA Specialists.
jeanneThis article was prepared by Jeanne Knutzen, CSC, the President and Founder of the PACE Staffing Network. PACE remains committed to full compliance with the ACA and offers a variety of staffing products and services designed to ensure that our clients have options for containing the costs associated with ACA compliance. For a confidential discussion of how these services might be applied to your workforce, particularly your temporary and contract employees, contact a member of our PSN partnership team at infodesk@pacestaffing.com or 425.6376.3312.