Policy Matters Newsletter - October 2021 #2

Seyfarth Shaw LLP

President Biden Calls On Congress To Eliminate Subminimum Pay For Disabled Workers. The White House has called on Congress to eliminate a program under Section 14(c) of the Fair Labor Standards Act that allows employers to legally pay those with disabilities less than a minimum wage. That program has existed for over 80 years. Proponents of the program fear that its elimination would lead to fewer employment opportunities for people with disabilities. But critics of the program assert that there are better, less disruptive ways for individuals with disabilities to participate in the workforce and to incentivize employers to hire them. To date, seven states have completely eliminated subminimum wages for workers with disabilities, and five more have passed laws that will phase them out in the coming years. As Seyfarth reported, California recently passed SB 639, which prohibits the state Industrial Welfare Commission from issuing special licenses authorizing a subminimum wage for persons with disabilities.  It is unclear exactly how elimination of subminimum wages will impact employment opportunities for individuals with disabilities, but there is a clear trend toward phasing them out at the state and federal level.

Winter -- And A Federal Vaccine Mandate --  Is Coming. There are so many moving pieces -- including competing state and local laws, the interplay with existing employee benefits, federal agency / contractor requirements, and of course, plain old politics -- to the movement behind requiring Americans to get shots in arms, we feel it would be most helpful to laser in on what is probably the biggest and most important piece of the entire vaccine regimen: The impending OSHA Emergency Temporary Standard (“ETS”). As we noted here, the requirement that employers with 100 or more employees ensure either (1) employees are vaccinated or (2) show a weekly negative COVID-19 test will come through OSHA via an emergency temporary standard, which we explained here.

Timing: On October 12, 2021, OSHA submitted to the White House’s Office of Information and Regulatory Affairs (“OIRA”) an emergency temporary standard requiring private employers with more than 100 employees to implement vaccine mandates or testing.  OIRA held stake-holder meetings all last week and is still holding such meeting as of the publication of this newsletter. Indeed last week, OIRA held a meeting with our very own Larry Lorber and Camille Olson Below is the timeline we envision for the federal piece. OIRA’s regulatory reviews typically take months, but OSHA will push this out on an expedited basis.

We envision that OSHA will publish the ETS and make it available to the public later this week. Next, OSHA will publish the ETS in the Federal Register (making it official law of the land), likely the following week. It is effective immediately upon publication in those states that do not have an OSHA State Plan (The Federal States). OSHA plan States (for example, California, Michigan and Virginia) will then have 15 days to announce the adoption of the federal ETS or announce an alternative that is at least as effective. OSHA Plan States then have another 15 days to make the ETS (or their own alternative) effective. Federal enforcement timetable will likely kick in quickly for the 29 Federal States mid- to late November; State enforcement will likely kick in the middle of December.

Impact on Employers: According to the CEO Briefing that Seyfarth contributed to from “The Conference Board,” -- a 501(c)(3) non-profit business comprised of blue-chip companies like Nike, Marriot, and State Farm -- one of the most important aspects of the vaccine mandate rollout for employers will “include communications with employees on the following topics: the high transmissibility of COVID-19, its impact, that appropriate action must be taken to limit its transmissibility, that vaccines have been determined to be highly effective and safe against COVID-19’s most severe effects, and that the business is going to lower barriers to obtaining the vaccine for the benefit and safety of all employees.”

Benchmarking: More than 3,500 organizations -- from health care systems, to educational institutions, to state and local governments, to private businesses -- have already adopted vaccination requirements. These vaccination requirements have increased vaccination rates by 20-plus percentage points, with organizations routinely seeing their share of fully vaccinated workers rise above 90 percent.

Legal challenges: A substantial body of legal precedent supports the legal authority of elected leaders in the executive branches to implement social policies via executive order. The U.S. Supreme Court blessed the constitutionality of government vaccine mandates with its 1905 ruling in Jacobson v. Massachusetts. Indeed, just last week the 1st Circuit Court of Appeals dropped an important decision in Does 1-6 v. Mills, in which the Court denied a constitutional challenge to the State of Maine’s requirement that all employees in licensed healthcare facilities be inoculated against COVID-19. Workers and advocacy groups have filed at least 39 federal cases this year contesting vaccination requirements imposed by employers or governments; courts have denied requests for temporary orders against mandates in 12 of the suits, while seven have ended with dismissals. The only pro-challenger rulings involve exceptions to mandates rather than the validity of the mandates themselves.

Directives from OSHA, conversely, do not share the same support from the case law. An OSHA ETS can only issue when necessary to protect employees from “grave dangers” related to workplace exposure determined to be toxic or physically harmful. Courts have employed this high standard to strike down six of the last seven OSHA ETSs. Attorneys general from about half of the states have already pledged to challenge the law. Stay tuned.

Duration: An ETS can only last six months before it  must be replaced by a permanent OSHA standard, which must undergo a formal rulemaking process involving a typical notice-and-comment period.

Once the actual language of the ETS is released, expect additional guidance from our team on the ETS’ specific requirements. So stay tuned, but in the meantime, for more information on vaccines or any related topic, please contact the authors, your Seyfarth attorney, or any member of the Workplace Safety and Health (OSHA/MSHA) Team.

Speaking of Seyfarth’s Workplace Safety team, tomorrow, the House Education and Labor Committee will hold a hearing entitled “Protecting Lives and Livelihoods: Vaccine Requirements and Employee Accommodations.” Our very own Scott Hecker -- of Podcast hosting fame -- will be testifying at the hearing.

NLRB GC Memo Says Some College Athletes Are Employees. National Labor Relations Board General Counsel Jennifer Abruzzo recently issued a memorandum outlining her position that Division 1 FBS college football players and “other similarly situated players at academic institutions” are employees that should enjoy the privileges and immunities of the National Labor Relations Act. Among other things, employee status would allow athletes to unionize, to file charges with the National Labor Relations Act when they believe their rights have been violated, and to engage in various types of collective action. The memorandum also states that misclassifying players who qualify as employees as “student-athletes” will be considered an independent violation of the NLRA. Check out Seyfarth’s most recent episode of the Policy Matters Podcast for more on this fascinating topic!

Reconciliation Package Shrinks, But Moves Closer To The President’s Desk. It is often difficult to cut through the political noise and media echo chambers (depending on your chosen chamber) that have surrounded the Democratic push to pass President Biden’s broad social spending agenda without any GOP support. As we noted here, and here, a few weeks back, the House released the contours of a $3.5 Trillion reconciliation package, a package that received immediate pushback, especially from the Senate. Since then, Congress and the White House have been paring down the programs, presumably to assuage said Senators.

So, in the interests of cutting through the noise, what has been pared down or eliminated, and how will the government pay for it? According media sources, last week, the President laid out the contours of a slimmed-down economic package totaling roughly $1.9 Trillion in private to a group of lawmakers. So, what has been cut down or completely out?

Climate Change: Investments in fighting climate change remain the most fluid of all the issues surrounding the reconciliation package. About a week ago, Democratic Senator Joe Manchin -- whose vote is indispensable if the Democrats want to implement any of Joe Biden’s social spending plans -- announced that he is abjectly opposed to a key piece of the package aimed at addressing climate change: $150 billion Clean Electricity Performance Program. The program is designed to economically incentivize energy suppliers who switch from fossil fuels like coal and natural gas to clean power sources like solar, wind, and nuclear power. For many Democrats, a reconciliation package that does not address climate change is a non-starter; as such, Congress is still working with the moderates in the Senate on formulating some kind of pared-down climate proposal in the package. Stay tuned.

Reduced Federal Paid Leave Program: As we noted here, The House Ways and Means Committee’s provision of the reconciliation budget would have allowed for 12 weeks of paid family and medical leave for all workers; however, the President confirmed during a town hall last week that the length of available benefits will be cut by 1/3, to 4 weeks instead of 12. There has not been any indication from Washington, though, that the details of the program -- i.e., the reasons for which leave can be taken -- have changed outside of the length.  Even with the reduced program, should this pass, employers will still have to address “a host of complex operational challenges, the most acute of which is a rigid deference to the states,” according to American Benefits Council President James A. Klein.

Paying for it: The proposal, as currently constituted, and certainly subject to change, will increase the top marginal rate on individuals making at least $400,000 a year from 37% to 39.6%, eliminating the decrease set by the Republicans' 2017 tax cut law. The top capital gains rate would increase to 25%, from 20%, and would add a 3% surtax on individuals with adjusted gross incomes in excess of $5 million. The proposal also calls for increasing the top corporate tax rate for businesses with income greater than $5 million to 26.5%, up from the current 21% set by the Republicans' 2017 tax cut law. Questions still abound over whether Democrat will be able get these tax hikes through a reconciliation process. Stay tuned.

Free Community College: The original reconciliation package formulated by the House would have offered up to two years of free community college paid for by the federal government, allocating approximately $45.5 billion to the states to cover community college tuition. That proposal likely won’t see the President’s desk as the package will prioritize other education programs, especially for younger folks. The President is not giving up, however, as he noted at a town hall last week that “[w]e’re going to get free community college in the next several years.”

As the President noted last week, “Nothing has been formally agreed to,” so expect additional changes we will cover in this space. Stay tuned.

ESG: Don’t Call It A Retirement Plan Comeback. The Department of Labor recently proposed a rule that would permit managers of employee benefits plans to consider environmental, social, and governance factors when selecting vehicles for investment opportunities. This would roll back regulations put in place in October 2020 by the Trump Administration that did not outright ban ESG-related investments, but did require strict application of the fiduciary duties under ERISA that often discouraged plan fiduciaries from taking ESG factors into account. The notice and comment period for the proposed rule began on October 14th. We will continue to track this proposed rule and any agency revisions to the same.

COVID-19 COBRA Clarity: What An Alliteration! In May 2020, the DOL and IRS issued a Joint Notice that extended certain timeframes applicable to COBRA coverage by requiring that plans disregard the period from March 1, 2020 until 60 days after the end of the COVID National Emergency. The IRS recently issued Notice 2021-58 to clarify certain questions that it received regarding how that disregarded period applies to COBRA election and premium payment deadlines. The IRS clarified that the election and premium payment periods run concurrently. Regarding the specific timeframes, the Notice clarified that if an individual elects COBRA continuation coverage with 60 days of receipt of the notice, he or she will have one year and 45 days to make the initial payment.  If the election is made more than 60 days after receiving notice, the individual will have one year and 105 days to make the payment.  For more information on IRS Notice 2021-58, check out Seyfarth’s recent blog post covering all of its details.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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