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Door Open for Challenges to Required "Fair Share" Fees for Public Employee Unions

Posted on Wed, Jul 30, 2014 @ 07:46 AM

by Jack B. HarrisonJack B. Harrison

In addition to its Hobby Lobby decision, the Supreme Court issued another decision on the last day of its term that may have implications for unions and employers going forward.  In Harris v. Quinn, the Supreme Court was faced with the question of whether certain Illinois partial-public employees could be required to pay “fair share” fees when they elected not to join the public employees union.  While the Supreme Court’s decision in this case is narrow, it does lay the groundwork for future challenges to “fair share” fees for all public employees.

The plaintiffs in Harris were “personal assistants” who provided homecare services under the Illinois’ Home Services Program.  Under this program, eligible individuals may receive Medicaid funding for homecare services from a personal assistant.  Under the terms of this program, while the state pays the salary for the personal assistant, the individual who receives the care from the personal assistant is deemed to be the employer.  In 2003, the Illinois Legislature adopted a statute under which personal assistants were deemed to be “public employees” solely for the purpose of collective bargaining under the Illinois Public Labor Relations Act.  The statute specifically did not provide any benefits normally available to public employees to personal assistants.  Following the passage of the statute, the SEIU, the relevant public employees’ union, entered into a collective bargaining agreement with the state under which personal assistants that chose not to join the union were required to pay “fair share” fees.  These fees were automatically deducted from the personal assistants’ Medicaid payments.

In Harris, personal assistants alleged that the “fair share” fees were unconstitutional, arguing that the fees violated their First Amendment rights by requiring them to support a union against their wishes.  In addressing this issue, both the district court and the court of appeals rejected this First Amendment argument, relying primarily on the prior decision of the Supreme Court in Abood v. Detroit Board of Education, 431 U.S. 209 (1977). In Abood, the Supreme Court held that even where public employees choose not to join a union, they may still be required to pay “fair share” fees.

In Harris, the Supreme Court reversed the decision of the lower court, refusing to apply the reasoning of Abood to the personal assistants in this case.  Writing for the Court, Justice Alito noted that, in this case, the personal assistants at issue were not full-fledged public employees, but rather were deemed public employees solely for the purposes of collective bargaining.  The Court concluded that the “fair-share” fee requirement violated the personal assistants’ First Amendment rights, in that the state had not met its burden of showing that the fee requirement served a compelling government interest in the least restrictive manner.

Most importantly, however, the Court strongly criticized the reasoning underlying its prior decision in Abood.  While the Court did not overrule Abood, it certainly provided a framework for future challenges to “fair share” fees.  In dissent, Justice Kagan attempted to create a firewall against future challenges to the reasoning of Abood, pointing out how “deeply entrenched” the rule from Abood has become and noting that the Courts own “precedent about precedent makes it impossible for this Court to reverse that decision.”

Like its decision in Hobby Lobby, the Supreme Court’s decision in Harris, while intentionally narrow, opens the door to future challenges to required “fair share” fees in the public employee context.  It will be important for employers and unions, particularly those in the public sector, to continue to monitor this issue.

Tags: US Supreme Court

UPDATE | The State of Ohio Settles Worker's Comp Overpayment

Posted on Mon, Jul 28, 2014 @ 09:34 AM

by David J. SchmittDavid J. Schmitt

A lot can change in a few weeks. Only a matter of days ago, the State of Ohio appealed the San Allen litigation to the Ohio Supreme Court. If you have seen my earlier blog posts on this case, you may recall that pursuant to the trial court ruling, employers who paid Ohio Worker’s Compensation premiums between 2001 – 2008, and which were not group-rated, were found to be entitled to reimbursement for a portion of their premiums.

In the case of San Allen, Inc., et al, v. Stephen Buehrer, Administrator of the Ohio BWC, Cuyahoga County Court of Common Pleas, Case No. CV-07-644950, the plaintiffs consist of Ohio employers who paid workers compensation premiums during the indicated period, and which did not receive group-rated premium discounts. The lawsuit contended that the BWC’s premium discounts for group-rated employers were too steep and that the BWC overcharged other employers to make up the difference.

The plaintiffs initially requested close to $1.3 Billion in reimbursement for class members. In a decision issued December 28, 2012, Judge Richard McMonagle that the class was entitled to reimbursement in the amount of $860 Million Dollars.

Unsurprisingly, the Ohio BWC appealed the decision to the Cuyahoga County Court of Appeals.  That Court has upheld the lower court’s decision, and was unstinting in its criticism of the BWC, stating,  “Reduced to its irreducible essence, this appeal is about a cabal of Ohio Bureau of Workers’ Compensation bureaucrats and lobbyists for group sponsors who rigged workers’ compensation premium rates so that for employers who participated in the BWC’s group-rating plan, it was “heads we win” and for employers who did not participate in the group-rating plan, it was “tails you lose”.

The Court of Appeals also returned the case to the trial court for a recalculation of damages, based on the State’s assertion that some employers were being credited for years in which they were not actually class members. This led to a reduction in the award from $860 Million to $650 Million.  

Even after this reduction, the State appealed the case to the Ohio Supreme Court, but continued to negotiate with class counsel. Yesterday, a tentative settlement in the amount of $420 Million was announced. I describe this as “tentative” because the settlement must be approved by the trial court judge. Judge McMonagle has shown himself to be sympathetic to the plaintiff employers, and there is some chance, albeit a small one, that he may refuse to approve the settlement and tell the parties to negotiate further. Additionally, attorney’s fees will be deducted from the total, and those too must be approved by the judge.

Once approved, class counsel will be required to notify all class members of the settlement and the method by which they can submit their claim for reimbursement. While the formula is not yet known, it will undoubtedly be based on the amount of premiums paid and the number of years in which the company was a class member, i.e., was not group rated.

As developments continue to arise in this case, Cors & Bassett will provide further information and guidance to assist you. Please contact David Schmitt  at djs@corsbassett.com or by phone at 513-852-2587 if you would like to discuss this matter further.

Tags: Ohio Workers' Compensation, San Allen Litigation

Is the Affordable Care Act on the Ropes?

Posted on Tue, Jul 22, 2014 @ 07:45 PM

by Hans M. ZimmerHans M. Zimmer

In a somewhat surprising opinion issued by the federal Court of Appeals for the DC Circuit (Halbig v. Burwell), the court ruled that the federal government lacks the authority to provide subsidies on healthcare.gov to encourage persons currently without health insurance to buy insurance. The court based its decision on the language in the statute that limits subsidies to health insurance policies that can be purchased on exchanges run by state governments. At present, state-run exchanges are available in only 16 states and the District of Columbia. The remaining 36 states operate the exchange through healthcare.gov.

The plaintiff, Jacqueline Halbig, is a West Virginia resident who never had health insurance but also did not want to buy it. Under the Affordable Care Act (“ACA”), she would either have to buy insurance or pay the penalty imposed by that statute as the individual mandate. West Virginia is one of the 34 states that does not have its own exchange but relies on healthcare.gov, the federal exchange. The court ruled that the plain language of the statute limited subsidies to exchanges “established by the states” and as West Virginia had not established such an exchange, no subsidy could be granted. The effect of this interpretation is that not only does the individual mandate disappear in states that do not have their own exchange, but the employer mandate disappears along with it. The judges writing the opinion conceded that the effect of their ruling would be to drastically reduce the number of persons who would be able to gain coverage, but that it was not their job to write laws, only to interpret the law as written by Congress.

This opinion is directly contrary to an opinion issued by another federal circuit court of appeals the same day (King v. Burwell). That court heard the same arguments advanced in the DC Circuit but said that the language in the statute limiting subsidies to exchanges “established by the state” was ambiguous. As the language in the statute was ambiguous, the court relied instead on the regulation issued by the IRS, which permits the subsidies in “exchanges” and then goes on to define exchanges as marketplaces established either by the states or by the Department of Health and Human Services. The court viewed the regulation issued by IRS as a reasonable exercise of its regulatory discretion and upheld the subsidies.

The split between 2 federal circuits on an issue this crucial to the implementation of ACA likely means that the United States Supreme Court will again have to decide the future of ACA. The Obama administration already announced their decision to appeal earlier this afternoon.  In 2012, the Supreme Court generally upheld the validity of ACA in a very divided opinion with the majority ruling stating that ACA was a valid exercise of Congress’ power to impose taxes as opposed to an invalid limitation on the rights of individuals in the country to decide their own fate with respect to health insurance. It will be interesting to follow the course of this issue over the next year. Current numbers indicate that over 8,000,000 individuals in states where the only marketplace is healthcare.gov are subject to the individual mandate and the penalties imposed. These individuals would now be free from that mandate. In addition, in those same states, 250,000 firms with 57,000,000 employees would now be freed from the employer mandate that requires employers to offer “affordable” insurance to their employees. In contrast, only 5,000,000 individuals signed up for coverage in the 34 states relying on the federal exchange and are receiving the subsidy that was declared illegal by the DC Circuit.Given the number of persons involved on both sides of this issue, Supreme Court involvement appears likely.

Tags: Affordable Care Act

DOL Proposes FMLA for Eligible Employees in Same Sex Marriages

Posted on Fri, Jul 18, 2014 @ 09:59 AM

by Jack B. HarrisonJack B. Harrison

Recently, the Department of Labor (“DOL”) issued a Notice of Proposed Rulemaking under which it stated its intentions to extend the protections of the Family and Medical Leave Act (“FMLA”) to all eligible employees in legal same-sex marriages regardless of the state in which they live.  In releasing the proposed rule change, the DOL described the purpose of this proposed rule change as follows:

The proposal would help ensure that all families will have the flexibility to deal with serious medical and family situations without fearing the threat of job loss. Secretary Perez is proposing this rule in light of the Supreme Court's decision in United States v. Windsor, in which the court struck down the Defense of Marriage Act provision that interpreted "marriage" and "spouse" to be limited to opposite-sex marriage for the purposes of federal law.

Under the proposed rule change, the regulatory definition of “spouse” would be changed to allow eligible employees in a legal same-sex marriage to take FMLA leave for his or her spouse or family member regardless of the state in which the employee resides. Under the current regulatory definition of "spouse," only same-sex spouses who reside in a state that recognizes same-sex marriage are able to take advantage of FMLA leave.  The proposed rule would define “spouse” for FMLA purposes as follows:

Spouse, as defined in the statute, means a husband or wife. For purposes of this definition, husband or wife refers to the other person with whom an individual entered into marriage as defined or recognized under State law for purposes of marriage in the State in which the marriage was entered into or, in the case of a marriage entered into outside of any State, if the marriage is valid in the place where entered into and could have been entered into in at least one State. This definition includes an individual in a same-sex or common law marriage that either (1) was entered into in a State that recognizes such marriages or, (2) if entered into outside of any State, is valid in the place where entered into and could have been entered into in at least one State.

Thus, under the proposed rule change, coverage under the FMLA would be based on the law of the place where the marriage was entered into (“state of celebration” as opposed to “state of residence”), which would allow legally married same-sex couples to be eligible for FMLA family leave rights regardless of whether the state in which they currently reside recognizes such marriages.

Under the process following the issuance of a Notice of Proposed Rulemaking, interested parties may submit comments on the proposed rule at www.regulations.gov.  Interested parties who wish to provide comments on the proposed rule must do so on or before August 11, 2014.

Employers, particularly those in states that do not currently recognize same-sex marriages, should closely follow the developments surrounding this proposed rule.  Assuming the rule is adopted, employers should be prepared to modify their leave policies to bring them in line with the new rule.  Cors & Bassett will continue to monitor developments related to this proposed rule and will provide updates as appropriate.

Tags: Family and Medical Leave Act, FMLA

Does the Hobby Lobby Supreme Court Ruling Invite Future Challenges?

Posted on Tue, Jul 15, 2014 @ 09:24 AM

by Jack B. HarrisonJack B. Harrison

On the final day of the term, the United States Supreme Court issued its much anticipated decision in Burwell v. Hobby Lobby.  In Hobby Lobby, the Supreme Court ruled in favor of Hobby Lobby and two other entities, holding that closely held, for-profit entities who had objections to certain aspects of the birth control mandate imposed by the Affordable Care Act ("the ACA") based on religious beliefs could invoke the protections of the Religious Freedom Restoration Act (RFRA) to avoid complying with the mandate. 

Hobby Lobby involved three closely held companies, Hobby Lobby Stores, Inc., Conestoga Wood Specialties Corporation, and Mardel, Inc., all of whom sought exemption from the birth control mandate contained in the ACA.  In its decision, the Supreme Court held specifically that:

(a) for-profit, closely held corporate entities are "persons" authorized to bring claims under RFRA;

(b) the ACA's birth control coverage mandate with respect to the four specific forms of birth control at issue in the case placed a substantial burden on the religious beliefs of the entities seeking the exemption; and

(c) while agreeing with the government’s position that providing corporate employees free access to these four forms of birth control was a matter of compelling interest to the federal government, the ACA's coverage mandate was not the least restrictive means of achieving that goal.

Justice Ginsburg, joined in full by Justice Sotomayor, authored a very strong dissent in which she clearly articulated her disagreement with all three of these holdings by the majority.  Justices Breyer and Kagan also dissented, refusing to reach a conclusion as to whether for-profit corporations had standing to bring claims under RFRA, but joining in the remainder of Justice Ginsburg’s dissent.

While the decision is expressly limited to the specific birth control mandate of the ACA, the forms of birth control specifically objected to in the case, and the specific corporate structure (i.e. closely held, for-profit entities) before the Supreme Court in Hobby Lobby, it is likely that language in the decision will spawn litigation over religious objections to generally applicable federal laws, including non-discrimination laws. 

The majority stated in its opinion the following:

The principal dissent raises the possibility that discrimination in hiring, for example on the basis of race, might be cloaked as religious practice to escape legal sanction. Our decision today provides no such shield. The Government has a compelling interest in providing an equal opportunity to participate in the workforce without regard to race, and prohibitions on racial discrimination are precisely tailored to achieve that critical goal.

It can be argued that this statement by the Supreme Court should be read narrowly, applying only to federal statutes that prohibit discrimination based on race.  Presumably, those taking such a position would argue that because race based discrimination is specifically prohibited by the Constitution, federal statutes implementing the Constitutional prohibition are beyond the reach of RFRA.  Arguably, it would then follow that federal statutes prohibiting discrimination on other categories, such as gender or sexual orientation / gender identity would be subject to religious objections under RFRA.  It is unlikely that the Supreme Court meant for its language to be read so narrowly.  However, this language certainly opens the door for future challenges.

Prudent employers, particularly closely held, for-profit entities whose corporate documents and practices express strong religious beliefs, should review this decision and its implications for them.  However, such employers should continue to comply with all federal, state, and local laws prohibiting discrimination, giving consideration to the public relations problems that might be created by openly seeking to defy non-discrimination laws based on religious beliefs, no matter how strongly held they may be.

Legislation has already been introduced in the Congress to reverse the impact of this decision.  Introduced on July 9, 2014, the Protect Women’s Health from Corporate Interference Act of 2014 (H.R. 5051, S. 2578), specifically seeks to overturn the decision in Hobby Lobby.  According to the sponsors of this legislation, the “bill exempts federally mandated health services from RFRA while keeping in place the existing exemption for religious employers (e.g., houses of worship) and accommodation of religious non-profits who do not wish to provide contraceptives.”  The intent of this legislation is to “explicitly prohibit for-profit employers that maintain a group health plan for its employees from using religious beliefs to deny employees coverage of contraception or any other vital health service required by federal law.” 

Thus, employers should continue to monitor developments following Hobby Lobby, both in the courts and in the Congress.  Cors & Bassett will continue to provide updates as developments occur.

Tags: US Supreme Court