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Labor & Employment Newsletter June 2021: Legislative Update

American Rescue Plan Act: Voluntary vs. Required Provisions

By: Jennifer S. Jackman
 
The American Rescue Plan Act (“ARPA”) was signed into law on March 11, 2021 and mandates certain important changes for employees, while also providing choice as to others. 

Takeaway:  employer funded COBRA benefits are REQUIRED through September 30, 2021 (with specific notice requirements) and emergency paid sick leave and family leave benefits are voluntary.
 
Emergency Paid Sick Leave (“EPSL”) (VOLUNTARY)
ARPA expands EPSL benefits in several ways.  First, the timeline for providing these benefits has been extended until September 30, 2021.  Second, it increases the cap available for the paid sick leave and the payroll tax credit available to employers to $511.00 per day, regardless of qualifying reason.  Third, the reasons available for triggering this leave have been expanded to include (1) obtaining the Covid-19 vaccine; (2) recovering from an illness or condition related to the vaccine; and (3) waiting for results of a test or medical diagnosis after exposure to Covid-19.

Employers are not required to provide this benefit, but if employers do provide EPSL, the sick leave bank must be “reset” to allow a new ten day leave bank that reset on April 1, 2021.  Thus, if an employee already took EPSL under the Families First Covid Recovery Act (“FFCRA”), they are entitled to take an additional ten days of leave under ARPA. Employers need not add the prior available leave to the “reset” leave bank (though this is permissible), but do need to provide a “new” 10 day period if offering EPSL under ARPA.  Further, if providing this benefit, employers must allow leave for all of the reasons provided under ARPA and may not pick and choose between qualifying reasons.
 
Emergency Family Leave (“EFML”) (VOLUNTARY)
ARPA also expands the EFML benefits that were initially provided under the FFRCA. Previously, EFML was only available to employees who needed time off to care for a child due to closure of school or daycare and the first two weeks of EFML was unpaid.  Now, EMFL is expanded to include all of the same new reasons that EPSL can be provided.  While the pay under EMFL remains capped at $200 per day and the first two weeks are now paid.  Since the first two weeks can now be paid, the total allowable tax credit has been expanded from $10,000 to $12,000.

Like EPSL, this benefit is also voluntary.

Employer Choice
Employers have three options under ARPA:
  • Offer BOTH options (EPSL and EFML)
  • Offer NEITHER Option
  • Offer ONE but not the other

NOTE:  ARPA has an anti-discrimination provision that prohibits employers from discriminating in favor of highly compensated employees, full time employees or more senior/tenured employees if employers was to receive the tax credits. Accordingly, if employers provide this benefit, they should provide it to all employees.  
 
ARPA – COBRA (REQUIRED)
ARPA provides a new mandatory benefit that provides employees up to 6 months of free COBRA coverage for qualifying events.  Employers are required to pay for this benefit, if elected.  Similar to EFML and EPSL, employers will receive a payroll tax credit to offset this benefit.  Eligible employees are “assistant eligible individuals”.  This benefit applies for COBRA payments through September 30, 2021.AEI includes employees who were eligible but have not yet elected, previously declined or discontinued COBRA coverage but who still are under the period of eligibility.  Any former employee who declined COBRA within the prior 18 months may be eligible and employers are required to provide notice to those former employees no later than May 31st.  ARPA does not extend eligibility.  For example, if the benefit was set to end in July, it does not extend to September.  

No Employer Choice:

COBRA coverage is REQUIRED and employers must take the following actions:
  • Provide notice to all assistant eligible individuals by May 31st.
  • Reimburse all April and May payments that assistant eligible individuals made.
  • Allow formerly terminated assistant eligible individuals to opt in regardless of whether they previously discontinued, declined or failed to timely elect coverage.

NOTE:  There are substantial financial penalties for non-compliance.

NOTE:  ARPA continuing coverage requirements apply to state mini-COBRA benefits, as well though some of the requirements differ.
 

Standard Lessened for Actionable Claims of Harassment in Montgomery County

By: Tiffany M. Releford

For years, employers have understood that harassment, including sexual harassment, must be “severe or pervasive” to be actionable. However, that recognized standard has now changed in Montgomery County, Maryland. As a chartered county, Montgomery County has the discretion to determine what actionable discrimination is under County law. As such, effective January 15, 2021, the County Council for Montgomery County, Maryland passed Bill 14-20 which updated the County’s Human Rights law to define harassment, including sexual harassment.  However, the most significant change is that the updated law departs from the age-old “severe and pervasive” standard for discriminatory harassment to a lesser standard that merely requires that “a reasonable victim of discrimination would consider the conduct to be more than a petty slight, trivial inconvenience, or minor annoyance.” This change affords greater protection to County employees.

As noted above, the updated law has a new definition of harassment, which includes “verbal, written or physical conduct, whether or not the conduct would be considered sufficiently severe or pervasive under precedent applied to harassment claims. . . .”  Likewise, the added definition of sexual harassment includes “unwelcome sexual advances, requests for sexual favors, or other verbal, written, or physical conduct of a sexual nature, whether or not the conduct would be considered sufficiently severe or pervasive under precedent applied to harassment claims . . . .” 

So what do these changes mean for employers doing business in Montgomery County, Maryland?  The new changes do not affect the definition of employers covered by the law, or the existing damages or penalties allowable in employment discrimination cases. However, employers must change their mindset with regard to harassment claims that historically were more difficult for a complainant to bring unless the complainant had endured a series of extreme and persistent incidents of harassment. This means employers should review and revise their current harassment policies to address this lesser standard to avoid employee complaints being dismissed or ignored under the former “severe or pervasive” standard. Further, employers should be proactive in training supervisors on what constitutes harassment, including sexual harassment, under the updated County law.
 

Virginia’s Legislative Update Affecting Employers

By: Robert N. Drewry and Betsy Davis

Every winter, Virginia’s General Assembly gathers in Richmond to pass new laws affecting Virginians and Virginia businesses. Three of the most recent and consequential changes affecting employers are changes to Virginia’s minimum wage, paid sick leave to certain employees, and prohibition on disciplining employees for medicinal use of cannabis oil.

First, Virginia increased the minimum wage, effective May 1, 2021. The new minimum wage[1] is tied to a tier system, provided the Federal minimum wage is never increased. If the Federal minimum wage ever exceeds the tiered system in Virginia, Virginia employers will follow the Federal minimum wage. Otherwise, from May 1, 2021, until January 1, 2022, the minimum wage in Virginia is $9.50 per hour. On January 1, 2022, the minimum wage increases to $11.00 per hour until January 1, 2023. From January 1, 2023 until January 1, 2025, the minimum wage in Virginia is set at $12.00 per hour. After January 1, 2025, the minimum wage is dependent on the General Assembly and in the event they do not act prior to July 1, 2024, the Commissioner of Labor and Industry shall establish the adjusted state hourly minimum wage.

Second, Virginia, in a move towards full paid sick leave,[2] is now requiring certain employers to provide paid sick leave. Home health workers, or individuals who provide personal care, respite, or companion services to an individual who receives consumer-directed services under the state plan for medical assistance services. If you employ a home health worker, those employees shall accrue a minimum of one hour of paid sick leave for every 30 hours worked.

Lastly, Virginia is moving towards a regulated form of recreational marijuana use. Beginning July 1, 2021, if an employee provides a valid written certification for use of cannabis oil, issued by a practitioner, the employer is prohibited from discharging, disciplining, or discriminating against an employee for their lawful use of cannabis oil. While an employer shall not discharge, discipline, or discriminate, the employer is not restricted from taking adverse employment actions for impairment or use during working hours.[3]

In addition to these three new laws, Virginia employers should remember that in 2020 Virginia clamped down on misclassification of employees as independent contractors. WTP’s July 2020 Newsletter details those changes.

Overall, employers in Virginia are experiencing changing winds. For any questions regarding recent changes in Virginia’s employment laws, please contact Robert Drewry and Betsy Davis.
[1] Va. Code § 40.1-28.10
[2] Va. Code § 40.1-33.3 through § 40.1-33.6
[3] Va. Code § 40.1-27.4
 

D.C. Bans Non-Compete Agreements

By: Rafiq R. Gharbi
 
In the close geographic quarters of the District of Columbia, non-compete agreements were a common tool for employers seeking to protect their business from former employees going to work for competitors. Now, employees cannot be bound by such covenants not to compete, and are generally free to take up shop with the competitor across the street. This new law will inevitably change the landscape of DC employment practices.

The Ban on Non-Compete Agreements Act of 2020 was passed on December 15, 2020, signed into law on January 11, 2021, and made effective by Congress on March 16, 2021. The Act prohibits the use of agreements and policies which prohibit or discourage competition in employment. The new legislation also restricts employers from prohibiting secondary employment, creating a protection for employees with additional employment or run their own business concurrently. The scope of the Act is broad, and extends to employees who perform work in DC, or employees whom an employer reasonably anticipates will perform work on behalf of the employer.

The Act awaits full enforceability after approval of its budget and fiscal impact, which is expected to happen in fall 2021.

In recent years, DC’s neighbors Maryland and Virginia also passed legislation banning non-competes. However, unlike DC, Maryland and Virginia’s laws are tied to certain salary thresholds. With no tie to employees’ salaries, DC’s new law is a nearly blanket prohibition on non-compete agreements.

The prohibition involves three core concepts. First, an employer may not require an employee to sign a non-compete agreement. Second, an employer may not maintain a non-compete policy. And third, an employer may not maintain a policy against secondary employment. Any retaliation based on an employee’s exercise of these protections afforded by the Act is also prohibited.

Losing the protections of non-compete agreements and policies may lead to companies having questions about they can protect their business. Employers may still enter into and enforce confidentiality agreements to protect their client/customer lists and trade secrets, and may also require non-solicitation agreements. Non-compete agreements entered into prior to the Act’s applicability date (projected to be fall 2021) will survive the Act and still be enforceable. However, policies created and maintained prior to the Act will not survive, and their prohibition will be enforceable following the applicability date.

It is unclear what the effect of banning prohibitions on secondary employment will have. In today’s gig economy, some full-time employees choose to engage in after-hours jobs to supplement their income. But what about the highly compensated officer devoting time and loyalty to another venture that is competing with the prime employer, all the while reaping the benefits? Employers should consider policies that protect confidential information and assets, and set clear expectations for potential conflicts of interest when it comes to secondary employment.

There are a few limited exceptions to the Act’s coverage. The Act does allow for non-compete agreements between the seller and buyer of a business. As far as individuals exempted from the Act,  “Medical Specialists” are exempt if they meet the following four requirements: 1) they hold a license to practice medicine; 2) they must be a physician; 3) they must have completed a medical residency; and 4) they must have a total compensation of at least $250,000 per year. Volunteers, officers of religious organizations, and casual babysitters are also exempted from the Act. Conversely, Radio broadcasters are no longer subject to a special exception pursuant to the Broadcast Industry Contracting Freedom Act of 2002, and fall within the general scope of the Act.

Consequences for non-compliance range from administrative fines arising from complaints filed with the DC Mayor’s office, to potential liability and damages arising out of the private cause of action created by the Act.

With enforcement of the Act on hold, now is the perfect time to revisit any potential issues with coming into compliance with the Act. As mentioned above, employers that have policies in place containing non-competition provisions should revisit their policies and handbooks to ensure they are brought into compliance.  Employers should also prepare for the affirmative requirements the Act imposes. Once the fiscal review and budget are approved, the Act’s applicability date will be established. At that time, employers will have 90 days to provide notice of the Act to employees. Thereafter, new employees must receive notice of the Act within 7 days, and employees who request the notice must be given notice within 14 days.

Whiteford, Taylor & Preston recently discussed this new legislation and more during its webinar, “Recent Changes in Federal, MD and DC Law.” If you have any questions regarding this new shift in DC law, or are interested in learning about other legislative changes and what they mean for your business, please contact Rafiq Gharbi or one of the attorneys in the Labor and Employment Section.
 
The information contained here is not intended to provide legal advice or opinion and should not be acted upon without consulting an attorney. Counsel should not be selected based on advertising materials, and we recommend that you conduct further investigation when seeking legal representation.