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Employment Posts (76)

The Department of Justice Tax Division and the IRS have been ramping up an intense crackdown on offshore tax evasion, and the IRS’ reduced resources due to new budget cuts is having no effect on IRS enforcement initiatives in this area

The Government’s reach has extended far beyond Switzerland (where it is pursuing criminal investigations of a dozen Swiss banks and another 100 banks are seeking to avoid criminal investigations and prosecutions) to jurisdictions including Israel, (Bank Leumi recently entered into a Deferred Prosecution Agreement with the Department of Justice, paid a penalty of $270,000,000 and agreed to identify numerous additional Bank Leumi account holders in the U.S. to the IRS), India, Liechtenstein, Luxemburg, Barbados, Hong Kong, Singapore - and is pursuing numerous other investigations in other areas as well not yet made public.

Fourteen active federal grand jury investigations involving foreign banking institutions, as well as the recently enacted FATCA legislation (which mandates that a foreign financial institution identify and reveal American depositors – individual and entity – to the IRS or suffer a 30 percent withholding on withholdable payments and pass thru payments), along with the Department of Justice amnesty program for Swiss banks (BSI SA became first Swiss bank in this disclosure program to agree to pay a $211 million penalty and turn over U.S. account holder’s identity to escape criminal charges) to disclose how they aided tax evasion. Taken together, all of the foregoing will result in the eventual disclosure of several thousands of taxpayers’ identities to the IRS.

Up to date, taxpayers have made more than 52,000 disclosures since the first IRS Offshore Voluntary Disclosure Program opened in 2009 and tax authorities have collected more than $7 billion from these initiatives alone.

For individuals and business entities with undisclosed foreign accounts and unreported income from international sources, time is of the essence to review the options available, these are dangerous times…nothing is more destructive than a criminal tax investigation with the real probability of prison time and draconian fraud and FBAR – foreign bank account report penalties.

Fortunately, options exist. First, the IRS Offshore Voluntary Disclosure Program provides taxpayers a way to resolve their non-compliance with these rules. Taxpayers who are not under criminal investigation or audit, and whose names have not been disclosed to the IRS by foreign banks are eligible and can escape criminal prosecution and more severe civil penalties. They can stop looking behind their shoulders, repatriate the funds, file truthful and accurate tax returns in the future, and not leave their heirs headaches.

In addition to providing a means to avoid criminal prosecution, the program provides those who participate certainty as to their maximum civil penalty exposure, instead of a potential laundry list of confiscatory civil tax and FBAR penalties.

The overall penalty structure of the offshore voluntary disclosure program includes a 27.5% penalty (50% if the taxpayer has accounts at a dozen or so already identified “bad banks” including UBS and Credit Suisse) of the highest balance in the account over the past eight years as a substitute for the potential willful FBAR penalty of the higher of $100,000 or 50% of the highest balance in the account. With respect to the calculation of the substitute penalty under the program, it is important to note that the IRS includes the fair market value of any assets acquired with tainted funds in calculating the 27.5%. There are certain penalty mitigation situations recognized, as well as an opt out of the program opportunity in the least egregious nonwillful tax cases. Participants in the program must file all original or amended tax returns and delinquent FBARs for the past eight years, and include a payment for back taxes, interest and an accuracy penalty.

The Opt Out procedure entails an irrevocable election being made by a taxpayer to have his or her case handled under the standard audit process. Once the election is filed, together with the taxpayer’s alternative penalty calculation recommendation, the case is removed from the civil settlement structure set up in the offshore voluntary disclosure program and an examination is initiated. An opt out will result in an examination of the taxpayer for all open years under the offshore voluntary disclosure program. The scope of the examination is determined by the IRS and all civil penalties are on the table including FBAR penalties, civil fraud penalty, and penalties for failing to file information returns, if applicable. Taxpayers who opt out of the program must continue to cooperate with the IRS, provide information requested and subject themselves to an interview. In determining whether to opt out or not, advisers have to consider the nature and size of the errors and what caused them, and generally the most important factor is to assess the taxpayer’s exposure under the willful FBAR penalty (potentially the greater of $100,000 or 50% of the highest account balance for each open year).

Next, taxpayers who balk at incurring the financial costs and penalties associated with participating in the offshore voluntary disclosure program, may have other attractive alternatives.

Last year, IRS expanded its Streamline Procedures and added a Delinquent International Information Returns procedure and a delinquent FBAR procedure which should be considered.

With respect to the expanded Streamlined Procedures, procedures are now available to a wider range of taxpayers living both inside and outside the U.S. Specifically, there is now both a Streamlined Domestic Offshore Procedure (for taxpayers residing in the U.S.) and a Streamlined Foreign Offshore Procedure (for taxpayers residing outside the U.S.). Under both of those procedures, there is a 3 year (vs. 8 years under the 2014 OVDP) lookback period for filing amended income tax returns and a 6 year lookback period for filing delinquent FBARSs. For eligible taxpayers residing in the U.S., the only penalty that will be assessed is a miscellaneous offshore penalty equal to 5% (vs. 27.5 or 50% under the 2014 OVDP) of the foreign financial assets that triggered the tax compliance issue – calculated on the highest year – end balance and asset values over the past six FBAR years. For eligible taxpayers residing outside the U.S., no penalty will be assessed.

Both Streamlined Procedures require that taxpayers certify under penalties of perjury that previous failures to comply were due to non-willful conduct and in that regard are required to submit a detailed narrative statement of the facts explaining the taxpayer’s failure to disclose offshore accounts/assets.

In view of the fact that there is no criminal tax investigation/prosecution guarantee under the Streamline Procedures, and an application for Streamline relief disqualifies a taxpayer from subsequently seeking entry into the 2014 OVDP in the event IRS rejects the Streamline application, a decision to opt for that alternative can be risky in certain factual circumstances. In fact, instead of choosing the 2014 OVDP option, opting for Streamline Procedures should only be utilized in truly non-willful conduct situations. Caution is advised in evaluating willful and non-willful conduct in this context, and any possible so-called badges of fraud must be identified. A false Certification can also result in civil or criminal liabilities.

Furthermore, for those taxpayers who were already in the IRS Offshore Voluntary Disclosure Program by May, 2014, another option has been recognized by the IRS. Specifically, pursuant to Transition Rules: Frequently Asked Questions No. 6, these taxpayers can request transitional treatment under the applicable lower penalty terms available under the Streamlined Procedure. In those situations, all required terms of the OVDP Program must still be satisfied and in addition taxpayers have to submit a Certification setting forth their nonwillful conduct and request that the lower penalty terms in the Streamline Procedures be applied to their OVDP applications.

With respect to the IRS Delinquent International Information Return Submission Procedures, this option can be utilized for taxpayers who do not need to use the OVDP or the Streamlined Filing Compliance Procedures to file delinquent or amended tax retainer to report and pay additional tax, but who have not filed one or more required international information return (ex. forms 3520, 3520-A) have reasonable cause for not timely filing the information returns; are not under a civil examination or a criminal investigation by the IRS, and have not already been contacted by the IRS about the delinquent information returns. Those eligible taxpayers can utilize this procedure by filing the delinquent information returns with a statement of the facts establishing reasonable cause for the failure to file.

In addition, there is also an IRS Delinquent FBAR Submission Procedures which taxpayers who do not need to use either the OVDP or the Streamlined Filing Compliance Procedures to file delinquent or amended tax returns to report and pay additional tax, but who have not filed a revised FBAR and are not under a civil examination or a criminal investigation by the IRS and have already been contacted by the IRS about the delinquent FBARs. These taxpayers should file the delinquent FBARs and include a statement explaining why they are filing the FBARs late.

The IRS has represented that it will not impose a penalty for their failure to file the delinquent FBARs by the taxpayers properly requested on its tax returns, and paid all tax on the income from a foreign financial account reported on the delinquent FBARs, and they have not previously been contacted regarding an income tax examination or a request for delinquent tax returns for the years for which the delinquent FBARs are submitted.

A final option that has been utilized is known as making a “quiet disclosure”. Such a disclosure, not limited to reporting foreign accounts or income, involves filing original/amended tax returns (and delinquent FBARs) with the appropriate IRS Service Center that correct deficiencies in original returns in the hope that such amended return filings will not be selected for audit and/or referred to the IRS Criminal Investigation Division.

If the quiet disclosure is successful, it has the benefit of avoiding some of the more harsh penalties with respect to undisclosed foreign accounts and shortens the look back time period. However, there are considerable risks associated with such a strategy since the IRS strongly disfavors this approach and takes the position that the taxpayer is “gaming the system”.

For those taxpayers who have little criminal tax exposure since they didn’t engage in willful concealment type conduct, a quiet disclosure is more attractive. Nevertheless, if their tax return filings are audited, the chance of leniency on penalties will be significantly compromised. Finally, it should go without saying that any quiet disclosure must be truthful and accurate as to every material matter.

For many individuals and entities with undisclosed foreign accounts, assets and unreported income from international sources, the offshore voluntary disclosure program with its known civil penalties outcome and related offshore initiatives detailed above are the last best options in an environment where the IRS is getting more information under new disclosure requirements and following more leads from ongoing foreign bank investigations. It is critical that these taxpayers and their advisers recognize that time is of the essence here, since it will be too late if a foreign bank discloses the taxpayer’s name to the IRS first.

Doing nothing is increasingly not a viable option for anyone who wants to be able to use and enjoy the undisclosed foreign account or assets.

On June 15, 2015, the Colorado Supreme Court ruled that an employer did not violate Colorado law by terminating an employee for testing positive for marijuana, which the employee used for medicinal purposes. Brandon Coats sued his former employer, Dish Network, LLC (“Dish”), for terminating him when he tested positive for the use of marijuana. Mr. Coats, who had a license issued pursuant to Colorado law for the use of medical marijuana, sued Dish alleging that it violated Colorado’s “lawful activities statute,” which prohibits an employer from terminating an employee for engaging in “lawful” activities outside of work. The Colorado Supreme Court found that because the use of marijuana is prohibited by federal law, the use of medical marijuana is not a “lawful” activity for purposes of the “lawful activities statute.”

While the Colorado Supreme Court’s decision is a positive one for employers, it is specific to Colorado law, and is not binding in Florida. Florida does not have a comparable “lawful activities statute.” However, because of Charlotte’s Web and continuing efforts to legalize additional strains of marijuana for medical use in Florida, we will continue to monitor decisions regarding the issue as they may provide guidance to Florida employers in the future. 


Sarah P. Reiner | Sarah is a shareholder in the firm's employment and labor law department. Her practice centers on the representation of private and public employers and management in employment related actions at the agency, state and federal levels.

Craig F. Novick | Craig is an associate attorney with the firm's Orlando office, where he is a member of the Employment Law Group. He represents employers in all areas of employment law, including, but not limited to: discrimination; retaliation; the Fair Labor Standards Act; the Family and Medical Leave Act; and the Americans With Disabilities Act.

The employer community has been waiting for years to receive guidance from the Equal Employment Opportunity Commission on wellness programs and how an employer’s obligations under the Americans with Disabilities Act intersect with its rights and obligations under the Health Insurance Portability and Accountability Act (as amended by the Affordable Care Act).

The EEOC finally issued a proposed rule on April 20. The following is what employers need to know in a “Q&A” format.

What problem is the EEOC trying to resolve?

The quick answer is an apparent conflict between the ADA rules on employer “medical inquiries,” on the one hand, and the “wellness program” provisions of the HIPAA/ACA, on the other.

Title I of the ADA (the part of the ADA that applies to private sector employers) generally prohibits employers from making “medical inquiries” of current employees unless the inquiries are “job-related and consistent with business necessity” (for example, to verify the need for a reasonable accommodation). The general rule is that employers are not supposed to be asking for medical information from current employees.

There are some limited exceptions to this rule, including an exception for medical inquiries made in connection with a “voluntary wellness program.”

As employer wellness programs have become more popular, many employers began offering specific rewards or penalties to employees based on whether they participated in the programs and even on whether they achieved certain “results.” As will be discussed in more detail below, the HIPAA and the ACA specifically authorize wellness programs to offer incentives for "participation" and “outcomes” under certain circumstances. However, the question arose whether the use of such incentives would render the wellness program not “voluntary” for ADA purposes. If the wellness program was not voluntary because of the incentives, then any requests for employee medical information made in connection with the wellness program would violate the ADA.

(Title I of the ADA would not have an impact on medical inquiries made, say, to the family member of an employee who might also be eligible to participate in the employer’s wellness program.)

Thus, it was possible that an employer could offer a wellness program that was authorized and lawful under the HIPAA/ACA but still be vulnerable to charges and lawsuits under the ADA. The EEOC’s proposed rule seeks to address this problem, and for the most part, it should be welcomed by employers who offer wellness programs.

What does the proposed rule say, in a nutshell?

The proposed rule says that a wellness program can still be “voluntary” for ADA purposes if the program provides “incentives” for employees (both rewards and penalties), as long as the employer complies with the wellness incentive requirements of the HIPAA/Affordable Care Act.

There are two caveats: The wellness program would have to be associated with a group health plan (either insured or self-insured), and the EEOC proposals do not exactly match the HIPAA/ACA rules, although they are reasonably close.

Can you give us a recap of the HIPAA/ACA requirements?

Under the HIPAA/ACA scheme, there are two types of wellness programs. A “participatory” program is one that rewards employees just for participating and does not require a specific goal to be met. (An example would be an employer who reimburses employees for fitness club memberships.) Under the HIPAA/ACA, participatory programs can be offered without limitation, as long as they’re available to all similarly situated individuals.

The other type of wellness program is a “health-contingent” program. There are two types of “health-contingent” programs: (1) activity-only programs, in which the employee is rewarded for completing an activity but doesn’t have to achieve or maintain an outcome (for example, “we’ll pay you $100 if you walk a mile three days a week for a year”); and (2) outcome-based programs, in which employees are rewarded for achieving or maintaining results (for example, “we’ll pay you $100 if you keep your BMI at or below 25 for a year, or if you quit smoking”).

If the program is health-contingent, employers are allowed to offer incentives (carrots or sticks) if –


  • Employees are allowed to try to qualify at least once a year,
  • The total reward offered doesn’t exceed 30 percent of the total cost of employee-only coverage under the plan or the total cost of family coverage if dependents are also allowed to participate in the program ("total" means the employee’s and the employer’s share). The percentage is up to 50 percent for tobacco prevention or cessation,
  • The program is reasonably designed to promote health or prevent disease,
  • The full reward must be available for all similarly situated individuals, and reasonable alternatives must be offered to those who can’t qualify, and
  • The availability of reasonable alternatives must be disclosed in plan materials and in any disclosure telling an individual that he or she did not meet an initial outcome-based standard.


Under the HIPAA/ACA, the 30 percent/50 percent incentive limit applies only to “health-contingent” programs. HIPAA and the ACA have no limit on rewards that apply to “participatory” programs (if the programs are available to all similarly situated individuals).

The EEOC’s proposed rule is slightly different.

How does the EEOC proposed rule contrast with the HIPAA/ACA rule?

The EEOC would allow employers to offer incentives for employee participation in wellness programs associated with group health plans if the total reward does not exceed 30 percent of the total cost of employee-only coverage under the plan for both participatory and health-contingent wellness programs. The EEOC proposed rule does not allow a 50 percent reward level for tobacco cessation programs (unless there are no associated disability-related questions or medical exams), and the total cost used in the reward calculations does not take into account family-level coverage, even where dependents can participate in the program.

In addition, the wellness program must be completely voluntary. The EEOC would define “voluntary” as follows:

  • Employees aren’t required to participate in the wellness program,
  • Health insurance coverage is not denied or made more difficult to get if the employee chooses not to participate (with the exception of the permitted “incentives”), and
  • The employer does not take adverse action against an employee for refusing to participate . . . as this employer allegedly did.

The EEOC invites the public to comment on the proposed rulethrough June 19. The agency is particularly interested in comments pertaining to how much medical information an employee should be required to disclose to be eligible for an incentive, whether the rule should require that the incentives not render health insurance “unaffordable” within the meaning of the ACA, issues related to the “notice” requirement, how to treat wellness programs that are not associated with group health insurance, as well as other topics.

The employer would also be required to provide a notice “that clearly explains what medical information will be obtained, who will receive the medical information, how the medical information will be used, the restrictions on its disclosure, and the methods the covered entity will employ to prevent improper disclosure of the medical information.”

The wellness program would be required to disclose medical information to the employer only in aggregated, non-individually-identifiable form, “except as needed to administer the health plan.”

Are there any other issues to consider under the HIPAA/ACA?

Although the EEOC rule is currently in proposed form, we expect any final version to still be somewhat different from the HIPAA/ACA requirements for wellness programs. For example, one of the primary requirements of a outcome-based program under HIPAA is the ability of an employee to meet a “reasonable alternative standard” to receive the reward. Participants in the program must be clearly informed of that option, and it remains to be seen how that notification will be coordinated with the notice proposed by the EEOC. A related issue is the intersection of the “reasonable alternative standard” under HIPAA with the reasonable accommodation and interactive process obligations under the ADA. The EEOC’s Interpretive Guidance to the proposed rule says that provision of a “reasonable alternative standard” along with the required notification will generally satisfy the employer’s reasonable accommodation obligations under the ADA, but no specifics are given. Moreover, the Interpretive Guidance notes that under the ADA an employer would have to make reasonable accommodations for an employee who could not be in a “participatory” program because of a disability, even though the HIPAA/ACA rules do not require a “reasonable alternative standard” for participatory programs.

Also, details about wellness programs commonly appear in ERISA-governed summary plan descriptions, so will the EEOC rules also have to appear there as well?

There are similarities between the employee benefits issues affecting wellness programs, on the one hand, and the ADA and employee-relations issues, on the other, but the differences are equally important and will hopefully be addressed by the EEOC in the final rules expected to be issued later this year.

What should employers do? 

The proposed rule describes certain employer “best practices,” as follows:

  • Employers should ensure that employees who handle medical information know their obligations under the laws.
  • Employers should adopt privacy policies for collection and handling of employee medical information, assuming that they have not already done so.
  • If medical information is stored electronically, it should be encrypted and other security measures implemented such as password protection and firewalls.
  • If possible, employees who handle medical information should not be “making decisions related to employment, such as hiring, termination, or discipline.” If this is not possible, then the employer should ensure that there is no discrimination based on an employee’s disability.
  • Breaches of confidentiality should be promptly and effectively addressed, and the affected employees should be informed immediately.
  • Employers should take appropriate action against an employee who breaches confidentiality, and should “consider discontinuing” their relationships with vendors who breach confidentiality.

Why doesn’t the EEOC proposed rule have a 50-percent incentive for tobacco-related programs, since the HIPAA/ACA does?

The EEOC explained that it did not include the 50 percent incentive for tobacco programs because, it said, most of those programs do not seek employee medical information at all. If not, there would be no ADA issue. But if a tobacco program does seek such information (for example, through testing for nicotine, or monitoring blood pressure), then the tobacco program would have to be included in computing the 30-percent limit for incentives.

Did the proposed rule address the employer’s right to get medical information from an employee’s family members, who may be covered under the employee’s health insurance and might be eligible for participation in the wellness program?

No, because Title I of the ADA applies only to employers and employees. Medical inquiries about an employee’s family member would, of course, be covered under the Genetic Information Nondiscrimination Act, which is also enforced by the EEOC. The EEOC says it will issue guidance on wellness and the GINA “in future EEOC rulemaking.”

Did the proposed rule contain anything else of interest?

Yes. The EEOC has explicitly disagreed with a wellness/ADA decision from the U.S. Court of Appeals for the Eleventh Circuit, Seff v. Broward County. At issue in theSeff case was a $20-per-paycheck penalty that employees had to pay if they chose not to participate in the county’s wellness program. The court found that the county’s program fell within a “safe harbor” in the ADA, which provides that a covered entity is not prohibited “from establishing, sponsoring, observing or administering the terms of a bona fide benefit plan that are based on underwriting risks, classifying risks, or administering such risks that are based on or not inconsistent with State law.” Because the program fell within the safe harbor, the court said, it was irrelevant whether the program was “voluntary” or whether medical inquiries made in connection with the program violated the ADA.

The EEOC’s position is that this “safe harbor” provision in the ADA does not apply to wellness programs.

Employers who operate in the Eleventh Circuit states of Alabama, Florida, or Georgia can continue to follow Seff for the time being. However, employers who operate in other states may choose to follow the EEOC’s position once its proposal becomes final. The conflict between the EEOC and the Eleventh Circuit will probably be resolved eventually by the courts.



M. Brian Magargle | Of Counsel : Since 1993, Brian Magargle has practiced employment law, and he began practicing in the area of employee benefits and ERISA in 1995.
Robin E. Shea | Partner : Robin Shea has more than 20 years' experience in employment litigation, including Title VII and the Age Discrimination in Employment Act, the Americans with Disabilities Act.



In today’s post, Gregg Rodgers, Chair of GSB’s Immigration Practice Group and member of our Hospitality, Travel & Tourism practice team, provides us with the latest updates regarding the federal processes that authorize employment for certain undocumented persons.

In my previous blog post, I discussed how recent Presidential Executive Actions had made it possible for certain people who reside in the U.S. without proper documentation to be assigned social security numbers and issued Employment Authorization Documents (EADs).  Today’s post provides important information and updates to help an undocumented individual get and retain legal employment authorization. (An employer should never knowingly hire or continue to employ an unauthorized worker.) Most importantly, you will see that it has become extremely important to apply for renewal of an EAD earlier than the government had previously suggested. Getting the word out to employees affected by this may help keep them on your payroll.

Deferred Action for Childhood Arrivals (DACA)

You have probably heard about the President’s Executive Action on June 15, 2012, in which he authorized a procedure for many undocumented people in the U.S. to become authorized for employment.  Individuals who demonstrate that they meet the guidelines may request consideration of “Deferred Action for Childhood Arrivals” (DACA) for a period of two years, subject to renewal for a period of two years, and may be eligible for employment authorization. By December 31, 2014, 638,897 people who came to the United States as children and who met the guidelines, had been approved for “deferred action” by the government.

DACA has made it possible for hundreds of thousands of undocumented people to become legally employed in the US for the first time, or to get employment authorization that they could present to their current employer to update Form I-9 information.

Many people have already obtained a two-year EAD and have applied for or are now ready to apply for renewal. Employers should know that, for this group of individuals, employment can occur only after the presentation of a valid EAD and cannot continue past its expiration date unless the employee presents another EAD or other documentation from the List of Acceptable Documents.  Having applied for renewal of an EAD or even presenting proof of the approval of an EAD that has not yet been received is not enough to allow continued employment.

But renewing an EAD has become a challenge. Historically, the government discouraged the filing of an Application for renewal of an EAD more than 120 days before its expiration. Most people applied between that date and 90 days before its expiration because, by regulation, the government has 90 days from the date of receipt of the application to adjudicate it, or it is required to grant an EAD for a period not to exceed 240 days. Unfortunately, the government has not met its required adjudication or issuance obligations in most cases over the past several months, resulting in the inability to confirm employment authorization and the subsequent termination of employment for those whose EADs have been delayed. Some employers have treated the termination as temporary, allowing a return to employment for those affected by these delays after the new EAD is presented.

Just this month, the government acknowledged the problem and began to encourage applicants tosubmit renewal requests 150 to 120 days before the current period of DACA and employment authorization is set to expire.   Employers are encouraged to notify DACA-authorized employees of this procedural change.

Implementation of Executive Action of November 20, 2014 Delayed

My January blog post also referenced the President’s Executive Action of November 20, 2014, which had two important issues relevant to this post. However, a temporary injunction was issued on February 16, 2015, that prevents the government from accepting requests as noted below. People interested in understanding more about these issues can read more and register with the federal government to get email updates regarding the status of this important program.

Expanded DACA

The 2014 Executive Action expanded DACA in several ways. If the injunction is lifted, it could apply to applicants of any age who meet the other requirements (whereas DACA applies to only those under the age of 31 on June 15, 2012) and employment authorization would be expanded from two years to three years.

Deferred Action for Parents of Americans and Lawful Permanent Residents (DAPA)

Another significant part of the now-enjoined Executive Action of November 20, 2014 includes authorization for parents of U.S. citizens and lawful permanent residents to request deferred action and employment authorization for three years, provided that they have lived in the United States continuously since January 1, 2010, and pass required background checks. This is known as “Deferred Action for Parents of Americans and Lawful Permanent Residents,” or DAPA.

Where Do We Go From Here?

Maintaining a loyal and stable workforce is important. I fully expect that expanded DACA and DAPA will be authorized in the relatively near future. It can be a good idea to monitor the litigation because, if the injunction is lifted, the government can be expected to move quickly to begin accepting applications for expanded DACA and DAPA. In the meantime, you may want to urge anyone who already has a DACA-based EAD to apply for renewal within the newly announced 150 – 120 day window as the best way to assure the likelihood of continuous employment authorization for them.

 Many hospitality employers are surprised to learn that employees have a right under federal labor law to access the exterior, nonworking areas of the hotel property in their off-duty hours for union or other protected concerted activities. Hospitality employers are also surprised to learn that handbook rules prohibiting any off-duty employee access or conditioning off-duty employee access on manager approval are unlawful.

In fact, the legality of hotel policies restricting off-duty employee access is a complicated area of federal labor law. But you do have some options when it comes to implementing lawful rules restricting off-duty employee access. Keep in mind that any rules on off-duty access must be clearly stated in the employee handbook and take into account the nuanced requirements of federal labor law.

Here’s an overview.

Exterior Areas Of The Property

The National Labor Relations Board (NLRB) has long held that employees have a presumptive right under federal labor law to access the exterior areas of the employer’s property to engage in union activities or other protected concerted activity. Exterior areas of the property include parking lots, outside break areas, smoking areas, and sidewalks near the hotel entrances. For hotels, exterior areas also include the “porte-cochere,” the covered area in the driveway where guests briefly park their cars to check into the hotel or to unload their luggage.

Off-duty employees who are engaging in concerted activity, for example distributing handbills regarding working conditions, have a legal right to be there. You cannot prohibit this type of off-duty employee access without “special circumstances,” which is a high bar under federal labor law. A hotel employer’s generalized concern about off-duty employees coming into contact with guests or customers is not a “special circumstance” that warrants prohibiting exterior property access for off-duty employees, or ejecting off-duty employees from the exterior areas of the property.

But only off-duty employees have the right to access the exterior areas of the property for union activity. The right does not extend to third parties, such as union business agents or outside union organizers.

Interior Areas

Employers can presumptively maintain a rule that prohibits employees from accessing the interior of the property, provided that the rule 1) is clearly disseminated to all employees; and 2) applies to off-duty employees seeking interior access for any purpose, not just for union activity.

The NLRB considers any policy that prohibits off-duty employee access without distinguishing between exterior and interior property areas to be overbroad and unlawful. For example, the board will find any rule that bans all off-duty employee access to the “property” or to the “premises” to be unlawful. The board believes these terms are too vague and overbroad, and that employees may interpret these terms to include the exterior areas of the property.

Further, the policy must be “clearly disseminated” to all employees. Practically speaking, this means the policy must be stated in an employee handbook. A verbal policy or undocumented historical practice will not meet the NLRB’s requirements.

Even if the rule is otherwise lawful, the NLRB holds that an employer cannot issue a new access rule in response to union activity. In other words, if you do not already have a rule on off-duty access in place, you cannot implement one once you learn that union representatives have visited the facility, or that an employee is soliciting coworkers to join a union.

Can You Require Manager Approval?

A common policy within the hospitality industry is to condition all off-duty employee property access on the express approval of the hotel manager or the senior manager on duty. This type of policy is not motivated by union animus, but rather is a matter of reasonable operational oversight. Naturally, many hotel managers want to know if an off-duty employee is on the premises, and for what purpose. Hotel managers know that off-duty employees being on hotel grounds can lead to lost revenues, such as free beverages and food among friendly coworkers. It can also result in over-socialization between on-duty and off-duty employees, which can detract from the guest experience.

Unfortunately, the NLRB holds that “manager approval” policies are overbroad and violate federal labor law. In the board’s view the problem with these policies is that they reserve too much discretion and allow managers to decide when and why employees may access the property. The NLRB believes that hotel managers will utilize their discretion to allow off-duty employees to access the property for some purposes, but will not allow off-duty employees to access the property for union activity or other protected concerted activity.

What About Off-Duty Contractors?

Hotel operators frequently utilize contractors for maintenance, laundry, or food-service work. In some cases, the NLRB has held that contractors who work at the hotel may access the exterior areas of the hotel for union activities or other protected concerted activities. Contractors are not “employees” of the hotel, but they are still “employees” of the contractor and, thus, entitled to certain legal protection under the National Labor Relations Act.

Is A Variation Possible?

The current state of the law allows hospitality employers to ban off-duty employees from accessing the hotel interior under any circumstances. This is because allowing off-duty interior access for some reasons but not others may lead to claims of union discrimination.

But a recent NLRB decision in the healthcare sector suggests another possible type of policy. In Sodexho America the board approved an off-duty access rule at a hospital that prohibited off-duty employees from accessing the hospital interior, except when obtaining their own medical care or when visiting hospital patients. In that case, the board held that the employer lawfully allowed the off-duty employees to use its medical facilities on the same terms as other members of the general public, but lawfully prohibited the off-duty employees from accessing the hospitality interior for any other purpose.

 The Board has not yet extended this holding to the hospitality industry so it’s not entirely clear whether a hotel employer can prohibit off-duty employee access to the hotel, except when the employee is accessing the hotel’s amenities “in the same manner as any other guest or customer.” Nor is it clear whether a hospitality employer can limit the number or frequency of visits by off-duty employees. Nevertheless, the recent Sodexho decision gives hospitality employers a legal foothold to implement a similar rule, and argue for its enforceability if challenged.

 Our Advice Regarding Access To Property

The NLRB applies tough rules regarding off-duty employee access. You should review the specifics of your off-duty employee access rules to ensure that they are precisely worded to comply with federal labor law while still protecting operational needs. Remember, you forfeit any right to implement lawful off-duty access rules once organizing activity has commenced, especially in light of the activist nature of the current NLRB. Don’t maintain access rules that are predicated solely on manager discretion.

The Department of Labor issued its Final Rule on Family Medical Leave Act (FMLA) rights on February 25, joining the Internal Revenue Service in adopting the “place of celebration”/“state of celebration” test. By virtue of this change, FMLA rights now extend to all workers in legal same-sex marriages regardless of the law of the state where the employee currently resides or works.

The Final Rule (RIN 1235-AA09) changes the definition of “spouse” in federal regulations, 29 C.F.R. §§ 825.102 and 825.122 (b). Under the new place of celebration test, if an employee was legally married in a state or country that recognizes same-sex marriages but moves to a state that does not, the employee’s marriage is still recognized and the employee can take FMLA leave to care for his/her spouse. This is a change from the prior “state of residence” test, which conditioned FMLA rights for same-sex couples on the law of the state in which the individual resides. This final rule takes effect on March 27, 2015.

The change has its roots in United States v. Windsor, 132 S. Ct. 2675 (2013), in which the Supreme Court struck down Section 3 of the Defense of Marriage Act (DOMA), which defined marriage as the union of a man and woman. After Windsor, employers needed to determine how to treat employees in same-sex marriages for purposes of federal taxes and various other federal employee benefits such as leave rights under the FMLA because many employee benefits are provided through the spousal relationship and state law on marriage equality differed.

In a revenue ruling shortly after Windsor, the IRS declared the state of celebration test would be used to define a marriage for federal taxes: meaning if a same-sex couple got married in a state that legally recognized their marriage, the couple will be considered married for purposes of federal tax laws regardless of whether they moved to a state where same-sex marriage is not recognized. This affected employee benefits as follows: (1) employers with group health plans had to cease imputing income to employees whose same-sex spouse participates in the plans (as employers had previously been required to do); (2) employers were required to allow employees to pay the premiums for their same-sex spouse’s coverage with pre-tax dollars (if other employees with opposite-sex spouses are permitted to do so); and (3) employers with qualified retirement plans needed to treat same-sex spouses as “spouses” for all purposes under their plan (e.g., the spousal consent requirements for beneficiary designations).

In contrast to the IRS and other federal agencies, for purposes of the FMLA, the DOL determined that an individual would only qualify as a same-sex spouse of an employee if the employee resides in a state that recognizes his or her marriage (i.e., the “state of residence” test). Because this test precluded couples who were legally married but moved to states that did not recognize their marriage from applicable rights, in June 2014, the DOL proposed regulations to modify its regulations to adopt the state of celebration test like the IRS. The proposed rule was published in the Federal Register June 27, 2014. The DOL noted that the proposed rule elicited 77 comments representing more than 18,000 individuals. The comments that came from the Human Rights Campaign, labor organizations, employer associations, and a group of 23 U.S. Senators overwhelmingly supported the change.

Today, 37 states and the District of Columbia have full marriage equality and six states have lower court decisions in favor of marriage equality, which are staying pending appellate court review. Additionally, the Supreme Court has accepted certiorari to review the 6th Circuit Court of Appeals decision which upheld same-sex marriage bans in Michigan, Ohio, Kentucky and Tennessee. As of June 2015, we will likely have more clarity nationwide on marriage equality.

The Bottom Line for Employers

For now, under the new rule, provided the employee was married in a state or country where same-sex marriage is recognized, and regardless of the state law in which the employee currently resides or works, an eligible employee will be allowed to take FMLA leave to care for his/her same-sex spouse with a serious health condition, take qualifying exigency leave due to his/her same-sex spouse’s covered military service, or take military caregiver leave for his/her same-sex spouse. If your FMLA policy simply provides for leave for a “spouse” and does not define spouse or improperly limit the definition of spouse, there is no need to change it. However, employers should make sure human resources personnel and managers understand this change and are providing all required leave for legally married same-sex spouses regardless of the law of the state in which the employee currently resides or works.

As you may have heard, the NLRB recently ruled that employees who are given access to their employer’s email system for their jobs must be permitted to use that email system during nonworking time to engage in protected activity, such as forming a union or discussing terms and conditions of employment. This ruling applies to both unionized and non-unionized workforces. The ruling has caused some controversy because it overturned long-established precedent. It is not, however, a reason to panic. Employers who are already complying with the NLRB’s guidance on social media need only make a few changes to their policies.

The case is called Purple Communications, Inc., and all 70-plus pages of the order are available here (under “Board Decision” dated 12/11/2014). The rule before this case was that an employer had the right to restrict non-business use of its email system, so long as it did so in a non-discriminatory fashion. In Purple, the Board held that employees must be granted access to use their employer’s email system during nonworking time to engage in protected activity, such as discussing terms and conditions of employment. Employers with a strict rule that work email is for business use only will therefore need to revise their policy to allow employees to use company email during nonworking time to engage in protected activity. There are some limited exceptions to this rule, for circumstances where permitting use of company email for protected activity will seriously disrupt productivity or business operations. If you think this is the case for your business, please contact us, and we can help you craft a policy that should satisfy the NLRB.

If, like many employers, you already allow non-business use of work email during nonworking time, this decision still impacts you. Most employers have some kind of policy that regulates what employees can do on the company’s email and other communication systems. Because the Purple ruling requires employers to allow employees to use company email to engage in protected activity, restrictions that infringe on this right are no longer OK. This, too, is no reason to panic, however, because it simply means your use of technology policy has to look a bit more like your social media policy (you have one of those, right?). As discussed in the blog posts available here, the Board has already issued a series of rulings and memoranda explaining how it will evaluate social media policies. Generally speaking, the Board has stated that a policy will be struck down if it could be read by a reasonable employee to prohibit protected activity, such as engaging in collective action or discussing conditions of employment.

Although Purple Communications was a dramatic opinion, in that it overturned decades of previous Board law, it should not be difficult for businesses to adapt.

The problem of employee theft in hotels is an age-old problem. Businesses lose billion of dollars each year in employee theft. And hotels, by nature, present numerous opportunities for employee theft from guests and the house. Theft in a hotel can take many forms – from identity theft to credit card fraud to theft of merchandise and guest property. No employer hires an employee thinking that the employee is someday going to steal. Hotels need to take steps to prevent theft and be cautious in taking action against an employee after a suspected theft. Both have practice and legal implications.

Prevention in All Forms

Take a thorough look at your hotel’s security measures and processes. Ensure that your guest room locking systems and room safes meet general industry standards. Review, implement or update employee policies related to 1) package passes to control removal of property from the hotel, 2) lost and found procedures, which should be strictly enforced and 3) guest room access by employees. Consider an audit by a security expert to review your security procedures and protocols - in action.

Another criminal trend that can have a major impact on the hotel industry is identity theft. Many hotel employees have access to guest identity and credit card information. Make certain that your hotel is in compliance with the payment card industry security standards. Implement best practices related to credit card and identity documents: purge unneeded credit card data, do not imprint credit cards, ensure that only partial credit card numbers are displayed, carefully monitor charge-backs and carefully limit the employees who have access to guest identity and credit card information.

Prevention also includes proper employee screening. One of the best ways to prevent theft by your employees is to not hire a thief. Consider conducting criminal background checks on applicants and employees with access to guests, their property and hotel property. Consider credit checks on applicants and employees who have access to financial assets. And employee screening should not be finished once the employee has been hired. Require employees to report any criminal convictions during the course of their employment and conduct periodic criminal background and credit checks during employment.

Criminal background checks pose some legal risks at any stage in the employment process. In 2012, the U.S. Equal Employment Opportunity Commission (EEOC) issued updated guidance on the use of criminal background checks in employment titled, Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 1964. Although Title VII does not prohibit the use of criminal background checks, the EEOC cited concerns that employers could use arrest and conviction records to unlawfully discriminate against job applicants based on their race or national origin. A hotel’s criminal background and credit check policy should be tailored to comply with the EEOC guidance and state and local laws that restrict or prohibit criminal background and credit inquires.

The hotel also should be certain it is in full compliance with the federal Fair Credit Reporting Act (FCRA) which sets forth the requirements for authorization by the applicant or employee to conduct the background check and which has strict notification requirements for a hotel if it decides not to hire an applicant based on the information obtained in the background check. Be certain that your background screening vendor is accredited and using updated authorization and notification forms.

Responding to Suspected Theft

A common reaction to suspected theft is to discharge and make an example of the employee and hope to prevent similar actions by other employees. While an employer has the right to discharge an employee who steals, doing so can involve hidden traps. Case law is rife with examples of employers being sued by discharged employees for wrongful termination, malicious prosecution, defamation, false imprisonment, false arrest and invasion of privacy. These legal challenges are usually centered on the methods used to try to catch or prove employee theft – which can result in liability. Surveillance or recording of employees may be illegal under federal anti-wiretapping laws and some state laws. Forcing a suspected employee to sit in a room where the employee cannot leave an investigation meeting can lead to a false imprisonment claim. Searching an employee’s personal items without consent or proper notice can lead to an invasion of privacy claim. Federal laws also regulate the use of lie detectors in investigations of monetary loss.

Before conducting any kind of surveillance through video or voice monitoring, hoteliers should check state and federal law to determine whether an employee’s consent is necessary for such surveillance. Even if consent is not necessary, it is wise to inform employees at the time of their hire and throughout their employment that such monitoring may occur. Never conduct surveillance in private areas such as restrooms or locker rooms.

Policies regarding searches of employees’ lockers or personal belongings brought onto hotel property are generally acceptable and common in the hotel industry. Be certain that the policy is well publicized and acknowledged by every employee. These searches should be conducted in a manner that minimizes confrontation – such as first requesting an employee remove a lock from a locker before removing it forcibly. Loss prevention personnel and managers should be instructed that any search of an employee’s purse or briefcase should be minimally invasive and conducted with the dignity of the employee in mind. Give all employees specific instructions on how to properly remove authorized items from hotel property, through the use of a property pass or otherwise.

Investigations into theft should be carefully conducted and invasive techniques, such as polygraphs, should be avoided. Involve at least two individuals in the investigation and, optimally, one person should not personally know the accused employee. This will help avoid claims that “charges” were trumped up against an employee because of hostility by the investigator. If the company has a written protocol or established past practice for conducting investigations, the protocol or past practice should be followed. Witnesses should write their own statements in their own handwriting and all statements should be legible, dated and signed. An employee who is being investigated should be allowed to tell his or her side of the story and have it included as part of the investigation file. Otherwise, a judge or jury may feel that the employee was railroaded and falsely accused. The investigation must be thorough and an investigator should not limit the investigation to the witnesses identified by the accused if other individuals might have relevant knowledge.

While many law enforcement agencies still include a polygraph examination in investigations, employers are severely limited in the use of polygraphs. The Employee Polygraph Protection Act of 1988 (EPPA) prohibits most private employers from using lie detector tests either for pre-employment screening or during the course of employment. Polygraph tests are permitted in only limited circumstances. One of those circumstances is in connection with an ongoing investigation of theft, embezzlement, misappropriation or an act of unlawful industrial espionage or sabotage. But there are strict limits to this exception, which makes the use of the polygraph exam a legally risky proposition. In order to conduct the polygraph, an employer must demonstrate that the employee had access to the property that is the subject of the investigation, that the employer has a reasonable suspicion that the employee was involved and the employer must execute a specific statement about the loss.

Employers conducting polygraph tests under circumstances permitted by law are subject to strict standards for the conduct of the test, covering pretest, testing and post-testing procedures. And most significantly, the employer cannot terminate an employee based solely on the results of the polygraph test. The employer must have additional, independent evidence of the theft before it can discharge the employee. Many employers decide not to risk running afoul of the strict requirements under the EPPA if the employer has other evidence linking the employee to the theft.

The Final Days

Risks arise again when the hotel makes a decision about what to do with the employee after an investigation into theft. Carefully consider whether police involvement makes sense. While it might act as a deterrent for other employees, it may also lead to a lawsuit by the departing employee for malicious prosecution. It is critical to have some idea as to how seriously the police will respond to allegations of employee theft. Some police departments are too overwhelmed with violent crimes to do more than write a report of the complaint. Ultimately, no police involvement is better than limited or poorly handled police involvement. If a police department is ready, willing and able to respond to reports of theft, call them when the missing item or money is discovered.

Attempting to recoup monetary losses from employee theft can be tricky business. Before engaging in efforts to recoup losses, strongly consider whether it is worth the effort. A common method of recoupment is to deduct from the discharged employee’s last paycheck or withhold the pay out for earned benefits, such as vacation or PTO. Making deductions from a last paycheck may implicate the federal Fair Labor Standards Act, and there are numerous state laws around the country that make the paycheck deduction either unlawful or extremely risky. Before embarking on efforts to recoup losses, it is strongly advised that you consult with trusted labor and employment law counsel in your particular state.

Treat the inevitable unemployment compensation claim with great care. If the employee has counsel, that attorney will likely attend the hearing and question witnesses. Take the time to prepare witnesses fully and make sure they understand the importance of the proceeding. If an employer loses an unemployment compensation claim related to employee theft, the employee may become emboldened to assert other claims. If you cannot spend the time, energy and effort needed to fully prepare for the unemployment hearing, it may well be better to not contest the claim at all.

While hoteliers can take strong steps to reduce employee theft, eliminating it entirely is likely an impossibility. The best loss prevention involves good procedures for hiring, training and supervision of employees. And by following a few best practices, employers can limit the potential liability for claims related to employee theft situations and diminish the potential for the insult of an expensive lawsuit on top of the injury of employee theft. 

I’d like to thank Sarah Phaff of our Macon, Georgia, office, who wrote this post with me.

As one who presumably has no nude selfies, you may not be too concerned about a “hack” like the one that continues to afflict celebrities like Jennifer Lawrence and Kate Upton. But that doesn’t mean there aren’t still plenty of technology issues that an employer should look out for. Are you guilty of any of these top ten technology blunders that are either committed or allowed by employers?

Blunder No. 1: Recruiting or hiring employees using “coherent people profiles” assembled by aggregators like Spokeo. Spokeo was fined $800,000 in 2012 by the Federal Trade Commission because it gathered all kinds of data about individuals – including race, ethnic background, religion, economic status, and age ranges – and sold the information to employers who used it in making recruiting and hiring decisions. Spokeo was hit because it was not complying with the Fair Credit Reporting Act, but use of this type of information can obviously also violate state, federal, and local anti-discrimination laws, as noted by an attorney from the Equal Employment Opportunity Commission, who spoke at a session on “big data” sponsored by the FTC.

Blunder No. 2: Asking applicants for their social media passwords. This is illegal in an ever-growing number of states, and a bad idea even if you live where it’s legal. As with Blunder No. 1, Blunder No. 2 could give you a lot of information that you’ll wish you hadn’t had.

Blunder No. 3: Legally reviewing “public” social media information too early in the hiring process. This isn’t as bad as Blunders 1 and 2, but it’s still a mistake – particularly if your social media review includes sources that generally contain a lot of personal information, such as Facebook. Again you may get TMI* about an individual’s medical condition or the condition of the individual’s family members, about religious beliefs, about age, and about all kinds of things that you’re not supposed to know early in the process. (On the other hand, reviewing a “professional” social media site like LinkedIn should not be as risky.)

*TMI = Too Much Information

Blunder No. 4: Having a weak, unrealistic, or nonexistent electronic usage policy. If it’s weak, it may not accomplish your goal of having a harassment-free workplace full of productive employees. If it bans all personal internet use during work time, it is unenforceable. Not having a policy at all is bad, too.

A good electronic usage policy will prohibit employees from using the internet and emails, texts, and social media in a way that (1) keeps them from getting their work done, (2) is harassing or discriminatory on the basis of any legally protected characteristic, or (3) is illegal (such as visiting internet gambling sites, doing illegal downloads, or viewing child pornography). Whether you want your policy to go beyond that depends on how much trouble you are willing to risk from the National Labor Relations Board. A good policy will also acknowledge that reasonable personal use of electronic communications is allowed.

Blunder No. 5: If you’re in a business or profession that requires you to preserve the confidentiality of your customers, clients, or patients, failing to ensure that all employees understand that they may never post on social media any individually identifiable information about such customers, clients, or patients. This seems to be a problem primarily with medical care providers, public safety officers, and teachers. Nurse Betty comes home after a hard day, goes on Facebook, and vents,

“So glad to be home!!! Had to flip 350-lb man with kidney stones to prevent bed sores, and my back is killing me – must be wine o’clock!”

Or Officer Jim posts a photo of the crime scene he handled that day, including the faces of the victims and their families. Or Teacher Anne vents about the spoiled brats in her class (by name) and their idiot parents. Make sure your employees know before it’s too late not to do this – if you don’t, you may have to fire an otherwise good employee.

Avoiding these last five blunders will require the involvement of your IT professional:

Blunder No. 6. Not taking extraordinary means to protect highly sensitive information such as employee Social Security numbers, employee medical information, and the company’s trade secrets and confidential business information.

Blunder No. 7: Using a cloud-based system for employment information without taking reasonably prudent precautions, including consideration of the following:

  •  Where, physically and geographically speaking, are your “cloud” servers located? If they’re in Siberia, your information may not         have the legal protections that it would have in the United States.

  •  Are the data secure?

  •  How will your information be destroyed securely if the relationship ends?

Blunder No. 8: Not requiring employees to take reasonable security precautions with mobile devices, including use of passcodes, segregation of business information from personal information, and remote wiping of employer information in the event that the device is lost or the employee is terminated. And don’t forget “low-tech” security measures, such as requiring employees to lock their cars when they’re leaving laptops or tablets in them to minimize the risk of a security breach via an old-fashioned breaking and entering. (Better yet, encourage employees to never leave laptops or devices in the car at all.)

Blunder No. 9: Failing to keep your employees informed of the latest “hacks” and “phishing expeditions,” and other ways dishonest people may be able to get into your data through the employees’ devices. (This could also include the risks associated with storing nude or other sensitive photos in a “cloud” that is not secure.)

Blunder No. 10: Allowing employees to use unsecured WiFi when working on the road, or in restaurants, cafes, or other public places. (PS – If they’re non-exempt under the Fair Labor Standards Act, then this is “time worked,” too, and you have to pay for it.)

As technology continues to evolve, methods of attack will also become more sophisticated and creative. It’s probably unrealistic to expect that you will never experience some type of technology-related “event.” If you do, act as promptly as possible to limit the damage, and make sure all affected individuals are aware.

Ain’t technology grand?

You might think your workers’ compensation covers all work-related injuries and illnesses. This could prove a costly mistake.

In most cases, workers’ compensation will cover work-related injuries and illnesses. But in certain special circumstances—which might apply to your company—the basic workers’ compensation policy will not provide coverage. This could leave your company on the hook for a costly workers’ compensation claim.

Out-of-State Coverage

On any work day, how many of your employees are on the road or working from home? U.S. residents logged 452 million person-trips for business purposes in 2013, says the U.S. Travel Association. Person-trips involve travel of 50 or more miles, or an overnight stay in paid accommodations. Many of these trips involve out-ofstate travel.

Many employees also telecommute. A 2013 Harris poll found that one in 10 U.S. workers worked either exclusively from home or mainly from home. Either business travel or telecommuting could pose workers’ compensation claim problems. Did you know that an employee injured in another state while on business may be able to elect to receive benefits in that state if…

 • The injury takes place there
 • The employee’s principal place of work is located there
 • The employee entered into a contract of employment there
 • The employee lives there
 • The employee is principally located there.

Although the typical workers’ compensation policy provides out-of-state coverage, it provides only the level of benefits required by state law. If an injured employee opts to receive benefits in another state, you might have a coverage gap if that state provides more generous benefits.

Further, the typical policy limits out-of state coverage to employees “who are hired in (state) and…temporarily working anywhere outside of (state) on a specific assignment.” This disqualifies telecommuters who live outside the state or who are working outside the state on a more permanent basis.

Finally, failure to have coverage in the state of injury may void the “exclusive remedy” protections of the workers’ compensation system. This risk increases if your employee is working out of state on a more permanent basis. With the “exclusive remedy,” an employee foregoes the right to sue in exchange for receiving medical treatment and lost time benefits guaranteed by state workers’ compensation law. If the exclusive remedy doesn’t apply, an employee may file a civil lawsuit against you for his or her injuries.

Do You Need “Other States Coverage”?

Other states insurance gives you coverage to meet your workers’ compensation obligations under the workers’ compensation law of any state listed in your policy’s declarations page. It does NOT apply to the monopolistic fund states: Ohio, North Dakota, Washington and Wyoming. These states have a state-controlled workers’ compensation plan and prohibit private insurers from writing mandatory workers’ compensation coverage in their borders. It also does not apply to Canadian provinces. To obtain coverage for these areas, you need an “extended protection endorsement.”

Some workers’ compensation insurers (particularly smaller ones) have licenses in only one or a few states. Your insurer cannot pay your employees directly for a claim if the injury occurs in a state for which your insurer lacks a license. To protect your business, you can ask the insurer to word your policy so that it will reimburse you for any benefit payments you have to make.

Finally, consider the risks involved when an employee travels overseas for work. Courts have often ruled that an injury or illness that an employee suffers while on short term assignment away from home—even if he or she is not working when it occursis work-related. But a basic workers’ compensation policy will probably not cover this type of claim. A foreign workers’ compensation policy will. Although no law requires employers to provide this coverage, you risk paying medical and lost-time costs out of pocket if you do not have coverage and a traveling employee becomes injured. Consider the fact that medical evacuation alone can cost more than $50,000, and a complicated case as much as $250,000. Buying coverage makes good financial sense!

Volunteer Coverage

Most states do not require nonprofit organizations or public agencies to provide workers’ compensation coverage to unpaid volunteers. But some organizations opt to provide coverage, for several important reasons. Some feel a moral obligation to provide protection to their valued volunteers. This can affect morale: volunteers who have this coverage know they will not have to pay medical expenses out of pocket for any injuries occurring from their volunteer work.

Covering volunteers as employees can protect your organization from litigation in ambiguous cases, as when a worker is sometimes paid and sometimes unpaid. Finally, without the “exclusive remedy” of workers’ compensation, an injured volunteer can sue your organization in court, creating a much larger risk exposure.

If your nonprofit organization chooses to cover volunteers, your board of directors or other governing body must first adopt a resolution to provide this coverage. If your workers’ comp carrier won’t cover volunteers, you might want to provide volunteers with accident and medical insurance…and be sure to have adequate limits on your commercial general liability policy.

An analysis of your workers’ compensation risk exposures could turn up other potential coverage gaps. 

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