As we have previously explained, certain employers with 50 or more full-time employees (or equivalents) will incur a penalty from the IRS if they fail to offer health insurance coverage to their full-time employees and their dependents that meet certain standards under the Affordable Care Act (“ACA”).  Now that the ACA has been in effect for several years, employers are beginning to receive Federally Facilitated Marketplace Notices (“Marketplace Notices”) from the health insurance marketplaces (where employees may purchase insurance and receive tax credits to subsidize their purchase in the event his or her employer fails to offer insurance).  A sample Marketplace Notice can be found here.

These Marketplace Notices explain that the employer may be subject to a fee for failing to offer affordable coverage that meets the minimum value standards required under the ACA.  Because employers only have a limited amount of time to respond to a Marketplace Notice, it is important that employers are aware that these notices are being issued and how to appeal a notice issued in error.  This blog discusses employers’ rights with respect to Marketplace Notices and how an employer may limit its employer-mandate liability exposure under the ACA.

The ACA requires the marketplaces to send notices to employers if an employee received an advance payment of a tax credit after purchasing insurance from a marketplace.  The employer then has 90 days of the date of the Marketplace Notice (not date of receipt) to appeal if the employer believes the notice has been sent in error.  While the marketplaces cannot fine employers, a successful appeal is helpful in defending against a penalty assessed by the IRS against the employer for failing to provide affordable coverage to its employees.

In deciding whether to appeal these types of notices, the employer should confirm whether it offered the employee in question affordable coverage that provides minimum value under the employer’s health plan.  The employer should also verify that the employee is in fact employed by the organization and a full-time (or equivalent) employee.  Because an employer must be able to establish that it offered coverage to its employee to prevail on appeal, it is important that employers maintain files with respect to the employer’s requirements under the ACA.

Assuming the employer confirmed it offered the appropriate insurance to its employee(s), an employer may challenge a Marketplace Notice in one of two ways: (1) complete the Employer Appeal Request Form found here; or (2) submit a letter with the business name, the employer ID number, the employer’s primary contact name, phone number, and address, as well as the reason for the appeal.  The employer should also include the date of the marketplace notice, when received, and the employee’s information.   The Appeal Request form or letter and a copy of the marketplace notice should be sent to the Department of Health and Human Services, Health Insurance Marketplace, 465 Industrial Blvd., London, KY  40750-0061.  After the appeal is filed, the employer will receive a letter confirming receipt of the appeal and instructions for submitting additional information if necessary.  Questions about a specific appeal should be directed to the Marketplace Appeals Center at 1-855-231-1751 Monday through Friday between 9:00 a.m. and 7:00 p.m. Eastern Time.

Finally, employers should be aware that the Marketplace Notices are sent to the address provided by the employee.  If an organization has multiple locations, the notice will be sent to the address provide by the employee which may not be the preferred address for the employer.  Because of the short amount of time to appeal, employers should take steps to establish a system that ensures the appropriate person or department within the organization timely receives these notices.

On May 11, 2016, President Obama signed into law the Defend Trade Secrets Act of 2016 (“DTSA”), which has been widely hailed as the “most significant expansion” of federal intellectual property law since the passage of the Lanham Act 70 years ago. This post provides a brief overview of the DTSA and discusses the provisions most likely to impact businesses and trade secret owners.

      a.  Summary

The DTSA amends the Economic Espionage Act, 18 U.S.C. §§ 1831 et seq. (the “EEA”), to create a private civil cause of action for trade secret misappropriation. As stated in the official summary of the DTSA, under the new law “[a] trade secret owner may file a civil action in a U.S. district court seeking relief for trade secret misappropriation related to a product or service in interstate or foreign commerce. The bill establishes remedies including injunctive relief, compensatory damages, and attorneys’ fees. It sets a three year statute of limitations from the date of discovery of the misappropriation.” (Summary: S. 1890 – 114th Congress (2015-2016), at Sec. 2.) Although closely aligned with the Uniform Trade Secrets Act (“UTSA”), adopted in some form by every state except New York and Massachusetts, the DTSA explicitly does not preempt preexisting state laws protecting trade secrets. (See 18 U.S.C. § 1838.)

Other provisions of the DTSA (not discussed in this post), require “the Department of Justice [to] submit to Congress and publish a biannual report on trade secret theft outside the United States” and the “Federal Judicial Center [to] develop, update, and submit to Congress best practices for seizing information and securing seized information.” (Id., at §§ 4, 6.)

     b.  Ex Parte Seizure

One of the more controversial provisions of the DTSA empowers a district court “upon ex parte application but only in extraordinary circumstances, [to] issue an order providing for the seizure of property necessary to prevent the propogation or dissemination of the trade secret that is the subject of the action.” (18 U.S.C. § 1836(b)(2)(A)(i).)

Although seizure might be an invaluable remedy to a trade secret owner, to obtain it they must meet a high burden, both factually and financially. As the text makes clear, ex parte seizure will be granted “only in extraordinary circumstances” and the requesting party must also provide security for the payment of damages resulting from wrongful, excessive, and even attempted seizure. (Id. at § 1836(b)(2)(A) and (B) (setting forth requirements for issuing seizure order and listing required elements of seizure order itself).) If the requirements are met, however, “[a]ny materials seized … shall be taken into the custody of the court” pending a hearing that must be scheduled within seven (7) days or “at the earliest possible time”. (See 18 U.S.C. § 1836(b)(2)(B)(v) (emphasis added).)

     c.  Damages

The DTSA increases the maximum penalty for trade secret theft (currently $5 million) to the greater of $5 million or 3 times the value of the stolen trade secret. A court may also award “exemplary damages” (triple damages and/or attorneys’ fees) upon a finding that the trade secret was “willfully and maliciously misappropriated”. (See 18 U.S.C. § 1836(b)(3)(B).) A variety of other remedies are available under the DTSA, including “an injunction to prevent any actual or threatened misappropriation” and, “[i]n exceptional circumstances that render an injunction inequitable,” the court may condition future use of the trade secret(s) upon the payment of a reasonable royalty. (See 18 U.S.C. § 1836(b)(3)(A)-(B).)

     d.  Whistleblower Immunity and Notice Requirement

The DTSA includes a whistleblower immunity provision that grants civil and criminal immunity “under any Federal or State trade secret law for the disclosure of a trade secret that (A) is made (i) in confidence to a Federal, State, or local governmental official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.” (18 U.S.C. § 1833 (b)(1)(A)-(B).)

Businesses and trade secret owners should familiarize themselves with these provisions of the DTSA because “[i]f an employer does not comply with the [whistleblower immunity and] notice requirement…, the employer may not be awarded exemplary damages or attorney fees … in an action against an employee to whom notice was not provided.” (18 U.S.C. § 1833(b)(3)(C).)

     e.  New Definitions (And Some Old Ones, Too)

The EEA’s definition of “trade secret” remains unchanged under the DTSA, which adds definitions for, among other things, “misappropriation” and “improper means” that are similar to those found in the UTSA. (See 18 U.S.C. § 1839(5)-(6) (defining “misappropriation” and “improper means,” respectively).) A key distinction, however, is that unlike the UTSA, the DTSA expressly exempts reverse engineering and independent derivation from its definition of “improper means.” (See 18 U.S.C. § 1839(6)(A)-(B).)

CONCLUSION

     Trade secret owners and employers desiring to protect their valuable intellectual property rights should familiarize themselves with the DTSA. Although it is, in many respects, substantially similar to the UTSA already adopted by a majority of states, the remedies afforded under the DTSA – ex parte seizure of assets, treble damages and attorneys’ fees – will likely incentivize parties to file suit in federal court. Critically, however, the panoply of remedies under the DTSA is not available to an employer/trade secret owner that fails to incorporate a proper whistleblower immunity notice into their agreement with the misappropriating party. Employers and trade secret owners faced with the threat of misappropriation should be certain to incorporate a proper immunity notice in their confidentiality and trade secrets agreements with employees and contractors.

On May 18, 2016, the United States Department of Labor (“USDOL”) released its long- anticipated changes to the Fair Labor Standards Act’s (“FLSA”) overtime exemption rules (the “Final Rule”).  The Final Rule marks the first major revision to the overtime rules since 2004.  Significantly, it changes the minimum salary and fee level employees must receive to be potentially eligible for the white collar overtime exemptions.  This change is estimated to significantly increase the number of overtime-eligible employees in the United States.  Here are the Final Rule and USDOL Fact Sheet.

By way of background, the rules regarding exempt executive, administrative and professional employees were established in 1940.  In an effort to modernize the rules, in 2014, President Obama directed the USDOL to examine and update the rules applicable to employees exempt from the overtime rules under the executive, administrative and professional exemptions (the “White Collar Exemptions”).  A Notice of Proposed Rulemaking was published on July 6, 2015, and a significant comment period followed.

The FLSA provides that if certain criteria are met, white collar employees are exempt from its minimum wage and overtime provisions.  The rules have always set three (3) requirements for application of the White Collar Exemptions: (1) the employee must earn a salary (or fee) “that is not subject to reduction because of variations in the quality or quantity of work performed” (the “salary basis test”); (2) the salary or fee must be in the requisite minimum amount (the “salary level test”); and (3) the employee’s job duties must involve executive, administrative or professional duties as defined by the applicable regulations (the “duties test”).  The rules also currently set a relaxed duties test for employees earning at least $100,000 per year (“highly compensated employees”).  The current salary level of $23,660 per year ($455 per week) was last adjusted in 2004.

The Final Rule is designed to address the effect of the 2004 changes, which exempted lower paid workers from overtime although they performed few of the requisite duties.  The Final Rule increases the minimum salary required from $23,660 to $47,476 ($913 per week) annually.  This sets the standard salary level at the 40th percentile of earnings of full-time salaried workers in the Southern part of the United States, which is the lowest-wage earning Census region.  The Final Rule also increases the annual salary for highly compensated employees to $134,004.  Significantly, the Rule also provides for automatic, periodic updates to the salary and compensation levels, every three years, to ensure maintenance of “a threshold equal to the 40th percentile of weekly earnings of full-time salaried workers in the lowest-wage Census Region.” See Fact Sheet.  In addition, the Final Rule permits employers to include nondiscretionary bonuses and incentive payments to satisfy up to 10% of the standard salary level, as long as the payments are made at least quarterly.

The Final Rule will go into effect on December 1, 2016.

The Final Rule does not make any changes to the duties test.  The Rule will impact nearly all employers in the country, especially those with exempt employees currently earning between $23,660 and $47,476 per year.  The USDOL estimates that the Final Rule may extend overtime pay to approximately 4.2 million workers who are currently classified as exempt.  Employers must immediately become familiar with the rules and strategies to address the increased labor costs.

The United States Equal Employment Opportunity Commission (“EEOC”) issued final rules yesterday establishing how employer-sponsored wellness programs can comply with the Americans with Disabilities Act (“ADA”) and the Genetic Information Nondiscrimination Act (“GINA”), without discriminating against employees or running afoul of the Health Insurance Portability and Accountability Act (“HIPAA”).

In today’s health-driven world, many employers are encouraging their employees to participate in wellness programs to promote good health and healthier lifestyles.  Ultimately, employers aim for a healthier and happier workforce that will lead to greater productivity and less needed time off for sick leave.  Often, employers will offer employees financial incentives for participating in such wellness programs and achieving goal-oriented results.  As part of such programs, though, employees and their family members are typically asked to provide certain protected medical information to help assess their individual health risk factors, which in turn raises potential conflicts with employee privacy rights under the ADA and GINA.

The EEOC’s new wellness program rules provide clarity on this issue.  Specifically, the new rules require employers to explain to participating employees what information will be collected from them in connection with a wellness plan, with whom and for what purpose such information will be shared, and what safeguards are in place to ensure that such information will be kept confidential.  In addition, the final ADA rule permits employers to offer incentives of up to 30% of the total cost of self-only coverage if an employee participates in a wellness program that is part of a group health plan that requires information about the health conditions of an employee or his/her family members.  The final GINA rule provides a similar cap equivalent to 30% of the total cost of self-only coverage if an employee’s spouse participates in the wellness program.  However, neither the ADA nor GINA rules permit employers to offer incentives in exchange for the provision of current or past health information about employees’ children or for certain genetic information about an employee, his/her spouse and his/her children (including the results of certain genetic tests).  The EEOC’s rules also prevent employers from discriminating against employees based upon the health information that they provide or, alternatively, from discriminating if employees choose  not to participate in the offered wellness programs.

Along with these new rules, the EEOC conveniently published informative Q&A documents on its website, which are available at https://www.eeoc.gov/laws/regulations/qanda-ada-wellness-final-rule.cfm (ADA), and https://www.eeoc.gov/laws/regulations/qanda-gina-wellness-final-rule.cfm (GINA).  The EEOC’s wellness program rules, which will apply to all workplace wellness programs, will go into effect in 2017.

On April 4, 2016, Governor Andrew Cuomo signed legislation in connection with New York’s 2016-2017 budget that will impact employers large and small throughout the State.  In addition to annual increases to the minimum wage that will ultimately reach $15.00 per hour, the legislation also provides for up to 12 weeks of paid family leave for qualifying employees.

Minimum Wage Increases

The timeframe for the increased minimum wages is determined by both an employer’s geographic location and size.  Specifically, wages will increase under the following schedule:

  • Employers Within New York City: On December 31, 2016, the minimum wage for “small” employers with 10 or fewer employees will increase to $10.50 per hour, while wages for “large” employers (11 or more employees) will rise to $11.00 per hour.  Small and large NYC employers will see minimum wages rise to $12.00 and $13.00 per hour by December 31, 2017, and then $13.50 and $15.00 per hour by December 31, 2018, respectively.  By December 31, 2019, however, all NYC employees will be entitled to $15.00 per hour in minimum wage.
  • Employers in Westchester, Nassau and Suffolk Counties: Employers in these 3 counties will be subject to a $10.00 per hour minimum wage on December 31, 2016.  This amount will increase by $1.00 every year until it reaches the $15.00 threshold on December 31, 2021.
  • All Other New York Employers: For employers outside of the noted high-density geographic region in and around NYC, the New York minimum wage will increase to $9.70 per hour on December 31, 2016.  It will then rise by increments of $0.70 every December 31 until the year 2020, by which time the minimum wage will have reached $12.50.  The New York Director of the Division of Budget and the Commissioner of Labor will establish a schedule for annual increases thereafter until the minimum wage reaches $15.00 per hour.

Tipped employees in the hospitality industry will have their minimum wage calculated by the greater of (1) two-thirds of the current minimum wage in their locality (rounded to the nearest $.05), or (2) $7.50.  Employers must ensure that these employees receive tips sufficient to bring their total wages (i.e., wages and tips) to meet or exceed the current minimum wage in effect for non-tipped employees in that geographic location.

Paid Family Leave

The April 4th legislation also provides up to 12 weeks of paid family leave for eligible New York employees who are employed by “covered” employers (as defined under New York law).  To qualify, employees must have worked at least 26 calendar weeks with their current employer and seek leave for any of the following reasons:

  • to provide care for a family member suffering a serious health condition;
  • to bond with the employee’s child during the first 12 weeks after birth (or the first 12 weeks after a child is placed with the employee for adoption or foster care); or
  • based upon a qualifying exigency under the federal Family and Medical Leave Act as a result of a qualifying family member’s “active duty” status with the United States military.

The amount of paid leave will increase each year starting January 1, 2018, where eligible employees will first be entitled to 8 weeks of paid leave, and ultimately 12 weeks by January 1, 2021.  Over that time, the amount of paid leave benefits will increase as follows:

  • January 1, 2018: 8 weeks of paid leave at 50% of the employee’s average weekly wage (capped at 50% of the New York average weekly wage);
  • January 1, 2019: 10 weeks of paid leave at 55% of the employee’s average weekly wage (capped at 55% of the New York average weekly wage);
  • January 1, 2020: 10 weeks of paid leave at 60% of the employee’s average weekly wage (capped at 60% of the New York average weekly wage); and
  • January 1, 2021: 12 weeks of paid leave at 67% of the employee’s average weekly wage (capped at 67% of the New York average weekly wage).

New York employers should begin preparing themselves now for these important changes to the minimum wage and paid family leave laws, including conducting a comprehensive review of their employee handbooks and policies and an internal audit of their compensation structures.  While the minimum wage and paid family leave requirements will take effect gradually over the next few years, New York employers must be ready to adopt them in order to avoid running afoul of their new statutory obligations.