2014 Changes affecting Federal Contractors

There have been significant developments in the labor policy arena during the first quarter of 2014.  In January, President Obama unveiled his plan to use an Executive Order to increase the minimum wage Federal Contractors pay their workers.  In March, a Presidential Memorandum was issued to the Department of Labor (DOL) to update and modernize the overtime pay system.  Additionally, the Final Rule of Section 503 of the Rehabilitation Act of 1973 which was amended in September 2013 will go into effect on March 24, 2014.  Federal Contractors need to be aware of these changes and the potential impact they have on DOL compliance.

Minimum Wage Increase/Overtime Protection

On February 12, 2014, President Obama issued an Executive Order to raise the minimum wage for Federal Contractors.  As of January 1, 2015, the minimum wage for affected federal contracting and subcontracting personnel will increase from $7.25 per hour to $10.10 per hour. Additionally, the Obama administration announced it will issue a Presidential Memorandum to the DOL instructing its Secretary to update regulations regarding overtime protection for workers under Federal Labor Standards Act (FLSA).   Any changes to the regulation will be the first since 2004, when the minimum weekly salary for overtime-exempt workers was increased to the current $455 per week.

Rehabilitation Act

On March 24, 2014 two final rules issued by the Federal Contracts Compliance Programs will go into effect, enhancing contractor’s hiring and affirmative action obligations for individuals with disabilities and covered veterans. The disability rule sets a seven percent goal for contractors’ employment of persons with disabilities across all job categories and introduces numerous compliance and reporting mandates.  If you would like more information on these rules please click here to read a fact sheet outlining the background and highlighting the regulations.

Given these diverse and often disparate developments, the importance of the Professional Service Council (PSC) and the Human Resource Labor Relations Committee (HRLRC) in conveying industry consensus viewpoints to government officials and as a forum for companies and policymakers to meet face-to-face has never been greater.   In addition to serving as a discussion forum with government officials, the HRLRC serves as a focal point for PSC’s policy and educational activities around the Service Contract Act ( SCA ), the Davis Bacon Act (DBA),  and a range of legislation and regulations governing contractor health, hiring and safety practices.

The committee welcomed Office of Federal Contract Compliance Programs (OFCCP) Policy Director, Debra Carr, for an extensive dialogue on its upcoming hiring requirements, and both PSC and OFCCP pledged to remain engaged as the new rule takes effect. HRLRC will also continue its longstanding engagements with the military and civilian agency labor advisors, along with officials from DOL and its component divisions.

During 2014, under the aegis of the HRLRC, PSC will continue to explore areas in which PSC members can benefit from expert insight and training. They will continue their HRLRC meetings during the year as well as their PSC- SCA two day courses, along with the DOL and DOD panels, which are an active part of their training programs.

Under the leadership of long-time committee chair Al Corvigno of MARAL, LLC and new committee co-chair Anne Rohall of Tech Systems, Inc., the Human Resources and Labor Policy Committee will continue to be the premier venue for PSC members focused on critical HR and labor policy issues.

At Cleary, we know how important a comprehensive benefits package can be to your continued success. Give us a call today at 617-723-0700 and we will work with you to create a plan that meets your fringe-benefit obligations and provides your employees with valuable benefits.

Directors & Officers (D&O) Coverage

Presented by Justin Yurchenko

Every Board of Director member needs to realize the risks of operating any organization, and how to reduce those risks with appropriate management strategies. Written and implemented risk management procedures can serve as an effective way to monitor and mitigate risk within any organization. However, when these strategies are unsuccessful, the transfer of risk should fall to your insurance policy.

Directors and Officers insurance (D&O) is an important safeguard to any for-profit or nonprofit organization. D&O protects the directors, officers, employees, shareholders (not involved in management) and sometimes even volunteers. Unfortunately, even in today’s litigious environment, only 28% of companies with revenue of less than $100 million have purchased D&O coverage. In most cases, board members do not foresee any possible litigation, which is the main reason for not purchasing coverage. This is a common misconception, as just about any board can be a sued; moreover, claims can come from just about anyone – employees, customers, board members, vendors, creditors and current clients.

At the heart of any D&O policy lies the promise to indemnify the individual directors and officers in the event they are subject to allegations of wrongful conduct within their organizational duties. The primary coverages offered under a D&O policy are as follows:

  • Coverage for claims made against the company, its directors, officers, managers, employees and, sometimes, volunteers.
  • Employment Practices Liability, which includes allegations such as wrongful termination, discrimination, and harassment.
  • Fiduciary Liability coverage
  • Employee Dishonesty coverage
  • Kidnap & Ransom coverage

Choosing the right carrier and policy limits is often a difficult process. Each carrier has specialized coverage wording and exclusions. It is important to work with an experienced broker who can determine the best available combination of D&O pricing and coverage for your organizational needs.

At Cleary, we will evaluate your business exposures and work with you to develop a comprehensive plan to safeguard your business. Give us a call today at 617-723-0700.

PPACA ALERT: Change in Employer Mandate Affects All Employers in 2015

There has just been another PPACA delay to the employer mandate (also known as the “pay or play” mandate) that was slated to begin on January 1, 2015. As you may recall, this was originally effective as of 2014, but postponed last July. The employer mandate is the component of the law that will fine employers for not providing coverage (or not meeting the affordability or minimum value requirements) to their full-time employees (those working 30+ hours per week, on average). Here are the newest delays to be aware of as they affect all employers with at least 50 full-time equivalent employees:

Employers with 50-99 full-time equivalent employees: Delay of the employer mandate until 2016. Therefore, no penalty in 2015 if you don’t offer coverage, however you still must begin reporting details about your insurance coverage to the federal government in 2015.
Be aware, you will need to certify eligibility for this transition relief and meet other requirements, including not reducing your workforce to qualify for transition relief and maintaining previously-offered coverage.

Employers with 100+ full-time equivalent employees: You must offer coverage to at least 70% of your full-time employees (working 30+ hours) in 2015, then to at least 95% in 2016. You will also be required by to report details to the federal government next year.
Other transition relief contained in the proposed regulations were also extended, including the ability to use a short timeframe (at least 6 months) to determine whether an employer is large enough to be subject to the mandate, a delay in the requirement to provide coverage to dependent children to 2016 (as long as the employer is taking steps to arrange for such coverage to begin in 2016), and the permitted use of a short measurement period in 2014 to prepare for 2015.

WHAT DOES ALL OF THIS MEAN TO ME?

Employers still need to analyze their exposure and employee population. If you are under 100 employees, there is more relief for you however you still have compliance and reporting requirements (to be released over the coming months) that must be reviewed and prepared in time for 2015. If you have more than 100 employees, you will need to review your workforce to determine which employees need to be offered coverage in 2015. While you only have to ensure that 70% of that population is offered coverage, you will need to identify them and ensure you are in compliance with nondiscrimination rules as they apply. Even though this delay appears to provide some relief, it still requires a full analysis and review of your workforce and compliance with some mandates in 2015.

REFERENCE MATERIALS:

The final regulations are available here: https://s3.amazonaws.com/public-inspection.federalregister.gov/2014-03082.pdf
An IRS Q&A is available here: http://www.irs.gov/uac/Newsroom/Questions-and-Answers-on-Employer-Shared-Responsibility-Provisions-Under-the-Affordable-Care-Act#Liability

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