On March 23, 2021 Governor Pritzker signed into law Senate Bill 1480 which makes several meaningful changes to the Illinois Human Rights Act (“IHRA”). One significant change under the new law is that employers may not use criminal records when making employment decisions unless they consider specific factors and take certain steps before making a final employment decision. The law goes into effect immediately.
Employment Decisions Based on a Conviction Record Violate the IHRA
It is now a violation of the IHRA to “use a conviction record” as a basis for any employment-related decision, unless the employer can establish either:
- there is a “substantial relationship” between the criminal conviction and the employee’s job; or
- hiring or retaining the employee would create an “unreasonable risk” to a specific individual or the public.
To determine whether an “unreasonable risk” exists, employers must consider “whether the employment position offers the opportunity for the same or a similar offense to occur and whether the circumstances leading to the conduct for which the person was convicted will recur in the employment position.” Accordingly, in evaluating whether an “unreasonable risk” exists, employers must evaluate the following six factors:
- the length of time since the conviction;
- the number of convictions that appear on the conviction record;
- the nature and severity of the conviction and its relationship to the safety and security of others;
- The facts or circumstances surrounding the conviction;
- the age of the employee at the time of the conviction; and
- evidence of rehabilitation efforts.
If an employer determines that one of the two exceptions applies, the employer must engage in an interactive process with the employee or applicant. The employer is required to notify the employee or applicant in writing of its preliminary decision that the employee’s conviction record disqualifies the employee. This notice must include:
- notice of the conviction or convictions that are the basis for the preliminary decision and the employer’s reasoning for the disqualification;
- a copy of the conviction history report, if any; and
- an explanation of the employee’s right to respond to the employer’s preliminary decision before it becomes final. This explanation must inform the employee that the response may include “submission of evidence challenging the accuracy of the conviction record that is the basis for the disqualification, or evidence in mitigation, such as rehabilitation.”
Upon receipt of the employer’s notice, the employee has up to five business days to provide a response before the employer makes a final determination.
Written Final Decision
Before making a final decision, the employer must consider any information submitted by the employee. If the employer determines that the employee or applicant is disqualified “solely or in part because of the employee’s conviction record,” the employer must provide another written notice to the employee. The second notice must include the following:
- notice of the conviction or conviction(s) that are the basis for the final decision and the reasoning for the disqualification;
- any existing procedures available to the employee to challenge the decision or request a reconsideration; and
- a statement that the employee has the right to file a charge with the Illinois Human Rights Department.
Illinois employers should reconsider how they will use criminal background checks in the future. While the law does not prohibit an employer from obtaining criminal background checks, it places a significant burden on employers if they want to use this information to make employment-related decisions.
Given the burdensome notice obligations, it may be more practical for employers to forego the use of criminal background checks altogether, unless there is a particularly compelling business reason for doing so. Due to the complexities of this decision, employers should discuss this matter with their employment lawyer. If an employer intends to continue using criminal background checks, it will need to implement appropriate procedures and policies to ensure compliance with the new law.
For additional help navigating these issues, feel free to contact Walker R. Lawrence, a partner in the employment law practice at Levin Ginsburg, at email@example.com, or Joseph A. LaPlaca, an associate attorney at Levin Ginsburg, at firstname.lastname@example.org.
As the COVID-19 vaccines are currently being distributed, employers must address various issues relating to the transition of employees back to the office. Below is a quick general guide concerning what employers can and cannot ask their employees concerning COVID-19:
Can an employer take an employee’s temperature?
Yes. Generally, measuring body temperature is a medical examination. Because the CDC and state/local health authorities have acknowledged community spread of COVID-19 and issued attendant precautions, employers may measure employees’ body temperature.
Can an employer ask an employee if they have had COVID-19?
Yes. Employers may ask all employees who will be physically entering the workplace if they have had COVID-19 or symptoms associated with COVID-19, as well as ask if they have been tested for COVID-19.
Can an employer ask an employee if they are having COVID-19 symptoms?
Yes. During a pandemic, ADA-covered employers may ask employees if they are experiencing symptoms of the pandemic virus.
Can an employer send an employee home during the COVID-19 pandemic if they have COVID or symptoms associated with it?
Yes. The CDC states that employees who become ill with symptoms of COVID-19 should leave the workplace. The ADA does not interfere with employers following this advice.
Can an employer ask an employee if any member of their household has had COVID symptoms or has tested positive?
No. The Genetic Information Nondiscrimination Act (GINA) prohibits employers from asking employees medical questions about family members. GINA, however, does not prohibit an employer from asking employees whether they have had contact with anyone diagnosed with COVID-19 or who may have symptoms associated with the disease.
Can an employer require employees to have a COVID-19 test?
The ADA requires that any mandatory medical test of employees be job related and consistent with business necessity. Applying this standard to the current circumstances of the COVID-19 pandemic, employers may take screening steps to determine if employees entering the workplace have COVID-19, because an individual with the virus will pose a direct threat to the health of others. Therefore, an employer may choose to administer COVID-19 testing to employees before initially permitting them to enter the workplace and/or periodically to determine if their presence in the workplace poses a direct threat to others.
Can an employer require employees to notify the employer if they test positive with COVID-19?
Can an employer require employees to adopt infection-control practices?
Yes. Regular hand washing, cough/sneeze etiquette and proper tissue usage and disposal may be required.
Can an employer require employees to wear PPE (masks, gowns, etc.) designed to reduce the spread of COVID-19?
Yes. An employer may require returning workers to wear personal protective gear and observe infection control practices.
Can an employer ask an employee if he or she has been vaccinated?
Yes. Simply requesting proof of receipt of a COVID-19 vaccination is not likely to elicit information about a disability and, therefore, is not a prohibited disability-related inquiry.
Can an employer require employees to have a vaccine?
Yes. Employers are permitted to encourage and even require vaccination before allowing employees to return to work. However, mandatory vaccination policies will require careful planning, training, and transparency to implement effectively and minimize risks.
Can an employer exclude employees from the workplace if they have not had a vaccine?
Yes, but only after doing an individualized assessment to determine if an employee poses a direct threat and concluding there is no other possible accommodation.
If an employer is currently complying with the Health Insurance Portability and Accountability Act (“HIPAA”), then it is already prepared to deal with the collection, storage, and disposal of an employee’s Personal Health Information (“PHI”) collected as a result of COVID-19. However, the Occupational Safety and Health Administration’s (“OSHA”) most recent guidance on controlling COVID-19 encourages all employers, including non-health-related companies, to put a COVID-19 prevention program into practice. OSHA encourages record-keeping as part of such a program. Thus, the days of avoiding the storage of health-related data to potentially avoid record-keeping activities are seemingly over. Certainly, employers in California must comply with California’s OSHA’s requirements concerning COVID-19. The following table provides guidance for those employers who are not already HIPAA-compliant.
Can an employer store medical information it collects from employees related to COVID-19?
Yes. The ADA requires that all medical information about a particular employee be stored separately from the employee’s personnel file, thus limiting access to this confidential information.
Can an employer disclose the name of an employee to other employees when it learns that the employee has COVID-19?
No. The employer should not disclose the name of the employee who has COVID-19. However, the CDC stated: If an employee is confirmed to have COVID-19, employers should inform fellow employees of their possible exposure to COVID-19 in the workplace but maintain confidentiality as required by the ADA.
Can an employer keep a log of daily temperature checks before entering the workplace?
Yes, provided that the employer maintains the confidentiality of this information.
Can an employer keep records of employees who have tested positive for COVID-19?
Yes, if confidentiality is kept. Employers should make every effort to limit the number of people who get to know the name of the employee.
Can the employer notify other employees that an employee has tested positive for COVID-19?
Yes. The ADA does not interfere with a designated representative of the employer interviewing the employee to get a list of people with whom the employee possibly had contact through the workplace, so that the employer can then take action to notify those who may have come into contact with the employee, without revealing the employee’s identity.
For almost a year since the onset of COVID-19, employers have been collecting and using data to track and trace the spread of the virus. Employers must be vigilant when collecting and utilizing data for tracking and tracing the spread of the virus and understand the risks of unauthorized disclosure or other potential abuses of the data.
Data Privacy and Security
Employers must develop policies and procedures to collect, use, and analyze PHI that are in compliance with relevant privacy laws. PHI, such as information that an employee has tested positive or is having symptoms of COVID-19, must be stored separately from regular personnel files and kept confidential. If this information is stored electronically, it must be stored in a manner which limits access to the information.
Employers should consider creating a COVID-19 task force that is responsible for handing all COVID-19 related issues within the company. This will necessarily limit the number of people who have sensitive COVID-19 information about employees.
It is important that employers discuss these issues with their data privacy attorney. A data privacy attorney can help employers comply with the patchwork of federal and state privacy regulations, including GDPR and HIPAA, and develop systems for the storage and use of employee PHI.
This article is intended to provide generalized guidance for employers and may or may not apply to your exact situation. If you require specific legal advice on these or related topics, or compliance with data privacy regulation that may affect your business, please contact Natalie A. Remien, a partner in the data privacy practice at Levin Ginsburg at email@example.com or Walker R. Lawrence, a partner in the employment law practice at Levin Ginsburg at firstname.lastname@example.org.
Restrictive covenants are contractual terms that restrict an employee’s ability to work for a competitor. Historically, these covenants were often used to prohibit high-level executives or employees with proprietary knowledge from working directly for a competitor. Today, restrictive covenants are increasingly used for even lower-level employees.
Examples of restrictive covenants are: “employee may not compete directly or indirectly with employer for a period of two (2) years after leaving the company,” or “employee may not do business within a 50-mile radius of the business after employment termination.” Under Illinois law, a restrictive covenant must be:
1. necessary to protect a legitimate business interest;
2. limited in terms of duration, geographic scope, and prohibited activity;
3. supported by sufficient consideration; and
4. ancillary to a valid employment agreement or sale of a business.
In 2016, the Illinois Freedom to Work Act (“IFWA”) was passed, which prohibited employers from implementing restrictive covenants for low-wage employees. IFWA defines low-wage employees as “an employee whose earnings do not exceed the greater of (1) the hourly rate equal to the minimum wage required by the applicable federal, state, or local minimum wage law or (2) $13.00 per hour.”
On January 8, 2021, the Illinois legislature introduced Senate Bill 672 (“Bill 672”), which seeks to expand the scope of IWFA as follows:
1. covenants not to compete are neither valid nor enforceable unless the employee’s actual or expected yearly earnings exceed $75,000. Every 5 years, the yearly earnings figure will increase by $5,000;
2. covenants not to solicit are neither valid nor enforceable unless the employee’s expected yearly earnings exceed $45,000. Every 5 years, the yearly earnings figure will increase by $2,500;
3. covenants not to compete are neither valid nor enforceable if the employee subject to the covenant was terminated or furloughed due to the COVID-19 pandemic. Additionally, covenants not to compete are neither valid nor enforceable if the employee is terminated or furloughed under circumstances that are similar to the COVID-19 pandemic (such “circumstances” are not defined by Bill 672) unless enforcement of the covenant includes the payment of the employee’s base salary for the period of enforcement of the covenant, minus compensation received by the employee through subsequent employment; and
4. the employer must advise its employees in writing to consult with an attorney before agreeing to a non-compete or non-solicitation clause. Additionally, the employer must supply a copy of the clause at least 14 days before execution for the employee’s review.
Furthermore, the legislature also established five components necessary for a valid restrictive covenant. A restrictive covenant is void unless:
1. the employee receives adequate consideration;
2. the covenant is ancillary to a valid employment relationship;
3. the covenant is no greater than is required to protect the legitimate business interest of the employer;
4. the covenant does not impose an undue hardship on the employee; and
5. the covenant is not injurious to the public.
If an employer seeks to enforce a restrictive covenant and fails to succeed because the covenant is deemed unenforceable, Bill 672 would require the employer to pay the employee’s reasonable attorneys’ fees and costs. Significantly, Bill 672 does not apply retroactively.
It is expected that Bill 672 will pass in some form and would go into effect on June 1, 2021. Employers should consider whether they want to implement restrictive covenants in some form prior to Bill 672 being enacted into law, as those covenants will be grandfathered in.
For additional help navigating these issues, feel free to contact Roenan Patt, an attorney in the employment and business law practice at Levin Ginsburg, at email@example.com or Joseph A. LaPlaca, an attorney at Levin Ginsburg, at firstname.lastname@example.org.
The distribution of the COVID-19 vaccine is now underway and will become more widely available to the public. Employers are permitted to encourage and even require vaccination before allowing employees to return to work. However, mandatory vaccination policies will require careful planning, training, and transparency to implement effectively and minimize risks.
The Equal Employment Opportunity Commission (EEOC) released new COVID-19 vaccination guidelines providing that an employer may require employees get vaccinated and may administer the vaccine themselves or through a third-party.
Here are some key takeaways from the EEOC’s guidance:
- The CDC strongly recommends that anyone receiving a COVID vaccine answer pre-screening questions. If an employer asks the recommended questions, it is possible the employee’s answers will create obligations under the Americans with Disabilities Act (ADA). For example, the questions may require the employee to disclose any pre-existing medical conditions that may be relevant to administering the vaccine.
- If an employer or its third-party vendor administers the vaccine to employees, any pre-screening questions the employer asks before administering the vaccine must be “job-related and consistent with business necessity.”
- According to the EEOC, to meet this standard, “an employer would need to have a reasonable belief, based on objective evidence, that an employee who does not answer the questions and, therefore, does not receive a vaccination, will pose a direct threat to the health or safety of her or himself or others.”
- An employer can avoid issues that arise from asking pre-screening questions in one of two ways: (1) making the receipt of the vaccine voluntary and giving the employee a choice not to answer the pre-screening questions, or (2) requiring employees to be vaccinated by an unaffiliated third-party (e.g. Walgreens or CVS).
- Employers can require employees to provide proof of receiving a vaccine.
- Employers must consider possible accommodations for employees with disabilities and “sincerely” held religious beliefs.
- If an employer determines that an employee poses a direct threat, the employer must make an individualized assessment to determine if an employee poses a direct threat, considering (1) the duration of the risk; (2) the nature and severity of the potential harm; (3) the likelihood that the potential harm will occur; and (4) the imminence of the potential harm. A direct threat would generally mean an unvaccinated individual “will expose others to the virus at the worksite.”
- Even after determining an individual poses a direct threat, an employer still may not exclude the employee from the workplace (or take any other adverse employment action) unless there is no possible reasonable accommodation “that would eliminate or reduce this risk, so the unvaccinated employee does not pose a direct threat.”
Before deciding whether a mandatory vaccine against Covid-19 is the best choice for your business, it is important to consider the potential risks and discuss them with employment counsel.
Levin Ginsburg is here to help answer any questions you may have about mandated vaccinations or any other employment-related matters. To discuss, please contact Walker R. Lawrence, a partner in the employment law practice at Levin Ginsburg, at email@example.com, or Joseph A. LaPlaca, an attorney at Levin Ginsburg, at firstname.lastname@example.org.
As Congress pushed through an additional COVID stimulus bill on the eve of the new year, it also temporarily extended the benefits afforded to employees under the Families First Coronavirus Response Act (FFCRA).
The FFCRA required employers with less than 500 employees to provide additional job protected paid leave for specific qualifying events (up to 80 hours of paid leave), and also provided up to 12 weeks of leave for parents who could not work because they needed to care for their children whose schools were closed due to COVID-19. For employers, any covered payments under FFCRA are eligible to be reimbursed to the employer by the federal government through a 100% tax credit. As a result, it is often a win-win for employers and employees – the employee gets paid, and in the end, the employer is reimbursed. The FFCRA benefits were set to expire on December 31, 2020.
On December 21, 2020, Congress did not extend FFCRA into 2021; however, they allowed employers to voluntarily continue providing paid leave benefits under FFCRA and to continue receiving the payroll tax credit through March 31, 2021. Thus, while FFCRA is no longer mandatory, employers can still provide these benefits to their employees and continue to offset their costs with the tax credit through the first quarter of 2021.
Key Takeaways for Employers
• Employers should not provide any additional leave under FFCRA to employees who have exhausted their bank of leave. The new legislation did not restart an employee’s entitlement to leave.
• Any FFCRA benefits taken in 2020 by employees will be applied to their leave bank in 2021. For example, if an employee used 48 hours of emergency paid sick leave in 2020, they should only be entitled to use an additional 32 hours.
• Employers will not be eligible to receive tax credits for any amount of paid leave that is greater than what employees are entitled to under FFCRA.
• If an employer provides voluntary FFCRA benefits in 2021, such leave is job protected and employers may not retaliate against an employee who takes such leave.
• Employees who took leave in 2020 are still protected by FFCRA’s anti-retaliation and anti-discrimination protections.
• If an employer provides FFCRA benefits in 2021, it is important to maintain proper documentation in the event of an IRS audit regarding the tax credit.
• If an employer chooses not to continue to offer paid leave under FFCRA, employees may choose to show up to work regardless of having COVID-19 symptoms to avoid missing a paycheck.
Employers should assess whether to continue offering FFCRA benefits and update their policies and practices accordingly. As with any policy change, employers should communicate these changes to their employees.
For additional help navigating these issues, feel free to contact Walker R. Lawrence, a partner in the employment law practice at Levin Ginsburg, at email@example.com, or Joseph A. LaPlaca, an attorney at Levin Ginsburg, at firstname.lastname@example.org.
As a result of recent amendments to the Illinois Human Rights Act (IHRA), employers in Illinois are required to provide annual sexual harassment training to employees who (1) work in Illinois, (2) may perform work in Illinois, or (3) regularly interact with Illinois employees. Employers have largely ignored these new requirements in the wake of the ever-changing environment created by COVID-19, but there is still time to comply. The training must occur on or before December 31, 2020. To help our clients comply with the law, Levin Ginsburg has been providing updated sexual harassment training to its clients virtually.
The Illinois Department of Human Rights provided a model PowerPoint program that employers can use to comply with the law. However, many employers prefer to offer their own training tailored to their business and policies. The law allows employers to use their own training, provided it meets or exceeds the statutory standards. At a minimum, the training must include:
• an explanation of sexual harassment consistent with the IHRA;
• examples of conduct that constitutes unlawful sexual harassment;
• a summary of relevant federal and state statutory provisions concerning sexual harassment, including remedies available to victims of sexual harassment; and
• a summary of responsibilities of employers in the prevention, investigation, and corrective measures of sexual harassment.
If your business is a restaurant or bar, the statute provides additional requirements, including providing each employee a written sexual harassment policy. Illinois recently issued a model training program for restaurants and bars, and this additional training must include the following additional topics:
• specific conduct, activities, or videos related to the restaurant or bar industry;
• an explanation of manager liability and responsibility under the law; and
• English and Spanish language options.
As the December 31, 2020 deadline is quickly approaching, it is important for employers to take steps to meet their obligations imposed by Illinois law. If you have questions about how Levin Ginsburg can help you conduct this training virtually for your employees, please reach out to
312-368-0100 or email@example.com.
Employers Continue To Struggle With Employee Leave Laws That Protect Parents In The Wake Of Schools Reopening
With the start of the school year upon us, employers continue to struggle with employee leave laws that protect parents. In response to the pandemic, Congress passed sweeping legislation (the Family First Coronavirus Response Act or FFCRA) that provides, among other benefits, up to 12 weeks of paid leave for parents who are unable to work (or telework) to care for their child because their child’s school or day care is closed due to COVID-19. For employers, any covered payments under FFCRA are eligible to be reimbursed to the employer by the federal government through a 100% tax credit. As a result, it is often a win-win for employers and employees – the employee gets paid, and in the end, the employer is reimbursed.
However, FFCRA did not anticipate the hodgepodge of school reopening plans that may lead to an employee staying home to care for their child, but which are not covered by the FFCRA. As a result, the win-win situation the FFCRA was intended to create may not be available.
FFCRA’s benefits were far-reaching (our original blog about it is here). FFCRA created two new benefits for employees who worked for employers with less than 500 employees: (1) Emergency Family Medical Leave (FMLA+) and (2) Emergency Paid Sick Leave (EPSL). Among other things, FMLA+ and EPSL provided paid benefits for employees who need to care for a child whose school or childcare provider is unavailable or closed for COVID-19 related reasons. Accordingly, if a qualified employee met the requirements of FMLA+ and EPSL, that employee would be eligible to take 12 weeks of job protected leave paid at two-thirds of the employee’s regular rate of pay. The employer would be reimbursed by a tax credit.
After the legislation was passed, the U.S. Department of Labor (DOL) provided additional clarity (or in some cases muddied the waters) with regulations and FAQs. The DOL provided that the employee had to provide the following information:
- The name of the child being cared for;
- The name of the school, place of care, or child care provider that has closed or become unavailable; and
- A statement from the employee that no other suitable person is available to care for the child.
Accordingly, FFCRA benefits are only available if the school is closed or unavailable.
Schools Begin to Reopen
Each school district has its own unique plan for reopening its schools, but many of them allow parents the option of choosing either a full remote learning experience or in-person learning. In this situation, under the current regulations and guidance from the DOL, a parent who chooses not to send their child to school would not qualify under FFCRA because the school is neither “closed” nor “unavailable.”
Accordingly, it is critical for employers to ensure they understand all the facts around an employee’s request to claim FFCRA benefits. If an employer pays an employee who does not qualify under FFCRA, the employer would be ineligible to receive the 100% tax credit for payments and would be on the hook for these payments.
To address this dilemma, employers must develop FFCRA policies requiring employees to complete proper leave request forms. These forms must be carefully drafted to comply with the DOL’s regulations (which limit the information an employer can require), but also provide sufficient information to protect the employer. In this situation, an employer would have written documentation from any employee who was paid FFCRA benefits to minimize the risk that the employer would not qualify for the 100% tax credit. As this situation continues to evolve, it is important that employers stay vigilant in this ever-changing landscape and work closely with their employment lawyer. If you have any questions about the FFCRA or any other employment laws, please reach out to Walker R. Lawrence, a partner in the employment law practice at Levin Ginsburg, at 312-368-0100 or firstname.lastname@example.org.
When disaster such as fire, explosion, or other event strikes and damages a business to the point of interrupting operations, the business owner will turn toward its insurance policy and business interruption coverage (if available) to alleviate the financial fall out. Business interruption policies generally provide coverage for lost income and extra expenses that a business sustains due to a “covered peril” (i.e. an explosion or fire) that “causes direct physical injury or damage” to the business’s real or personal property. Some business interruption policies also provide insurance coverage for indirect losses due to acts of “civil authority” or “supply chain disruptions.” Conversely, some business interruption policies contain exclusions for damages caused by a virus.
In the new COVID-19 world, businesses are now asking whether a pandemic is a “covered peril” or whether a government ordered shut-down triggers insurance coverage. Many businesses that have been deemed “non-essential” by state governments have either been closed or have had a substantial reduction in business revenue (such as restaurants providing only for curb-side or delivery). Businesses that have paid their insurance premiums for years have turned to their insurers for coverage and finding declination letters instead of open arms. Many insurers have taken the position that businesses closed by government action have not sustained damage that caused “direct physical injury or damage” to the business’s real or personal property. Insurance companies have argued that because the closure was to prevent exposure to COVID-19, the interruption is not a “covered peril.” Additionally, many business interruption policies contain a “viral exclusion” that insurers are invoking to deny coverage.
Several businesses have sought court relief upon learning that their insurers have denied coverage. Insurance coverage and bad faith lawsuits have already been filed in several states, including Illinois, California, and Missouri, challenging the insurers’ decision to deny coverage. Arguments advanced by the businesses include the claim that COVID-19 causes physical damage to the businesses’ real property because the virus physically infects and stays on the surfaces of objects or materials for weeks. Insurers will vigorously defend these coverage challenges and it is expected that litigation will be ongoing for years.
Because an insurance policy is a contract, the language contained in the policy itself is the best place to begin the coverage analysis. While reviewing your policy, some of the key questions to ask are:
- Do you have business interruption coverage?
- Does your policy specifically have coverage for a viral outbreak or pandemic?
- Does your policy allow for coverage for acts of “civil authority” or “supply chain interruption?”
- Does your policy exclude coverage for viral outbreak?
If you have questions regarding your insurer’s coverage obligation with respect to the COVID-19 crisis, please contact:
The Setting Every Community Up for Retirement Enhancement Act (SECURE Act) is now effective. The Act made various changes to rules regarding qualified retirement plans as well as some changes to 529 plans. The following are but a few of the changes:
IRAs and other Qualified Retirement Plans
Under the SECURE Act, the general rule is that after an employee or IRA owner dies, the remaining account balance must be distributed to designated beneficiaries within 10 years thereafter. This rule applies regardless of whether the employee or IRA owner dies before, on, or after the required beginning date, unless the designated beneficiary is an eligible designated beneficiary.
An eligible designated beneficiary is: (1) the surviving spouse of the employee or IRA owner; (2) a child of the employee or IRA owner who has not reached majority; (3) a chronically ill individual; or (4) any other individual who is not more than ten years younger than the employee or IRA owner. Under the exception, following the death of the employee or IRA owner, the remaining account balance generally may be distributed (similar to present law) over the life or life expectancy of the eligible designated beneficiary, beginning in the year following the year of death.
Previously, an employee or IRA owner had to withdraw required minimum distributions (RMD) in the year they turned age 70 1/2. The SECURE Act increases that age to 72.
Employer-sponsored retirement plans are now available to long-term part-time workers, with a lower minimum number of hours worked. The SECURE Act drops the threshold for eligibility down to either one full year with 1,000 hours worked, or three consecutive years of at least 500 hours.
Under Internal Revenue Code section 529, a person may contribute to an account for a designated beneficiary’s qualified higher education expenses. Distributions (including any attributable earnings) from a 529 plan are not included in gross income if such distributions do not exceed the designated beneficiary’s qualified higher education expenses. For distributions made after Dec. 31, 2018, section 529 education savings accounts may cover costs associated with registered apprenticeships, and up to $10,000 of qualified student loan repayments (principal or interest). A special rule for qualified student loan repayments allows such amounts to be distributed to a sibling of a designated beneficiary (i.e., a brother, sister, stepbrother, or stepsister). The deduction for interest paid by the taxpayer during the tax year on a qualified education loan is disallowed to the extent the interest was paid from a tax-free distribution from a 529 plan.
If you would like to discuss any of these changes or if you have other questions regarding retirement planning or 529 plans, please contact Morris Saunders or any of our partners at Levin Ginsburg, 312-368-0100.
Every business with employees should have an employee handbook. An employee handbook is essential because it helps employees to understand what their rights are, what the company’s human resource processes and policies are, standardizes company policies and reduces human resource’s time resolving issues. Handbooks and policies are also often required if an employer wants to take advantage of certain defenses or protections. One very common provision in an employee handbook is a statement advising the employee that nothing contained in the handbook creates a contract between the parties, and the handbook does not alter the “at will” nature of the employment. Recently in Bradley v. Wolf Retail Solutions I, Inc., the United States District Court for the Northern District of Illinois held that because a company’s handbook disclaimed all contract rights, the company could not require its employees to arbitrate their claims, despite the fact that the handbook provided that employees’ claims were to be arbitrated.
In Bradley, the plaintiff filed a class action lawsuit alleging that the employer did not pay overtime under the Fair Labor Standards Act and the Illinois Minimum Wage Law. The handbook contained a dispute resolution provision stating that the employee agreed to mediate any dispute with the company and if not successful, the company and employee agreed to submit the dispute to arbitration. The plaintiff received a digital version of the handbook and signed it by clicking a box next the statement: “I have read, understood and accept the terms and conditions stated in this handbook.” The company filed a motion to compel the plaintiff to arbitrate her claims. The court refused to compel arbitration.
In denying the company’s motion to compel, the court stated that because arbitration is a matter of contract, i.e., the parties must first agree to arbitrate in order to be required to go to arbitration, and a party cannot be compelled to arbitrate a dispute when there’s no valid contract to do so. It was, therefore, incumbent upon the employer to prove the existence of a valid contract to arbitrate. The employer pointed to the dispute resolution provision in the handbook, arguing that the employee acknowledged receipt of the handbook and agreed to the policies therein. The court reasoned, however, that the employer could only rely on the dispute resolution clause in the handbook if the handbook is, in fact, a contract. The court found that because the handbook stated “in no uncertain terms” that it is not an employment contract, the company could not require the employee to arbitrate the dispute.
The question is obvious. How can you force an employee to arbitrate claims, thereby eliminating a public record of the proceedings and keeping the case from a jury, when your handbook does not create any contractual right to do so? Similar to your ability to enforce a non-compete with an at-will employee, a separate arbitration agreement will likely be enforceable if the agreement is a stand-alone contract and where consideration is given for the agreement. The consideration may be in the form of a payment, the right to continued employment, or even the agreement to arbitrate a claim itself can be sufficient consideration. In any event, do not assume that your employees will be compelled to arbitrate, rather than litigate, their class action lawsuits if the “agreement” is contained in the employee handbook where no contract is created. Employers have run into similar problems when an employee uses confidential information, but the only confidentiality provision is within the handbook (which by its nature is not a contract). It is also important to ensure that any arbitration agreement with an employee be carefully crafted to eliminate any class or collective claims.
For more information, please contact:
Howard Teplinsky at: email@example.com or 312-368-0100.