By Barry Forbes
WASB Associate Executive Director and Staff Counsel
February 26, 2015

2011 Wisconsin Act 10, as enacted, prohibits collective bargaining over
wages, hours and working conditions except for “total base wage”
increases. Base wage increases agreed to through collective bargaining
were also capped at a rate tied to the CPI (subject to a referendum to
exceed the cap).

Legal challenges to Act 10 have been resolved.

Act 10 created a void in school district employment policies, work rules,
and procedures that must be filled by school boards and administrators
with board policies and administrative rules.

Some key gaps often left by the expiration of the
final pre-Act 10 CBA:
◦ Compensation and fringe benefits for new and existing employees (other
than changes to total base wages).
◦ Employee paid and unpaid leave rights.
◦ Evaluation procedures.
◦ Standards for employee discipline and discharge.
◦ Reduction in staff.
◦ Internal hiring/recruitment (job posting); job assignments & transfers.
◦ Employee work rules and hours of work.
◦ Employee code of conduct.
◦ Employee resignation / end-of-employment procedures.
◦ Statutory grievance procedure in place of grievance arbitration.

Fundamentally, an Employee Handbook is a policy document that serves several
important purposes, including:
• Give notice of terms of employment
• Establish routine personnel procedures
• Clarify and give notice of expectations
and responsibilities
• Articulate values/promote trust
• Promote legal compliance and limit
exposure to liability
• Promote consistency over time
• Provide a framework for evaluation and
skill development

Fundamentally, an Employee Handbook is not an employment contract or a labor
agreement.

Handbooks and contracts are somewhat similar in that, once established, a school
district is generally obligated to follow its policies and procedures.

A significant distinction between a contract and a policy/handbook is that the school
district generally has discretion to modify its policies/handbooks (at least
prospectively) based on unilateral decisions.

Once a handbook is adopted, it must be followed unless
and until it is changed:
 The principle that government will not be permitted to escape
regulations it has promulgated to govern its relations with others
is a common law rule, not one dictated by the constitution. . . If put
in the abstract, “should government be required to follow the rules
it has imposed upon itself,” the answer “yes” is compelling.
Scheckel v. School District of Wauzeka, et al. Wis. Ct. App., 1994.

Handbooks need to be aligned with:
◦
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State and federal law.
Collective bargaining agreements on base wages.
Other board policies and administrative rules.
Individual employee contracts.
Unwritten employment practices in the district.
Employee
handbook
Policies and
rules
Legal
requirements
Individual
contracts
Unwritten
practice
 We
adopted our handbook
several years ago. Is it time for an
update?



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
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Personal internet accounts.
Reduction in staff policy.
Grievance process.
FMLA compliance.
Same gender marriage issues.
Wage and hour issues.
Employee smart phones and other mobile devices.
Wellness programs and the ADA.
Post-employment benefit vesting.
PPACA implementation.

Employer and educational institution access
to, and observation of, personal internet
accounts
• School districts may not request or require access to an employee’s
personal email account as a condition of employment, penalize an
employee for refusing to disclose such information or refuse to hire
an employee who does not provide such information with specified
exceptions. 995.55(2)



Criteria for selection for layoff need to be standardized and
objective.
Subjective criteria may open door for claim that employer
is retaliating for employee exercise of statutory right, such
as right to leave under FMLA.
Reed v. Tetra Tech, Inc., No. CIV-13-542-M (W. Dist.
Okla., March 10, 2014).
◦ An employee with Lupus who was laid off several days after
requesting intermittent leave for medical treatment was allowed to
advance claims of discrimination and retaliation under the ADA,
FMLA and state law was allowed to advance claims to jury trial. The
court found inconsistencies in the reasons given for layoff.

When charged with discrimination or retaliation
following an employee layoff, employers will be asked
to articulate objective nondiscriminatory reasons for
selecting that employee.
◦ To survive summary judgment under the mixed-motive
burden-shifting framework, an employee must first make a
prima facie case of FMLA retaliation. Richardson, 434 F.3d at
333. The burden then shifts to the employer to articulate a
legitimate, nondiscriminatory reason for the adverse
employment action. Id. Ion v. Chevron USA, Inc., No. 1260682 (5th Cir., Sept. 26, 2013).

How to avoid problems:
◦ Employers need good consistent documentary evidence
supporting reasons for selecting one employee over another for
layoff.
◦ Methodology and criteria for selecting employees should be
standardized and uniformly applied.

The District shall utilize the following criteria in order
of application for determining the employee for
nonrenewal:
◦ Educational Needs of the District: Will be those needs as
identified and determined by the Board through normal
channels in accord with its constituted authority.
◦ Qualifications as Established by the Board: Including, but not
limited to specific skills, certification [if applicable], training,
District evaluations, etc.
◦ Qualifications of the Remaining Employees in the Grade
Level, Department or Certification Area: Relevant
qualifications will be those experiences and training that best
relate to the position(s) to be maintained and District needs as
determined by the Board. These experiences may include but
not be limited to current and past assignment and practical
experience in the area of need.
◦ Performance of the Employees Considered for Nonrenewal:
Performance of the employees under consideration as
previously and currently evaluated. Greater weight may be
given to more recent evaluations.
◦ Length of Service of the Employee.

Grievance Procedure
◦ Any grievance process created to satisfy the requirements of
Act 10 must cover at least all of the following:
 employee terminations;
 employee discipline; and
 workplace safety.

Grievance Process
◦ If a local governmental unit creates a grievance process
under these provisions, it must include the following:
 a written document specifying the process that a grievant and
an employer must follow;
 a hearing before an impartial hearing officer; and
 an appeal process in which the highest level of appeal is
the governing body of the local governmental unit.

A county employee terminated for failing to have a
driver’s license following conviction for operating a
motor vehicle while intoxicated (first offense) was
denied an opportunity to grieve the termination.
◦ County grievance process excluded terminations for lack of
qualification or license.
◦ Circuit court granted summary judgment for the county,
finding that the county could exclude terminations of lack of
qualification or license from the grievance process.

The court of appeals overturned the decision.
◦ The statute does not define “terminations,” and the County presents
no reason to suppose that the term has a technical meaning. When a
statutory term is not defined, we may consult a dictionary to
ascertain the term’s common meaning. The word “termination” is a
form of the verb “to terminate.” The AMERICAN HERITAGE
COLLEGE DICTIONARY 1399 (3rd ed. 1993) provides definitions of
“terminate” as “[t]o discontinue the employment of; dismiss.”
◦ In rejecting the County’s arguments, the court stated that, while it
will not always be clear whether a “termination” within the meaning
of the statue occurred, in this case, the action taken against the
employee was a termination “within the plain meaning of the
statute.” Local 1323-A, AFSCME v. Dodge County, Ct. App., 2013.

Significant changes and additions were made to federal
rules in 2013:
◦ New rules governing military caregiver leave for the families
of active military personnel and veterans.
◦ Rules relating to the accounting for intermittent leave are
changed such that employers may not require that employees
use more leave than is necessary. 29 CFR 825.205.

2013 military caregiver rule changes:
◦ A new category of “qualifying exigency” leave allowing
employees to care for the parent of a military service member
who is incapable of self-care. 29 CFR 825.126.
◦ Up to 26 weeks of military caregiver leave:
 An employee who is a spouse, son, daughter, or parent, or next of
kin of a covered service member may take up to 26 weeks of
military caregiver leave.
 Covered military service members include covered veterans who
were discharged within last 5 years. 29 CFR 825.127.
 Definition of serious illness or injury expanded to include illness
or injury occurring before military service that was aggravated
during military service. 29 CFR 825.127.

2013 military caregiver and other FMLA rule changes:
◦ The health care providers authorized to provide certification
for military caregiver leave is expanded to include health care
providers, as defined in § 825.125, who are not affiliated with
DOD, VA, or TRICARE. 29 CFR 825.127.
◦ All periods of absence from work due to or necessitated by
USERRA-covered service is counted in determining an
employee’s eligibility for FMLA leave. 29 CFR 825.110.

Federal FMLA requires that employees requesting
FMLA leave be given 3 types of written notices:
◦ Eligibility and rights and responsibilities notice:
http://www.dol.gov/whd/forms/WH-381.pdf
 Send within 5 days of leave request.
◦ Rights and responsibilities notice:
http://www.dol.gov/whd/regs/compliance/posters/fmlaen.pdf
 Note this notice requirement also covered by WH-381.
◦ Designation notice: http://www.dol.gov/whd/forms/WH382.pdf
 Send within 5 days of determination of leave eligibility.

Failing to give notice can cause problems:
◦ Employer that provided 16 weeks of maternity leave, but did
not tell an employee that her right to reinstatement to the same
or an equivalent position ended after 12 weeks of leave,
violated the law when it failed to reinstate her at the end of the
16 weeks of leave, Fry v. First Fidelity Bancorporation, No.
95-6019 (E.D. Pa. 1996).
◦ Note that employees who are given all leave they have a right
to will likely not be eligible for a claim based on failure to
provide notice of rights, Dodgens v. The Kent Manufacturing
Co., 955 F. Supp. 560 (D.S.C. 1997).


Wisconsin FMLA does not have similar requirement
that written notice be given when leave is granted.
There are few instances where an employee is eligible
for Wisconsin but not Federal FMLA, so giving written
notice of eligibility and designation for both is a good
business practice.

How often do you require a doctor’s note when an
employee is taking intermittent leave covered by
federal law?
◦ Federal FMLA: Employers may ask for a recertification of a
serious health condition, but generally no more often than
every 30 days (29 C.F.R. §825.308(a)).
◦ No similar state law requirement.

FMLA leave may require modification of evaluation
process:
◦ A negative evaluation based on quantifiable performance measures
may be viewed as retaliation for or interference with an employee’s
exercise of the right to take FMLA leave:
 If the failure to meet the quantifiable performance measures was caused in
part by the employee taking FMLA leave, the negative evaluation may be
found to be the result of the employee taking leave.
 Several cases have involved salespersons and quantifiable sales goals.
Pagel v. TIN Inc., 695 F.3d 622 (7th Cir. 2012), Gostola v. Charter
Communications, LLC, 2014 WL 7204924 (E.D. Mich., Dec. 17, 2014).
 How might this apply to Educator Effectiveness?

Employees who exhaust FMLA leave may have right to
leave under ADA:
◦ An employee with several disabling medical conditions was
granted intermittent leave starting November 2008 under the
FMLA for one medical condition, which exhausted her FMLA
leave by July 2009. She then was diagnosed with cancer. She
requested and was given several unpaid leaves, the last ending
September 19, 2009. She was unable to return to work at that time
and requested another leave through February 4, 2010. The
employer refused and terminated her on October 7, 2009. A
federal district court found that the employer had failed to
consider an extension of the unpaid leave as an accommodation of
the employee’s disability and failed to prove that allowing such
leave would be an undue hardship on the employer. Casteel v.
Charter Communications Inc., No. C13-5520 RJB (W.D. Wash.,
Oct. 23, 2014).



In U.S. v. Windsor, 570 U.S. 12 (June 26, 2013), the U.S.
Supreme Court invalidated Section 3 of the Defense of
Marriage Act, which had provided that federal law would
only recognize opposite-gender marriages.
On Sept. 4, 2014, the 7th Circuit ruled unanimously that the
state same-gender marriage ban is unconstitutional. The
U.S. Supreme Court declined to review that decision on
October 6, 2014.
On January 16, 2015, the Supreme Court announced that it
would take up a 6th Circuit decision upholding a same
gender marriage ban. The hearing is scheduled for April and
a decision is likely in June.

Handbook implications:
◦ Presuming a Supreme Court decision consistent with its earlier
decisions, employers now must review handbooks and policies
to modify rules inconsistent with these decisions.
◦ Employers also must modify how they administer handbooks
and policies in light of the expanded scope of the terms
“spouse” and “family.”

Handbook provisions that may need review:
◦
◦
◦
◦
FMLA
Leave provisions
Insurance benefits
Retirement benefits

Current definition of spouse:
◦ Spouse. Spouse means a husband or wife as defined or recognized
under State law for purposes of marriage in the State where the
employee resides, including common law marriage in States where it
is recognized. 29 CFR 825.122(b).

On June 20, 2014, the US Department of Labor issued a
notice that it was revising the definition of spouse under the
FMLA.
◦ The new definition would allow eligible employees in legal samegender marriages to take FMLA leave to care for a same-gender
spouse with a serious medical condition, regardless of whether the
couple resides in a state where same-gender marriage is recognized.

Wage and hour provisions all handbooks should
include:
◦ Hour and pay provisions specifying work hours, meals and
breaks, overtime, pay periods and any deductions allowed by
contract. Some of these may need to be referenced in the
individual contracts of employees with contracts.
◦ FLSA safe harbor anti-docking provisions for exempt
employees.
◦ Description of how overtime is authorized and paid.
◦ Include clear and prominent disclaimer language that the
handbook is not a contract. Include statement that any and all
handbook provisions may be modified prospectively at
employer discretion.

Lunch breaks for non-exempt employees:
◦ Unpaid lunch breaks must generally be at least 30 minutes.
◦ Employees must be free to leave their posts.
◦ Employees are generally relived of duties:
 “As long as the employee can pursue his or her mealtime
adequately and comfortably, is not engaged in the performance of
any substantial duties, and does not spend time predominantly for
the employer’s benefit” the time is not compensable. (See White v.
Baptist Memorial Health Care Corp., 699 F.3d 869, 873 (6th Cir.
2012).)
 DOL has issued guidance indicating that non-exempt employees
supervising children during their lunch breaks have not been
relieved of their duties and must be compensated.

Lunch and break periods:
◦ Teachers - 118.235 Lunch period for teachers. Every school board shall
grant daily a duty-free lunch period to each of its teachers, except that a
school district may contract with any teacher employed by it for services
during such period. Such period shall be not less than 30 minutes and shall
be provided at or near the time of the regular school lunch period.
◦ Wisconsin law does not require that employers provide brief rest periods,
coffee breaks, or meal periods to adult employees, although the Department
recommends, at Wis. Admin. Code § DWD 274.04(2), that employers do so.
◦ Employers are encouraged, but not required, to provide breaks of at least 30
minutes in duration at times reasonably close to the usual meal period. Such
matters are to be determined directly between the employer and the
employee.

Potential problems:
◦ Employees may access work email or other employer data
through personal smart phones.
 Confidential information may be compromised if device is lost or
stolen.
◦ Other employees may be distracted by employee smart phone
use, particularly unusual ringtones.
◦ Employees taking photographs and making video and audio
recordings in workplace.

Potential problems:
◦ Non-exempt employees using smart phones to respond to work
emails may be performing compensable duties.
◦ Where employer allows employee use of personal device,
employee may demand reimbursement for lost, stolen or
damaged device.
◦ Smart phone use by employees while driving (e.g. mapping
app) can be distractive.
 Employees having accidents while driving for work may have
workers’ compensation claims.
 Others injured in such accidents may claim that the employer is
liable.

Smart phone policies and employee handbook
provisions:
◦ Determine how you will deal with school district data on
personal smart phones:
 One option is to prohibit such use.
 If personal device use is allowed, what steps should be taken to
protect school data.
 Require security software to protect school data.
 Require employees to report lost or missing personal devices with
school data.

Smart phone policies and employee handbook
provisions:
◦ Personal calls and other smart phone use should be limited.
◦ Using smart phones while driving for work should be
prohibited.
◦ Adopt rules of smart phone etiquette, such as requiring that
phones be silenced or on vibrate ringtone during workday.
◦ Prohibit use of smart phones cameras in sensitive areas such as
rest rooms and lockers.
◦ Require employees to use different passwords for work and
personal/social media accounts.

Sample employee handbook provision:
◦ Electronic Recording: Employees shall not electronically record by
audio, video, or other means, any conversations or meetings unless each
and every person present has been notified and consents to being
electronically recorded. Persons wishing to record a meeting must obtain
consent from anyone arriving late to any such meeting. Employees shall
not electronically record telephone conversations unless all persons
participating in the telephone conversation have consented to be
electronically recorded. These provisions are not intended to limit or
restrict electronic recording of publicly posted Board meetings,
grievance hearings, and any other Board sanctioned meeting recorded in
accordance with Board policy. These provisions are not intended to limit
or restrict electronic recordings involving authorized investigations
conducted by District personnel, or authorized agents of the District, or
electronic recordings that are authorized by the District, e.g. surveillance
videos, extracurricular activities, voicemail recordings.

Sample employee handbook provision:
◦ Personal Electronic Devices: The District permits staff to use personal
technology devices in support of teaching and learning and to access the
District’s Wireless Public Network when doing so. Personal devices
include laptop computers, portable digital assistants (PDAs), cell
phones, smart phones, iPods/MP3 players, wireless devices, digital
cameras, e-readers, storage devices, or other electronics that may be
carried on a person. Staff may use personal devices provided such use
does not interfere with educational or employment responsibilities,
hinder, disrupt or consume an unreasonable amount of network or staff
resources, or violate board policy, administrative rules, state law or
federal law. An employee using a personal device shall take adequate
measures to ensure the confidentiality and proper maintenance of all
pupil record information. The District is not liable for the loss, damage
or misuse of any personal device including while on District property or
while attending school-sponsored activities.

EEOC enforcement actions claim wellness programs
violate limits on employer required medical
examinations of employees:
◦ EEOC enforcement action claims that Honeywell
International, Inc.’s biometric testing incentive for employees
and their spouses violates the ADA and GINA.
 The incentives included a $125 per month contribution toward
health insurance and other incentives totaling up to $4,000 per
year.
 The Minneapolis Federal District Court refused to issue a
temporary restraining order. The case is pending.

EEOC enforcement actions claim wellness programs
violate limits on employer required medical
examinations of employees:
◦ The EEOC brought an action claiming that an employer
wellness program was not voluntary because the employer
required employees not participating to pay all of the cost of
their health insurance. EEOC v. Orion Energy Systems, No.
1:14-cv-01019 (E.D. Wis.).
◦ The EEOC filed another action against a Wisconsin employer.
Flambeau, Inc., a plastics manufacturer cancelled the health
insurance coverage for an employee who failed to participate
in biometric screening.

EEOC enforcement actions will likely continue and
expand in 2015:
◦ The ADA prohibits employers from requiring medical
examinations or making disability-related inquiries of an
employee, unless the examination or inquiry is job-related and
consistent with business necessity. The ADA does not prohibit
voluntary medical examinations.
◦ The EEOC enforcement action argues that wellness programs
with large incentives or penalties are not voluntary.

Vesting:
◦ The prerequisites written into an employee handbook for
qualification for post-employment benefits determines when
and if an employee vests.
◦ Loth v. City of Milwaukee Wis. Sup. Ct., 2008: The city could
prospectively change post-employment health benefits for
those employees who had not yet met all the requirements for
receipt of those benefits:
 15 years of service;
 Age 60 or older; and
 The employee retires from service.

Vesting:
◦ Champine v. Milwaukee County, 280 Wis. 2d 603 (Wis. Ct.
App. 2005): An employee right to be paid for earned sick leave
at retirement is a form of deferred compensation that the
employee earns as the work is performed.
 Milwaukee County could not deny employees a retirement
payment on sick leave earned before the benefit was modified.
 The county could change the benefit prospectively.

Individual Mandate: Requires U.S. citizens and legal residents to
have qualifying health coverage (there is a phased-in tax penalty for
those without coverage, with certain exemptions).
◦ Implementation: January 1, 2014.
◦ Implementation Update: On February 12, 2014, the IRS issued
final regulations on the individual shared responsibility provision.
The IRS also prepared a set of Q&As on the so-called individual
mandate. On January 30, 2013, HHS released a companion
proposed rule on minimum essential coverage. On July 1, 2013,
HHS issued a final rule that establishes the standards and
processes for the Exchanges to determine eligibility for and grant
exemptions from the individual shared responsibility payment.
◦ http://kff.org/interactive/implementation-timeline/

Health Exchanges/Marketplace: Creates state-based American Health
Benefit Exchanges and Small Business Health Options Program
(SHOP) Exchanges, administered by a governmental agency or nonprofit organization, through which individuals and small businesses
with up to 100 employees can purchase qualified coverage. Exchanges
will have a single form for applying for health programs, including
coverage through the Exchanges and Medicaid and CHIP programs.
◦ Implementation: January 1, 2014
◦ Implementation update: On July 15, 2011, HHS issued two proposed rules on the
health insurance exchanges. The first rule detailed the specifics of how states may set up
their exchanges, while the second rule focused on the standards related to risk
adjustment, risk corridors and reinsurance provisions. HHS released the final rule on
exchanges on March 27, 2012, and the final rule on risk adjustment, risk corridors, and
reinsurance on March 23, 2012. HHS also issued a proposed rule on the SHOP
exchange on March 11, 2013.
◦ http://kff.org/interactive/implementation-timeline/

Health Exchanges/Marketplace:
 Enrollment in exchanges began on October 1, 2013. HHS issued FAQs on
exchanges, market reforms, and Medicaid on December 10, 2012. The
Department also released additional guidance on the partnership exchanges
on January 3, 2013. On May 10, 2013, HHS announced new flexibility to
allow states to run the SHOP-only exchange. States choosing this option
would run the SHOP exchange while the federal government would run the
individual exchange.
 The ACA requires every exchange to operate a Navigator program to
provide enrollment assistance to consumers. The final exchange rule,
issued on March 27, 2012, specified the Navigator program standards.
HHS further clarified the standards for Navigators and Non-Navigator
Assistance programs in a proposed rule issued on April 5, 2013. The final
rule also finalizes the requirement that exchanges must have a certified
application counselor program. On May 1, 2013, HHS issued guidance on
the role of agents, brokers, and web-brokers who will also be providing
enrollment assistance to consumers.
◦ http://kff.org/interactive/implementation-timeline/

PPACA Shared Responsibility Provisions - Delayed Until
January 1, 2015. § 4980H of the IRC provides that an
applicable large employer (as defined in § 4980H(c)(2)) is
subject to an assessable payment if any full-time employee is
certified to receive an applicable premium tax credit or costsharing reduction and either:
◦ (1) the employer does not offer to its full-time employees
(and their dependents) the opportunity to enroll in minimum
essential coverage under an eligible employer sponsored plan
(§ 4980H(a))1; or
◦ (2) the employer offers its full-time employees (and their
dependents) the opportunity to enroll in minimum essential
coverage that is either unaffordable as defined by law or does
not provide the minimum value within meaning of the
PPACA.

PPACA- The IRS announced on February 11, 2014 the
transition rules for the employer mandate under the ACA's
shared responsibility provisions.
http://www.irs.gov/uac/Newsroom/Questions-and-Answerson-Employer-Shared-Responsibility-Provisions-Under-theAffordable-Care-Act

For 2015 (and for employers with non-calendar-year plans, any
calendar months during the 2015 plan year that fall in 2016), an
employer that (a) had at least 100 full-time employees (including
full-time equivalents) in 2014, or (b) had at least 50 but fewer than
100 full-time employees (including full-time equivalents) but does
not qualify for the relief described in question 34, will be liable for
an Employer Shared Responsibility payment only if:
◦ The employer does not offer health coverage or offers coverage to
fewer than 70% of its full-time employees and (unless the
employer qualifies for the 2015 dependent coverage transition
relief described in question 33) the dependents of those
employees, and at least one of the full-time employees receives a
premium tax credit to help pay for coverage on a Marketplace.
◦


For 2015 (and for employers with non-calendar-year plans, any calendar
months during the 2015 plan year that fall in 2016), an employer that (a) had
at least 100 full-time employees (including full-time equivalents) in 2014, or
(b) had at least 50 but fewer than 100 full-time employees (including fulltime equivalents) but does not qualify for the relief described in question 34,
will be liable for an Employer Shared Responsibility payment only if:
◦ The employer offers health coverage to at least 70% of its full-time
employees and (unless the employer qualifies for the 2015 dependent
coverage transition relief described in question 33) the dependents of
those employees, but at least one full-time employee receives a premium
tax credit to help pay for coverage on a Marketplace, which may occur
because the employer did not offer coverage to that employee or because
the coverage the employer offered that employee was either unaffordable
(see question 19) to the employee or did not provide minimum value (see
question 20).


After 2015, 95% should be substituted for 70% in the bullets above (see
question 18).

PPACA Shared Responsibility Provisions –
◦ Safe Harbor Wage Determination: In Notice 201173, the IRS notes that the safe harbor it plans to
develop is designed to make it easier for employers to
determine whether the health coverage they offer is
affordable coverage.
◦ Thus, the safe harbor would use 9.5% of wages that
the employer paid to an employee, instead of the
employee’s household income, as the standard for
affordability.
Source: http://www.irs.gov/pub/irs-drop/n-11-73.pdf
http://www.treasury.gov/connect/blog/Pages/Continuing-toImplement-the-ACA-in-a-Careful-Thoughtful-Manner-.aspx

PPACA Shared Responsibility Provisions –
◦ Safe Harbor Full-time Employee: In Notice 2012-58, the
IRS notes that the safe harbor it plans to develop is
designed to make it easier for employers to determine
whether the health coverage they offer is affordable
coverage. Multiple definitions, including:
◦ “On-going Employee”: Employed for at least one
standard measurement period (3-12 months as
established by the employer.
Source: http://www.irs.gov/pub/irs-drop/n-12-58.pdf

PPACA Shared Responsibility Provisions –
◦ Safe Harbor Full-time Employee: Notice 2012-58 (cont.)
◦ “New employee Expected to work full-time”
◦ “30 hours per week” employers and others should
determine whether a new employee "is reasonably
expected to work an average of at least 30 hours per
week."
Source: http://www.irs.gov/pub/irs-drop/n-12-58.pdf

PPACA Shared Responsibility Provisions –
◦ Educational Institution Rules
 School Year Employees
 Break Periods of less than 4 weeks
 Crediting of average hours worked during break periods of
less than 4 weeks to a maximum of 501 hours
 Break periods of 4 weeks or more
 Anti-abuse provisions
Source: http://www.irs.gov/pub/irs-drop/n-12-58.pdf
http://www.irs.gov/pub/newsroom/reg-138006-12.pdf

PPACA Shared Responsibility Provisions – Penalty
◦ The penalty is $3,000 annually for each full-time
employee receiving a tax credit, up to a maximum of
$2,000 times the number of full-time employees minus
30.
◦ The penalty is increased each year by the growth in
insurance premiums.
Source:
http://healthreform.kff.org/~/media/Files/KHS/Flowcharts/employer__
penalty_flowchart_1.pdf

State Law on Health Insurance:
◦ If a district offers a group health insurance plan, the
group health insurance offered by the district must offer
insurance to all employees working on a permanent basis
and having a normal work week of 30 hours or more.
Wis. Stats. 632.745(5)(a). Requirement is on the group
insurance carrier, not the employer.
◦ Except as provided in par. (b), "eligible employee"
means an employee who works on a permanent basis
and has a normal work week of 30 or more hours. The
term includes…, but the term does not include an
employee who works on a temporary or substitute basis.

Federal Law on Health Insurance - General:
◦ Self-funded Plans: Existing Internal Revenue Code
(IRC) section 105(h) rules on benefit testing – covering
self-funded plans.
◦ Cafeteria Plans/Flexible Spending Accounts: Existing
IRC Section 125 Rules on Employee Contributions for
fully insured plans.
◦ Health Benefits: Proposed IRS IRC 105(h) rules as
proposed by the Federal Patient Protection Affordable
Care Act (PPACA).

Federal Non-discrimination Provisions re:
Health Insurance - General:
◦ A group health plan cannot, under certain circumstances,
discriminate in favor of highly compensated individuals
(HCI) in regard to either eligibility to participate in the
plan or health benefits.

Retiree-only and “grandfathered” plans are excepted.
◦ Retiree-Only plans most likely are the following:
 Plans including only retirees;
 Plans experience rated for retiree groups only;
 Most common arrangements at the present time are
group Medicare Supplemental Coverage and Medicare
Advantage.
 Plans with fewer than two active employees.

Retiree-only and “grandfathered” plans are excepted.
◦ “Grandfathered” plans are those plans where the
following changes have not been made:
 Elimination of all or substantially all benefits to treat a particular
medical condition.
 Increase in a percentage cost sharing requirement, for example,
raising the co-insurance by 5% or more.
 Increase in a deductible or out-of-pocket maximum by amount that
exceeds medical inflation plus 15%.

Retiree-only and “grandfathered” plans are excepted.
◦ “Grandfathered” plans are those plans where the
following changes have not been made:
 Increase in a co-payment by an amount that exceeds medical
inflation by 15 % or if greater, $5.00 plus medical inflation.
 Decrease in an employer’s contribution rate toward the cost of
coverage by more than 5%.
 Imposition of annual limits on the dollar value of all benefits
below specified amounts. PHS§2716

Penalty: Consequences of violation
fall on the plan sponsor [district], not
the HCI(s).
◦ If a fully-insured plan is found to be
discriminatory, a penalty will be imposed
on the employer/plan sponsor.
◦ Regulations are needed to define exactly
how the employer penalty will be applied.
◦ It is not clear when the regulations will be
forthcoming.
◦ Currently, it appears that the employer
will pay a penalty of at least $100 per day
per highly compensated participant.

Proposed IRS IRC 105(h) rules Enforcement
Commencement Date.
◦ IRS Notice 2011-1, stated that compliance with §105(h)
requirements by fully insured plans will not be required,
and the excise tax penalties for violations will not be
imposed, until plan years beginning some time after final
regulations or other definitive guidance has been issued.
◦ The Department of Labor (DOL) and the Department of
Health and Human Services (DHHS) have also agreed to
the delayed effective date.
◦ http://www.irs.gov/pub/irs-drop/n-11-01.pdf

IRS IRC 125 Non-discrimination Testing.
◦ IRC §125 permits employers to offer benefits on a pretax basis to employees through the use of a cafeteria plan.
However, the tax advantage is conditioned upon the
cafeteria plan passing three nondiscrimination tests.
◦ If a cafeteria plan discriminates in favor of highly
compensated participants, those highly compensated
participants will be taxed on their benefits.
◦ HCI rules are different for IRC 125 than listed in IRC
105(h).
◦ http://www.irs.gov/publications/p15b/ar02.html

Impact on Employee Handbooks and Individual
Contracts
◦ Health Insurance Benefit Levels
◦ Premium Contribution Levels
◦ Post-employment Benefits
Telephone:
Email:
608-257-2622
877-705-4422 toll free
608-512-1707 direct line
bforbes@wasb.org
Barry Forbes has served as WASB staff counsel since 1983 and has more
recently been appointed, with Bob Butler, the Association’s coassociate executive directors. WASB Staff counsel provide
representation to nearly one-quarter of all school districts in
Wisconsin on employment & labor, human resources and school law
matters.
They also provide membership services, including general legal
information, to all school districts that are members of WASB. For
more information, please visit the WASB’s website at:
http://wasb.org/websites/employment_law_hr_services/index.php?p=900