Avoiding the legal landmines of 3 popular employee benefits
September 2, 2009 by Jared BilskiPosted in: Discrimination, Hiring, Pay and benefits, References, Special Report - Benefits
It’s a constant challenge for employers: Offering the benefits and incentives that employees desire without running into compliance problems with the feds.
Here are three popular benefits that present a legal minefield for benefits managers — and ways companies can offer them without fear of repercussions.
1. Wellness programs and the ADA
While every employer wants to promote healthier lifestyles for its employees, some wellness initiatives run afoul of the Americans with Disabilities Act — if the initiatives are constructed in a manner that makes it more difficult for certain employees to participate.
Example: A company unveils an on-site exercise program; participants can bring home perks like extra vacation days, cash bonuses, gift cards, etc.
Problem: The company has several disabled employees who are physically unable to participate and, therefore, can’t reap the benefits of the rewards.
Fix: If your wellness program includes certain features in which disabled employees can’t participate, create some alternatives where these employees can earn the rewards — like attending a class on the benefits of doing the cardiovascular exercises permitted by their disability.
Note: Don’t forget the tax implications of your rewards. For example, all cash equivalent rewards — gift cards, etc. — are taxable, where as the tax status of an iPod Shuffle or movie tickets is uncertain.
2. Domestic partner benefits
While domestic partner benefits are highly coveted by many employees, domestic partners aren’t generally granted the same protections as spouses under ERISA and the IRS regs. For example, unlike spousal health coverage, domestic partner benefits are taxable.
However, there are two exemptions:
- If the employee’s partner qualifies as a dependent, or
- If the partner is recognized as a spouse or the benefits are protected under state law, as in MA, CT and VT.
And there are more restrictions surrounding the rules for flexible spending accounts (FSAs). However, ERISA trumps state law, and flex accounts are subject to the Defense of Marriage Act (DOMA), which only recognizes traditional marriages.
The effects: Flex accounts may not reimburse workers for domestic partner medical care, care of a domestic partner’s dependent, etc.
To get around the red tape, many companies require the employee to cover the entire cost of the partner’s health coverage. To balance this out, some employers adjust the worker’s pay to make up for the difference.
For a more extensive look at the tax problems with domestic partner benefits, check here.
3. Employee referral programs and the EEOC
The Equal Employment Opportunity Commission has already addressed the problems that accompany word-of-mouth recruiting. According to the EEOC, employee referrals can limit workplace diversity and increase the risk for discrimination because employees tend to only recommend colleagues of the same race, gender ethnicity.
Potential legal problems: Even in cases of accidental discrimination, companies that do extensive hiring based on employee referrals can be fined or sued by the EEOC. To add to more pressure to employers, EEOC compliance manuals now recommend that most firms scale back — or eliminate altogether — their employee referral programs.
Safeguard: If your company has no intention of scrapping its employee referral program, make sure to measure its effect on employee diversity and encourage widespread participation.
Tags: americans with disabilities act, compliance, domestic partner benefits, eeoc, Employee referral programs, Legal problems
September 3rd, 2009 at 7:31 am
This is just my opinion but I don’t believe that there is a such thing as “accidental discrimination” as mentioned in # 3. The term is oxymoronic. However, I do agree the referral bonus programs have the potential to of set diversity initiatives but honestly that is the world we live in unfortunately so until we become more socially evolved we as HR professionals will have to remain cognizant and vigilante regarding such issues.
September 3rd, 2009 at 9:10 am
I think you would agree Greg there is such thing as intentional and un-intentional events. I do believe that the pharase un-intentional discrimination would have been more acceptable in this context but the point was well made that hiring from intenal referrals can lead to less diversity. If hiring under a government contract, that could skew your numbers. I would guess that most situations are smaller employers just trying to fill needs as cost effectively as possible.
Remember we are still facing the threat of the “Healthy Families Act” requiring paid leave of up to 7 days among other reasons ; “to care for, or help obtain medical care for, a child, parent, spouse (and are you ready for this language?) or “any other individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship” Can you believe that? I hope the Congress knows what to do with this legislation…. can it.
September 3rd, 2009 at 9:30 am
Marty,
The vague language you are referring to in the “Healthy families Act” is typical of government legislation. A precedent will have to be set quickly because based on that definition the room for abuse is enormous.
Yes I agree with you, intentional and unintentional would have been better way of putting it however, as you know, the wrong word choices in policies and procedures and even in local, state, and federal laws can have you eating the proverbial crow in front of a judge or arbitrator.
September 3rd, 2009 at 9:55 am
I like your “O” term for the healthy families legislation. It will lead to unbridled abuse of the system.
September 3rd, 2009 at 1:24 pm
Marty,
The last sentence of your article uses the word “affect” as a noun. I believe you meant to “…measure its effect on employee diversity…”
Great points, though. Thank you.
September 3rd, 2009 at 2:04 pm
Joni,
I believe the articles author is Jared Bilski, not Marty. Good point though.
September 4th, 2009 at 8:49 am
Joni,
Nice catch! You’re absolutely correct, it should have been “effect.”
Jared
September 8th, 2009 at 9:17 am
#1. We have a Wellness program that covers EVERY employee’s ability. If you get your annual wellness exam, you are qualified for a $500 wellness allowance that you can use toward Gym Membership, Weight Management Program, nutritionist, Therapeutic Massage, Smoking Cessation, Acupuncture. Also, if you don’t want to take advantage of the Wellness Allowance, you get a discount on your employee share premium.
#2. We don’t have Domestic Partner benefits and I doubt very seriously that the state of Virginia will see that benefit any time soon.
#3. Unintentional Discrimination? Hmmm………I like that term and it happens and as a Black Female, it does NOT offend me. In my 13 years in HR as an Assistant and a Manager, I have seen employers hire in their own likeness, doesn’t mean they don’t like the other race or gender or age group, its just what they have in common. When I worked in the corporate offices of a large retailer, a great majority of the Buyers, Planners Mid Management and Sr. Management were Jewish Americans (Male/Female). It’s not intentional, it’s just how the retail industry has always been. I see Managers that have a lot of family and friends and if they know someone looking for work that is qualified, they refer them. As long as no “Favor” is cast upon the friend or family member hired, I don’t see a problem with it.