By: Trevor D. Large, Partner
September 2013
California employers covered by the Fair Labor Standards Act (which applies to the vast majority of California employers) have long been preparing to issue their employees the Health Insurance Exchange Notice required by recent healthcare reform. Under the terms of the healthcare reform law, that notice is to be provided no later than October 1, 2013. The Department of Labor even issued model notices for employers’ use (found at http://www.dol.gov/ebsa/pdf/FLSAwithplans.pdf – if you provide employee healthcare, and http://www.dol.gov/ebsa/pdf/FLSAwithoutplans.pdf – if you do not offer employee healthcare). It had been assumed that failure to provide this notice could lead to fines of $100 per day.
Then, after most employers had prepared for compliance, on September 11, 2013, the United States Department of Labor (“DOL”) posted on its website:
Q: Can an employer be fined for failing to provide employees with notice about the Affordable Care Act’s new Health Insurance Marketplace?
A: No. If your company is covered by the Fair Labor Standards Act, it should provide a written notice to its employees about the Health Insurance Marketplace by Oct. 1, 2013, but there is no fine or penalty under the law for failing to provide the notice.
Similarly, on September 12, 2013, the U.S. Small Business Administration posted on its site:
If your company is covered by the Fair Labor Standards Act, you must provide a written notice to your employees about the Health Insurance Marketplace by Oct.1, 2013. However, there is no fine or penalty under the law for failing to provide the notice.
So, the question now arises, “If there is no penalty, should an employer worry about providing notice?” Short answer: Yes.
Hopefully, preparations have already been made to comply. If so, there is little reason not to complete the process. If preparations have not been made, there is still adequate time to do so prior to October 1. In general, it is safer to comply with these requirements, regardless of the applicable statutory penalties.
At this time, it is uncertain how long the DOL’s position on “no penalty” will remain in effect. It is also unclear whether the failure to comply with this notice requirement could cause compliance issues with an ERISA audit. Moreover, intentional disregard for the notice obligations could theoretically create civil liability for an employer who has employees unhappy with their healthcare plans.
It is unlikely that an employer will face a penalty or liability for properly sending out the notice. However, given the lack of clarity on employer consequences for non-compliance, failure to send out a notice contains unnecessary risks.
Should you have any questions about how to complete this notice requirement, don’t hesitate to contact us. We look forward to partnering with you to develop compliance strategies that work for you, your business and your employees.
Trevor D. Large, Partner
TLarge@BFASLaw.com
(Direct) 805.966.7716
This Advisor is one of a series of business, real estate, employment and tax advisories prepared by the attorneys at Buynak, Fauver, Archbald & Spray, LLP. This Advisor is not exhaustive, nor is it legal advice. You should discuss your particular situation with us or with your own attorney. Our legal representation is only undertaken through a written engagement letter and not by the distribution of this Advisor.
