“Applicable Large Employers” are exposed, beginning January 1, 2015, to significant new taxes if they fail to offer “minimum essential coverage” to at least 70% of their full-time employees and their dependents. Employers also must permit full-time employee coverage to become effective within a “90-day” maximum waiting period. Unlawfully delaying coverage exposes the employer both to the new taxes and to fines of up to $100 per day per affected individual. Puzzlingly, the enforcement agencies’ (DOL, HHS, IRS) rules on each subject fail to address their potential disruption of temp-to-perm staffing arrangements. When callers ask for specific guidance, our contact information is taken. We are reminded of Lewis Grizzard’s joke that the 1988 Atlanta Braves and Michael Jackson had one thing in common: they both wore one glove, for no apparent purpose.
Many employers obtain all new hourly workers from a leasing company that is their W-2 employer for, say, 90 days, at which time the customer moves some to its own payroll. Is the employee’s first day on the new payroll Day 1 of the maximum waiting period under the customer’s group health plan, or must that plan count the employee’s 90 days with the leasing company?
The rules tell us little more than that an employer’s ACA obligations extend to every person who is its “common law employee.” The IRS uses a 20-factor “right to control” test to determine whether a common law employment relationship exists. No one factor determines the result, but if an employer can tell a worker what to do, when to do it and how to do it, then, generally speaking, the worker is that employer’s common law employee. And an employee may have multiple, joint, common law employers. If high penalties and lack of clear guidance compel leasing firms and their customers to adopt the most risk-averse rule interpretations, they might shorten the lease term to coincide with the one month “orientation period” of the maximum waiting period rules. Some leasing firms might not be able to survive in that environment. Some employers might not find truncated lease terms worthwhile.
If such disruption is to be minimized, leasing firms, their customers and their lawyers need clearer enforcement guidance, and we need it soon. We’re asking our Congressional representatives to help us get the guidance that we need. If this matters to you, please consider doing the same.