Category Archives: Employee Benefits

Final Rule Implementing Executive Order Mandating Paid Sick Leave by Federal Contractors Published

By Jerilyn Jacobs

Last week, the Department of Labor published a Final Rule regarding implementation of Executive Order 13706, which requires certain federal contractors to provide paid sick leave to their employees.  The Final Rule applies to contracts where the solicitation was issued or the contract was awarded on or after January 1, 2017.

Under the Final Rule, applicable federal contractors will be required to provide employees with one hour of paid sick leave for every 30 hours worked on or in connection with a covered federal contract, up to 56 hours.  Employees may use paid sick leave for the following reasons:

  • To care for the employee’s own illness and other health care needs, including preventative health care;
  • To care for a family member who is ill or needs health care, including preventative health care (the Final Rule takes an expansive view of the types of family relationships that are covered, extending beyond individuals with biological or legal ties to the employee); and
  • For purposes related to being the victim of domestic violence, sexual assault or stalking, or assisting a family member or loved one who is such a victim.

The four major types of federal contracts that fall under the Final Rule are procurement contracts for construction covered by the Davis-Bacon Act (DBA), service contracts covered by the McNamara-O’Hara Service Contract Act (SCA), concessions contracts, including any concessions contracts excluded from the SCA by the Department of Labor’s regulations at 29 CFR 4.133(b), and contracts in connection with federal property or lands and related to offering services for federal employees, their dependents, or the general public.

The Executive Order and Final Rule do not apply to contracts for the manufacturing or furnishing of materials, supplies, articles, or equipment to the federal government that are subject to the Walsh-Healy Public Contracts Act (PCA).  However, where a PCA-covered contract involves a substantial and segregable amount of construction work that is subject to the DBA, employees whose wages are governed by the DBA or the Fair Labor Standards Act (FLSA), including those who qualify for an exemption from the FLSA’s minimum wage and overtime provisions, are covered for the hours spent performing work on or in connection with such DBA-covered construction work.

As to employees working on contracts covered by a collective bargaining agreement (CBA), if the CBA already provided the employee with at least 56 hours of paid sick time per year, then the other requirements of the Executive Order and the Final Rule do not apply to the employee until the date the CBA terminates or January 1, 2020, whichever is first.  If the CBA provides less than 56 hours or seven days, in cases where the CBA refers to days rather than hours, the contractor must provide covered employees with the difference between the amount provided under the CBA and 56 hours in a manner consistent with the Executive Order and Final Rule or the terms and conditions of the CBA.

The Final Rule also provides that employees can carry over up to 56 hours of unused paid sick leave from year to year while they work for the same contractor on covered contracts. Further, contractors are required to reinstate employees’ accrued, unused sick leave if the employee returns to work within 12 months after a job separation, unless the employee was paid for unused sick leave upon separation.

Employees can use as little as an hour of paid sick leave at a time.  An employee’s request to use paid sick leave may be made orally or in writing.  Advance notice can be required where the need for leave is foreseeable, and a contractor can require supporting documentation if the employee is absent three or more consecutive full days.

For further reference, the Final Rule may be found at https://www.federalregister.gov/documents/2016/09/30/2016-22964/establishing-paid-sick-leave-for-federal-contractors

 

Three Lindner & Marsack Attorneys to Present at the State Bar of Wisconsin Health, Labor & Employment Law Institute

Lindner & Marsack’s Tom Mackenzie, Laurie Petersen and Daniel Finerty will share expertise on a variety of employment law matters at the State Bar of Wisconsin’s 2016 Health, Labor, and Employment Law Institute, an event is designed to share comprehensive information to help attorneys stay current on new developments that impact health, labor and employment law practice.

The conference will be held at the Wilderness Hotel and Golf Resort in Wisconsin Dells on August 18-19 and the agenda includes:

  • Tom Mackenzie will co-present NLRB Update: The Changing Landscape of Labor with Jennifer Abruzzo, Deputy General Counsel to the National Labor Relations Board. The focus will be on ever-changing issues faced by today’s employers including topics critical to health care employers such as the use of cameras and videotaping in the workplace, “English only” policies, civility and confidentiality rules and other updates regarding recent changes to the election rules (Breakout Session 1: Thursday, August 18th at 10:05 a.m.).
  • Daniel Finerty will present Advanced Issues in Health Care Employee Background Checks to further review the applicable federal and state law regarding background checks and review recent examples of missteps in the hiring process and claims filed by applicants (Breakout Session 3: Thursday, August 18th at 1:25 p.m.).
  • How to Fire Someone the Right Way will be presented by Laurie Petersen along with Richard Rice of Fox & Fox, S.C. The session will explain that it is best to provide a legitimate, clearly-articulated business reason for termination in order to prevent costly litigation and obtain the best result (Breakout Session 3: Thursday, August 18th at 2:35 p.m.).
  • Lindner & Marsack will co-host a complimentary Thursday Evening Social Hour and Cocktail Reception for conference attendees (Thursday, August 18th at 4:50 p.m.).

The Conference also features an optional paid lunch with Tammy H. Scheidegger, Ph.D. According to Dr. Sheidegger, while “having it all” seems to go hand-in-hand with being “successful,” research on happiness, and the emerging science of neuro-counseling, is shifting the happiness paradigm and providing a clear roadmap for how “having enough” is actually the way to balance all aspects of one’s life.

Watch for live updates on Twitter at the #2016HLE conference from Daniel Finerty (@DanielFinerty). A full schedule and registration information is available at http://hle.wisbar.org/schedule.html.

Lindner & Marsack, S.C. has represented management exclusively in all facets of labor, employment, employee benefits and workplace injury defense law since 1908.  Call Tom, Laurie or Daniel at (414) 273-3910 regarding any of their #2016HLE topics, or visit http://www.lindner-marsack.com/ to learn more about the firm and how our experienced and innovative attorneys can help your business.

PROPOSED EEOC WELLNESS PLAN REGULATIONS FOCUS ON COVERAGE, INCENTIVES AND VOLUNTARINESS OF PARTICIPATION

On April 20, 2015, the Equal Employment Opportunity Commission published its proposed regulations regulating employer wellness plans under the Americans with Disabilities Act.  The proposed rules attempt to strike a balance between allowing wellness plans to offer incentives for employee participation while, at the same time, limiting incentives to defined percentages in order to prevent economic coercion that could render a participant’s provision of medical information involuntary.

While the proposed rules will be reviewed in depth on April 28, 2015 at our Annual Compliance/Best Practice Seminar (please register by clicking here), here are some of the basics regarding the proposed rules:

  • The proposed rules re-assert the EEOC’s position that employee health programs that include disability-related inquiries or medical examination (including inquiries or medical examinations) that are part of a health risk assessment or medical history must be voluntary in order to comply with the Americans with Disabilities Act. By contrast, employee health programs that do not include disability-related inquiries or medical examinations are not covered by the proposed rules. While a smoking cessation program that asks participants if they smoke and provide information regarding how to quit is not subject to the proposed rules, a biometric screening or other medical examination that tests for nicotine or tobacco is a medical examination.
  • The proposed rules adopt the already existing HIPAA limitation, as amended by the Affordable Care Act, on wellness plan incentives. The proposed rules clarify that an employer may offer limited incentives up to a maximum of 30% of the total cost of employee-only coverage to promote an employee’s participation in a wellness program that includes disability-related inquiries or medical examinations as long as participation is voluntary. Note that the EEOC does not distinguish between whether the incentive is provided in the form of a reward or penalty. While the proposed rules acknowledge the HIPAA/ACA limitation which permits plans to offer incentives as high as 50% of the total cost of employee coverage for tobacco-related wellness programs, such as smoking cessation programs, the proposed rules are clear that such programs are not covered by the regulations. Again, programs that do not contain disability-related inquiries or medical examination are not covered by the proposed rules.
  • The proposed rules specifically define “voluntary,” a critical term to the ADA analysis. Companies should ensure their wellness plans that includes disability-related inquiries or medical examinations are be voluntary and comply with the ADA by ensuring the plan:
    • Does not require employees to participate;
    • Does not deny coverage under any of its group health plans or particular benefits packages within a group health plan for non-participation or limit the extent of such coverage (except pursuant to allowed incentives); and
    • Does not take any adverse employment action or retaliate against, interfere with, coerce, intimidate, or threaten employees within the meaning of Section 503 of the ADA, at 42 U.S.C. 12203.
  • In addition, in order to be voluntary, a plan must provide notice to participants that:
    • Is written so that employees from whom the information is being gathered are reasonably likely to understand it;
    • Describes the type of medical information that will be obtained and the specific purpose for which it will be used; and,
    • Describes the restrictions on disclosure of the employee’s medical information, the employer representatives with whom the information will be shared and the methods the employer will employ to prevent improper disclosure of the medical information including HIPAA-related protections.
  • Employer wellness plans should provide opportunities for reasonable accommodation for employees with disabilities to fully participate and earn any reward or avoid any penalty offered by the plan, absent undue hardship, by providing a reasonable alternative standard for the employee or providing an individual waiver. For example, if an employer’s wellness plan’s outcome-based program requires employees to achieve an average blood sugar level of 140 or less, the employer may have to provide a reasonable alternative standard to allow participation by diabetic employee for whom that goal is not achievable.

More information regarding the proposed rules and best practices for ensuring your Company’s wellness plan complies with the proposed rules will be provided on April 28, 2015. We will also present an annual review of developments in labor and employment law and discuss the National Labor Relations Board’s “quickie” election rules which went into effect on April 15, 2015, among other topics. Please register to join us for the half-day educational seminar by clicking here.

With Same-Sex Marriage Permissible In Many States, Plan Sponsors Should Clarify the Rights Of Affected Children

By: Alan M. Levy and John E. Murray

Two years ago, in United States v. Windsor, the U.S. Supreme Court held that the Defense of Marriage Act (“DOMA”) is unconstitutional in its requirement that “marriage” be defined as restricted to heterosexual couples.  After that, regulations were issued which treated same-sex married couples as entitled to the same federal benefits and rights as opposite-sex couples, such as joint tax returns, classification of dependents for health and retirement benefits governed by federal law, and FMLA rights.  Now, either by legislation or judicial determination, 37 states and the District of Columbia permit the same treatment as the federal rule.

Recently, several ramifications of these rules have become apparent.  For example, if a health plan covers dependents of employees, the child of an employee’s same-sex marriage is a dependent.  Similarly, an employee’s same-sex spouse is entitled to a survivor pension, which includes both payment upon the employee’s death and the requirement of the spouse’s written agreement if the employee declines joint and survivor benefits to maximize the retirement benefit during his/her own lifetime.

Some plans may be able to provide these spousal and dependent benefits under their present language.  Others may require amendments to plan documents and summary plan descriptions.  While some issues about same-sex marriage are scheduled for Supreme Court consideration this term, that case will not affect the federal rules which limit the application of DOMA to ERISA plans.

Plan administrators and fiduciaries are encouraged to review their programs and make all necessary modifications to comply with these rules.  If there are any questions about the rules, existing benefit documents, or practices, please contact Alan Levy or John Murray here at Lindner & Marsack, S.C.  We will be happy to assist you in this activity.

Supreme Court Alters Pregnancy Accommodation Requirements for Employers

By Kristofor L. Hanson

The U.S. Supreme Court on March 25, 2015, issued a decision that alters the landscape for employers under the Pregnancy Discrimination Act (“PDA”).  In the decision, the Court held that employers are now required to assess their ability to accommodate a pregnant employee’s restrictions in a manner consistent with efforts to accommodate other employees under similar restrictions.

The case, Young v. UPS, Inc., No. 12-1226 (March 25, 2015), involved a pregnant UPS employee, Peggy Young, whose pregnancy restricted her lifting to 20 pounds, then again to 10 pounds, as her pregnancy progressed.  Her job required her to lift items as heavy as 70 pounds and to assist in moving packages weighing up to 150 pounds.  UPS had a policy that called for light duty assignments for employees injured on the job, employees with suffering from conditions that qualified as disabilities under the Americans with Disabilities Act, and for those employees who had lost their Department of Transportation license.  Young sought an accommodation similar to those the company had provided for employees with similar restrictions.  UPS said that she was not entitled to an accommodation because pregnancy did not fall within one of the three categories for which it provided accommodations.

The District Court dismissed Young’s case, determining that UPS’s decision complied with the PDA, because Young could not demonstrate that she was “similarly situated” to employees in the three categories for whom UPS provided accommodations: 1) she was not injured on the job; 2) she was not legally restricted from working like those who lost or had suspended their DOT certifications; and 3) she was not disabled under the law.  The 4th Circuit Court of Appeals upheld the District Court’s decision and stated that Young more closely resembled “an employee who injury his back while picking up his infant child or . . . an employee whose lifting limitation arose from her off-the-job work as a volunteer firefighter,” neither of whom would qualify for an accommodation under UPS’s policy.

Young presented facts that showed that UPS was able to accommodate other employees who had lifting restrictions similar to hers.  She also presented evidence that other employees had indicated they were willing to assist her with lifting and moving packages.  In addition, a shop steward testified that UPS had no issues with accommodating employees except when a pregnancy situation arose.

The PDA provides, in relevant part, that employers must treat “women affected by pregnancy . . . the same for all employment-related purposes . . . as other persons not so affected but similar in their ability or inability to work.”  The Supreme Court’s analysis determined that this language is intended to provide pregnant women with accommodations provided to other employees who are similarly limited in their work.  Because Young provided evidence that other employees with similar restrictions were regularly accommodated by UPS, the Supreme Court overturned the lower courts and remanded the case.  The District Court will now analyze whether Young presented sufficient evidence to move her case beyond summary judgment under the new standard articulated by the Supreme Court.

The decision places an onus on employers to treat a pregnant employee as they treat other employees who have restrictions similar to the pregnant employee.  Previously, employers were not required to do that.  Rather, employers could limit accommodations as UPS did.  Employers must now analyze pregnant employees’ restrictions on a case-by-case basis to determine whether they are offering accommodations to other employees with like restrictions.  If they are, employers should do the same for pregnant employees.  As the Supreme Court asked, “[W]hen the employer accommodated so many, could it not accommodate pregnant women as well?”  According to the Supreme Court, the answer to that question could very well be, “Yes.”

If you have questions about this material, please contact Kristofor Hanson by email at khanson@lindner-marsack.com or by phone at (414) 273-3910, or any other attorney you have been working with here at Lindner & Marsack, S.C.

Registration is now open for our Annual Compliance/Best Practices Seminar!

Registration and a continental breakfast will be served beginning at 7:30 a.m.  Click here to register.

April 28, 2015

8:00 a.m. – 12:00 p.m.

Sheraton Milwaukee Brookfield Hotel

375 South Moorland Road Brookfield, Wisconsin

This FREE half-day event will address current topics in labor, employment, benefits and worker’s compensation law and provide employers across industries with practical and creative solutions for addressing their toughest workplace legal challenges.

SESSION TOPICS INCLUDE:

  • Annual Labor & Employment Update (Plenary)
  • Wellness Plans – Ensure ADA Compliance & Avoid EEOC Litigation
  • Steps To Avoid The Retaliation Claim Trap
  • Worker’s Compensation Update
  • The National Labor Relations Board And Its Impact On Non-Union Employers

Public Employers May Reduce Prospective Retiree Health Insurance Benefits

February 16, 2015
By:  Alan M. Levy and Oyvind Wistrom

On February 12, 2015 the Wisconsin Supreme Court held that Milwaukee County could eliminate its payment of Medicare Part B premiums for otherwise eligible employees who retired more than three months after its adoption of ordinance amendment to that effect. Wisconsin Federation of Nurses and Health Professionals, Local 5001, AFT, AFL-CIO, et al. v. Milwaukee County, 2015 WI 12. This decision comes after the decision in Stoker et al. v. Milwaukee County et al., 2014 WI 130, argued the same day, which allowed prospective reduction of a pension multiplier.

The retiree health benefit required 15 years of credited service, a minimum retirement age and (originally) a date of hire prior to July 31, 1989. In 2010 the ordinance was amended to provide that the benefit would no longer be paid to otherwise qualified employees who retired on or after April 1, 2011, with extensions of the date for existing union contracts which would expire later. The WFN sued (after its contract expired) on the basis of ordinances and session laws which allegedly treated retiree health benefits as vested like pensions and prohibited the diminishment of any pension benefit by subsequent amendment.

The Court’s 5-2 majority emphasized that pensions and health insurance are two different kinds of benefits, and that “by their nature, health insurance benefits have always been fluid opportunities available for a limited period of time . . . .” The County had argued that health benefits are never frozen at the time of retirement because retirees expect to receive the improvements in medicines and treatments which occur later, and premium costs change to pay for those changes. Therefore, benefits and premiums can be changed prospectively.

This opinion takes the same position as Loth v. City of Milwaukee, 2008 WI 129, 315 Wis. 2d 35, 758 N.W.2d 766, which allowed a prospective reduction in retiree health benefits, and it declined to apply pension and disability decisions which had contrary results. ( Stoker has allowed the County to reduce the pension multiplier applicable to future years of service.) Most important, the distinction between pensions and health benefits allows the employer to adapt its benefits and costs to the reality of modern circumstances, and its own ability to pay inherent in a public entity’s relationships with its employees (a topic discussed in Justice Prosser’s concurrence).

The magnitude of the authority sustained here depends on the number of employees on retirement in future years who were originally subject to the premium subsidy. If this change were to affect as few as 1000 retiring employees and their spouses, the savings to taxpayers will be approximately $2,500,000.00 per year. Other public employers which offer retiree health care benefits will be able to rely on this analysis to achieve similar savings if the language of their benefit plans and ordinances allows a similar approach to claims of unchangeable vested benefits.

Alan Levy of Lindner & Marsack, S.C. represented Milwaukee County throughout this litigation, as well as the City in Loth and the County in Stoker. If you have any questions about this, please contact him at alevy@lindner-marsack.com.

 

Wisconsin Supreme Court Rules that Municipalities May Implement Prospective Reductions in Employee Benefits

December 29, 2014

By:  Alan M. Levy

On December 19, 2014, the Wisconsin Supreme Court issued its decision in Stoker v. Milwaukee County and Milwaukee County Pension Board.  In 2011, the County had amended its previous ordinance to reduce the multiplier used to calculate the amount of a person’s pension payments from 2% to 1.6% for years of service which began after January 1, 2012.  The employees challenged this on the theory that they had a vested right to contributions at the higher multiplier because of state law and County ordinances which, they argued, gave them vested rights to benefits when they were hired, and that these vested rights could “not be diminished or impaired” thereafter.

By a 5-2 majority, the Court reversed the decisions of both lower courts and ruled that the employees’ vested benefit was what had been earned prior to the effective date of the amendment.  Because subsequent benefits were earned by the performance of subsequent service, the prospective change could be made.  This position relied on Loth v. City of Milwaukee and several other decisions in which Lindner & Marsack represented the municipal employer.  While not overruling the earlier cases (Welter v. City of Milwaukee and Rehrauer v. City of Milwaukee), the Court limited them to disability benefits, distinguishing them from benefits based on periods of service, such as pensions, paid sick leave, and retiree health insurance.  In short, a benefit based on years of service can be modified and reduced in regard to service not yet performed.

Should there be any questions about these rules and the impact of the Stoker decision, please contact Alan Levy, who is the Lindner & Marsack attorney who represented the employers in these cases.

EEOC Challenges Employer Wellness Programs

November 13, 2014

By: Alan M. Levy and Samantha J. Wood

The Affordable Care Act (ACA) has recently popularized employer wellness programs. The Department of Labor and Health and Human Services are presenting the ACA as promoting such programs by encouraging employers to offer “rewards” for participation. According to the final regulations, such “rewards” can include obtaining a benefit (such as a discount or rebate of a premium or contribution, or any financial or other incentive) and/or avoiding a penalty (such as the absence of a surcharge or other financial or nonfinancial disincentive). But the Equal Employment Opportunity Commission (EEOC) is now acting to remind employers that their programs’ “rewards” must comply with other laws.

In the past few months, the EEOC has challenged three employer wellness programs alleging that the programs, which offer financial incentives to those who participate, violate the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA). The EEOC reasons that the programs’ financial incentives constitute unlawful penalties and inducements.

The ADA prohibits employers from requiring their employees to submit to medical examinations or answer medical inquiries, unless such exam or inquiry is shown to be job-related and consistent with business necessity. However, the ADA permits employers to conduct medical exams and activities without having to satisfy the job-related/business necessity components as long as participation is voluntary, the information is kept confidential, and the information is not used to discriminate against employees. The EEOC has taken the position that a wellness program is “voluntary” as long as an employer neither requires participation nor penalizes employees who do not participate. In the recent litigation, the EEOC has maintained that large financial incentives affect the voluntariness of the programs.

GINA prohibits plans and issuers from collecting genetic information (including family medical history) prior to or in connection with enrollment, or at any time for underwriting purposes. A plan cannot offer rewards or inducement in return for genetic information. Accordingly, in the recent litigation, the EEOC has maintained that programs which offer financial incentives in exchange for spousal health information are unlawful inducements for one’s family medical history.

The EEOC brought its first lawsuit in the Eastern District of Wisconsin, challenging Orion Energy Systems, Inc.’s wellness program. Orion’s program required employees to complete a health risk assessment, to self-disclose their medical histories, and to have blood work performed. If the employees participated in the program, Orion would cover the entire amount of the employee’s health care costs. However, if an employee declined participation, s/he would be required to pay the entire premium cost for coverage ($413.43/month for single coverage or $744.16/month for family coverage), as well as a $50 non-participation fee. The EEOC has alleged that such financial incentive/disincentive is so great that it constitutes a penalty in violation of the ADA.

On September 30, 2014, the EEOC challenged Flambeau Inc.’s wellness program in the Western District of Wisconsin. Flambeau’s wellness program required employees to complete biometric testing and a health risk assessment, which required the employees to self-disclose their medical histories and have blood work and measurements performed. Employees who completed the testing were only obligated to pay 25 percent of the premium cost of their health insurance. However, employees who did not complete the testing were subjected to termination of health insurance and were required to pay the entire premium cost for COBRA health insurance coverage. As in the Orion Energy Systems case, the EEOC has alleged that Flambeau’s program is not job-related or consistent with business necessity and is not voluntary due to the financial penalty.

The EEOC’s most recent attack was brought October 27, 2014, against Honeywell International Inc., in the District Court of Minnesota. Honeywell’s wellness program required its employees and their spouses to undergo biometric testing. If the employees and their spouses did not take the biometric test, the employees risked losing the employer’s contributions to their health savings accounts (which could be up to $1500); would be charged a $500 surcharge that would be applied to their 2015 medical plan costs; would be charged a $1000 tobacco surcharge even if the employee chose not to undergo the testing for reasons other than smoking; and would be charged another $1000 tobacco surcharge if his/her spouse did not participate. In total, an employee could suffer a penalty of up to $4000. Again the EEOC has alleged that the wellness program is not job-related or consistent with business necessity and is not voluntary due to the large financial penalties. In addition, the EEOC has alleged that the program violates GINA’s proscription against providing inducements to an employee to obtain that employee’s family medical history.

Honeywell disputes that its financial incentives are in violation of the law, as such incentives/disincentives are allowed under the ACA. Indeed, prior to the ACA, the maximum financial incentive that could be offered for health-contingent wellness programs could not exceed 20 percent of the health plan’s premiums. However, the ACA increased the financial incentive allowance, permitting financial incentives of up to 50 percent of the premium for health-contingent wellness programs designed to prevent or reduce tobacco use, and 30 percent of the premiums for all other health-contingent wellness programs. Accordingly, if the EEOC’s position is adopted, which states that such financial incentives are penalties under the ADA and unlawful inducements under GINA, it would diminish the DOL and HHS’s final regulations affecting the financial incentive allowance.

Accordingly, employers offering health-contingent wellness program incentives should watch for the resolution of this litigation while keeping in mind their obligations to comply with other laws. Employers should be aware that offering large wellness program incentives could not only violate the ADA and GINA, but could also make their health plans unaffordable or inadequate under the ACA, which requires large employers to offer coverage that provides minimum value and affordability. Coverage is affordable if the employee’s required contribution to the plan does not exceed 9.5 percent of the employee’s household income; and a plan provides minimum value if the plan’s actuarial value is at least 60 percent. If an employer offers a premium discount for participation in a wellness program (that is not connected to tobacco use), employers must remember that the determination as to whether the plan is affordable and offers the minimum value, will be based on the higher deductible that applies to non-participating individuals.

If you have questions about this material, please contact Alan M. Levy or Samantha J. Wood by email at alevy@lindner-marsack.com or swood@lindner-marsack.com, or any other attorney you have been working with here at Lindner & Marsack, S.C.


WI COURT OF APPEALS HOLDS MUNICIPAL EMPLOYERS MAY MODIFY RETIREE HEALTH INSURANCE BENEFITS

By: Alan M. Levy

On October 1, 2013 the Wisconsin Court of Appeals held that Milwaukee County could eliminate the reimbursement of Medicare Part B premiums for employees who had not retired before that modification took effect on April 1, 2011. Reversing the decision below, the Court held that the Supreme Court’s decision in Loth v. City of Milwaukee, which was “at odds” with two earlier Court of Appeals decisions, supported the County’s application of a less generous retiree benefit to those who were still actively employed. Although the Courts of Appeal in Welter v. City of Milwaukee and Rehrauer v. City of Milwaukee, had ruled that a city employee had a vested right immediately upon being hired to the highest level of retiree benefit in effect at any time during his/her active career, Loth held that a benefit due upon retirement for employees who already met age and service requirements did not vest until actual retirement. In turn, that benefit could be reduced for an employee who had achieved the necessary age and service, but not yet retired and become vested. As a result, Milwaukee County could eliminate the premium reimbursement benefit for “retired members of the County Retirement System” who were still active employees on the effective date of the new rule.

This rejection of Welter and Rehrauer suggests that retiree benefits for public employees whose benefits have not yet vested are open to modification by the municipal employer, an important option in this time of severe limits on revenue and ever increasing retirement costs. The majority opinion in the Milwaukee County case also said that collective bargaining agreements which had provided the same retiree benefits as in the County’s ordinances, did not bar these modifications if those agreements had expired before the amendment was applied to the bargaining unit.

There are a number of cases pending at all levels of the Wisconsin courts which involve reductions in retiree benefits. This decision will undoubtedly be an important precedent favoring the employer in similar litigation. The case is Wisconsin Federation of Nurses and Health Professionals, Local 5001, AFT, AFL-CIO, et al. v. Milwaukee County; Court of Appeals Case No. 2012AP002490; Milwaukee County Circuit Court Case No. 2012CV001528.

Lindner & Marsack attorney Alan Levy represented Milwaukee County in Wisconsin Federation of Nurses and the City of Milwaukee in Loth. Please contact him directly if you have any questions about these matters.