NEWSLETTER

Executive Summary:  Recently, unions and union-backed workers' centers have set their sights on employers in the restaurant industry, particularly those operating fast-food establishments.  While the groups have touted higher wages and better benefits as the reason for their crusade, another obvious motivation for their effort is to drive up membership.  Over the past several months, a number of protests have taken place in various cities across the country, culminating in a nationwide strike on August 29.  Regardless its success, it is highly unlikely the unions will begin to back down anytime soon.  Accordingly, restaurant employers should prepare themselves for more strikes and protests as unions continue to serve up steaming hot plates of workplace tension.

Employees' Right to Strike

The National Labor Relations Act (NLRA) protects an employee's right to organize and participate in union activity, such as strikes, and to engage in other types of concerted activity for "other mutual aid or protection."  Importantly, these rights extend to all employees, regardless of whether they are represented by a union or whether collective bargaining is involved.  The law prohibits an employer from interfering with employees' rights, which means an employer cannot terminate or take any other adverse action against an employee for engaging in activity protected by the NLRA, such as a strike.  Employers also cannot threaten to take action against employees who strike, nor can the employer question employees about their plans to strike.

These rights do not extend, however, to supervisors or managers, who are considered agents of the employer.  The NLRA lists a number of supervisory functions in its definition of supervisor, including, among others, the authority to hire, fire, promote, discipline, assign or reward other employees or effectively recommend such actions.  An employee's status as a supervisor or manager is not determined by title but by his or her actual authority. 

What's an Employer to Do?

While it may seem that employees have the upper hand in these situations, restaurant employers should know they have rights as well.  Below are some general guidelines regarding employers' rights if a strike occurs:

• Just because the employees strike does not mean the employer must give in to their demands.  If a union has not been certified as your employees' representative, you are not obligated to bargain with the strikers. 
• The employer is not obligated to pay striking employees for their time spent on strike. Employers are only required to pay employees for time spent working.  Striking is not working, so employees are not entitled to pay for that time.  
• The employer may hire replacement employees or use existing members of the workforce who are not on strike to perform the jobs vacated by the strikers.  In most situations, these replacements will be temporary.  Although an employer may permanently replace striking employees in certain situations, employers should discuss this option with counsel prior to implementation.
• Unless the employer has permanently replaced the striking employee, it must allow the employee to return to work after the strike.  The employer is under no obligation, however, to allow the employee to make up for the time lost due to the strike. 

Can a Strike Become Unlawful?

Even if a strike has a lawful goal, when unlawful methods are used to achieve that goal, the strike may be declared unprotected.  For example, employees may not engage in repeat, intermittent, quickie-type strikes.  Nor can employees refuse to do some, but not all, their work duties and remain protected.  In addition, the law prohibits employees from picketing in a manner that prevents others – such as delivery trucks or patrons – from entering or exiting the building or adjacent access points such as parking lots.  Strikers also cannot physically assault or threaten violence against the employer or guests.  Engaging in such conduct may cause the employee to lose protection and make him or her subject to discipline up to and including termination.

After the Strike

After the strike, employees who have not been permanently replaced have the right to reinstatement upon making an unconditional offer to return to work.  On the flip side, an employee who insists upon an employer concession before returning to work has not made an unconditional offer and is not entitled to reinstatement.

Employers should resume normal operation of their business including regular enforcement of lawful employment policies, including disciplinary procedures.  However, employers should be careful not to target for discipline employees who participated in a strike or any other concerted activity.  Doing so could constitute an unfair labor practice.  Employers seeking to discipline employees who have previously engaged in concerted activity should discuss the situation with experienced labor counsel before taking the adverse action.     

Preparing for the Next Strike 

In the likely event that another strike is organized, whether nationwide or locally, employers should take a proactive but measured approach in preparing for the strike.  

• Consider explaining to employees what they legally could lose with respect to their wages as well as the company's right and intention to operate during a strike.  This includes informing employees that striking does not obligate the employer to give them anything.
• Do not promise employees any benefits or threaten them in an effort to dissuade them from participating in the strike or to encourage them to cross the picket line. 
• Determine whether you intend to operate your restaurant on the day of the strike. Consider how many employees you expect to participate in the strike and the number of replacement employees you will need, if any, to maintain normal operations during the strike.
• Call a meeting of managerial and supervisory personnel.  Advise these individuals of the possibility of a strike and what he or she should do if a strike occurs.  Be sure to advise all supervisory personnel that the restaurant expects them to report to work regularly during the strike. 
• Inform delivery people and product reps of the possibility of the strike and inform them the restaurant expects deliveries to be made regardless of the picket line.
• Have supervisory personnel and any replacement employees ready to begin work before the strike starts.
• While employees are on strike, do not photograph or videotape the strikers unless it is necessary to document an unlawful action.

Organizing efforts like these are likely to continue for the foreseeable future.  While most may come and go without much effect, the potential for a union to organize your workforce remains ever present.  Employers who suspect their employees are interested in forming a union should contact experienced labor counsel to develop an appropriate and lawful response strategy.

If you have any questions regarding this article or other labor or employment related issues impacting the restaurant industry, please contact the author, Joshua Sudbury, jsudbury@fordharrison.com, any member of FordHarrison's Restaurant Industry practice group, or the FordHarrison attorney with whom you usually work.

Executive Summary:  In July 2013, the Obama Administration delayed implementation of the employer mandate, a major provision of the 2010 health care reform law, which applies to employers with 50 or more full-time or full-time equivalent employees.  This delay did not impact other provisions of the Affordable Care Act (ACA), many of which are going forward as scheduled.  Additionally the reprieve may be short-lived because, unless additional guidance is issued, January 1, 2014, will start the clock on determining employers' size for purposes of the employer mandate, and for determining which employees will be considered full- and part-time for purposes of offering health care coverage.

Background

Under the ACA's employer mandate, an employer with 50 or more full-time (including full-time equivalent) employees generally must offer minimum essential health coverage that provides minimum value and is affordable to substantially all of its full-time employees (at least 95%) or it will be assessed a penalty if one or more full-time employees obtains coverage from a state- or federally-run health insurance exchange and is eligible for a subsidy or cost-sharing reduction.  Under the ACA, a "full-time" employee is an employee who works 30 hours or more per week or 130 hours or more per month. 

There are special rules that require all employees within an employer's controlled group to be counted for purposes of determining whether the employer is a large or small employer.  These rules are complicated, but generally a controlled group includes a parent-subsidiary group with at least 80% overlapping interest or a brother-sister group owned by five or fewer individuals who have at least 80% combined total interest, and more than 50% shared interest.  In addition, there are special rules for franchises.

Because of the July 2013 delay, employers who fail to offer minimum essential coverage that provides minimum value and is affordable to their full-time employees under the ACA's employer mandate will not be subject to a penalty in 2014. 

The Affordable Care Act in 2014 

Despite the delay, many provisions of the ACA are moving forward as scheduled, such as: adopting certain plan design requirements regarding the type of coverage that must be provided (such as women's preventive care and the elimination of pre-existing condition exclusions); implementing a 90-day waiting period; reporting on employees' Form W-2 the cost of health care coverage the employer has provided; and distributing certain notices, such as a Summary of Benefits and Coverage (start of open enrollment) and a Notice of Coverage Options (October 1, 2013). 

Additionally, starting January 1, 2014, individuals must still obtain coverage under the ACA's individual mandate, or pay a penalty.  The IRS recently released new regulations on the individual mandate that clarify the individual's responsibility, such as whether an individual will be responsible if his or her dependents do not obtain coverage, and elaborate on what constitutes coverage.  Meanwhile, some lawmakers are still pushing for a delay of the individual mandate to match the delayed employer mandate.

For small employers (generally, those with fewer than 50 employees), full implementation of the Small Business Health Insurance Exchanges, a featured provision of the state- or federally-run health exchanges, has also been delayed until 2015.  Small businesses should be able to participate in a limited operation of SHOP in 2014, but generally will not have access to a variety of health insurance options until 2015.  Small employers who employ fewer than 25 employees may still qualify for a tax credit for providing health care in 2014.

Finally, ACA fees are here to stay.  The ACA imposes several fees such as the PCORI fee, Transactional Reinsurance Fees, and, eventually, the Cadillac Tax.  In addition, employers are still required to distribute Medical Loss Ratio rebates, if any, to participants shortly after they are received from insurance companies.

Back to the Future: 2015 Planning Opportunities Start January 1, 2014 or Sooner

Determining Employer Size.  The ACA provides that an employer's status as a large or small employer under the employer mandate is determined by looking to the employer's average size during the full 12 months of the preceding calendar year.  Before the delay, the IRS had created a transition rule whereby employers could look to any consecutive six-month period in 2013 to determine whether they were a large or small employer for 2014.  The current employer mandate delay did not delay the transition rule. Accordingly, employers may now have to look to the full 12 months of 2014 to determine whether they are large or small employers.

Measurement Periods.  In addition, IRS guidance allows employers to use measurement periods to measure variable hour and seasonal employees.  Generally, if an employer cannot reasonably determine whether an employee will be a full- or part-time employee, or if the employee is a seasonal employee, the employer may use a measurement period of between 3 and 12 months to determine the employee's status.  The following is a brief overview of these rules (note – these rules contain many exceptions):

• During the employee's first measurement period, the employer not need to offer health care coverage to the variable hour or seasonal employee under the employer mandate, even if the employee works full-time. 
• Once the measurement period has run, if the employee is, on average, determined to be full-time (30 hours or more per week or 130 hours or more per month), generally the employer must offer that employee health insurance coverage that is effective for a period of time that is not less than the length of the measurement period, or at least six months (called the "stability period").
• If, instead, the employee was, on average, considered to be part-time during the measurement period, the employer does not need to offer that employee health care coverage for a stability period (that is no longer than the preceding measurement period). 
• There are special, complicated rules for employees hired mid-year that generally follow these principles but apply separately until the new hire "syncs" with ongoing variable hour or seasonal employees. 
• The IRS rules allow for a gap period (called the "administrative period") of no more than 90 days between the measurement period and the stability period, during which time the employer can determine the employee's full- or part-time status, and offer coverage to the employee.

Many restaurant industry employers are expected to rely on measurement periods to determine whether coverage must be offered to their variable hour employees. 

Under a 2013 IRS transition rule, employers could use a six-month measurement period in 2013 and still use a full 12-month stability period in 2014.  Now, unless other guidance is released, employers who want to use a 12-month stability period in 2015 may need to start measuring variable hour employees as soon as October 1, 2013, if the employers also plan to use the full administrative period.

Conclusions

Employers cannot afford to wait until next year to start planning compliance with the ACA.  Although the penalties under the employer mandate have been delayed until 2015, employers will still face compliance hurdles in 2014 in implementing the other provisions of the ACA.  In addition, because many of the transition rules have not yet been delayed, planning for 2015 starts much sooner than many employers expect.

If you have any questions regarding this article or other health care reform issues, please contact the author, Scott Wagner, swagner@fordharrison.com, any member of FordHarrison's Employee Benefits practice group, or the FordHarrison attorney with whom you usually work.