HR Solutions

Personal Liability, Medicare and COBRA, Holiday Pay

By Dec 1, 2004
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HR Magazine, December 2004

Q: I know that my company can be sued by current and former employees for its employment actions. Do I, as an HR professional, have personal liability for my participation in such actions?

A: An HR professional may be personally liable for participation in employment actions under federal, state and local employment laws depending on how “employer” is defined in the particular law and interpreted by courts. There may also be personal liability for HR professionals under common law.

At the federal level, the Family and Medical Leave Act (FMLA)—one of the most difficult employment laws to administer—provides for personal liability because an employer is defined in FMLA Regulation 825.800 as “any person who acts, directly or indirectly, in the interest of an employer to any of the employees of such employer.”

The Fair Labor Standards Act includes a similar definition of employer, thus also providing for personal liability of managers.

Under Title VII of the Civil Rights Act, the Age Discrimination in Employment Act and the Americans with Disabilities Act, the current interpretation of the term “employer” is contested. The U.S. Circuit Courts of Appeals have not usually found personal liability under these laws. Ultimately, the U.S. Supreme Court may rule on this issue.

Many states and localities have fair-employment laws that may provide for personal liability of the company manager. As discussed in the Society for Human Resource Management Legal Report “Personal Liability of Human Resource Professionals in Employment Litigation,” more cases alleging discriminatory acts in employment are brought in the state court system than in the federal system. Increasingly, the risk for personal liability is under state, not federal, law.

Common-law claims are not based on federal, state or local laws but on case law. These claims may include intentional infliction of emotional distress, such as severe anxiety caused by sexual harassment, and defamation, such as a false and malicious reference given on a former employee. Common-law claims may also be for wrongful termination under exceptions for employment-at-will, such as when an employee is terminated for whistle-blowing about an illegal employer activity.

You can help protect yourself from liability by complying with all applicable employment laws, following your company’s policies and procedures, and consulting legal counsel for definitive guidance on complicated situations.

Many employers also obtain employment practices liability insurance against many employment claims. If your employer does not have such coverage, it may be worth considering for HR staff as well as other management employees.

—DL

Q: How does an employee’s entitlement to Medicare affect his right to continued health coverage under COBRA?

A: To answer this, it is important to establish what is meant by “entitlement” to Medicare.

Under federal regulations, simply being eligible to enroll in Medicare does not constitute entitlement. According to the Internal Revenue Service, to be considered entitled to Medicare, the qualified beneficiary (QB) is required to have actively enrolled in either Part A or Part B of Medicare.

Moreover, the Social Security Administration has said that entitlement to Medicare involves actively applying for benefits or submitting a claim that Medicare pays. The timing of the entitlement is what determines a QB’s right to continued health coverage under COBRA (created by the 1985 Consolidated Omnibus Budget Reconciliation Act). If a QB becomes entitled to Medicare before electing COBRA coverage, entitlement cannot be a basis for terminating the QB’s right to coverage.

But if a QB becomes entitled to Medicare after electing COBRA coverage, the statute generally allows for the coverage to be terminated as of the date of entitlement to Medicare. Exceptions for retirees on COBRA at time of bankruptcy may apply.

The difference stems from the QB’s status as an active employee. Although the COBRA statutes permit an employer to terminate continuation coverage because of Medicare entitlement, the Age Discrimination in Employment Act prohibits an employer from reducing or eliminating health care benefits of active employees simply because they reach age 65.

Thus, Medicare entitlement usually cannot be a qualifying event that would result in a QB losing coverage while an active employee.

But a QB who is already on COBRA and is not an active employee is not protected by the age discrimination law, and entitlement to Medicare after electing COBRA can be used to terminate coverage in most cases.

—SL

Q: When calculating overtime, do you include holidays and/or vacation time in the 40 hours or more per week? Is it considered a bonus to be included in the regular rate?

A: Many employers do include holiday and vacation pay in their calculation of the regular rate for overtime purposes, but you are not required to do so. Some collective bargaining agreements have provisions that require the inclusion of vacation or holiday pay—or both—in the calculation of the regular rate. In most instances, however, employers only have to use actual hours worked when they are calculating overtime.

When an employee is required to work on a holiday, you have several options, assuming that the employee is not covered under a collective bargaining agreement. Exempt employees are only required to receive their regular salaries. Nonexempt employees are only required to be paid for the time they do work.

However, if you want to compensate employees who must work instead of taking a paid holiday, you have several options. You can pay a premium for working that day. You can pay time and one-half, double time, triple time or anything that seems practical. As an employer practice, you may choose to pay for both the holiday pay and for the hours worked on the holiday (two days’ pay total)—for both nonexempt and exempt employees.

You also may offer the employees paid time off or unpaid time off in the future—one day, two days or anything that seems practical. You may not, however, give time off in lieu of pay. That is, employees must be paid for the time they do work, and you can opt to give a future, normally scheduled work day off. You are not obligated by law in most cases, but you may choose any combination of the options mentioned.

—RD

Diane Lacy, SPHR, Shari Lau, SPHR, and Ruhal Dooley, SPHR, are information specialists in SHRM’s Information Center.

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