FEDERAL UPDATES

ACA Reporting Requirements – Effective January 1, two new laws alter employer requirements under the Affordable Care Act.  Until now, Applicable Large Employers (ALEs; 50+ FTEs) have been required to automatically provide Form 1095-C to full-time employees each year by mail, or electronically if the employee consents.  Under the new laws, if the employer provides “clear, conspicuous, and accessible notice” of the right to receive a Form 1095-C, it does have not to provide Form 1095-C unless an employee requests one.  The notice of rights must be “provided” by January 31 – generally by posting it on an internal website – and must be retained in the same location through October 15.  If an employee requests it, the employer must then provide Form 1095-C by mail (or electronically if the employee consents) within 30 days, or if later than by January 31 following the end of the year to which it relates.

There is some disconnect on the dates these forms are due:  the IRS permanently extended the January 31 deadline by 30 days under the prior rules, but this legislation still contemplates providing any requested notices by January 31.  The hope is that the IRS will soon provide further instructions, but in the meantime, employers may want to continue providing the Form 1095-C under the prior rules if they will not be prepared to issue them by January 31 under the new rules.

ALEs must still file their ACA forms with the IRS by February 28, 2025 (paper) or March 31, 2025 (electronic).

In addition, until now employees have been permitted to put limits on their consent to electronic receipt (i.e. one time only, until a certain date, for certain years, for certain information only), making it difficult to track when each consent is in effect.  Under the new laws, the consent to electronic delivery is valid until revoked in writing.

Other changes include extending the time to respond to an IRS 226-J letter assessing shared responsibility penalties from 30 to 90 days and imposing a six-year statute of limitations for the IRS to assess ESRP penalties (previously unlimited).

This affects federal requirements only.  It does not change any state distribution requirements in those states with individual health insurance mandates.

I-9 Compliance.  With the upcoming presidential inauguration, employers should prepare for increased I-9 audits and raids.  During the first Trump administration, audits surged from around 3,000 per year to about 6,000 per year during the first two years.  They were expected to increase to 12,000-15,000 during the remainder of his term but were curtailed due to the pandemic.  In addition, after a decade without raids, these also resumed in 2018 under Trump, and will likely be more common in the coming presidential term.

To prepare, employers should focus on auditing and organizing their I-9 files, and establishing a response plan in the event of an audit or ICE raid.  The audit response time is extremely short – 3 business days – so ensuring that the notice of inspection or subpoena gets to the right person quickly is critical, and having these files separate and organized will make the response go much more smoothly.  In addition, ICE has substantial discretion when reviewing files and assessing fines, so full cooperation and delivering an organized and timely response may help minimize any financial impact on the company.

Fines are assessed for each “substantive” error and each “technical” error that is not corrected within 10 days.  Again, ICE has a lot of discretion and differentiates between substantive and technical errors based on “whether it could have led to hiring an unauthorized alien”.  Fine amounts increase every year based on inflation and increases for 2025 were just announced.  Examples include:

• Substantive or uncorrected technical violations: $288 – $2861
• “Knowingly” employing (1^st): $716 – $5,724 (*includes should have known)
• “Knowingly” employing (2^nd): $5,724 – $14,308
• “Knowingly” additional: $8,586 – $28,619
• Document Fraud (1^st): $590 – $4,730
• Document Fraud (additional): $4,730 – $ 11,823

Fines are assessed per violation and vary depending on the company’s error rate and ICE discretion. An error rate of 0-9% will usually result in a base per-error fine at the lower end of the scale; an error rate of 50% or more result in base fines at the higher end.  ICE also considers five factors for adjustments that can increase or decrease fines by up to 25%:  business size, good faith, the seriousness of the violations, compliance history, and the number of unauthorized workers discovered.

Criminal charges against owners and managers/field supervisors and the loss of any federal contracts are also possible, and ICE can share your information with other agencies such as the IRS, DOL, or state equivalents.

ICE does not regularly publish the results of its audits, but some public examples include:

• A northwest staffing agency with 50 Full-time employees and hundreds of temporary employees was audited after ICE received a tip. ICE found over 1,400 violations (including backdated forms), and imposed a $2 million fine.  After an appeal, an administrative judge reduced it to $1.5 million, but it also cost the company more than $100,000 in attorney’s fees.
• An oil field company failed to prepare and provide fifty-five I-9 forms. It was fined $1,500 for each form violation, and $2,000 for each charge of unauthorized employment, for a total of $107,000.
• An events planning company was charged with over 800 violations, mostly due to the failure to sign Section 2. It was fined $605,000 (at 2015 rates – that amount would be much higher today).
• A trailer manufacturer settled a DOJ discrimination case after it terminated an employee who refused to revert his permanent resident card. The company was required to pay a $218,000 fine and set up a $218,000 fund to compensate other affected individuals, provide mandatory training to all employees, and submit to two years of monitoring by the DOJ.

ICE is also authorized to show up unannounced at any time, and can search public areas (i.e. reception area, or dining area in a restaurant).  If they have a subpoena or administrative warrant they can seize records, and if they have a judicial warrant they can also search private areas.  Having an attorney on call for these situations is ideal, and basic training and instructions for employees to respond and notify management immediately are highly recommended.

DOT Drug Testing Rates.  Random drug and alcohol testing rates for 2025 have been announced.  They are unchanged from 2024, other than a new requirement for the Pipeline and Hazardous Materials Safety Administration.  The Federal Motor Carrier Administration rates remain at 50% for drug testing and 10% for alcohol.

STATE/LOCAL UPDATES

California:

Wildfire Smoke – Workplace Safety.  As wildfires and high winds continue in California, employers should be aware of and prepared to comply with Cal/OSHA’s regulation governing protection from Wildfire Smoke. (California Code of Regulations, Title 8, Section 5141.1. Protection from Wildfire Smoke.)  With a few exceptions, the wildfire smoke standard applies to workplaces where the air quality index is 151 (Unhealthy) or higher and where it is “reasonably anticipated” that employees may be exposed to wildfire smoke.

Employers can monitor the AQI using the U.S. EPA AirNow website, California Air Resources Board website, or local air pollution control district websites.

The regulations apply to outdoor worksites, as well as indoor locations if air is not filtered or doors and windows are kept open (i.e. warehouses, packing, manufacturing, and distribution facilities).  Employers are required to protect employees from smoke by monitoring conditions, communicating with employees, providing training, implementing engineering and administrative controls, and providing PPE (use is mandatory if the air quality index for particulate matter (PM) 2.5 exceeds 500).

If employers are unable to comply with the requirements, they must cease operations until air quality improves; it is illegal in California to retaliate against workers who refuse to work in unsafe conditions.  Requests for sick leave, FMLA, ADA accommodations, and leaves for emergency responders/military leave may also increase.

PFL/SDI Benefits.  SB 951 went into effect on January 1 and significantly increased state benefits available for Paid Family Leave or Disability Leave.  Workers earning less than $62,025.60 per year will now be eligible for 90% wage replacement; those earning up to $79,747.20 will be eligible for a weekly benefit amount of $1,074, and those make more than that will be eligible for 70% wage replacement (up to a maximum of $1,681).  The state hopes that this will allow low and middle-income workers to take the time off they need to bond with their baby and care for themselves or their family members.

Whistleblower Rights Poster.  As a reminder, as of January 1 California employers are required to post a notice that includes information about employee rights and protections under state whistleblower laws. The labor commissioner published a model notice on the DLSE website:  Whistleblowers are Protected.  Employers can also develop their own notice, as long as it is at least 14-point typeface and includes the hotline number.

Illinois – Caregiver Discrimination.  P.L.103-0797 (eff. 1/1/25; 20+ employees) amends the Illinois Human Rights Act to protect workers caring for qualifying family members.  It prohibits employers from making decisions about recruiting, hiring, promotion, training, discipline, or other employment actions based on real or perceived obligations to care for a child, stepchild, spouse, domestic partner, sibling, parent, mother-in-law, father-in-law, grandchild, grandparent, or stepparent.  Care includes, but is not limited to, taking a family member to appointments, tending to basic medical, hygiene, nutritional, or safety needs, and providing emotional support to a family member receiving inpatient or home care for a serious health condition.  The statute relates to discrimination; it does not provide additional leave beyond existing paid leave, FMLA, or similar requirements.

Massachusetts – Workforce Data Reporting.  The deadline for the first submission of workforce data (EEO-1 reports) to the state is rapidly approaching, and the state recently published some limited FAQs.  Employees with 100+ employees in the Commonwealth at any time during the prior calendar year must submit the report to the Secretary of State’s office in PDF, JPG, or PNG format through a web portal that is yet to be released.  The report is due by February 3, 2025 (due to the 1^st falling on a weekend).  Employers can submit a copy of their most recent EEO-1 report filed with the EEOC, and will not be required to include wage data (unless the EEOC eventually reinstates its Component 2 requirement).  The state does not intend to publish the data for individual employers but will aggregate it and publish the results by NAICS code.

New Jersey – Unreimbursed Business Expenses.  According to an unpublished NJ Appellate Division opinion, failure to reimburse employees for business expenses may violate the New Jersey Wage Payment Law by effectively diverting wages to pay for employer operating expenses.  In this case, an employee used his vehicle for work-related tasks without reimbursement for the cost of gas or wear-and-tear on his car.  He then quit and claimed that he should be entitled to unemployment benefits because he had good cause to leave his position based on the employer’s violation of the NJWPL.  Although the case was returned to the NJDOL for fact-finding on other grounds related to unemployment insurance, employers are advised to take the appellate court’s comments as a warning that unreimbursed business expenses may result in litigation, damages, and penalties.

New York

Reproductive Health Choices (Handbooks).  In 2019 New York passed Labor Law 203-e protecting employee information about their reproductive health, and prohibiting discrimination and retaliation against an employee “because of or based on the employee’s or dependent’s reproductive health decision making, including but not limited to, a decision to use or access a particular drug, device or medical service.”  It also required employers to include a notice of rights and remedies in their handbook if they have one. Some faith-based employers filed a lawsuit, and the district court issued an injunction against the handbook requirements in 2019.  On January 2^nd, an appeals court vacated that injunction and reinstated the handbook requirement.  As a result, New York employers should update their employee handbooks to include this notice.

Worker’s Compensation.  The Governor signed legislation (S.6635/A.5745) in December that expands the ability to file for worker’s compensation based on extraordinary work-related stress.  Under the revised law, if a worker files a claim for “mental injury premised upon extraordinary work-related stress incurred at work”, the worker’s compensation board cannot disallow the claim based on a finding that the stress was not greater than that which usually occurs in the normal work environment.  While this may seem to harm employers it may reduce the likelihood of claims for negligent infliction of emotional distress, which can result in much higher damages.  Employers may want to review their insurance policies to ensure that they include coverage for mental injury claims due to work-related stress.

To learn more about the best HR and compliance services for your company, reach out to our team of small business HR and payroll experts today.

Asure Software provides this information for general information purposes only.  We are not attorneys, and the information in this update should not be relied upon or regarded as legal advice.  This information may not be accurate or complete as it relates to a particular company or situation, and does not reflect all developments or laws in all jurisdictions.