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DOL Says I am Wrong: No Penalty for Failing to Provide October 1 Notice

Posted in Plan Administration, Welfare Plans

I do love a good controversy.  I have previously written about the obligation of employers to provide the October 1, 2013 Notice of Health Insurance Marketplace and had raised the concern over the possible penalties associated with failing to provide that notice.  On Monday, 9/9, I was quoted in an article in Fox Small Business for the proposition that “PPACA has a general $100-a-day penalty for non-compliance.  Since this requirement is in the FLSA there are also penalties there.  So the general consensus is that some penalty applies and probably the general provision.”  And I did say that and I think it holds true.

Kate Rogers, the author of that article, noted that “the White House declined to comment on how the fine would be implemented, but deferred to the U.S. Small Business Administration, which says education on this FLSA requirement has been part of “any and all outreach that SBA does with small business owners.”  Now I can tell you that between Monday, when the article came out, and yesterday afternoon, I received hundreds of e-mails wanting to know more about the penalty.  Well, low and behold, yesterday, the DOL gave us a one question FAQ that provides that employers will NOT face a fine or penalty for failing to provide the Notice on October 1.

All I can say is this:

  1. The FAQ provided on 9/11 says “[i]f your company is covered by the Fair Labor Standards Act, it should provide a written notice to its employees about the Health Insurance Marketplace by October 1, 2013, but there is no fine or penalty under the law for failing to provide the notice.”  (Emphasis added).
  2. Technical Release 2013-02, from the DOL, says that Section 18B of the FLSA generally provides that “an applicable employer must provide” each employee a notice. (Emphasis added).
  3. Section 18B of the FLSA definitely says that any employer subject to the FLSA “shall provide” written notice to current and future employees. (Again, emphasis added).

My experience with the federal laws and the enforcement of said laws by federal agencies is that when things say “shall” and “must,” there are penalties when you don’t do them.  So when the DOL now takes the position that it is not a “shall” or “must” scenario, but rather only a “should” and “even if you don’t we won’t punish you” proposition, I get suspicious.  But I also thinks this confirms what I have said a since the beginning about PPACA compliance for employers.  It is all about your risk tolerance.

Employers have to decide how much risk they are willing to take, either in the cost of complying, the potential penalties or the risks associated with managing their workforce to comply with eligibility requirements.  In the face of uncertainty, employers have to decide how much money is worth saving now as compared to possible future costs of penalties or loss of employees.  So, if you don’t want to send the October 1, 2013 Notice, apparently the DOL “FAQ” says you have no penalties and thus no risk.

 Me?  My risk tolerance is a little lower than that and my experience with regulatory agencies is such that I don’t trust informal “FAQs” posted on the web as much as I trust the clear language of the statutes and prior technical releases.  Words like “shall” and “must” usually mean that if I don’t do it I get burned.  So I am still recommending that employers comply with the notice requirement.  Why?  I can almost guarantee that if you send the notice, you won’t face a penalty for not sending it.  But if you don’t send one, well, I stll say all bets are off.