Legislative Update January 2013


We hope that everyone had an enjoyable holiday season and an opportunity to re-charge heading into 2013.  Below are a few matters of note in the employment law realm as employers begin the year, including a significant case pending before the U.S. Supreme Court that will clarify how “supervisors” are defined for liability purposes under Title VII of the 1964 Civil Rights Act, some post-election compliance observations about the Patient Protection and Affordable Care Act, a summary of the final four-year Strategic Enforcement Plan approved in December by the EEOC, and a reminder about the new forms that must be used to obtain certain background reports on employees beginning in 2013.


Is a “supervisor” anyone that oversees employees, or only the person with authority to hire and fire?  In late November the U.S. Supreme Court heard oral argument in Vance v. Ball State University, a case that should provide important guidance on this issue in the context of deciding when employers can be held vicariously or strictly liable for the unlawful conduct of “supervisors” under Title VII of the 1964 Civil Rights Act.

How broadly or narrowly "supervisor" is defined has important implications under the tests that the Supreme Court articulated in its opinions Faragher v. Boca Raton, 524 U.S. 775 (1998), and Burlington Industries Inc. v. Ellerth, 524 U.S. 742 (1998).  In Faragher and Ellerth, the court held, among other things, that an employer can be vicariously  liable (and in some cases strictly liable) for workplace harassment of, and discriminatory conduct directed toward, employees under Title VII when the offending conduct was committed by “supervisors.” The Court did not, however, indicate how "supervisors" should be defined when applied to Title VII cases.  (By contrast, an employer is vicariously liable for harassment or discrimination inflicted by an employee's co-workers only if the employee can prove that the employer was negligent in either discovering or remedying the offending conduct—e.g., the employer failed to appropriately respond to complaints of harassment or did not have effective policies in place to identify, report and appropriately address such conduct.)

Over the ensuing years, lower courts have reached different conclusions on the definition of supervisor to be applied, and have generally adopted and applied two very different standards.   In some circuits, a supervisor is any employee with whom an employer vests authority to direct and to oversee employees' daily work activities. But other circuits have adopted a narrower definition that limits “supervisors” to those individuals who have the power to undertake “tangible employment actions” with regard to employees—that is, a supervisor has the authority to “hire, fire, demote, promote, transfer, or discipline” employees.

In Vance the Court has been asked to consider and decide which of the two different definitions of "supervisor" should be applied.  If the court adopts a broad definition of supervisor (e.g., any individual who has the authority to direct and oversee employees' daily work activities), employers will find themselves confronting increased exposure to Title VII claims as they will suddenly be vicariously liable for many more management level employees. However, if the court affirms the lower court's narrower definition applied initially in Vance (i.e., "supervisors" are limited to individuals who have the power to “hire, fire, demote, promote, transfer, or discipline” employees), than employers' exposure to Title VII liability and litigation will decrease.

Employer’s Bottom Line

Regardless of how the Supreme Court rules, its decision in Vance will have a significant impact on Title VII employment discrimination and harassment litigation against employers.   In preparation for this decision, employers may find it beneficial to review companywide policies, training, job descriptions, and performance expectations to assess and confirm that they are all consistent with current Title VII law and how they might be impacted by this decision. 


With the re-election of President Obama, health care reform appears to be here to stay.  For employers that adopted a "wait and see" approach before focusing on compliance with the Patient Protection and Affordable Care Act (PPACA), the time to wait is over.  Employers need to comply with existing requirements and begin preparations for compliance with future requirements, many of which come into effect in 2014.  Below is an overview of key provisions coming into effect in 2013.   

Requirements that Take Effect in 2013

The most significant requirements of the PPACA that take effect in 2013 include: 

  • Cap on Employee Contributions to Flexible Spending Accounts.  Effective for plan years beginning in 2013, employees' contributions to Flexible Spending Accounts (FSAs) will be limited to $2,500 per tax year with annual inflation increases.  There is no limit on employer contributions.
  • Medicare Tax Increase.  The Medicare tax will increase by 0.9% (from 1.45% to 2.35%) on wages above $200,000 ($250,000 if filing a joint tax return), effective January 1, 2013.
  • Coverage of Women's Preventive Care.  Health insurers and group health plans will be required to cover women's preventive care services at 100%.
  • Form W-2 Reporting of Health Care Coverage Value.  Employers who issue 250 or more W-2s for prior calendar year are required for informational purposes to report the value of each employee's health coverage on the W-2s issued for the 2012 tax year. (Smaller employers that issued fewer than 250 W-2s in a prior year are exempt this year.)
  • Notification Requirement:  Beginning March 1, 2013, employers must notify all employees of:
    • Information regarding the state Health Insurance Exchange; and
    • Information on tax credits and reductions in cost-sharing if the employer share of the total cost of benefits under the employer's plan is less than 60%.
  • Health Care Exchanges:  States had until December to submit a plan to federal regulators on how their state's health exchange would operate.  States generally have until February 15, 2013 to decide if they will instead set up their health exchange in partnership with the federal government.

New Guidance is Imminent 

The election is expected to fast-track new health care guidance and regulations that likely have been postponed until after the election.  Expected guidance includes a transitional federal reinsurance program that partially reimburses commercial insurers underwriting coverage for high health cost individuals starting in 2014, which could cost as much as $90 per health care plan participant; the imposition of a $2000 per full-time employee penalty on employers that do not offer qualified coverage to employees; and subsidies to uninsured individuals earning less than 400% of the federal poverty level.

Regulations are expected soon, and compliance with the proposed regulations could be within 180 days of issuance or sooner.  

Employer’s Bottom Line:

2013 is a critical planning year for employers, with particular focus on understanding compliance requirements and logistics as well as likely costs.  Employers should also be vigilant about checking for and reviewing further guidance as it is issued.


After nearly a year of discussion and input, the EEOC finalized its Strategic Enforcement Plan (SEP) for fiscals years 2012 through 2016 in December.  The SEP is intended to promote more strategic use of the EEOC’s resources by identifying key areas of focus for its enforcement efforts. 

The EEOC identified six national enforcement priorities to be pursued during these four years:

1.         Eliminating Barriers in Recruitment and Hiring. The EEOC will target class-based recruitment and hiring practices that discriminate against racial, ethnic and religious groups, older workers, women, and people with disabilities.

2.         Protecting Immigrant, Migrant and Other Vulnerable Workers. The EEOC will target disparate pay, job segregation, harassment, trafficking and discriminatory policies affecting vulnerable workers who may be unaware of their rights under the equal employment laws, or reluctant or unable to exercise them.

3.         Addressing Emerging and Developing Issues. The EEOC will target emerging issues in equal employment law, including issues associated with significant events, demographic changes, developing theories, new legislation, judicial decisions and administrative interpretations.

4.         Enforcing Equal Pay Laws. The EEOC will target compensation systems and practices that discriminate based on gender.

5.         Preserving Access to the Legal System. The EEOC will target policies and practices that discourage or prohibit individuals from exercising their rights under employment discrimination statutes, or that impede the EEOC's investigative or enforcement efforts.

6.         Preventing Harassment Through Systemic Enforcement and Targeted Outreach. The EEOC will pursue systemic investigations and litigation and conduct a targeted outreach campaign to deter harassment in the workplace.

Employer’s Bottom Line

Employers have already started to see signs of the SEP being put into effect, including the release in April 2012 of new guidance on the use of criminal background checks and a focus on large, national systemic discrimination cases being filed by the EEOC.  A review of policies and practices with the above priorities in mind would be well advised.


Beginning January 1, 2013, employers must use the revised forms issued by the Consumer Financial Protection Bureau (CFPB) in November 2012 to conduct background checks under the Fair Credit Reporting Act (FCRA).   

The FCRA imposes certain requirements on employers who use third party consumer reporting agencies (CRAs) to obtain consumer reports and investigative consumer reports on employees and applicants.  A consumer report includes a written or oral summary of a person's credit-worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living. An investigative consumer report is a consumer report containing information about a person's character, general reputation, personal characteristics, or mode of living that was obtained through personal interviews with neighbors, friends, associates, or others who have knowledge of such information about the consumer. 

Previously, the Federal Trade Commission (FTC) was solely responsible for interpreting and enforcing the FCRA.  In July 2011 the responsibility for interpreting the FCRA was transferred to the CFPB and the FTC began to share responsibility for enforcement with the CFPB.  In November 2012 the CFPB issued revised forms that employers are to use when complying with the FCRA's background check requirements.  The revisions to the forms include instructing employees to contact the CFPB or visit its web site to learn more about their rights under the FCRA instead of contacting the FTC.  The new forms do not impose additional substantive requirements on employers. 

The forms that the CFPB has revised are:

  • A Summary of Your Rights Under the Fair Credit Reporting Act (Revised Appendix K to Part 1022).  CRAs provide this to employers.  Employers must provide this form to an employee prior to taking an adverse employment action based on a consumer report. 
  • Notice to Furnishers of Information: Obligations of Furnishers Under the FCRA (Revised Appendix M to Part 1022 – Notice of Furnisher Responsibilities). 
  • Notice to Users of Consumer Reports: Obligations of Users Under the FCRA(Revised Appendix N to Part 1022 – Notice of User Responsibilities). 

These forms are available at the following link:

Employer’s Bottom Line

Employers should be prepared to use the new forms beginning on January 1, 2013.

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For additional information on any of the foregoing, please contact:

Andy Hament or Louis Wilson

Ford & Harrison LLP

Melbourne, Florida

(321) 724-5970