Ohio’s Proposed Healthy Families Act: Important Considerations for Non-Profit Employers

The Healthy Families Act (“HFA”), first proposed by the Service Employees International Union (“SEIU”) District 1199 and a number of other groups in April 2007, appears to be on the road to the November election and a decision by Ohio voters. The HFA would apply to all employers with 25 or more employees that are also subject to the Ohio Minimum Wage Amendment, with no explicit exemptions for nonprofit or church employers. Nonprofit employers must, therefore, begin now to consider the impact of this proposal on their operations.

Significant Aspects of the Proposed Act

The Healthy Families Act would:

1. provide employees that work 30 hours or more per week with seven paid sick days a year, and provide a pro-rated amount of paid sick leave for “employees working less than 30 hours per week or less than 1560 hours per year;

2. allow employees to use the paid sick leave for (1) their own physical or mental illness, injury or medical condition, (2) their own professional medical diagnosis or care, or preventive medical care, or (3) the same for their child, parent (including in-laws), or spouse;

3. prohibit an employer from reducing existing vacation, or paid time off leave provided by the employer at the time of the HFA’s enactment in order to comply with the law;

4. prohibit an employer from counting paid sick leave as an occurrence under a no-fault attendance policy or from considering paid sick leave absences when evaluating an employee or when making an employment decision (e.g., discipline or promotion);

5. allow employees to carry over from year to year up to seven paid sick days, with perhaps no limit as to the total bank of sick days;

6. allow an employee to request paid sick leave in writing or verbally, by providing the reason for the absence involved and the expected duration of leave, with seven days notice required for foreseeable leave, and notice as soon as practicable for unforeseeable leave once the employee becomes aware of the need;

7. limit the type of medical certification an employer can seek to substantiate the need for paid leave by allowing employers to require medical certification only for sick leave of more than three consecutive work days; and

8. provide for a civil action against employers to enforce the Act and allow for potentially significant damages, including attorneys’ fees.

All employers, including those already providing seven or more days of paid sick leave or the equivalent, need to be concerned. This proposal would place increased administrative burdens on employers, as employers would need to track the accrual and use of the HFA sick days. Employers also would need to revise certain employment policies in order to comply with the HFA, as employers cannot use HFA time taken adversely in an employment decision. With the HFA’s limited notice and documentation requirements, employers need to consider backup staffing plans in the event of HFA use by numerous employees at critical times. This all is likely to amount to increased costs for Ohio’s employers.

If you have any questions about HFA or any other employment matter, please contact Betsy Swift 614.227.8850, Lisa Kathumbi 614.227.2326, or any other member of Bricker & Eckler’s Human Resources Law Group.

Quick Hits

Ohio Uniform Prudent Management of Institutional Funds Act
Introduced in the Legislature
Ohio House Bill 522 (Oelslager) has been introduced in the Legislature for the purpose of adopting the Uniform Prudent Management of Institutional Funds Act by revising it. The measure proposes changes in prudent investing, endowment spending, and release or modification of donor restrictions. It makes clear the duty to minimize costs, to investigate, and to diversify. The legislation allows a charity to spend whatever amount from an endowment it deems prudent, taking into account donor intent regarding maintenance of the fund’s value. The proposal also clarifies that a charity may ask either for a release or a modification of restrictions a donor places on an endowment.

The Act also would establish a “safe harbor,” 5 percent-of-fund-value annual spending rule for charity-managed endowment funds, similar to the percentage already contained in Ohio’s Institutional Trust Funds Act. The Act will give nonprofits greater flexibility in managing their funds in a manner more in line with modern investment practices, while at the same time providing clearer standards and greater possibilities for oversight.

IRS Continues Program on Political Campaign Activity By Charities
The IRS announced recently that its Political Activities Compliance Initiative (PACI) will be in effect for the 2008 election season. The PACI program seeks to educate 501(c)(3) organizations about the federal law concerning political campaign activity. By law, 501(c)(3) organizations may not participate in or intervene in (including the publishing or distributing of statements) any political campaign on behalf of (or in opposition to) any candidate for public office. The organizations can engage in advocating for or against issues and, to a limited extent, ballot initiatives or other legislative activities. The IRS is making extensive efforts to educate 501(c)(3) organizations, political parties and candidates, posting on its website a “program letter” to its Exempt Organizations employees, explaining the PACI objectives for 2008 and emphasizing its priority both to educate the public and tax-exempt community about the law pertaining to political campaign intervention and to maintain a meaningful enforcement presence in this area.

PPA Supporting Organization Requirements Added to Service’s Priority Guidance Plan
Proposed regulations on new requirements for supporting organizations created under the Pension Protection Act of 2006 have been added to the first update of the IRS’s 2007-2008 Priority Guidance Plan. The IRS in Announcement 2007-87 said it plans to propose regulations that would require Type III supporting organizations that are not functionally integrated to meet a payout requirement equal to the quali.ed distributions requirement for private nonoperating foundations. The 2006 Act amended the requirements for organizations trying to qualify as Type III supporting organizations. Final regulations on excise taxes on prohibited tax shelter transactions and related disclosure requirements also were included in the guidance plan update. Those rules defined a number of critical terms and proposed defining a prohibited tax shelter transaction according to an existing reportable transaction regime. The update of the plan also included proposed regulations on the new excise taxes on donor advised funds that were added by the PPA. Failure to meet requirements under the guidance plan could result in denial of 501(c)(3) status.

New Determinations Guide Sheets Address Applications for Private Foundation Status
The IRS on April 2 released new determination guide sheets on supporting organizations that provide guidance for processing applications for private foundation status classi.cation under Code Section 509(a)(3). The update includes references to Type 1, Type II, and Type III supporting organizations – and supporting organization arrangements that could lend themselves to private benefit abuses, including situations where a supporting organization makes loans, grants, or compensation payments to or for the benefit of donors or donors’ families and businesses. The guide sheets also inquire about situations where the supporting organization is a recipient of closely held stock, personal residences, partnership interests, sole proprietorships or insurance policies, as these asset types may be manipulated for the bene.t of donors or donors’ families and businesses. In those instances, the IRS will consider possible denial of 501(c)(3) exemption or possible denial of IRC 509(a)(3) supporting organization status.