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Warehousing and Logistics News – Employers Face Obamacare Minefield

ACWI | Volume 3, Issue 21 | November 15, 2015

2015-11-16_19-51-43Since the Supreme Court turned back the last serious legal challenge to the Affordable Care Act, employers can expect to face a slew of consequences, including postponed deadlines coming due and Obama Administration attempts to use the act to push other aspects of its agenda.

For example, employers already should be aware that they are expected to to determine exposure to various requirements based on meeting the definition of a “large employer” – having more than 50 full-time equivalent employees.

Terrence M. Finn, an attorney with the law firm of Ober Kaler, says that definition of employee is critical in addressing the 50 employee test. This has been made more challenging by the issuance of a legal interpeation by a top Department of Labor official declaring that almost all independent contractors are really employees.

On July 15, David Weil, administrator of the Labor Department’s Wage and Hour Division, released an “interpretation” of employement law and said his agency now will assume “most workers are employees” for the purposes of wage and hour law enforcement (AA, 7-31-15, P. 1)

Independent contractors also maintain their own liability insurance and pay for their own Social Security, Medicare and other benefits.

“While the DOL action pertains to an interpretation under the Fair Labor Standards Act and the administrative interpretation is not the equivalent of a law, the courts tend to give deference to the agency charged with administering certain laws,” Finn points out.

“Therefore, for purposes of the FLSA and counting employees under the ACA, a review of the definition of employee is well-advised,” he adds.

If a company is found to have misclassified employees as independent contractors, the costs can run quite high – hundreds of millions of dollars in the recent case of a settlement agreed to by FedEx Ground.

Under Obamacare, falsely defining a large chunk of your workforce as contractors could add enormous additional costs, Finn notes.

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Court Rebukes Spur EEOC to Settle Suits

Three long-fought and closely-watched federal government lawsuits against employers were settled recently.

BMW has agreed to settle a suit in which the Equal Employment Opportunity Commission charged it had illegally run criminal background checks of employees of a 3PL company that provided warehouse, distribution and transportation and services for the carmaker’s South Carolina facility.

In the settlement, BMW agreed to pay $1.6 million to the 56 claimants and other unidentified applicants. It also will offer those 56 claimants, and
up to 90 other applicants, employment through a logistics labor contractor.

The company also agreed to use only an updated criminal record screening policy fashioned to resemble EEOC’s recommended best practices.

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Real Estate Outlook Eases Through 2017

Although the overall real estate market is expected to start cooling off over the next two years, the industrial and warehouse segment will continue show strength, according to the Urban Land Institute.

Warehouse availability rates are expected to continue to decline in 2015 and 2016, with year-end vacancy rates at 9.7% and 9.5%, respectively, and remain steady in 2017 at 9.5%.

The prediction is for healthy rental rate growth to continue, with increases of 4.9% in 2015, 4.0% in 2016, and 3.0% in 2017. These forecasts are all above the 20-year average growth rate.

For retail on-going improvements are anticipated over the next three years, with year-end availability rates expected to decline to 11.1% by 2015, 10.7% by 2016, and 10.4% by 2017. Still, these rates remain above the 20-year average.

Rental rates are expected to sustain this growth, increasing by 1.5% in 2015, 2.5% in 2016, and 2.8% in 2017. Compared to six months ago, the outlook of availability rates and rental rate growth for the next three years is less optimistic.

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