Unions May Disrupt ACA Transition

Legal experts say the unions may have the upper hand over organizations when it comes to implementing portions of the Affordable Care Act.

Friday, August 30, 2013
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A change in healthcare benefits sparking a bitter battle with a union is sadly nothing new.

But legal experts say implementing the obligations of the Affordable Care Act without thoughtful consideration of how unions may respond could bring the conflict to a whole new level, one that may put unprepared employers in a compromising -- and potentially costly -- position.

"I think it's going to be a rocky road for a lot of union-employer negotiations over the next couple years," says R. Pepper Crutcher Jr., a partner at the Jackson, Miss., law office of Balch & Bingham and the leader of the firm's Affordable Care Act strategists.

"You probably have a duty to negotiate your ACA plan with the union," he says, "because it affects wages, hours and work duties," he says. "Typically, that takes many weeks or months, especially discussing something that's totally new. When the employer shared responsibility mandate was put off to 2015 (announced by the IRS in July), a lot of employers just said, 'We'll put our head in the sand.' "

But if you're a unionized employer, he adds, you need that extra time. "If you have a current labor agreement, the union may have the right to say, 'We're not bargaining until the end of the agreement.' Or they could say they will bargain, but they're going to have a lot of leverage."

Recently, the major unions have spoken out against the delay and voiced other concerns about tax subsidies.

While a media representative of the AFL-CIO declined comment for this story, the union has issued prior statements expressing concern about the delay and said the Act has "a long way to go."

The International Brotherhood of Teamsters' press secretary Galen Munroe says the union will not provide comments to the media about the ACA, but Teamsters President Hoffa was one of three major union leaders to sign a scathing letter to Washington that was leaked in July.

That letter, also signed by the presidents of both the United Food and Commercial Workers union and UNITE-HERE, states the law in its current form will "shatter not only our hard-earned health benefits, but destroy the foundation of the 40-hour work week that is the backbone of the American middle class."

Aside from concerns that the law encourages employers to use part-time workers rather than providing health insurance to full-timers -- which Crutcher says is already happening -- the letter from union officials expresses concern with the deadline extension for employer mandate and penalties.

It also says that non-profit health insurance plans, governed by unions and companies under the Taft-Hartley Act, will be at a disadvantage under the law because employees covered won't be eligible for subsidies.

"As such, many employees will be relegated to second-class status and shut out of the help the law offers to for-profit insurance plans," the letter states. "And finally, even though non-profit plans like ours won't receive the same subsidies as for-profit plans, they'll be taxed to pay for those subsidies. Taken together, these restrictions will make non-profit plans like ours unsustainable, and will undermine the healthcare market of viable alternatives to the big health insurance companies."

Crutcher says he anticipates that many unions may ask to drop the health benefits they fought for decades to secure, and employers should be prepared.

"How do you shut down a plan that doesn't just cover employees of one employer?" he asks rhetorically. "It may be in a whole industry."

There is no easy answer, he says.

"The solution is a major reworking of the Affordable Care Act," he says, "but that's not very do-able right now."

In the meantime, HR managers at unionized workplaces need to immediately examine when the next bargaining period will begin and start preparing now, says corporate attorney Alden J. Bianchi at the Boston office of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo.

"The impact of the ACA should have been part of your bargaining process since 2010," he says. "If you're behind the ball, you get it there as fast as you can. The one year delay is good. It's not great. There might be instances where you might want to re-open. People don't like to do that. Although if you have a multi-employer plan, it's not a question of, 'Are they affordable, or do they provide minimum value?' I think it's clear they do."

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The real question, he says, is the point at which coverage is offered.

"If you have someone who wasn't full-time last quarter, but is this quarter, now you have a potential penalty," he says. "Now you can't do anything about that."

The pressure to push through a bargaining agreement that aligns with Affordable Care Act implementation gives unions the upper hand, Bianchi says, and, though the Treasury Department is well aware of the issues, no firm solution is in place yet.

"I think it will be part of the mix of the larger regulations package, pay or play final regulations," he says. "I don't think we're going to see those until mid-next year. What do you do if you have bargaining this year? You do what you can to the best of your ability. You may have to have a placeholder, which nobody likes."

Understanding what union officers are looking for as early as possible is key, he says, and success will depend on basic negotiation skills.

"Legal advice is necessary, but I don't want to overstate that," Bianchi says. "What you need your lawyers for is to make sure you understand the rules. Once you understand, it's squarely in the hands of HR. This is Plan Design 101."

Skipping the process of bargaining in the interest of becoming compliant, Crutcher says, could be the most costly mistake of all, and could mean rescinding insurance benefits already paid for, repaying lost benefits and paying non-compliance fines while bargaining in good faith.

"You could actually have the worst of both worlds," he says.

Though the transition may create greater headaches for employers with union workers, Crutcher says he does not anticipate a spike in walk-outs and strikes during the coming year, such as the four-day strike at the Bay Area Rapid Transit in San Francisco in July.

"Unions are going to have such potent legal leverage, they won't need to strike," he says. "Their lawyer[s] will handle this just fine."

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