President Obama Signs Workplace-Related Legislation

November 12, 2010
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By Christina M. Michelson | NEW AMENDMENTS TO COBRA

Employers that provide a group health insurance plan to their employees must take note of the American Recovery and Reinvestment Act that was signed into law on February 19, 2009. The new legislation provides employers with a subsidy for the cost of COBRA (Consolidated Omnibus Budget Reconciliation Act of 1985) premiums for eligible former employees. Eligible employees are those that have been terminated or laid off on or after September 1, 2008 through December 21, 2009.

Under the new legislation, eligible employees will only be required to pay 35% of the COBRA premium. The remaining 65% will be reimbursed through a payroll tax credit to the employer. Employers will be responsible for providing coverage until reimbursement from the federal government. Subsidy coverage by the federal government began on March 1, 2009.

Employer Requirements under the New Law

Employers are required to provide written notification regarding the new federal subsidy to all individuals that were involuntarily terminated as of September 1, 2008 and must provide written notification to the individuals by April 18, 2009. Details of the new notice requirements and flyers can be found at www.dol.gov/COBRA.

Subsidy Reimbursement

The new legislation provides employers with a subsidy for the cost of COBRA premiums for eligible former employees. Employers are reimbursed through the federal quarterly payroll tax reporting system. Employers are required to advance the premium subsidies until the employer’s payments can be recouped through reduced federal tax payments. Payroll taxes will be offset by the amount of the premium paid for COBRA-eligible individuals, however, only after the COBRA-eligible individual has paid the 35% portion. Details on the new tax provisions can be found at www.dol.gov/COBRA.


President Obama signed into law the Lilly Ledbetter Fair Pay Restoration Act, which amends the Civil Rights Act of 1964 and addresses salary bias in the workplace. Lilly Ledbetter Equal Pay Restoration Act essentially restarts the six-month statute of limitations every time a worker receives a paycheck. Additionally, this Act applies retroactively to May 28, 2007 and expands the definition of unlawful pay practices as well as broadens the scope of persons who may file claims.

The Act was named for an Alabama woman who at the end of a 19-year career as a supervisor at a tire factory complained that she had been paid less than men. Ms. Ledbetter, prior to retiring, discovered that the men in her plant doing similar work were paid 15 to 40 percent more than she was paid. This new legislation will almost certainly lead to more lawsuits being filed and increased wage discrimination litigation based not only on age, but on all of the protected classifications. There are measures, however, that employers can take to decrease liability.

This Scarinci Hollenbeck Client Alert has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel.