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Cypen & Cypen
September 12, 2019

Stephen H. Cypen, Esq., Editor

A federal appellate court has held that a single document can serve as both the formal plan document and the summary plan description (SPD) for an ERISA welfare benefit plan. The plan administrator of a self-insured medical plan provided benefits to a participant for injuries sustained in an accident. After the participant recovered (from a third party) an amount sufficient to cover the medical expenses paid by the plan, the plan administrator sought reimbursement. While there was no written document clearly identified as the plan, there was an administrative services agreement (ASA) that indicated that plan benefits and terms and conditions were set forth in an attached exhibit--the SPD. Along with benefit provisions and ERISA-mandated language, the SPD contained a provision addressing the rights of subrogation, reimbursement, and assignment. The participant argued that the SPD was distinct from and could not constitute the plan, and therefore the reimbursement provision was unenforceable. The plan administrator argued that, despite its SPD label, the document was, in fact, the plan. The participant’s argument was rooted in the Supreme Court’s reasoning, in its Amararuling, that statements in the SPD do not themselves constitute the terms of the plan. But the Eighth Circuit disagreed with his contention that the SPD was unenforceable because it conflicted with the ASA, pointing out that the ASA was silent as to reimbursement and expressly incorporated the terms and conditions of the SPD. The court joined other circuits in distinguishing Amara and concluding that, absent a formal plan document, the SPD could constitute the plan. The court also pointed out that it would be inequitable to allow the participant to receive benefits according to the SPD but not hold him to the responsibilities set forth in that same document. It concluded that, since the SPD was the plan’s written instrument, the participant was bound by its terms and obligated to reimburse the plan.

EBIA Comment
Arguably, a combined plan document/SPD is unacceptable because it is not possible for a document to summarize itself. Nevertheless, many plans, particularly welfare plans, use a combined document and will appreciate the confirmation that this approach is acceptable--so long as the document meets ERISA’s stated criteria for both written instruments and SPDs. More information is available hereMBI Energy Servs. v. Hoch, 2019 WL 2814855 (8th Cir. 2019), EBIA Staff, EBIA, September 5, 2019.

Aristotle said “The virtue of justice consists in moderation, as regulated by wisdom.” No where is this adage more appropriate than in selecting investments from a 401k menu. Plan sponsors might feel their job is done once a robust plan menu is provided to employees, but it’s really only the beginning. A 401k plan is like a rope – a lifeline – to a safe and comfortable retirement. Plan sponsor must remain mindful they may just be giving employees enough rope to hand themselves. For all the good we’ve experienced in encouraging employees to save more, all that hard work evaporates over time should employees make poor investment decisions. And the temptation to “do-it-yourself” only grows as the employee’s retirement assets grow. While a Qualified Default Investment Option make offer some protection, that aegis disappears once the employee seizes control of the wheel. Education, then, can be viewed as “the ounce of prevention” that avoids the need for the cure for employee investment mistakes. Some of these mistakes are obvious. Others are quite stealthy. It’s up to experienced fiduciaries to reveal these most hidden dangers to employees. And it’s up to 401k plan sponsors to make sure fiduciary advisers offer education programs that meet this objective. One of the most overlooked of these investment perils is what’s known as “over-diversification.” We all know the advantages of diversification. “Diversification is when you invest in a variety of assets whose fluctuations in value are not highly correlated with each other,” says Michael Foy, Senior Director, Wealth Management at J.D. Power in New York City, “so if one or more of them declines sharply in value due to business or economic events, losses will be offset or at least limited by other assets that perform differently.” Mutual funds themselves have long been marketed as a low-cost alternative entry-level investment. By pooling many investors together, they are able to achieve a broad diversification that ordinary investors could not possibly do by themselves. This helps smooth investor returns by removing some of the more extreme elements of downside risk. “Diversification is not putting all of your eggs in one basket but instead spreading your investment over different asset classes – stocks, bonds, and cash for example – as well as different investments within those asset classes, such as domestic and international companies and companies of different sizes,” says Greg McBride, Chief Financial Analyst at Bankrate.com  in Palm Beach Gardens, Florida. “Proper diversification reduces the risk in your portfolio and increases the odds that your portfolio will grow over time with fewer sharp downturns.” The concept of diversification began within the realm of stock portfolios. As mutual funds became more popular, many naïve investors simply translated that concept directly. This is where the hidden danger lies. “You can have too many funds when you begin to get overlap in the funds you hold,” says Urban Adams, an investment adviser, Dynamic Wealth Advisors in Orange County, California. “That is, more than one fund holds the same or similar underlying stocks. Multiple funds do not always mean diversification.” Having too many funds can lead to any number of investing mistakes. “The most important mistake to avoid is ‘replication,’” says Ken Rupert, Founder of Financial Black Belt Academy in Hampstead, Maryland. “Replication is buying multiple mutual funds that mirror one another in the top ten holdings. This is a common mistake that novice and even some seasoned investors make. If you hold two or more mutual funds where the top ten holding are exactly the same or very similar, you are setting yourself up to magnify any losses those stocks may incur.” This is why it’s vitally important for employees to understand more than just the simple objective and class of the mutual funds they own. “Having multiple mutual funds holding similar investments is a sign that you are holding too many mutual funds,” says Michael Zovistoski, Managing Director at UHY Advisors in New York City. “When the investments inside the mutual funds are aggregated in a portfolio and the aggregate shows that the same investment is in multiple funds and the total investment in a single stock is over 5% of the total portfolio, you may have too many funds.” When this happens, the employee is said to be “over-diversified.” “Over-diversification is when the investor has so many investments that the risk of loss exceeds the risk of gain,” says Zovistoski. “The investor no longer owns only the best opportunities, but also owns the worst opportunities as well. The non-optimal stocks will have a dragging effect on the overall portfolio performance.” The bottom-line is employees may be setting themselves up not only for failure, but for a costly failure. “You end up paying for something that is not helping you,” says Georgia Bruggeman, Founder of Meridian Financial Advisors, LLC in Boston, Massachusetts. When it comes to choosing how many mutual funds employees should invest in with their 401k assets, they should be mindful of these words from Aristotle: “It is best to rise from life as from a banquet, neither thirsty nor drunken.” Moderation in the number of mutual funds is good. Over-diversification is downright dangerous.  Christopher Carosa, CTFA, Fiduciary News, September 4, 2019.
However, most are offering systematic withdrawals, lifetime education and planning tools, and in-plan managed account services; they are still leery of offering guaranteed income solutions such as annuities. More employers are adopting lifetime income solutions, according to the 2019 Lifetime Income Solutions Survey  by Willis Towers Watson. Thirty percent of employers say have adopted one or more lifetime income solution in this year’s survey, up from 23% in 2016. Additionally, 60% say they would consider offering their employees lifetime income solutions in the future. “Employer concern about their employees being financially ready for retirement has never been greater,” says Dana Hildebrant, director of investments at Willis Towers Watson. “And while many employers are making headway to help workers save more, their efforts to transform individual savings into a consistent flow of income that will last a lifetime remain a work in progress. The increased adoption of lifetime income solutions is an exciting step in the right direction.” Asked why they are adopting lifetime income solutions, 74% said it is because they are concerned about an aging workforce and increasing longevity, up from 45% in 2016. Seventy-four percent said it is due to their focus on retirement readiness, and 46% said it is due to the shift from defined benefit (DB) to defined contribution (DC) plans. Among those that offer a lifetime income solution, the most common is systematic withdrawals  (80%), followed by lifetime education and planning tools (70%) and in-plan managed account services (44%). Only 17% offer an in-plan asset allocation option with a guaranteed minimum withdrawal or annuity component . Fifteen percent support out-of-plan annuities, and 15% offer in-plan deferred annuity investment options. “While it is encouraging more employers are embracing various lifetime income solutions, it’s disappointing relatively few have adopted what the industry sees as more effective income-generating solutions, such as annuities and other insurance-backed products,” Hildebrant adds. “However, employer interest in these options may pick up steam as they better understand the value and associated benefits.” The survey also found 41% of employers that are currently offering a lifetime income solution are considering an in-plan asset allocation option with a guaranteed minimum withdrawal to be implemented in 2021 or later, 31% are considering an in-plan annuity option, and 23% are considering an out-of-plan annuity. Willis Towers Watson, in “Lifetime Income Solutions: Progress, With Work Ahead,” says that perhaps the most practical approach to offering workers annuities is to embed them in target-date funds or balanced funds. Today, 4% of survey respondents offer such a solution. Asked why they do not offer insurance-backed solutions, 75% of employers say they are too complex for them and their recordkeepers to administer. Sixty-one percent said fees are too high, 60% said the products themselves are too complex, 58% said they fear there may be restrictions in portability for departing employees, 55% said they are not transparent, and 52% said workers just are not demanding these options. “Policymaking is uncertain at this time, but the wheels appear to be in motion for more regulatory support  for all stakeholders as it relates to lifetime income,” Willis Towers Watson says in its report. Seventy-seven percent of sponsors want a specific safe harbor that lessens the burden of overseeing an annuity provider. Fifty-seven percent of sponsors are waiting to see if other sponsors adopting lifetime income solutions, 52% want a wider range of guaranteed products, and 33% want to see investment-only products. Willis Tower Watson’s findings are based on a survey of 164 companies conducted in May and June.  Lee Barney, Plansponsor, September 4, 2019.
Amid heightened concern over an aging workforce, increasing longevity and the financial health of their workers, a growing number of U.S. employers are adding lifetime income solutions to their defined contribution (DC) retirement plans, according to the 2019 Lifetime Income Solutions Survey by Willis Towers Watson (NASDAQ: WLTW), a leading global advisory, broking and solutions company. This year’s survey found 30% of employers currently offer one or more lifetime income solutions. That’s an increase from 23% in 2016. An additional 60% of sponsors have not adopted lifetime income solutions but are considering them, or would consider them, in the future. Lifetime income solutions include education and planning tools to help participants determine how to spend down accumulated savings during retirement as well as in-plan and out-of-plan options that create steady streams of income from DC retirement plans. "Employer concern about their employees being financially ready for retirement has never been greater,” said Dana Hildebrandt, director of Investments, Willis Towers Watson. “And while many employers are making headway to help workers save more, their efforts to transform individual savings into a consistent flow of income that will last a lifetime remain a work in progress. The increased adoption of lifetime income solutions is an exciting step in the right direction." When asked why they either adopted or are currently considering adopting lifetime income solutions, three in four respondents (74%) cited concern over an aging workforce and increasing longevity, a sharp increase from 45% in 2016. A similar percentage (74%) cited their focus on retirement readiness, while almost half (49%) cited a shift from a defined benefit plan to a DC plan as their primary retirement plan for adopting a lifetime income solution. Among those that offer lifetime income solutions, the most prevalent options offered are systematic withdrawals during retirement (88%), lifetime education and planning tools (70%), and in-plan managed account services (44%). Less common are the solutions designed to help participants develop a steady flow of income in retirement, typically involving both an investment and annuity component. Only 17% offer an in-plan asset allocation option with a guaranteed minimum withdrawal or annuity component, while 15% offer out-of-plan annuities at the time of retirement. In-plan deferred annuity investment options are also offered by 15% of these employers. “While it’s encouraging more employers are embracing various lifetime income solutions, it’s disappointing relatively few have adopted what the industry sees as more effective income- generating solutions, such as annuities and other insurance-backed products. However, employer interest in these options may pick up steam as they better understand the value and associated benefits,” said Hildebrandt. Indeed, more than four in 10 respondents (41%) that currently offer or are considering offering a lifetime income solution are considering adding an in-plan asset allocation option with a guaranteed minimum withdrawal or annuity component in 2021 or later, while 31% are considering adding an in-plan deferred annuity investment option. About one in four (23%) are considering adopting out-of-plan annuities at the time of retirement. Interestingly, there was a significant shift in why some plan sponsors are not currently considering lifetime income solutions. More than two-thirds (69%) cited administrative complexities as a barrier to adoption, an increase from 53% in 2016. Conversely, the percentage of employers who cited fiduciary risk as a barrier fell from 81% in 2016 to 62% this year. “Despite these barriers, we expect more plan sponsors will evaluate the various lifetime income solutions in the marketplace as they continue to help prepare their employees for a financially secure retirement. Employers will need to monitor retirement legislative and regulatory developments around safe harbors and fiduciary liability, which could provide some added level of comfort when considering a lifetime income solution for their participants,” said Hildebrandt.
About the Lifetime Income Solutions Survey
The Willis Towers Watson Lifetime Income Solutions Survey was conducted in May and June 2019. Respondents included HR and finance executives at 164 large and midsize U.S. companies representing a wide range of industries. Media contact Ed Emerman, Willis Towers Watson, September 4, 2019.
Retirement has always been a core part of the American Dream – after years of hard work, everyone deserves to kick up their feet and enjoy the golden years. Unfortunately, retirement ain’t cheap. On average, adults 65 and older spend between $36,000 and $48,000 a year, according to the Bureau of Labor Statistics The 2018 Retirement Confidence Survey  by Greenwald and Associates found that 45% of workers report the total value of their household’s savings and investments at less than $25,000. The study found that 6 in 10 workers are stressed about preparing for retirement, and for many Americans, retirement seems unreachable. Corroborating this idea, a recent GOBankingRates survey found that 42% of Americans risk reaching retirement age without adequate savings to support themselves through their golden years. But what about Baby Boomers on the cusp of retirement? We recently surveyed 1,000 Americans using Amazon’s Mechanical Turk platform to learn about their saving habits and retirement plans. While most of our Boomer respondents believe they’ll be able to retire by age 68, they may need to adjust their expectations. Financial experts  recommend having roughly eight times your salary stashed away for retirement by age 60. That would be around $456,000, based on our Boomer respondents’ average annual income of $57,000 a year. Unfortunately, the average Boomer has approximately $136,779 in retirement savings--about 30% of the recommended amount. We found that retirement savings aren’t the only financial hurdles Baby Boomers are facing--they struggle with emergency savings and paying off debt as well. This study offers a closer look at the financial problems that are plaguing older Americans and forcing them to put off retirement.

Key Findings

  • The average Baby Boomer in our sample was age 62 and plans to retire by age 68, but it appears this goal may be overly optimistic.
  • The average Boomer respondent had $136,779 in retirement fund savings, or about 30% of the recommended savings for retirement at age 60 (8x your annual income) based on the sample’s median income of $57,000--ideally, they’d have $456,000 in the bank .
  • Baby Boomers struggle with debt and saving for emergency funds, too.
  • 31% of Baby Boomers do not have an emergency fund.
  • 40% of Baby Boomers are still paying off credit card debt.
  • Strikingly, if Baby Boomers were given $10,000, 36% would pay off debt and 53% would use that money to save for an emergency fund.
  • 59% of Baby Boomers believe Social Security will be a major source of income in retirement; however, retirees will likely only be collecting 75% of their Social Security benefits by 2035, according to a 2019 report from the Trump administration.
  • When investing, Baby Boomers are the most risk averse, while Generation Z is the most risk tolerant.

Baby Boomer Retirement and Emergency Savings Come Up Short
To get a better idea each generation’s financial health, is we asked 1,000 Americans what they’d do with a $10,000 gift. The common consensus is Boomers are well-off and financially stable – you might expect well-aged Baby Boomers would invest in a month-long cruise or a sizable down payment on a shiny new car. Instead, we found that 36% of Baby Boomers would pay off existing debt, and 53% – more than any other generation – would stash away the money for an emergency fund. Millennials were almost three times as likely as Boomers to spend that money on whatever they wanted, indicating Baby Boomers are more money-conscious than any other generation. We also found that 31% of Baby Boomers do not have an emergency fund in place. 32% of Generation X, 38% of Millennials, and 53% of Generation Z indicated they didn’t have any emergency funds saved. This suggests saving money is an American problem, not just a problem for Baby Boomers.
Baby Boomers are Still Struggling with Credit Card Debt
Our survey also inquired about each respondents’ one-year financial goals.
Strikingly, 40% of Baby Boomers indicated they are still paying off credit card debt compared to 37% of Millennials and 23% of Generation Z. It appears younger generations learning from older generations that credit card debt with high interest rates can follow you well into old age. A 2016 Bankrate study  found that 33% of young adults between the ages of 18 and 29 own credit cards compared to 68% of adults over the age of 65, which suggests younger generations are shying away from credit cards. The study found that younger generations are wary of credit cards because high-interest debt has negatively impacted their family and friends. Baby Boomers were more likely to own credit cards.
Baby Boomers Expect Social Security to Be a Major Source of Income
A sweeping shift away from pension plans has many Boomers leaning on Social Security as their primary source of retirement funds. In 2017 , only 16% of Fortune 500 companies offered traditional or hybrid pension plans, compared to 48% of Fortune 500 companies in 1998. A study from the Insured Retirement Institute found that 59% of Baby Boomers believe Social Security will be a major source of income in retirement. However, Social Security might not be as stable a source of income as we think. An April 2019 report  from the Trump administration found that in 2020, Social Security will need to start dipping into its $3 trillion reserve fund to continue making full payments to retirees. At the fund’s current trajectory, retirees can expect to collect about three-quarters of their benefits by 2035. With fewer companies offering pension plans and less money coming from Social Security, Boomers need to explore other investment opportunity. About 3 in 10 Baby Boomers we surveyed indicated they prioritize saving for retirement as a financial goal, but, for many, building an emergency fund and paying off credit card debt are their top financial priorities.
Baby Boomers Least Likely to Invest in Real Estate – Generation Z is the Most Likely
Boomers are also the least likely generation to invest in commercial or residential real estate, not wanting to invest in a 30-year mortgage that will stay with them through retirement. 33% of Generation Z indicated homeownership was a top financial goal for them. We learned in a previous Clever study  that 47% of Baby Boomers are looking to downsize their homes in 2019. 7 in 10 Baby Boomers we surveyed own homes, and selling off a family home in favor of renting or downsizing to a smaller home is becoming a popular option for Boomers with financial concerns. In general, Baby Boomers are much more risk averse than Millennials and Generation Z. We asked each generation about their investment strategies, and Boomers tended to shy away from riskier types of assets. To their credit, Boomers and Generation Z are both following best practices: Financial advisors recommend riskier investments while you’re young so they have a chance to pay off, while more conservative investing later in life can continually generate passive income while maintaining a nest egg.
What should Baby Boomers do to get back on track?
Getting into your 60s and realizing your retirement savings aren’t adequate can be incredibly distressing. Start by taking stock of your existing assets: cash savings, employer pensions funds, annuities, and retirement accounts. Then look into physical assets that can be liquidated like real estate, cars, or antiques – anything that can be sold to help generate retirement income. Prioritize paying off high-interest debt like credit cards and personal loans--living without debt frees up a lot of monthly cash. The next step is to reduce spending and create a realistic budget. Look at your bank statements to learn exactly where money is going and start cutting out unnecessary expenses. If you’re a homeowner, downsizing a property might be the right move financially, depending on the amount of equity you’ve acquired and the state of the market. Renting can be surprisingly affordable in certain areas and cuts out expenses like property taxes, water and sewer utilities, maintenance, and repairs. Once you’re eligible, signing up for Medicare can reduce your out-of-pocket medical expenses substantially. Lastly, you might want to consider investing in a short-term index fund with a 5- or 10-year growth plan. These index funds invest in safer options for seniors that aren’t quite as aggressive as your typical 401(k).
The proprietary data featured in this report derives from an online survey conducted by Clever Real Estate using Amazon’s Mechanical Turk platform. In total, Clever surveyed 1,000 American adults on their financial goals and wellness. Mechanical Turk was responsible for finding and qualifying users throughout its platform. The survey was conducted July 10 to July 12, 2019. Thomas O'Shaughnessy, The Clever Blog, September 03, 2019.
Tax pros must create a written security plan to protect their clients’ data. In fact, the law requires them to make this plan. Creating a data security plan is one part of the new Taxes-Security-Together Checklist. The IRS and its Security Summit partners created this checklist. It helps tax professionals protect sensitive data in their offices and on their computers. Many tax preparers may not realize they are required under federal law to have a data security plan. Each plan should be tailored for each specific office. When creating it, the tax professional should take several factors into consideration. This includes things like the company’s size, the nature of its activities, and the sensitivity of its customer information.
Creating a plan
Tax professionals should make sure to do these things when writing and following their data security plans:

  • Include the name of all information security program managers.
  • Identify all risks to customer information.
  • Evaluate risks and current safety measures.
  • Design a program to protect data.
  • Put the data protection program in place.
  • Regularly monitor and test the program.

Selecting a service provider
Companies should have a written contract with their service provider. The provider must:

  • Maintain appropriate safety measures.
  • Oversee the handling of customer information review.
  • Revise the security program as needed.

More information:

 IRS Tax Tips, Issue Number: Tax Tip 2019-119, August 29, 2019.
After two straight years of beating expectations, pension investment earnings have slightly dipped thanks in part to fears of a trade war. Public pension plans are missing their investment earnings expectations for the first time in three years, a development that could strain future state and local budgets amid rising concerns that the national economy is slowing. Plans with more than $1 billion in assets earned a median return of 6.79 percent for the fiscal year ending June 30, according to the firm Wilshire Trust Universe Comparison Service. That’s below those plans’ median long-term expected rate of return of 7.25 percent. Pension plans rely heavily on investment earnings because annual payments from current employees and governments aren't enough to cover yearly payouts to retirees. As it stands, roughly 80 cents on every dollar paid out to retirees comes from investment income. Some pension plans didn’t miss by much. The California Public Employees' Retirement System (CalPERS), the largest plan in the nation, has reported a 6.7 percent return for the year--just a few tenths below the expected 7 percent. Its sister plan, the California State Teachers’ Retirement System (CalSTRS), did slightly better, earning 6.8 percent on the same expected rate of return. Both systems painted the year as a positive given market volatility over the past year. Much of those swings have been in response to fears over tariffs wars between the U.S. and China. “It was a roller coaster year and a very challenging environment in which to generate returns,” CalSTRS Chief Investment Officer Christopher J. Ailman said in a statement. “Thanks to the in-house expertise of our investment team, we were able to come very close to our assumed rate of return despite the instability of the market.” Other plans saw a bigger gap. The Employees Retirement System of Texas has reported a preliminary 5.29 percent annual investment return  on long-term expectations of 7.5 percent . And New York State’s Common Retirement Fund, which ended its fiscal year on March 31, reported an estimated 5.23 percent return on long-term average expectations of 7 percent.
What It Means for Funding
The poorer earnings come after two straight years  of beating expectations. Nationally, public pension plans have collectively exceeded their assumed rates of return six times since the financial crisis in 2008, according to data collected by the Boston College Center for Retirement Research. Yet funding ratios have not markedly improved. After falling sharply for four straight years following the financial crisis, the average plan has hovered around having 72 percent of the money it needs to pay retirement benefits to current and future retirees. Governments have collectively gotten better at making their full pension contributions in recent years thanks to a stabilizing economy. But because of the way pension accounting is done, every year a government skimps on a payment or investment returns fall short of expectations, a pension's funded ratio gets worse. Most experts say that pension health is better graded on long-term trends, not annual return results. But given the market volatility over the past decade, the long-term picture is becoming harder to assess. For example, CalPERS’ average investment return over the past 10 years has been an admirable 9.1 percent. But over 20 years, the average has been 5.8 percent. A recent Moody’s Investors Service report warned of market volatility, highlighting the fact that pensions are becoming more reliant on the stock market (as opposed to bonds) for investment returns. “While public pension systems take a long-term investment focus and there have been favorable returns the last two fiscal years," Moody's said, "equity market losses in late 2018 will translate into larger-than-expected pension cost hikes in 2021 for many governments." Liz Farmer, Governing, August 16, 2019.
The Americans with Disabilities Act was signed into law by President George H.W. Bush on July 26, 1990. Disability affects millions of Americans. It can inhibit peoples’ quality of life and their ability to earn a living. Social Security is here to help you and your family, but there are strict criteria for meeting the definition of disability. The definition of disability under Social Security is also different than it is for other programs. We do not pay benefits for partial or short-term disability. Social Security has a strict definition of disability. Social Security program rules assume that working families have access to other resources to provide support during periods of short-term disabilities, including workers’ compensation, insurance, savings, and investments. Social Security is also required by law to review the current medical condition of people receiving disability benefits to make sure they continue to have a qualifying disability. Generally, if someone’s health hasn’t improved, or if their disability still keeps them from working, they will continue to receive benefits. Social Security is a support system for people who cannot work because of a disability. You can learn more about Social Security’s disability program  on our website and also by accessing our starter kits and checklists .  Mike Korbey, Deputy Commissioner for Communications, Social Security Administration, August 1, 2019.
Since 1982, the National Labor Relations Board (“NLRB” or “Board”) has interpreted the National Labor Relations Act (“NLRA”) to prohibit employers from denying non-employee union organizers access to those parts of the employer’s private property that are generally open to the public, such as cafeterias or restaurants. Thus, for example, union representatives could hold court in a hospital’s cafeteria, and the employer could not stop such activity unless the union organizers were being disruptive. On June 14, 2019, the NLRB reversed this longstanding rule, opening the way for employers to exercise greater control over the activities of non-employee union organizers on the employer’s property. The case before the Board involved the University of Pennsylvania Medical Center (“UPMC” or “Hospital”) which, like most hospitals, has a cafeteria that is used by UPMC employees and visiting members of the general public. UPMC did not restrict access to the cafeteria but did enforce a general practice against solicitation, pursuant to which it asked non-employees to leave when it received reports of solicitation for money or for organizations. In February 2013, two representatives of a Service Employees International Union local who were not Hospital employees sat with UPMC employees who were eating lunch in the cafeteria, discussing, among other things, union organizational activities and displaying union flyers and pins. A UPMC security guard approached the union organizers and, upon determining what was going on, asked them to leave the property. When the union organizers refused, the security guard called 911 and six police officers then escorted the union organizers from the premises. The union filed charges with the NLRB, and an administrative law judge (“ALJ”) applied longstanding NLRB law in finding that the Hospital violated the NLRA by removing the non-employee union organizers. In response to exceptions filed by UPMC, the NLRB reversed the ALJ and took this opportunity to overturn its 38-year-old precedent, holding that employers may lawfully restrict union organizational activities by non-employees on the employer’s property even in areas generally open to the public. Employers that have public access areas may wish to review their policies in light of the Board’s about-face. Policies that were carefully drafted over the past four decades may have included language that followed the now-overturned law that allowed non-employee union organizers to engage in organizational activities on the employer’s publicly accessible premises so long as they were not disruptive. In revising such policies, employers should take into account the following legal principles that still apply:

  • The rules for employees are different and have not changed: An employer may restrict employees only from distributing materials during the employee’s working time (which does not include breaks) and in working areas or patient care areas and from soliciting other employees during either their or the other employees’ working times.
  • Employers may not discriminate against non-employees who are soliciting for union purposes as opposed to other purposes. For example, if the employer adopted a non-solicitation policy with regard to non-employee use of public spaces, then it must enforce it consistently against all non-employees.
  • If the union can show that the workplace is so remote that there is no reasonable way to communicate with employees about union organizing without being on the employer’s property, then longstanding Supreme Court precedent requires that the employer grant union representatives access to the premises.

In addition to these legal requirements, employers should carefully consider employee morale and public relations issues in developing policies concerning the use of publicly accessible spaces. Even if ejecting union organizers who are non-disruptively sitting at a table in a publicly accessible cafeteria is legal, it may not present the message to employees and the public that an employer may wish to project. Employers that are revising non-solicitation and premises access policies should consult with an attorney experienced in labor law issues.  Case UPMC, 368 NLRB No. 2 (June 14, 2019), McCarter & English LLP - Peter D. Stergios and Hugh F. Murray, III, Lexology, June 25, 2019.
Being ignorant is not so much a shame, as being unwilling to learn.
Why is it that people say they "slept like a baby" when babies wake up like every two hours?
Failure will never overtake me if my determination to succeed is strong enough. - Og Mandino
13. TODAY IN HISTORY:                                                             
On this day in 1959, Luna 2 launched by USSR; 1st spacecraft to impact on the moon.

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