The good news is that this article simplifies everything you need to know so that you can make the best decisions for your company. The bad news is that you are not going to like our answers whether you are the Farm Labor Contract (FLC) or the Grower.
The Rule: Applicable Large Employers (ALE) are required to offer affordable, minimum value insurance to their full-time employees or face penalties. An ALEs is any employer who employs more than 100 full-time and full-time equivalent employees in 2015 (more than 50 in 2016 and beyond).
The Problem: The only reason there is even a question here is because of one word: ‘Employer.’ And forget what you already know about this word in other areas of the law because the ACA broadened the definition. Under the ACA, the word ‘employer’ means any ‘common law’ employer. Typically, that would be the employer responsible for payroll taxes and withholdings and the one that does the hiring and firing. However, under the common law rule adopted by the ACA, the one who also controls and directs (or has the right to control and direct) the actions of employees is also considered the employer. This means that without clear guidance from the IRS or the courts, both the FLC and the Grower could be seen as the common law employer.
This is especially problematic if you are the Grower, for example, and you believe the FLC complied with the ACA with regard to the employees working for you. Let’s say you don’t find out until December 31, 2015 that your FLC offered a plan that did not comply with the ACA or that your FLC did not offer the coverage to all full-time employees. In that case, the IRS could penalize you, the Grower, for the entire year from January to December.
Alternatively, if you are the FLC, you face a different issue. You now have additional costs for your labor because you have to factor in the price of offering an ACA compliant plan. Your challenge is often how to convince the grower that the additional cost should be shared by both of you, right?
Here are the three things you need to know to protect yourself:
1. Growers may pay a fee.
The employer mandate applies directly to the common law employer. In this situation, the Grower who is arguably also the common law employer will want to argue that the FLC’s offer of coverage satisfies the Grower’s obligations under the mandate. The only way the Grower can make such a claim is if the Grower pays a higher fee for ACA compliant labor than it would otherwise pay. The best way for a Grower to protect itself is to verify the cost of the coverage being offered and document the additional fee being paid to the FLC for such coverage.
2. Put it in writing.
A written contract is not a get out of jail free card but it will definitely help. In the contract you should specify (a) who is agreeing to offer coverage; (b) what fee is being paid by the party who plans to rely on the third party offer of coverage to satisfy their employer mandate; (c) what type of coverage is being offered and a verification that it complies with the ACA; and (d) an indemnification provision specifying who is responsible if there is an ACA violation.
3. Adopt a compliant plan.
Seems obvious right? It is more common that you might think than an employer believes they are complying with the ACA and finds out too late that their plan fell short. Whether you are the Grower or the FLC, you are both obligated to make sure that the plan being offered is:
- (a) Minimum Essential Coverage;
- (b) Affordable; and
- (c) offering a Minimum Value Plan.
Your best bet is to adopt a plan that guarantees ACA compliance.