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President Signs Important Employment Legislation

From the October, 1996 issue of
HR Fact Finder

On August 20, 1996, President Clinton signed two pieces of legislation that will affect the terms and conditions of employment for numerous employees across America. The following summary highlights the key employment provisions of this recent legislation.

Small Business Job Protection Act

The Small Business Job Protection Act of 1996 was signed to amend the Fair Labor Standards Act (FLSA) to provide a two-step increase in the minimum wage. Specifically, the Act increases the FLSA minimum wage to $4.75 per hour effective October 1, 1996, with a further increase to $5.15 per hour effective September 1, 1997. The Act also creates a subminimum wage of $4.25 per hour for employees under 20 years of age during the first 90 consecutive calendar days of employment with an employer. Employers are prohibited from displacing older employees to hire youth at the subminimum wage and from reducing employees' hours, wages, or employment benefits to take advantage of this subminimum wage provision.

The Act contains several other provisions. It freezes the cash wage paid by employers to tipped employees at the current level of $2.13 per hour. This replaces the former provision requiring that tipped employees be paid at least 50 percent of the minimum wage in cash. However, an employer is still required to "make up the difference" if an employee's tips combined with the employer's cash wage of $2.13 per hour do not equal the new minimum hourly wage.

The Act also amends the Portal-to-Portal Act of 1947 by specifying that time spent in home-to-work travel by an employee in an employer-provided vehicle, or in activities performed by an employee, which are incidental to the use of the vehicle for commuting, is not "hours worked" and, therefore, does not have to be compensated. This provision applies only if the travel is within the normal commuting area for the employer's business and if the use of the vehicle is subject to an agreement between the employer and the employee or the employee's representative.

In addition, certain computer professionals who are paid at least $27.63 per hour are now exempt from overtime requirements. This amendment replaces the former requirement that they be paid an hourly rate of at least 6-1/2 times the minimum wage in order to be exempt, which would have amounted to $33.48 per hour as of September 1, 1997.

Health Insurance Portability and Accountability Act

On August 21, 1996, President Clinton signed the 1996 Health Insurance Portability and Accountability Act, which makes health insurance coverage more portable and continuous for employees who change jobs. Title I of the Act ensures the portability of health insurance for individuals moving from one group health plan to another. In general, Title I limits the ability of group health plans and issuers of group health insurance coverage to reject coverage for individuals with pre-existing conditions such as cancer and pregnancy. Title I limits pre-existing condition exclusions, expands the portability of prior satisfactions of pre-existing condition exclusions, guarantees renewability, prohibits the exclusion of individuals from coverage because of health status, and guarantees the availability of individual policies for certain previously insured individuals under group health plans.

The measure also addresses the small group market by obligating each health insurance provider that offers coverage in the small group market to make all its health insurance policies available to small employers and to accept for enrollment every eligible individual employed by the same employer. Protection is also provided for eligible individuals who are no longer covered by a group health plan (because they have become unemployed or their new employer does not offer health coverage) by allowing them to obtain individual health insurance and to receive credits for their prior coverage toward the new coverage's pre-existing condition exclusion period. Eligible individuals are those who have been continuously insured under a group health plan for at least 18 months and have exhausted all other types of employer-sponsored coverage.

Kirkpatrick & Lockhart LLP, 1500 Oliver Building, Pittsburgh, PA 15222-2312.

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