Q: Can
an employer require an employee to sign up for health insurance
coverage through the company and further require that the premium
for this coverage be deducted from the employee's paycheck?
A:
Depending on the particular insurance policy, employers may need a
certain number of employees to sign up for health insurance
coverage in order to maintain a certain premium or policy amount.
In other words, the price that an employer pays for a particular
insurance policy often depends on the number of employees it has.
If the number of employees drops below a certain level, the price
of the policy may increase. Under these circumstances, some
employers require employees to sign up for health insurance
coverage.
However, a different issue arises when and if the employer
requires that the premium for mandatory health insurance coverage
be deducted from the employee's paycheck. The key to this issue
is whether or not the law authorizes such a deduction.
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For example, in Arizona, an employer cannot withhold any portion
of an employee's wages unless the employer has obtained written
authorization from the employee for the withholding, or there is a
reasonable good faith dispute as to the amount of wages owed.
Similarly, in California, the general rule is that an employer can
only withhold wages when it has obtained prior written
authorization from the employee. Even with a written authorization,
wages can only be withheld for specific items, as defined by the
law.
In New York, an employer may only make deductions "for the
benefit of the employee," which, aside from those required by
law, are limited to those that are expressly authorized in writing
by the employee. And, under New York law, even with an
authorization, permissible deductions are very limited and
specifically defined, and these deductions can amount for no more
than 10 percent of the gross wages due to the employee for a
particular payroll period.
Therefore, under these laws, if the employer does not obtain
written authorization from the employee for the withholding of the
health insurance premium, such a deduction arguably would not be
permissible.
Different rules apply to employees performing work under federal
contracts. For instance, under federal construction contracts there
are limitations as to the sorts of deductions that can be made
without first obtaining the Secretary of Labor's approval.
However, there are other kinds of payroll deductions that a
contractor or subcontractor can make, including contributions on
behalf of an employee to funds established by the employer,
representatives of employees, or both, to provide medical or
hospital care, or for insurance to provide medical or hospital
care, without first applying to the Secretary of Labor for
approval.
Even these deductions, though, are not permitted unless a) the
employee voluntarily consents to the deduction in writing before
the period in which the work is to be done, and the consent is not
a condition either for obtaining or retaining employment, or b) the
deduction is provided for in a bona fide collective bargaining
agreement.
Thus, given these general rules and absent some other specific
state or federal law that may apply, if an employer is going to
require its employees to sign up for health insurance coverage, the
better practice would be to obtain written authorization first.
Leigh Ann Cicccarelli contributed to this article.
Note: The information in this column is provided by the
author, not Entrepreneur.com. All answers are general in nature,
not legal advice and not warranted or guaranteed. Readers are
cautioned not to rely on this information. Because laws change over
time and in different jurisdictions, it is imperative that you
consult an attorney in your area regarding legal matters and an
accountant regarding tax matters.
Larry Rosenfeld is co-chair of the national labor and
employment practice of the law firm Greenberg Traurig LLP. A
frequent writer and lecturer on employment law topics, Rosenfeld is
experienced in the areas of federal laws pertaining to employment
issues, EEOC, ADA, termination matters, employment liability and
the Fair Labor Standards Act.