Congress Closer to Passing 1099 Reporting Provision Repeal (4/11)

Both the Senate and the House of Representatives recently voted to repeal the burdensome 1099 reporting provision passed as part of last year’s controversial Patient Protection and Affordable Care Act.  However, the bills passed by the two chambers of Congress are different, so they must be reconciled before a final law can be sent to President Obama.      The 1099 provision, section 9006 of the Act, greatly expands when employers must file information returns (the so-called Form 1099) to report certain business transactions to the Internal Revenue Service (IRS).  Under current tax law, employers are required to issue 1099s in limited circumstances when they pay over $600 to an individual or a business for services rendered, such as when paying outside consultants and other independent contractors.  Payments made to corporations or in exchange for goods and merchandise do not require the form.  The 1099s are sent both to the IRS and the person or business receiving the payments.  The intent behind the reporting requirement is to allow the IRS to track the payments and to ensure that proper taxes are being paid on them. Under the new Act, every transaction over $600 would be covered and payments to corporations or for merchandize are no longer exempted.  The provision is scheduled to take effect January 1, 2012, and is supposed to raise between $19 and $22 billion to help pay for the Act’s overhaul of the health care system with the extra taxes that will be collected (the projected monies the requirement could generate in ten years).  Public outcry against the new provision was muted at first, but gained steam after a June 2010 report by the IRS’ National Taxpayer Advocate expressed concern that the potential administrative burden of the new requirement on businesses, their vendors, and the IRS outweighed any resulting improvement in tax collections.  The November 2010 mid-term elections and the resulting Republican majority in the House further solidified opposition to the provision and provided the necessary votes to push its repeal.  Several House Democrats also have joined the repeal movement, and even President Obama is on record in his January State of the Union address supporting its repeal.      So, with all of this bipartisan support, why isn’t the provision repealed yet?   The $19 to $22 billion in potentially lost revenue is a sticking point in both the House and Senate.  The two chambers are trying to figure out how to make up the revenue that will be lost since the amount was intended to go to offset a small portion of the estimated almost $1 trillion costs of the massive health care overhaul.  As this HR Matters went to print, the House and Senate were still trying to come to some agreement over the repeal.  Stay tuned – HR Matters will report on the outcome of this important issue.

Medical Marijuana in the Workplace (4/11)

We are in a state that allows employees to use marijuana for medical purposes.  We have a policy requiring employees to submit to drug tests for safety sensitive positions and after a workplace accident, and we prohibit employees from coming to work under the influence of illegal drugs.  Can we still apply these policies to employees who are using medical marijuana?

You likely can apply these policies to employees who are using medical marijuana in compliance with state laws, including taking adverse employment action against the employees who test positive or come to work under the influence of marijuana.      About fifteen states and the District of Columbia permit marijuana use for medical purposes, including Alaska, Arizona, California, Colorado, Hawaii, Maine, Michigan, Montana, Nevada, New Jersey, New, Mexico, Oregon, Rhode Island, Vermont, and Washington.  As a general rule, these states’ medical marijuana statutes do not prevent enforcement of workplace drug policies, such as those prohibiting drug use in the workplace.  However, they generally also do not address whether employers must accommodate employees using medicinal marijuana.  The courts in the few states that have addressed the potential conflict between the right to use medical marijuana and employers’ policies banning, and requiring testing for, illegal drug use generally have upheld the employer’s right to test and take action based on the presence of drugs.  Most of these decisions focus on the fact that while a state may pass a law allowing the state to exempt certain people from criminal prosecution for medicinal use of marijuana, the state is preempted under the federal Controlled Substances Act, found in 21 U.S.C. §§801 et seq., which prohibits marijuana use, from requiring employers to accommodate illegal drug use in their workplaces.        So, for example, in Emerald Steel Fabricators, Inc. v. Bureau of Labor & Indus., 230 P.3d 518 (Or. 2010), the Oregon Supreme Court overturned an administrative agency’s decision in favor of an employee who was terminated after he told his employer that he used medical marijuana pursuant to the Oregon Medical Marijuana Act.  The employer did not engage in any interactive process to determine a possible accommodation for his marijuana use.  The court held that the federal Controlled Substances Act preempted the state statute and the employer was entitled to discharge him because the employee was engaged in use of marijuana that was illegal under the federal statute.  Similarly, in Roe v. TeleTech Customer Care Mgmt., 216 P.3d 1055 (Wash. App. 2009), the Washington Court of Appeals found that the state medical marijuana act provided only a defense to criminal prosecution for marijuana use and it did not provide a private right of action or establish a public policy to create a cause of action for wrongful termination.  Therefore, it was lawful for the employer to rescind a conditional offer of employment when an applicant tested positive for marijuana.  And, in Ross v. RagingWire Telecommunications, 174 P.3d 200 (Cal. 2008), the California Supreme Court found in favor of an employer that refused to hire an applicant who tested positive for marijuana use even though he used it pursuant to a doctor’s order and the state medical marijuana statute.  The court found that no state law can completely legalize marijuana for medical purposes because the drug remains illegal under federal law, even for medical users.        Still, as a precaution, since your state allows medical marijuana use, you should consult counsel before taking disciplinary action under your organization’s workplace drug policies against employees who use marijuana for medical reasons.