DOL Issues Final Overtime Rule, Expanding Overtime Pay for Over 4 Million Workers; New Rule to Go Into Effect Dec. 1, 2016

The United States Department of Labor (DOL) Announced its long-awaited final rule regarding the update to the existing overtime rules.  The new rule is set to take effect on December 1, 2016.

Most significantly, whereas the previous rule employees who met certain duties tests under the so-called “white collar” exemptions had to make at least $455 per week on a “salary basis,” the new rule brings that threshold to $913 per week (or $47,476 annually).  This is approximately $3,000 less on an annual basis that an estimated $50,440 per year that a proposed version of the rule promulgated by the DOL had set last year, but over two times the current threshold amount.

The new salary basis threshold equates with the 40th percentile of weekly earnings for a full-time, salaried work in the United States’ lowest income region.

The final rule also raises the overtime eligibility threshold for highly compensated employees from $100,000 to $134,000.

While the rule raises the applicable thresholds for various exemptions, it also allows employers to count earnings paid to employees as bonuses and commissions toward meeting the salary threshold.  Specifically, the rule permits employers to meet up to ten (10%) of the salary threshold with amounts paid to employees as bonus and commission payments.

Although the DOL had also asked for input on a proposed rule which would have tracked the California white collar exemptions and created a more bright-line test requiring that a worker spend at least 50 percent of his or her time on exempt duties each week to qualify for an exemption, the final rule abandoned any such change to the duties’ portions of the executive, administrative, professional, outside sales, and computer employee exemptions.

In a lesser publicized 2nd final rule, the DOL carved out certain employers from the new rule.  Specifically, the 2nd rule announced a non-enforcement policy with regard to the 1st rule, for providers of Medicaid-funded services for individuals with intellectual or developmental disabilities in residential homes and facilities (i.e. group homes) with 15 or fewer beds.  Under the 2nd final rule announced, from December 1, 2016 to March 17, 2019, the DOL will not enforce the updated salary threshold of $913 per week for this subset of employers covered by the non-enforcement policy.

For further information on all things pertaining to the new rules, visit the DOL’s website.

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A Statistically Significant Settlement For Federal Contractors

As discussed in last week’s Fox Workplace Watch Alert, the Office of Federal Contract Compliance Programs (OFCCP) announced its largest pay equity recovery to date – a $5 million settlement of gender and racial pay discrimination claims it brought against State Street Corporation after a six-year investigation into the financial services firm’s compensation practices.  In essence, OFCCP alleged that a statistically significant disparity existed between the compensation paid to hundreds of women, and more than a dozen black, executives than that paid to their similarly situated male and white coworkers, respectively.

OFCCP’s action demonstrates how it can marshal sophisticated analytics to tease out pay disparities that otherwise may have gone unnoticed.  Like many other issues championed by the prior administration, it remains to be seen whether OFCCP’s recent focus on this issue will continue in the Trump Administration.  But federal contractors should pay attention to this settlement and take the opportunity to perform internal audits and address any potential issues before being the subject of a pay equity action (not to mention blog posts and alerts!).

Today’s post was written by Justin Schwam, an associate in our Labor and Employment Department in the Morristown office.

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3d Cir.: Employer Must Pay for All Breaks Shorter Than 20 Minutes Notwithstanding “Flex Time” Policy

Secretary United States Department of Labor v. American Future Systems, Inc.

This case was before the Third Circuit on appeal by the employer.  The district court granted the DOL’s motion for summary judgment, holding that the employer’s policy of excluding time for breaks less than 20 minutes long violated the FLSA.  The Third Circuit agreed and affirmed, holding that the Fair Labor Standards Act requires employers to compensate employees for breaks of 20 minutes or less during which they are free of any work related duties.

The court summarized the relevant facts as follows:

American Future Systems, d/b/a Progressive Business Publications, publishes and distributes business publications and sells them through its sales representatives. Edward Satell is the President, CEO, and owner of the company. Sales representatives are paid an hourly wage and receive bonuses based on the number of sales per hour while they are logged onto the computer at their workstation. They also receive extra compensation if they maintain a certain sales-per-hour level over a given two-week period.

Progressive previously had a policy that gave employees two fifteen-minute paid breaks per day. In 2009, Progressive changed its policy by eliminating paid breaks but allowing employees to log off of their computers at any time. However, employees are only paid for time they are logged on. Progressive refers to this as “flexible time” or “flex time” and explains that it “arises out of an employer’s policy that maximizes its employees’ ability to take breaks from work at any time, for any reason, and for any duration.”

Furthermore, under this policy, every two weeks, sales representatives estimate the total number of hours that they expect to work during the upcoming two-week pay period. They are subject to discipline, including termination, for failing to work the number of hours they commit to. Progressive also sends representatives home for the day if their sales are not high enough and sets fixed work schedules or daily requirements for representatives when that is deemed necessary.

Apart from those requirements, representatives can decide when they will work between the hours of 8:30 AM and 5:00 PM from Monday to Friday, so long as they do not work more than forty hours each week. As noted above, during the work day, they can log off of their computers at any time, for any reason, and for any length of time and may leave the office when they are logged off. Employees choose their start and end time and can take as many breaks as they please. However, Progressive only pays sales representatives for time they are logged off of their computers if they are logged off for less than ninety seconds. This includes time they are logged off to use the bathroom or get coffee. The policy also applies to any break an employee may decide to take after a particularly difficult sales call to get ready for the next call. On average, representatives are each paid for just over five hours per day at the federal minimum wage of $7.25 per hour.

On appeal, the defendant-employer raised three arguments: (1) that time spent logged off under its flexible break policy categorically does not constitute work; (2) that the District Court erred in finding that WHD’s interpretive regulation on breaks less than twenty minutes long, 29 C.F.R § 785.18, is entitled to substantial deference; and (3) that the District Court erred in adopting the bright-line rule embodied in 29 C.F.R. § 785.18 rather than using a fact-specific analysis. The Third Circuit rejected each of these arguments.

The court rejected the defendant’s that their defendant’s “flex time” policy was not a break policy within the meaning of the FLSA, reasoning that labeling its policy as “flex time” was simply a means to attempt to illegally circumvent the requirements of the FLSA.

The court next held that the DOL’s break time regulation, codified in 29 C.F.R. § 785.18 is entitled to Skidmore deference, the highest level of deference given to an administrative regulation.  The court reasoned that the regulation was due Skidmore deference because: (1) the former FLSA specifically empowered the DOL to promulgate such regulations; (2) the DOL’s interpretation of the break time regulations has been consistent throughout the various opinion letters the DOL has issued to address this issue; and (3) the DOL’s interpretation is reasonable given the language and purpose of the FLSA.

Having determined that the regulation is entitled to deference, the court held that the regulation must be read to create a bright line rule and concluded that it does.  The court explained that “the restrictions endemic in the limited duration of twenty minutes or less illustrate the wisdom of concluding that the Secretary intended a bright line rule under the applicable regulations.”  As such, the court affirmed the decision below and held that defendant’s break policy which excluded time for breaks less than 20 minutes long violated the FLSA.

Click Secretary United States Department of Labor v. American Future Systems, Inc. to read the entire Opinion of the Court.

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Massachusetts Will Require Accommodations for Pregnant Employees

As of April 1, 2018, employers in Massachusetts will be required to provide accommodations to pregnant employees.

In July, the Governor signed into law the Pregnant Workers Fairness Act that amends the Massachusetts’ general discrimination law to require employers to provide a reasonable accommodation to pregnant employees and to prevent employers from discriminating against pregnant employees who request an accommodation.

Under the law, there is no set guarantee of leave, but paid or unpaid leave to recover from childbirth may be a reasonable accommodation.

Other accommodations listed in the law may include:

  • more frequent or longer paid or unpaid breaks;
  • acquisition or modification of equipment or seating;
  • temporary transfer to a less strenuous or hazardous position;
  • job restructuring;
  • light duty;
  • private non-bathroom space for expressing breast milk;
  • assistance with manual labor; or
  • modified work schedules; provided, however, that no employer shall be required to discharge any
    employee, transfer any employee with more seniority, or promote any employee who is not able
    to perform the essential functions of the job, with or without a reasonable accommodation.

Employers do not have to provide an accommodation if doing so would create an undue hardship.

The law also poses some limits on the documentation that can be required from employees.  Generally, employers may require documentation to support a request for an accommodation, except when the employee is requesting one of the following accommodations:

  1. more frequent restroom, food and water breaks;
  2. seating; and
  3. limits on lifting over 20 pounds.

Employers will be required to give a written notice to employees of their rights beginning on January 1, 2018.  Employers will have to give such notice to any new hires after that date and to any employee who requests an accommodation.

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Will California “Ban the Box”?

The California Assembly has passed Assembly Bill 1008, which would affect employers’ abilities to make pre-hire and personnel decisions based on a person’s criminal history.  Governor Jerry Brown has until October 15, 2017 to act on the bill and he is expected to sign it.

AB 1008 would apply to all employers in California with five or more employees. The bill would make it unlawful for California employers to:
• Include on any application for employment any question that seeks the disclosure of an applicant’s conviction history;
• Inquire into or consider the conviction history of an applicant before the applicant receives a conditional offer of employment; and
• Consider or even disclose information about any of the following in connection with any application for employment: (1) an arrest that did not result in a conviction, subject to the exceptions in Labor Code § 432.7(a)(1) and (f); (2) referral to or participation in a pretrial or posttrial diversion program; and (3) convictions that have been sealed, dismissed, expunged or statutorily erased pursuant to law.

Once a conditional offer has been made, employers are required to conduct an individualized assessment before rescinding an employment offer based upon a criminal history. The assessment must include an evaluation of the:
• The nature and gravity of the offense and conduct;
• The time that has passed since the offense or conduct and completion of the sentence; and
• The nature of the job held or sought.

If the employer makes a preliminary decision that the applicant’s conviction history is disqualifying, the employer must notify the applicant of this preliminary decision in writing. However, the employer is not required to explain to the applicant its reasoning for making the preliminary decision.

The notice requirements are similar to those under Fair Credit Reporting Act.  In short, employers must state which convictions are disqualifying, include a copy of the criminal history and advise that the applicant has at least 5 business days to challenge the accuracy of the report or to explain the circumstances of the conviction.

If the applicant timely notifies the employer in writing that he or she is disputing the conviction history and is taking steps to obtain evidence to support this, the employer must provide five (5) additional business days to respond to the notice. The employer must also consider any additional evidence or documents the applicant provides in response to the notice before making a final decision.

Once a final decision is made, an adverse action notice must be given to the applicant and the applicant must be advised that he or she has the right to file a complaint with the Department of Fair Employment and Housing.

We will keep an eye on this one since it will likely go into effect on January 1, 2018 if it is signed into law.

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Birmingham Passes Ordinance Prohibiting Discrimination

Alabama never ceases to surprise.

On September 26, 2017, the Birmingham City Council passed an ordinance that makes it a crime for any entity doing business in the city to discriminate based on race, color, national origin, sex, sexual orientation, gender identity, disability, or familial status. The ordinance passed unanimously and is the first of its kind in Alabama.

In announcing the measure, the City Council took a bit of defiant tone, noting that Birmingham had to act since the state legislature was unwilling.  It remains to be seen if the state legislature will try to take steps to pass legislation prohibiting Birmingham and other cities from passing such ordinances.

The City also created a local human rights commission to process and try to resolve such complaints.  If the matter cannot be resolved, an employee must swear out a complaints in criminal court.  The criminal court has the power to order a fine, but not reinstatement or back pay.

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Seventh Circuit Says Extended Medical Leave is Not a Reasonable Accommodation under the ADA

On September 20, 2017, the Seventh Circuit Court of Appeals issued a decision that a requested three month medical leave due to a disability was not a reasonable accommodation under the ADA.  Although there is some discussion of the particular facts in the case, much to the delight of management-side attorneys like me, the case goes beyond saying that the leave was not reasonable in this particular circumstance.

Instead the Court noted that the ADA is not a medical leave statute.  The Court held that an accommodation need only be granted under the ADA if it will help the employee work.  Since an employee who needs leave cannot work, then they cannot be considered a qualified individual with a disability.

The Court does note that a brief leave of days or perhaps a few weeks, might, in some circumstances be a reasonable accommodation.  But, and here’s the good part, “a medical leave spanning multiple months does not permit the employee to perform the essential functions of his job. To the contrary, the “[i]nability to work for a multi-month period removes a person from the class protected by the ADA.”

The subject of how long must an employer grant leave to a disabled employee is a common one. Often, it is the source of great frustration for employers.  Although there is still no bright-line test as to just how much leave must be granted, this case certainly seems to limit that time to less than two months for employers within the Seventh Circuit.

Employers should still be cautious as many state and local laws that require reasonable accommodations for disabilities may not be interpreted in the same manner.

If you want to read more, the case is Severson v. Heartland Woodcraft Inc. 2017 U.S. App. LEXIS 18197.

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Be Careful Before Firing an Employee for Making a Political Statement

A few weeks ago, we posted that employers could fire Neo-Nazis who participated in the Charlottesville protests.  As we noted, we were just looking at First Amendment rights and that employees may have more protections under state laws.

My partner, Nancy Yaffe, has a written a thoughtful blog post on those state protections that might come into play.  For a more detailed discussions of those protections, please check out her blog post.

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Delay of EEO Gender Pay Equality Reporting Requirements Does Not Mean a Decrease in Enforcement

On Tuesday, the Office of Management and Budget notified the EEOC that it was delaying a rule finalized last year that would require large employers to report salaries of workers.  The rule was implemented to help combat gender pay inequality.

The rule would require any employer who must file an EEO-1 report, which is any private employer with 100 or more employees or federal contractor with 50 or more employees, to provide the previously required information about the number of its employees broken down by gender, race and ethnicity.  The second part of the rule would require employers to also submit W2 payroll data for its employees.

EEO-1 reports are filed in September of each year.  The rule was to go into effect for 2017.  Just days before the EEO-1 survey for 2017 with the new reporting requirements was scheduled to be opened, the OMB put on the brakes.

The EEOC, however, wants to make clear that this announcement does not mean that there will be a lack of enforcement in this area.  Law 360 is reporting that the EEOC Chair stressed Wednesday that gender pay inequality was still a “high priority.”

In the meantime, the 2017 EEO-1 online portal is temporarily off-line.  Employers will still have to provide the data required by the first part of the rule and should periodically check with the EEOC to see when the 2017 survey is issued.

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In the Aftermath of Hurricane Harvey Employers Should be Aware of Laws Protecting First Responders

The devastation in Texas is breathtakingly sad.  Although the storm has passed, recovery efforts continue.  For many, it will take months and years to recover.

Today I received my first call from a client asking about its obligations towards an employee who will be traveling to Texas to help with the recovery efforts.  Many states do have laws that protect first responders from being disciplined or terminated for missing work while responding to an emergency.

New Jersey, for example, is one such state that has a law that provides that an employer cannot “terminate, dismiss or suspend an employee who fails to report for work at his place of employment because he is serving as a volunteer emergency responder during a state of emergency declared by the President of the United States or the Governor of this State.”

Under the New Jersey law, a volunteer emergency responder is defined as “an active member in good standing of a volunteer fire company, a volunteer member of a duly incorporated first aid, rescue or ambulance squad, or a member of any county or municipal volunteer Office of Emergency Management, provided the member’s official duties include responding to a fire or emergency call.”

In the last few days, President Trump has declared a state of emergency in Texas and Louisiana.  As such any New Jersey volunteer emergency responder who is traveling to aid with the Hurricane Harvey recovery efforts may be entitled to leave.

The leave does not have to be paid.  Employees may be able to use available or vacation days while out on leave, but cannot be forced to use such time.

The bad news for employers is that the law does not provide a limit on the amount of work that can be missed by the employee.  Many other jurisdictions besides New Jersey provide similar protections.  Employers with questions about first responder leave are encouraged to contact employment counsel.

For those wanting to help victims of Hurricane Harvey, Consumer Reports  and the New York Times have written some helpful guidance on avoiding scams, as well as listing some charities that are in the best position to help.

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