Category: Labor & Employment

DOL Overtime Rule Appeal Faces Uncertainty

DOL Overtime Rule

Efforts to fast track the appeal of a nationwide preliminary injunction that prevents the U.S. Department of Labor (DOL) from implementing drastic proposed revisions to federal overtime regulations just got “Trumped.”

After obtaining an order in December 2016 to expedite the appeal while President Obama was still in office, attorneys for the federal government filed a short, unopposed motion on January 25, 2017, asking the U.S. Court of Appeals for the Fifth Circuit for a 30-day extension of time to file their reply brief, stating: “The requested extension is necessary to allow incoming leadership personnel adequate time to consider the issues. Plaintiffs’ counsel has authorized us to state that they consent to this extension motion.”

The preliminary injunction that is the focus of the appeal was issued on November 22, 2016, by a federal district court judge in Texas. The injunction halted the implementation of regulatory revisions that were scheduled to go into effect on December 1, 2016, and which would have more than doubled the minimum salary requirements for the major white collar overtime exemptions under the Fair Labor Standards Act (FLSA) from $455 per week to $913 per week.

The DOL already has filed its opening brief on appeal, and the plaintiffs in the case have filed their response. Amicus briefs in support of both sides also have been filed. Absent the requested extension, the DOL’s reply brief is due on January 31. If the extension is granted as requested, the DOL’s reply brief will be due on March 2. However, it also is possible that, after considering the issues, incoming leadership will abandon the appeal.

ARTICLE BY Steven F. Pockrass of Ogletree, Deakins, Nash, Smoak & Stewart, P.C.

© 2017, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.

Massachusetts Commission Against Discrimination: Job Transfer Not Retaliation

Massachusetts Commission Against DiscriminationOn December 30, 2016, a Hearing Officer with the Massachusetts Commission Against Discrimination (MCAD) dismissed the Complainant’s retaliation case, finding that the Complainant had failed to establish a causal connection between his earlier discrimination complaint and a later adverse action. Most interesting was the Hearing Officer’s determination that the Complainant had failed to establish a prima facie case of retaliation as a result of his transfer from one facility to another.  There was no evidence that his transfer “caused Complainant to suffer any tangible economic loss or a change in any other job related benefits.” MCAD v. Mass. Dept. of Corrections, 11-BEM-02854, 2016 WL 7733656 (MCAD).

Underlying Discrimination Claim

Complainant Rigaubert Aime (“Aime”) had been a correction officer with the Massachusetts Department of Correction (“DOC”) for over twenty years. In March 2011, he filed a race discrimination claim with the MCAD and soon thereafter filed internal complaints of unfair treatment by his supervisors. While his internal complaints were all dismissed, the Hearing Officer cited established law in holding that Aime only needed to prove that he — reasonably and in good faith — believed that the DOC had discriminated against him — not that it actually had done so — in order to proceed with his retaliation complaint.

Adverse Action Demonstrated but Retaliation not Proven

 In the ensuing months, Aime claimed he was subjected to disciplinary treatment of several types, including a two-day suspension for performance reasons, which the Hearing Officer concluded were “adverse employment actions” giving rise to retaliation claims.  However, in each instance the Hearing Officer concluded that the DOC’s disciplinary actions were justified for legitimate, non-retaliatory reasons.

Job Transfer Did Not Involve A Material Change

In late July 2011, the DOC informed Aime that he was being transferred from a Pre-Release Center in Roslindale, MA to the Lemuel Shattuck Hospital Correctional Unit in Boston. The DOC Superintendent in Roslindale, the evidence showed, had requested that Aime be reassigned within a few weeks of the filing of Aime’s MCAD discrimination complaint back in March 2011 because of Aime’s repeated conflicts with his supervisors. Aime claimed that transfers in the past had often been viewed as negative or punitive and although his transfer did not involve any material change in his shift, days off, or any other terms or conditions of his employment, including his commuting time, he asserted that his transfer was in retaliation for filing his earlier MCAD complaint. The Hearing Officer did not agree, concluding that the transfer did not “materially disadvantage” him in tangible working conditions. Aime’s subjective feelings of mistreatment, without objective evidence of loss, could not sustain his claim. The Hearing Officer went on to find that, even if the transfer was to constitute an actionable adverse employment action, Aime failed to prove that the reason given for the transfer was a pretext for retaliation.

Take-aways

  1. Just because an employee has filed a claim of discrimination does not immunize the employee from disciplinary action, including discharge.

  2. Just because the employee’s discrimination complaint has been dismissed does not immunize the employer from a retaliation claim.

  3. If the employee’s discrimination claim was asserted in bad faith, it cannot support a retaliation claim. But “bad faith” is difficult to prove.

  4. The temporal proximity between the discrimination complaint and further disciplinary action is a factor in evaluating whether retaliation has occurred, but it is not dispositive.

  5. Employers should not avoid disciplining an employee who has recently filed a discrimination claim. Discipline should be issued as uniformly as possible where the circumstances support it.

  6. A persistent employee may claim retaliation, repeatedly, no matter how justified the employer’s actions may seem. This is no reason to give in.

  7. All disciplinary action should be reviewed to make sure it is well-supported. This is particularly true if a retaliation claim is likely.

  8. Job transfers to a lesser position can support a claim of retaliation. In addition, a longer commuting distance may constitute an adverse employment action.

  9. This case nonetheless illustrates that not every change relating to a job assignment is an adverse employment action. The employee has the burden of proving the adverse employment action and that it was retaliatory.

ARTICLE BY Barry J. Waters of Murtha Cullina

© Copyright 2017 Murtha Cullina

Supreme Court Solicits Opinions on Breadth of Remedies under ERISA—Including Indemnity and Contribution

Supreme Court ERISA RemediesEarlier this week, the Supreme Court got back to work in the New Year. One of the court’s first orders of business was to invite the Acting Solicitor General to file a brief expressing the views of the United States in a handful of cases. Fenkell v. Alliance Holdings, Inc., a somewhat controversial ERISA case, landed amongst the chosen few. Specifically under Fenkell, the Supreme Court invited the Acting Solicitor General to opine on whether ERISA permits a cause of action for indemnity or contribution by an individual found liable for breach of fiduciary duty in light of the existing circuit split on the issue.

While the facts of Fenkell are largely irrelevant for this discussion, the important takeaway is that an ERISA employee stock ownership plan fiduciary led the effort to offload an unprofitable company onto its employees in a complicated leveraged buyout. The involved and resulting breach of ERISA fiduciary duties is not contested. Rather, the ringleader, Fenkell, challenged (and continues to challenge) the judge’s order requiring him to indemnify his co-fiduciaries. Simply put, the indemnification order seemed appropriate to the court given the control that Fenkell exerted over the other fiduciaries—the court noted the other fiduciaries’ “inexperience” as fiduciaries and their deference to Fenkell as the controlling owner, sole director, president, and CEO of Alliance. Stated another way, Fenkell was the “conductor,” and the other fiduciaries involved were the “mere musicians.”

In an earlier review, the Seventh Circuit rejected each of Fenkell’s arguments and followed its 30-year-old precedent which allows for indemnification and contribution among co-fiduciaries. In support of its decision to uphold its prior interpretation, the Seventh Circuit reiterated that “[i]f we are to interpret ERISA according to the background principles of trust law—as the Supreme Court has repeatedly instructed us to do—then indemnification and contribution are available equitable remedies under the statute.” Accordingly, the Seventh Circuit found ERISA’s equitable remedial power, as well as its foundation in principles of trust law, supportive of an order for contribution or indemnification among co-fiduciaries based on degrees of culpability.

While this case has not yet been taken up, argued in front of, or decided by the Supreme Court, the Acting Solicitor General’s brief may shed new light on the direction the Supreme Court may take to settle the circuit split. In the meantime and at a minimum, this case and the Supreme Court’s request for the U.S.’s view should remind us that:

  • Under ERISA, if defendants are found to be liable for breaches by co-fiduciaries, then co-fiduciary liability is joint and several.
  • Inexperience—and even fear of retribution from management (e.g., your boss)—will not excuse a failure to discharge fiduciary duties under ERISA.
  • Whether “mere musicians” will ultimately be able to seek protection (in terms of indemnification and/or contribution) from their “conductor” will, under current law, involve lengthy litigation and depend on the reviewing court.

Because fiduciary (and co-fiduciary) duties and conduct will most certainly continue to be closely scrutinized, best practice requires steadfast resolve to work hard as fiduciaries, acting solely in the interest of the participants and beneficiaries in order to discharge their duties of loyalty and prudence. To help ensure this compliance, it is good practice to undergo periodic fiduciary training.

ARTICLE BY Carrie E. Byrnes & Jorge M. Leon of Michael Best & Friedrich LLP

© MICHAEL BEST & FRIEDRICH LLP

“Change” Comes to Washington—What to Expect

President-elect Donald TrumpOn January 3, 2017, the 115th U.S. Congress opened with Republican majorities in both houses:

  • U.S. Senate: 52 Republicans and 46 Democrats and 2 Independents who Caucus with the Democrats

  • U.S. House of Representatives: 241 Republicans and 194 Democrats

On January 20, 2017, President-elect Donald Trump will be inaugurated as the 45th President of the United States, with an ambitious agenda set for the first 100 days, including the confirmation of his cabinet appointees and a yet-to-be-named Supreme Court nominee. Among his first acts, President-elect Trump is expected to undo many of the executive orders and “midnight regulations” of the Obama administration.

In the closing days of 2016, President Barack Obama adopted numerous federal regulations that may have served to advance and preserve his legacy. During his election campaign, Trump announced that, on his first day in office, his intention would be to roll back the executive orders adopted during the Obama administration and to seek repeal and replacement of other enactments such as the Affordable Care Act (or Obamacare). Most final regulations, however, may not simply be overturned with the stroke of the president’s pen, but must be undone by Congress, the courts, or reverse notice and comment rulemaking.

Thus, in addition to confirming President Trump’s cabinet nominations as quickly as possible, among the other early challenges for Congress will be to repeal and replace Obamacare and to invalidate en bloc the so-called “midnight regulations” and others adopted by the Obama administration or initiate a Congressional Review Act resolution of disapproval.

The first 100 days of the new Trump administration and the new 115th Congress will be busy and consumed by the following:

Senate Confirmations: Secretary of Labor-Designate Andy Puzder

Since his election, President-elect Trump has named his selections for cabinet seats, including on December 8, 2016, his choice of Andy Puzder to be the next Secretary of Labor. Puzder is the president and chief executive officer of CKE Restaurants, which has over 3,700 franchise restaurants, employing over 75,000 employees in the United States and 40 other countries. He has long been an advocate of job creation and an outspoken critic of government regulation of business, including the dramatic increase in the salary basis for exemption from overtime for “white collar” employees under the proposed overtime regulations. Puzder represents a dramatic shift from outgoing Secretary of Labor Thomas Perez.

Senate Democrats and labor unions have threatened opposition to Puzder’s confirmation. Under current Senate rules, however, confirmation requires only a simple majority since then Senate Majority Leader Harry Reid (D-NV) pushed through a rules change to eliminate 60-vote filibusters of administration and judicial nominations, except for nominations to the Supreme Court of the United States. With a majority of 52 votes, Senate Republicans should be able to confirm Mr. Puzder even if all 48 Democrats vote against his confirmation. The Senate Committee on Health, Education, Labor and Pensions has scheduled Mr. Puzder’s confirmation hearing for January 27, 2017.

Since Election Day, President-elect Trump and his transition teams (landing teams) have been hard at work vetting candidates for not only the cabinet, but subcabinet positions as well. Following Mr. Puzder’s confirmation, we expect the announcement of critical subcabinet positions at the U.S. Department of Labor, including those of deputy secretary of labor; solicitor; assistant secretaries for policy, occupational safety and health, and labor-management standards; and administrator of the Wage and Hour Division, among others.

Turning Around the NLRB and EEOC

At the National Labor Relations Board (NLRB), President-elect Trump will be able to designate lone Republican Board Member Philip Miscimarra as the new chairman to replace current Democratic Chairman Mark Pearce. He will also likely nominate two Republican members to join Miscimarra and current Democratic Members Pearce and Nancy Schiffer, thus giving Republicans a 3–2 majority. However, the task of reconsidering the staggering number of blatantly pro-union decisions by the Obama Board, which by some estimates overturned 4,559 years of well-settled Board law precedent, will be slowed by current Democratic General Counsel Richard Griffin, whose term will not expire until November of 2017. A former union lawyer, Griffin for the remainder of his term will likely insist that the NLRB’s regional offices adhere to and enforce the law established by the Obama Board, and will probably limit the opportunity to present cases to the new Trump Board for reconsideration. Since the NLRB is prohibited from issuing “advisory” opinions, the new Board will need to wait for “live cases” to rise up the pipeline. Thus, reversals of Obama Board decisions are not likely to come quickly.

At the U.S. Equal Employment Opportunity Commission (EEOC), current Democratic Chair Jenny Yang is now expected to serve out her term. President-elect Trump, however, will be able to designate Republican Commissioner Victoria Lipnic as chair and to nominate a Republican to fill the seat vacated by Republican Commissioner Constance Barker upon the expiration of Yang’s term in July of 2017. Barker’s nomination for a new term was pending in the Senate when Congress adjourned, and it must be resubmitted in the current Congress.

Overturning Federal Regulations

On his first day in office, President-elect Trump is expected to overturn numerous executive orders dating back to President Obama’s earliest days in 2009. Included may be executive orders mandating project labor agreements on federal construction projects, prohibiting reimbursement of labor relations costs for federal contractors, and setting mandatory minimum wages and paid family leave for federal contractors. Most importantly, he is likely to overturn Executive Order 13673 “Fair Pay and Safe Workplaces” requiring federal contractors and subcontractors to report “administrative merits determinations” (including alleged violations of 14 federal labor laws and equivalent state laws based on agency complaints prior to litigation and final judgment). These reports would need to be considered by federal contracting officials in the awarding of future federal contracts. Expect the so-called government contractor “blacklisting” rules and its implementing regulations and DOL guidance, already enjoined preliminarily by a court decision, to be among the first executive orders to be undone.

For its part, Congress is considering legislation to block “midnight regulations” issued by the outgoing Obama administration. During its first week in session, the new 115th Congress passed the Midnight Rules Relief Act (H.R. 21) sponsored by Representative Darrell Issa (R-CA) and the Regulations from the Executive in Need of Scrutiny (REINS) Act of 2017 sponsored by Representative Doug Collins (R-GA).

The Midnight Rules Relief Act amends the Congressional Review Act (CRA) to allow joint resolutions disapproving en bloc regulations submitted to Congress for review within 60 days of the end of a president’s term. The CRA may only be invoked on individual regulations, not a series of regulations en bloc.

The REINS Act requires that all new “major regulations” (those with an economic impact of $100 million or more) be subject to an up-or-down vote by a simple majority in both houses of Congress and be signed by the president before taking effect.

Of course, Congress already can institute a resolution of disapproval under the CRA for individual federal regulations within 60 legislative days of taking effect (or for a “reset” period upon the opening of a new Congress for regulations that were submitted to Congress for review on or after June 13, 2016, prior to its adjournment sine die). The resolution of disapproval is not subject to filibuster and, if passed and signed by the president, the same or “substantially similar” regulation may not be reintroduced and repromulgated in the future. The only federal rule ever to be disapproved under the CRA was the OSHA ergonomics standard issued in November of 2000, which was disapproved by the Republican Congress and signed by President George W. Bush in 2001.

Finally, of course, Congress may attach a “rider” to an appropriations or reconciliation bill (the latter of which is not subject to a Senate filibuster) that denies funding for the agency to enforce the regulation.

What Else?

In addition to the foregoing, Congress is expected to roll back agency regulatory powers by passing the Regulatory Accountability Act of 2017, H.R. 5 (Goodlatte, R-VA), which would repeal the longstanding so-called “Chevron deference” given to agencies’ legal interpretations. The legal standard originates from the Supreme Court’s 1984 decision in Chevron USA, Inc. v. Natural Resources Defense Council, Inc. The legislation would eliminate Chevron standards frequently used by courts to uphold agency interpretations of federal regulations, as well as change agency rulemaking and strip agency “guidance” from having legal effect. In addition, the bill would require six-month delays of enforcement for new rules and mandatory litigation stays for “major rules” that would have an impact of $1 billion or more on commerce. The bill also would require agencies to calculate the direct, indirect, and cumulative effects of new rules on small business. A vote on the bill is expected in the House in January, over the strong opposition of organized labor and environmental groups that fear that the bill will curtail labor and environmental rule making.

Other Priorities—Will the Government Be Less Dysfunctional?

Newly-elected presidents often pursue aggressive first year agendas that embody their most important policy goals enunciated during their election campaigns. President Trump will be no different, and he is likely to advance policy objectives fulfilling campaign promises on reversing government regulations as well as on immigration, trade, taxes, military spending, national security, infrastructure, and job growth. Taking on that laundry list of policy initiatives will be easier said than done. From the start of his administration, President Obama had difficulty overcoming united Republican opposition to his policy goals. For their part, Democratic leaders in the 115th Congress—led by Senate Democratic Leader Chuck Schumer (D-NY) and House Democratic Leader Nancy Pelosi (D-CA)—already promise to stand firmly against the confirmation of certain cabinet nominees and any Supreme Court nominee who in their opinion may be outside the mainstream of judicial philosophy and legislative policies they oppose. On a few issues, such as infrastructure, the Democratic leaders say they may seek bipartisan compromise. With a narrow 52-vote Senate majority, Senate Republicans will find it difficult to muster the 60 votes necessary to invoke cloture to end a Democratic legislative filibuster. Thus, expect congressional gridlock to continue, although possibly not to the same degree as over the past 12 years. Voters who are now seeking less gridlock and a less dysfunctional government may be disappointed at the pace of change.

Filibusters are meant to be dysfunctional, to be the Senate “saucer” that cools the “overheated cup” of House action by promoting extended Senate debate and deliberation. It is the main distinction between the House and Senate. Ironically, there were a number of Senate Democrats in the last Congress who supported a rules change to eliminate legislative filibusters along with the “nuclear option” advanced by then Senate Majority Leader Harry Reid (D-NV), which would have eliminated filibusters of administrative appointments and judicial nominations. Today, the legislative filibuster may be the Democrats’ salvation. Indeed, there may be some Senate Republicans who would consider eliminating the legislative filibuster. Where one stands depends on where one sits. However, Senate Majority Leader Mitch McConnell (R-KY) is unlikely to permit elimination of the legislative filibuster.

Still, the nuclear option against administrative and judicial nominations continues to stand. This means that President Trump’s cabinet nominations should be confirmed unless Senate Democrats are able to convince three Republicans to join them in voting against the nominations. It also means that judicial nominations should be quickly confirmed on simple majority votes. Currently, there are over 100 unfilled judicial vacancies—including a number of critical federal circuit court seats. The federal appellate courts are important for labor and employment policy since, in our constitutional system of checks and balances, the federal circuit courts are the appellate courts that review government regulations promulgated by the executive branch and legislation passed by Congress. Apparently, the “nuclear option” was so effective in the 114th Congress that President Obama was able to quickly push through Democratic judicial nominations, and today there are only 4 of the 12 judicial circuits with majorities appointed by Republican presidents. Expect that to change and for the circuit courts to become more balanced.

Legislation, however, is still subject to the 60-vote Senate filibuster of bills passed quickly by the larger Republican majority in the House. Thus, “change” may come to Washington, but perhaps not as easily or as quickly as some voters may anticipate.

ARTICLE BY Harold P. Coxson of Ogletree, Deakins, Nash, Smoak & Stewart, P.C.

© 2017, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.

You’re Hired: Labor Policy Under Trump Administration and 115th Congress

labor policy trump administrationIf personnel reflect policy, President-elect Donald Trump’s selection of Andrew Puzder as the next Secretary of Labor signals a turning point for labor and employment policy.  The Chief Executive Officer of CKE Restaurants, Mr. Puzder has been critical of many of the Obama administration’s labor initiatives.  His efforts to carry out Mr. Trump’s job creation agenda will likely intersect with action in Congress and in the courts, where several pivotal labor-related cases are currently being heard on appeal.  These dynamics mean that the early days of the Trump administration and the 115th Congress will be a time of flux for employers, with changes to existing regulations and new legislative and regulatory initiatives.  This article details several of the most important policy areas that are likely to undergo change.  Employers should consider engaging in the policymaking process now to help shape legislation and regulations.

New Players, New Priorities

As the leader of a major fast-food company, Mr. Puzder brings a “real-world” perspective on how policy decisions affect employers and employees.  He has been a vocal critic of several Obama-era labor initiatives, especially its activities with respect to the joint employer standard, expanded eligibility for overtime pay and paid leave, among others.

Mr. Puzder’s views on these topics are largely in alignment with the Republican leadership of the Congressional committees with jurisdiction over labor and employment issues.  On the House Education and Workforce Committee, Representative Virginia Foxx (R-NC) is expected to become the new Chair following the retirement of current Chair John Kline (R-MN).  Representative Foxx has promised “to do whatever [Republicans] can to stop the rules coming out of the [Obama] Labor Department – either block them or repeal them.”  She has named the repeal of the Department’s overtime and persuader rules as top priorities, in addition to the National Labor Relations Board’s (NLRB) broadened joint employer standard and rules related to the union election process.  Representative Bobby Scott (D-VA) will remain the Ranking Member on Education and Workforce.

In the Senate, Senator Lamar Alexander (R-TN) will remain the Chairman of the Senate Health, Education, Labor, and Pensions Committee (HELP), while Senator Patty Murray (D-WA) will continue to serve as the top Democratic or ranking member.

Overtime Rule

One of the key labor policies that Mr. Puzder, Rep. Foxx, and their Republican colleagues may consider for reform are the Obama administration’s initiatives with respect to overtime pay.  The overtime rule, which was published in the Federal Register on May 23, 2016, revises income thresholds for determining overtime pay for executive, administrative, professional, outside sales, and white collar employees exempt from regular minimum wage and overtime pay requirements, and raises the cut-off salary of employees eligible for overtime pay from $23,660 to $47,476 per year.  The rule was due to become effective on December 1, 2016.

However, a U.S. District Court Judge in Texas on November 22 issued a nationwide preliminary injunction blocking implementation of the overtime rule, just a few days before its December 1 effective date.[1] This preliminary injunction has given businesses that had not yet moved to comply with the new rules a respite from updating their systems and notifying employees.  In turn, knowing that some businesses have not yet had to comply, Congress has now prioritized repeal of the overtime rule as an early order of business in 2017.

Under complex procedural rules, repeal of the overtime rule could possibly be accomplished through use of the Congressional Review Act (CRA).  CRA is a 1996 law that allows Congress to repeal new “major rules” through an expedited resolution of disapproval as long as those regulations were issued within sixty legislative days in the House or session days in the Senate of the start of the new administration.  With the House and Senate still holding occasional pro forma sessions into mid-December, the Overtime Rule is in a grey area of the CRA window, and the final determination will be made by the Office of the Clerk.  Notably, the Senate Republican Policy Committee has identified the Overtime Rule as a potential candidate for review under the CRA.[2]

Paid Leave

Another key issue is the Department of Labor’s (DOL’s) final September 2016 rule implementing President Obama’s Executive Order 13706 to require federal contractors and subcontractors to provide certain employees with up to seven days of paid sick leave annually.  President-elect Trump has not made any statements regarding his position on mandated paid sick leave for federal contractors.  Delivering on a broad campaign promise to rescind executive orders issued by President Obama, it is possible that President-elect Trump may repeal the executive order, along with other Obama executive orders, during his first weeks in office.

On the other hand, the Trump administration and 115th Congress also could address issues surrounding paid leave.  During the campaign, the President-elect proposed six weeks of mandatory paid maternity leave, as well as tax incentives to support child and elder care.  Although the details of the plan, including what percentage of their salaries mothers will receive, have yet to be clarified, it could offer an opportunity for Democrats and Republicans to find common ground.

Minimum Wage

President-elect Trump has not taken a strong position on the federal minimum wage and has indicated an openness to an increase in the minimum wage as recently as July 2016.

Federal minimum wage legislation was last considered by Congress in April 2014, but the Minimum Wage Fairness Act could not garner enough support in the Senate to proceed to a vote.  This act would have gradually raised the federal minimum wage from $7.25 to $10.10 per hour over a two-year period.  Notably, there were attempts at compromise, which although unsuccessful could serve as a foundation in the case the issue moves forward, perhaps prompted by state-by-state action.[3] For example, Senator Susan Collins (R-ME) proposed to increase the federal minimum wage to $9 per hour, a wage that the Congressional Budget Office had projected would greatly reduce the negative impact on jobs.[4]

A Trump administration may look favorably towards an increase in the minimum wage — indeed, in a television appearance Mr. Puzder said that he was “not opposed to raising the minimum wage rationally.”  However, Congressional Republicans have generally not voiced support for increasing the minimum wage, so prospects for action remain unclear.

Joint Employer Standard

Mr. Puzder and Rep. Foxx will likely prioritize the NLRB’s joint employer standard for repeal.  The NLRB ruling broadens the standard for who is considered an employer from the company that is currently exercising control, to any company with authority to exercise control over the employee.  The result is that when two or more companies are involved with a worker — such as a temporary employment agency and the current employer — they may be considered joint employers.  The implication of this change is that it creates stronger grounds for organizing unions that represent workers at both of the joint employers, thus giving employees more leverage.  The change also increases exposure to liability because a company can now be held liable for labor violations committed by sub-contractors, franchisees, and other companies to which it outsourced responsibilities.

The issue remains unsettled into the next administration because the underlying case that prompted the NLRB decision is currently on appeal in the D.C. Circuit.[5]  In Congress, HELP Committee Chairman Lamar Alexander (R-TN) and House Education and the Workforce Chairman Kline introduced a bill to repeal the changes to the joint employer standard created by the NLRB’s ruling in Browning-Ferris Industries.  The Protecting Local Business Opportunity Act provides potential models for the next Congress.  The legislation would reaffirm that multiple employers must have “actual, direct, and immediate” control over employees to be considered joint employers, rather than the “indirect” or even “potential” control over employment decisions permitted under the NLRB’s new joint employer standard. Because the broadened standard was established by an NLRB ruling, it would require either future litigation or legislative action to overturn.

Additionally, the Committee on Education and the Workforce has been focusing its attention on this issue in part by conducting a year-long investigation of the Occupational Safety and Health Administration (OSHA) joint employer standard, which, they claim, instructs OSHA’s inspectors to “delve into unrelated matters – financial and otherwise – far outside their expertise,” and drifts from the agency’s core mission of examining workplace health and safety in a way that benefits union leaders.  In October, the Committee wrote a letter to Labor Secretary Thomas Perez expressing these concerns.

Persuader Rule

In March of this year, the DOL finalized its much-anticipated “persuader rule,” which requires employers to report any third-party arrangement entered into with the goal of persuading employees, whether directly or indirectly, regarding their right to organize or bargain collectively.  Critics of the rule argue that it will have a chilling effect on employer speech and prevent employers from hiring legal counsel or speaking on labor issues.

Since its passage, the persuader rule has faced significant hurdles in the form of lawsuits challenging its enforcement as unconstitutional, unlawful, and exceeding DOL’s authority.  Although it was set to go into effect July 1, a U.S. District Court judge in Texas granted a nationwide preliminary and later permanent injunction against enforcement of the rule.[6] The DOL is appealing the injunctive relief to the U.S. Court of Appeals for the Fifth Circuit.[7] However, since the persuader rule is based on an administrative determination of the DOL, it is likely that Trump administration changes in DOL priorities or personnel would moot the appeal at some point.  Relying in part on the assumption that a Trump DOL would abandon the rule and the permanent nationwide injunction issued in Texas, a federal judge in Minnesota faced with a similar case recently stayed that litigation, despite his earlier decision not to grant injunctive relief.[8] The split suggests that the issue could ultimately make its way to a federal court of appeals or to the Supreme Court.

Blacklisting Rule

Another DOL regulation following a path similar to that of the Persuader Rule is the DOL’s guidance for implementing E.O. 13673, Fair Pay and Safe Workplaces.  The DOL’s rule is popularly referred to as the “Blacklisting Rule,” and it was published on August 25, 2016.  E.O. 13673 requires that federal contracting officers consider a contractor’s compliance with certain federal and state labor laws as part of the determination of contractor responsibility in awarding federal contracts. The Blacklisting Rule requires that federal contractors bidding over $500,000 report violations of fourteen different labor laws, as well as similar state laws, to the federal government.  Contractors are obligated to report violations even if they are still being contested in court.

The rule was due to become effective on October 25, but just two days before that date, the U.S. District Court for the Eastern District of Texas granted a temporary injunction blocking parts of the rule from going into effect. Judge Marcia Crone ruled that the portion requiring disclosure of labor law violations — even if those violations are being challenged in court or have been settled without any actual violation of the law — was in violation of the First Amendment.[9]  While the injunction is temporary, it demonstrates that the court is likely to eventually rule in favor of the plaintiffs, Associated Builders and Contractors, and strike down the rule.  The ruling left intact the rule’s paycheck transparency provision, which requires employers to note on paychecks information such as whether the person is an independent contractor or an employee under the Fair Labor Standards Act.

In the event that the injunction is lifted, Congress may pursue repeal of the Blacklisting Rule through use of the CRA.  Since the rule was published on August 25, it falls within the CRA’s sixty-legislative or -session day window.  Similar to the Overtime Rule, the Senate Republican Policy Committee has identified the Blacklisting Rule as a potential candidate for review under the CRA.[10]

Predictive Scheduling

Proposed legislation to regulate work schedules has emerged at the state and local levels in the wake of San Francisco’s enactment of its “Retail Workers Bill of Rights” ordinance in November 2014.  A similar law, which applies to retail and food service establishments employing 500 or more workers, will take effect in Seattle on July 1, 2017.  The provisions of these scheduling laws vary, but most require employers to give good faith estimates of an employee’s work hours in advance and provide additional compensation to employees whose hours are changed on short notice, among other provisions.

Proposals similar to the San Francisco and Seattle laws are pending in state legislatures in California, Connecticut, Illinois, Indiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New York, Oregon, and Rhode Island, as well as in major cities like New York and at the federal level.

In the event state and local scheduling laws begin to gain momentum, the Republican majorities in the House and Senate could advance federal legislation to preempt such efforts. As a veteran of the fast-food industry, which has been a target of the push for restrictive scheduling, Mr. Puzder could be sympathetic to calls for a federal solution that balances the interests of employers and employees.

Conclusion

The Trump administration and leadership of the 115th Congress are charting a different course with respect to labor and employment policy than the outgoing Obama administration on the issues described above as well as many others.  The incoming administration and Congress will almost certainly advance efforts to repeal some of the Obama administration’s key labor and employment initiatives, and Congress will also position itself to react to state-based initiatives and legal challenges.  These developments promise a period of changing obligations for employers, as well as opportunities to shape the future of this important policy area.

Labor Regulation/Issue Status Options for Repeal/Change
Overtime Rule Under temporary injunction
  • Possibly CRA repeal
  • Congressional action
  • Final court ruling
Paid Leave for Federal Contractors Obama executive order and DOL implementing regulation passed
  • President-elect Trump can repeal with an executive order
Federal Paid Leave Legislation Currently none
  • Congressional action
Federal Minimum Wage Currently $7.25; no pending Congressional action
  • Congressional action
Joint Employer Standard NLRB ruling issued, currently on appeal in the D.C. Circuit
  • Congressional action
  • Final court ruling
Persuader Rule Under permanent injunction
  • Congressional action
  • Final court ruling
Blacklisting Rule Under temporary injunction
  • CRA repeal
  • Congressional action
  • Final court ruling
  • Reversal of underlying executive order
Predictive Scheduling This is currently being handled at the state and local level
  • Congressional action
ARTICLE BY Karishma Shah Page, Amy Carnevale & Peter V. Nelson of K & L Gates
Copyright 2016 K & L Gates

[1] State of Nevada v. U.S. Dep’t of Labor, No. 4:16-CV-00731 (E.D. Tex. Nov. 22, 2016).

[2] Reining in Obama Regulatory Overreach, SENATE REPUBLICAN POL’Y COMM. (Dec. 6, 2016).

[3] Alexander Bolton, Centrist Republicans Cool to Minimum Wage Hike Compromise, THE HILL (Apr. 4, 2014 6:00AM).

[4] Id.

[5] Browning-Ferris Indus. of California, Inc. d/b/a Newby Island Recyclery, 362 NLRB No. 186 (Aug. 27, 2015).

[6] Nat’l Fed’n of Indep. Bus. v. Perez, Case No. 5:16-cv-00066-C (N.D. Tex. June 27, 2016) (preliminary injunction); Nat’l Fed’n of Indep. Bus. v. Perez, Case No. 5:16-cv-00066 (N.D. Tex. Nov. 16, 2016) (permanent injunction).

[7] Lawrence E. Dubé, DOL Persuader Rule Blocked by Federal Judge, BLOOMBERG BNA (Nov. 17, 2016) https://www.bna.com/dol-persuader-rule-n57982082867/.

[8] Vin Gurrieri, Persuader Case Halted Pending Trump DOL Action, LAW 360 (Dec. 8, 2016, 6:27 PM), https://www.law360.com/articles/870551/persuader-case-halted-pending-trump-dol-action;  Labnet, Inc., d/b/a Worklaw Network v. U.S. Dep’t of Labor, Case No. 16-CV-0844 (PJS/KMM) (D. Minn. June 22, 2016) (stay of proceedings issued on Dec. 7).

[9] Assoc. Builders and Contractors of Southeast Texas v. Anne Rung, Administrator, Office of Fed. Procurement Policy, Office of Mgmt. and Budget, Case No. 1:16-CV-425 (E.D. Tex. Oct. 23, 2016).

[10] Reining in Obama Regulatory Overreach, SENATE REPUBLICAN POL’Y COMM. (Dec. 6, 2016) http://www.rpc.senate.gov/policy-papers/reining-in-obama-regulatory-overreach.

San Marcos, Texas Joins Growing Ranks of Cities Raising Minimum Wage to $15 Dollars

San Marcos Texas Minimum wageTaking its cue from other, larger cities, San Marcos, Texas, recently voted to raise the minimum wage to $15 dollars per hour for businesses applying for tax breaks and others incentives to build or expand in the city. In addition to the higher wage, businesses must also offer all employees and their dependents benefits equal to those offered to full-time employees. The San Marcos City Council saw requiring the higher pay rate as a way businesses could return the favor of receiving tax incentives to the local economy. This new law applies only to future businesses seeking economic development incentives, and not companies already doing business in San Marcos.  The city joins the ranks of cities such as Los Angeles, Seattle, San Francisco, and Washington, D.C. that require a “living wage.”

Key Takeaways for Businesses in San Marcos

Businesses seeking tax incentives to build or expand in San Marcos need to be prepared to pay a higher minimum wage and offer benefits to all of employees. This trend is likely to continue in other cities across the nation.

ARTICLE BY Raven Applebaum of Ogletree, Deakins, Nash, Smoak & Stewart, P.C.

© 2016, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.

Winter Is Coming —Wage and Hour Considerations During Weather-Related Emergencies

winter weather winter is comingWith winter storms around the corner, it’s the right time to revisit employer rights and responsibilities during a weather-related emergency or other major disruption.  We discuss below some typical scenarios that you are likely to face during weather-related or other emergencies, and the consequences under the wage and hour laws.

“Our office was closed for a few days because of the storm.  Do we have to pay our employees for those days?”

Non-exempt (i.e., overtime-eligible) employees generally have to be paid only for hours they actually work.  So if a non-exempt employee cannot work because your office is closed—or because the employee cannot make it into the office because of weather-related conditions—the wage and hour laws do not require you to pay the employee for non-working time.  On the other hand, a non-exempt employee who performs work remotely (say, from home, from a temporary site, or from a coffee shop) is entitled to pay for the time worked.

An exception exists for salaried non-exempt employees, who may—depending on the terms of their agreement with the employer—expect to receive their full weekly salary regardless of how many hours they actually work that week.

Exempt employees (i.e., employees not entitled to overtime pay) generally receive their full salary for any week in which the office is closed for less than a full workweek.  Employers who prorate an exempt employee’s weekly salary because of office closure risk losing the exemption for the week in question—a consequence that may or may not be material depending on how many hours the employee works that week.  If your office is closed for an entire workweek, you can inform all employees of the closure and you need not pay them for that week (unless they are working remotely).

Be sure to check any agreements with exempt employees—as well as offer letters, policies, or other statements regarding the nature of their pay—which may also limit your ability to prorate salary during office closures and/or give rise to pay claims.

 “Our office was open, but some of our staff could not make it in because of the weather.  Do we need to pay them?

As described above, non-exempt employees generally must be paid only for hours they actually work, but salaried non-exempt employees may have a contractual right to receive their full salary for any week in which they perform any work.

Exempt employees who are absent from work for one or more full days because of inclement weather, including because of transportation difficulties, are considered to be absent for personal reasons (if the office is otherwise open).  Absent a contractual right to be paid, they do not have to be paid for the days they fail to report to work, and your failure to pay them for such days will not jeopardize their exempt status.  Deductions for partial-day absences under these circumstances, however, will violate the salary basis rules and jeopardize the exemption for that week.

“Because of flooding or another dangerous condition, we had to close our office after a number of employees had already reported for work.  Do we have to pay them for the day?” 

Exempt employees who report to work but are turned away or sent home by their employer generally must receive their salary for that day.  Non-exempt employees who report to work but are turned away or sent home must be paid for all hours actually worked that day.  In addition, some states have “reporting pay” or “call in” pay laws that require employers to pay non-exempt employees a minimum number of hours’ pay for any day in which they report to work.

“Our payroll records were destroyed in the storm, or are inaccessible.  How do we pay our employees?”

Exempt employees paid on a salary basis should receive their normal salary payment (less any permissible full-day deductions).  For hourly non-exempt employees, use a reasonable method to determine the number of hours worked, such as:

  • Asking the employees themselves to submit a certified time sheet indicating the number of hours they worked;

  • Recreating hours worked through electronic records (g., card/ID swipes or log-ins/log-outs);

  • Making assumptions based on an employee’s fixed or regular schedule of hours;

  • Asking managers to verify hours worked; or

  • Some combination of the above.

“Can we require our employees to use available vacation days or other paid time off during a weather-related office closure or absence?”

Yes.  Under federal law and the laws of most states, employers are not required to provide vacation benefits or other paid time off to employees.  Such benefits are generally a matter of agreement between employer and employee, or set forth in the employer’s handbook or policy.  Under these circumstances, there is no prohibition on an employer giving PTO and requiring that it be taken on specific days.  So long as it’s permitted under the applicable PTO policy or agreement, employers can reduce an employee’s accrued PTO bank for either partial or full day absences, without violating the wage and hour laws.

“Can we give our staff additional paid or unpaid time off to assist in recovery or relief efforts?”

Employers can grant their employees additional paid and unpaid time off for any reason, including assisting with storm-related recovery and relief efforts.

Employees who are assisting in relief efforts as part of the National Guard or Armed Forces Reserves may have additional rights under federal and state law.

Because of the snow, it took our employees twice as long to commute to work as opposed to most other days.  Do we need to pay them for the additional commute time?”

Time spent in an employee’s normal commute from home to work at the beginning of the workday, and from work to home at the end of the workday, is not considered time worked and need not be paid.

“Some of my employees are members of a union.  Do these rules apply to them as well?”

Collective bargaining agreements generally cannot waive or reduce the protections available to employees under federal, state, or local wage and hour laws.  Collective bargaining agreements can, however—and often do—impose different and additional pay, time off, and other obligations on employers.  Employers with unionized employees should consider all applicable agreements when analyzing their rights and responsibilities in the context of a weather-related emergency or other “force majeure” event.

“We want to do more for our employees, to go above and beyond what the law requires. What are some things we can do?”

There are many options available to an employer who wants to do more for its employees, including:

  • Granting additional paid or unpaid time off

  • Allowing employees to donate accrued paid time off to other employees (i.e., leave-sharing plans)

  • Allowing affected employees to work remotely for some period of time

  • Making emergency advances of salary or loans

  • Setting up disaster-relief programs or payments

  • Making certain payments to assist disaster victims that can be excluded from their taxable income

  • Setting up food and clothing drives

Final Thoughts

Employers making decisions about scheduling, pay, and time off during weather-related emergencies and disruptions should bear in mind the potential implications on employee morale.  Flexibility and support in times of need—or the absence of them—are likely to be remembered long after the storm passes.

As always, check state and local laws—as well as your contracts and policies—before making any final decisions regarding wages, hours, or time off.

ARTICLE BY Allan S Bloom & Arielle E. Kobetz of Proskauer Rose LLP
© 2016 Proskauer Rose LLP.

Employment Based Immigration: New Form I-9, Employment Eligibility Verification

Employment Eligibility VerificationOn November 14, 2016, U.S. Citizenship and Immigration Services (USCIS) published a revised version of Form I-9, Employment Eligibility Verification (“Form I-9”). Employers can continue to use the most recent version dated March 8, 2013 until January 22, 2017. By January 22, 2017, employers must use only the new version or face serious fines.

Form I-9 requirements were established in November 1986 when Congress passed the Immigration Reform and Control Act (IRCA). IRCA prohibits employers from hiring people, including U.S. citizens, for employment in the United States without verifying their identity and employment authorization using Form I-9.

Among the changes in the new version, Section 1 asks for “other last names used” rather than “other names used,” and streamlines certification for certain foreign nationals. The revised Form I-9 is easier to complete using a computer. Enhancements include drop-down lists and calendars for filling in dates, on-screen instructions for each blank item, easy access to the full instructions, and an option to clear the form and start over.

Additionally, prompts have been added to ensure the information is entered correctly, and now employers can enter multiple preparers and translators. There is a dedicated area for including all additional information rather than having to add it in the margins. There is also a supplemental page for the preparer/translator. When the employer prints the completed form, a quick response (QR) code is automatically generated, which can be read by most QR readers and may be used to streamline audit processes.

The instructions have been separated from the form, consistent with other USCIS forms, and include specific instructions for completing each field.

ARTICLE BY Elise S. Levasseur of Dickinson Wright PLLC

© Copyright 2016 Dickinson Wright PLLC

Alaska Minimum Wage, Tip Credit, and Overtime Rights Ruling: Gallo’s and Taco Kings

alaska wage and hourOn Dec. 12, 2016 the Alaska Wage and Hour Division announced a settlement with a small chain of restaurants local to Alaska in the amount of $835,000.00.[1] Considering this is a small locally owned business this a staggering amount.  To put this in perspective there are a total of only 9 eating establishments involved, three Gallo’s and six Taco Kings. Gallo’s are traditional sit down restaurants with full service.  Taco Kings are small walk up and order off a menu board establishments with self-serve soda fountains and condiments and no wait staff.

In conversations with persons at both Gallo’s and the Alaska Wage and Hour Division it became clear that the overtime issues had been ongoing for several years.  The current settlement was related to an audit conducted by the Alaska Wage and Hour Division and covered the period of Nov. 2013 to Dec. 2015.[2]  Prior to the recent settlement, dating back to 2011, Gallo’s/Taco King had settled six previous complaints for a total of $50,000.[3]  It was this systemic abuse of the Alaska overtime law that led to the audit which revealed overtime being owed to 159 employees.[4]

Alaska law requires workers be paid minimum wage (currently $9.75/hr. and increasing to $9.80/hr. on Jan.1, 2017) with time and a half paid for overtime over 40 hours in a week.[5]  Alaska does not allow for a tip credit[6] and as such this was a straight overtime case.[7]

Despite this being an overtime violation case, a settlement of this significance will tend to catch the attention of restaurant workers around the country.  Add to that the recent nationwide injunction issued by Judge Mazzant with respect to the Final Rule,[8] there is likely to be heightened awareness of minimum wage and overtime rights among workers in general.  As such it is probably worthwhile for practitioners to remind their clients and perhaps update policies with respect to tipped employees.

Federal wage law as it relates to wait staff allows for a tip credit, but still requires that wait staff earn at least minimum wage when the hourly wage and tips are added up for the hours worked.[9]

One of the requirements of the tip credit often overlooked is the requirement that the employer inform the employee of the tip credit.  According to DOL Wage and Hour Division Fact Sheet #15: Tipped Employees Under the Fair Labor Standards Act, employers must inform tipped employees of the following before the tip credit can be applied:

1) The amount of cash wage the employer is paying a tipped employee, which must be at least $2.13 per hour;

2) The additional amount claimed by the employer as a tip credit, which cannot exceed $5.12 (the difference between the minimum required cash wage of $2.13 and the current minimum wage of $7.25);

3) That the tip credit claimed by the employer cannot exceed the amount of tips actually received by the tipped employee;

4) That all tips received by the tipped employee are to be retained by the employee except for a valid tip pooling arrangement limited to employees who customarily and regularly receive tips; and

5) That the tip credit will not apply to any tipped employee unless the employee has been informed of these tip credit provisions.

Failure to properly inform the tipped employee of the credit entitles the worker to receive both the Federal Minimum Wage of $7.75 and all of the tips received.[10]  Although the notification can be either verbal or written, it is advisable that employers have their employees sign a formal notification that the tip credit allowed under Federal law is being utilized by the employer to ensure minimum wage requirements are being met.

Cases like Gallos/Taco King are becoming more frequent as workers become more educated about their rights.  While many employers are taking advantage of employees’ ignorance of employment laws, in particular minimum wage/overtime, many more are making innocent mistakes which could result in significant violations. Now is the perfect time to be proactive to make sure employers who have tipped employees are not hit with significant wage violations for not having informed their employees of the tip credit.

ARTICLE BY Jim Arkell of University of Alaska Fairbanks

© 2016 University of Alaska Fairbanks

[1] Press Release No. 16-45 – State of Alaska Dept. of Labor and Workforce Dev., Heidi Drygas, Commissioner http://labor.alaska.gov/news/2016/news16-45.pdf

[2] Conversation with Commissioners office of the Alaska Wage and Hour Division on Dec. 14, 2016. 

[3] Id

[4] Above Note i

[5] Alaska Statute Sec. 23.10.065.

[6] Id.  According to the DOL 6 other states (California, Minnesota, Montana, Nevada, Oregon and Washington) and Guam also do not allow for a tip credit.  https://www.dol.gov/whd/state/tipped.htm#Alaska

[7] Above Note ii

[8] Nevada et al. v. U.S. Department of Labor et al., —F.3d—, 2016 WL 6879615 (Civil Action No.4:16-CV-00731) U.S.D.C (E.D. Tex. Nov.22, 2016).

[9] 29 U.S. Code Sec. 3(m)

[10] DOL Wage and Hour Division Fact Sheet #15: Tipped Employees Under the Fair Labor Standards Act (Revised July 2013)

NY State Prepared to Increase Salary Level for Certain Overtime Exceptions

New York OvertimeProposed amendments to the New York State Wage Orders significantly increase the salary levels needed for employers to qualify for the executive and administrative exceptions under the New York Labor Law.

Last month, a US district court in Texas enjoined the US Department of Labor’s proposed revisions to regulations regarding exemption status under the Fair Labor Standards Act, which were scheduled to go into effect on December 1, 2016. In light of this injunction, there is no federal legal requirement at this time to increase the weekly salary for individuals to be exempt from overtime to the $913 per week that the new Regulations would have required under federal law. This injunction is being appealed, and employers should be prepared to act quickly in case the district court’s decision is overturned and the injunction lifted.

However, for New York employers, that is only half of the issue.

Employers in New York must also simultaneously comply with the state’s salary basis floor for the executive and administrative exceptions under the New York Labor Law (NYLL). That minimum is presently $675 per week or $35,100 per year. If that amount is not paid, employers cannot claim executive and administrative exception status under the NYLL regardless of the duties the individual performs, and such individuals will be eligible for additional compensation for hours worked over 40 per workweek even if they are exempt under federal law. The New York salary minimum is a mandatory pre-condition to be completely excepted from the state overtime requirements.

Moreover, proposed amendments will very likely increase these salary basis minimums for the executive and administrative exceptions effective December 31, 2016, with scheduled increases in subsequent years. Specifically, the New York State Department of Labor (NYSDOL) has amended the state’s Wage Orders to increase the salary threshold for the executive and administrative exceptions to $825 per week for large employers in New York City. If adopted, these regulations would amend the salary basis threshold in the NYSDOL’s Wage Orders covering the building services industry (12 N.Y.C.R.R. 141), miscellaneous industries and occupations (12 N.Y.C.R.R. 142), nonprofitmaking institutions (12 N.Y.C.R.R. 143), and hospitality industry (12 N.Y.C.R.R. 146). The inclusion of the miscellaneous industries Wage Order will extend these amendments to nearly all employers.

The public comment period on these proposed changes closed on December 3, 2016. If the proposed amendments are finalized by the NYSDOL, they would become effective on December 31, 2016.

Proposed Amendments to Salary Threshold for Executive and Administrative Exceptions

The proposed salary basis amendments contain different salary requirements based on an employer’s size and geographic location within New York State. Specifically, there are different salary requirements for “large employers” in New York City (employers with 11 or more employees), for “small employers” in New York City (employers with 10 or fewer employees), “downstate” employers (employers in Nassau, Suffolk, and Westchester counties), and employers in the “remainder of state” (employers outside of New York City, Nassau, Suffolk, and Westchester counties).

The below chart provides an overview of the proposed changes:

NYC

Large Employers (11 or more employees)

 NYC

Small Employers (10 or fewer employees)

 Employers in Nassau, Suffolk, and Westchester Counties Remainder of NY State Employers
Current (as of December 31, 2015) $675.00 per week $675.00 per week $675.00 per week $675.00 per week
On and after December 31, 2016 $825.00 per week $787.50 per week $750.00 per week $727.50 per week
On and after December 31, 2017 $975.00 per week $900.00 per week $825.00 per week $780.00 per week
On and after December 31, 2018 $1,125.00 per week $1,012.50 per week $900.00 per week $832.00 per week
On and after December 31, 2019 – $1,125.00 per week $975.00 per week $885.00 per week
On and after December 31, 2020 – – $1,050.00 per week $937.50 per week
On and after December 31, 2021 – – $1,125.00 per week –

Effective Date

The effective date of the proposed amendments is December 31, 2016. While it is possible that the NYSDOL will withdraw or change the amendments before this date, it is more likely that they will be adopted without alterations and become effective on December 31, 2016.

Recommended Next Steps

In light of the increase in the salary threshold for the executive and administrative exceptions, employers should quickly identify and evaluate positions compensated below the new threshold and decide whether to reclassify employees as eligible for overtime under state and/or federal law, or raise their salaries. Employers should consider the hours worked for these employees to estimate the potential cost of paying overtime.

For those employees who will be reclassified as overtime eligible, employers should prepare talking points for managers and employees about the change, the reason for the change, and how the change will impact their compensation, benefits, and opportunities for advancement, if at all. Employers should also develop training and robust time reporting policies for reclassified workers who will not be accustomed to recording hours worked.

To the extent that reclassified employees previously were receiving bonuses, commissions, or other incentive compensation, employers will need to reevaluate those forms of compensation or carefully consider how to factor them into the regular rate of now-hourly workers. Employers should also be prepared to follow up and audit timekeeping practices for newly reclassified employees to ensure that they are following proper processes and procedures.

ARTICLE BY Samuel S. Shaulson & Christopher A. Parlo of Morgan, Lewis & Bockius LLP

Copyright © 2016 by Morgan, Lewis & Bockius LLP. All Rights Reserved.