Breaking Federal Developments in Labor and Employment September 2017

Salary Test for Exempt Status Invalidated

Under the prior administration the DOL had issued amendments to certain exemptions from the overtime requirements of the Fair Labor Standards Act (“FLSA”), which would have dramatically increased the number of employees eligible for overtime pay to over 4 million workers within the first year of implementation. The amendments were to be effective on December 1, 2016, however their implementation was stayed by a federal judge last November, as reported in our November 2016 Client Alert.

The new regulations were to essentially double the salary threshold for employees who would be exempt from overtime payments, assuming they met one of the three exemptions, from $455 per week or $23,660 per year, to $913 per week or $47,476 per year. Under these regulations, even if employees performed duties that would otherwise indicate they were exempt from overtime, if they made less than $47,476 per year, their employers would have to pay them overtime regardless of their duties. Just last week, a federal judge in Texas invalidated the new regulations, and specifically found that, while a salary test was permissible, the minimum threshold of over 47K per year was too high, and in fact obviated the need for any other duties based analysis, which has always been at the heart of the executive, administrative, or professional exemptions.

Employer Tip

For the time being, employers can feel comfortable relying on the duties test to determine eligibility for overtime, however, the DOL has indicated that it is still looking at the minimum salary threshold, and employers should expect that threshold to increase from the current number of $23,660. Employers would be well advised to take a look at their currently classified exempt employees making between 24-35K per year to determine whether such employees truly meet the duties test, and whether such employees are being paid at appropriate levels.

EEO-1 Salary Reporting Requirements Blocked

The new EEO-1 forms with reporting information for 2017 were to have included salary information in addition to the usual reporting requirements. The EEOC was presumably intending to use such information to target companies for Equal Pay investigations and complaints. Reporting is still due using the EEO-1 forms in March 2018, but the OMB has just announced that the forms are not going to require the reporting of salary information by gender and other protected characteristics, so employers have a reprieve with respect to federal reporting requirements.

Employer Tip

Employers should be mindful that the state and federal equal pay laws are still applicable, and it is always a good idea to do a self-audit of comparative pay data based on gender, race, and other protected characteristics in order to ensure compliance with such laws. Please also refer back to our April 2017 Client Alert with respect to NY pay equity laws and the salary history ban that goes into effect next month for NY employers.

New I-9 Form in Effect September 18, 2017

Employers should be aware that a new I-9 form is going into effect on September 18th. The link to the new form can be found here.

This post was written by David I. Rosen of Sills Cummis & Gross P.C. © Copyright 2017

Sign of Future Changes? DOL Proposes 18-Month Extension of Transition Period for Compliance With ERISA “Fiduciary Investment Advice” Rule

On August 9, the US Department of Labor (DOL) announced in a court filing that it has proposed an 18-month extension of the full implementation of the Best Interest Contract Exemption (the “BIC Exemption”) under the ERISA fiduciary investment advice rule. The Proposed Extension would also apply to the Principal Transaction Exemption and Prohibited Transaction Exemption 84-24 (together with the BIC Exemption, the “Exemptions”). In April of this year, the DOL extended the effective date of the Rule until June 9 and limited the requirements of the Exemptions to only require compliance with the “impartial conduct standards” (ICS) through December 31 (the “Transition Period”). If the Proposed Extension is approved, full compliance with the Exemptions will not be required until July 1, 2019.

As described in our earlier advisory, “Compliance With the ERISA Fiduciary Advice Rule for Private Investment Fund Managers and Sponsors and Managed Account Advisers: Beginning June 9, 2017,” compliance with the ICS generally requires that an investment advice fiduciary (1) act in the “best interest” of plan participants and IRA owners; (2) receive no more than “reasonable compensation” (as defined under ERISA and the Internal Revenue Code); and (3) make no materially misleading statements about recommended transactions, fees, compensation and conflicts of interest.

The Proposed Extension was submitted to the Office of Management and Budget (OMB) in the form of an amendment to each of the Exemptions.

This post was written by Henry Bregstein Wendy E. Cohen David Y. Dickstein Jack P. Governale Christian B. Hennion and Gary W. Howell of Katten Muchin Rosenman LLP
For more legal analysis visit the National Law Review.

DOL Proposes New LCA, H-1B Complaint Form

Following through on its April 3, 2017announcement that it was considering changes to the Labor Condition Application (LCA), the Department of Labor (DOL) published a notice in the Federal Register on August 3, 2017, of its proposed revisions to the ETA 9035 or LCA. A certified LCA must be included with every H-1B petition filed with the U.S. Citizenship and Immigration Services.  DOL’s Employment and Training Administration posted the proposed LCA on its website saying the changes would “better protect American workers, confront fraud, and increase transparency.” DOL said it would accept comments until Oct. 2, 2017.

The revisions in the form reflect the focus of the Trump Administration on increased enforcement of third-party placement and on H-1B dependent employers. The new LCA asks whether the sponsored worker will be “placed with a secondary employer” and, if yes, asks for the legal name of the secondary employer. The new LCA also requires H-1B dependent employers to complete an additional list of questions set out in an appendix if the sponsored worker is exempt from H-1B dependency obligations. In addition, the attestation language in the form is more expansive. For example, the wage attestation in the new LCA specifies that employers may not deduct attorneys’ fees or costs in connection with a visa petition.

At the same time it released its new LCA form, the DOL also posted its revised WH-4, Nonimmigrant Worker Information Form, which is the form individuals may use to submit complaints to DOL about fraud or misconduct in H-1B, H-1B1 or E-3 visa programs. This form is utilized by DOL’s Wage and Hour Division, which is the office that conducts LCA audits.

This post was written byRebecca B. Schechter of  Greenberg Traurig, LLP.
More information on Department of Labor at the National Law Review.

Department of Labor Signals Move to Limit Definition of “Employment”

On June 7, 2017, U.S. Secretary of Labor Alexander Acosta announced the immediate withdrawal of the U.S. Department of Labor’s (DOL’s) 2015 and 2016 Administrative Interpretations regarding joint employment and independent contractors. While this withdrawal signals the current administration’s attempt to limit the expansive definition of “employment,” the DOL made clear that it does not relieve companies of their legal obligations under the Fair Labor Standards Act (FLSA) and the Migrant and Seasonal Agricultural Worker Protection Act.

Many businesses had argued these obligations were unduly burdensome on employers. For the past several years, the Wage and Hour Division (WHD) has worked with the IRS and numerous states to combat employee misclassification and to ensure that workers receive all the wages, benefits and protections to which they are entitled. In Fiscal Year 2015, for example, WHD investigations resulted in some $74 million in back wages for more than 102,000 workers, many of which were concentrated in traditionally low-wage industries such as janitorial, temporary help, food service, day care and hospitality. Withdrawal of the Administrative Interpretations may be the first step to rein in these enforcement efforts.

Specifically, the DOL has withdrawn guidance regarding:

  • The Presumption That Most Workers Are Employees: The withdrawn guidance on independent contractors stated that “most workers are employees” under the FLSA. United States Supreme Court precedent makes clear that there is no single rule or test for determining whether an individual is an employee or an independent contractor for purposes of the FLSA. Thus, even now, the inquiry into independent contractor status remains complex and fact-intensive.

  • The Expansion of the “Joint Employer” Definition: The withdrawn guidance on joint employment distinguished between “horizontal” joint employment and “vertical” joint employment scenarios. Under this guidance, the joint employment inquiry focused on the “economic realities” of the relationship between the employee and the potential joint employer. Its withdrawal signals a shift back to applying joint employer status only when a business has direct control over another business’s workplace.

More is expected from the Trump Administration and the courts on the ever-changing law surrounding independent contractors and joint employment.

This post was written by Angela M. Duerden and Elisabeth (Lisa) Shu of Wilson Elser Moskowitz Edelman & Dicker LLP.

The U.S. Department of Labor Rolls Back Obama-Era Guidance on Joint Employers and Independent Contractors

The U.S. Department of Labor (“DOL”) announced today that it was rolling back an Obama-era policy that attempted to increase regulatory oversight of joint employer and contractor businesses.

Courts and agencies use the joint employer doctrine to determine whether a business effectively controls the workplace policies of another company, such as a subsidiary or sub-contractor. That control could be over things like wages, the hiring process, or scheduling.

Legal IT ConsultantIn a short statement, the DOL signaled that it was returning to a “direct control” standard. “U.S. Secretary of Labor Alexander Acosta today announced the withdrawal of the U.S. Department of Labor’s 2015 and 2016 informal guidance on joint employment and independent contractors. Removal of the administrator interpretations does not change the legal responsibilities of employers under the Fair Labor Standards Act and the Migrant and Seasonal Agricultural Worker Protection Act, as reflected in the department’s long-standing regulations and case law.”

Until 2015, the DOL interpreted the joint employer doctrine to apply only to cases in which a business had “direct control” over another business’s workplace. In 2015 and then again in 2016, under then-Labor Secretary Tom Perez (currently the Democratic National Committee Chair), the DOL changed its interpretation to state that a business may be a joint employer even if it exerted “indirect control” over another’s workplace. The 2015 and 2016 guidance effectively expanded the conditions for when one business can be held liable for employment and civil rights law violations at another company. Critics of this “indirect control” language argued that it was ambiguous and threatened to throw franchise, parent-subsidiary, and independent contractor relationships between businesses into disarray. Companies, particularly franchises, were particularly concerned that they could face liability at workplaces they did not directly oversee or control.

However, the DOL’s announcement today rescinded its guidance on “indirect control” and also rescinded guidance on independent contractors, which essentially stated that the DOL considered most workers to be employees under the Fair Labor Standards Act and that it was likely to apply a broad definition of “employee” and “employer” when investigating a company’s practices. This decision is a big win for businesses and business groups.

Despite the DOL’s reversal, the Obama-era standard can still be applied to businesses through the National Labor Relations Board (“NLRB”), an independent agency that serves as the government’s main labor law enforcer. The NLRB considers a company jointly liable for its contractors’ compliance with the National Labor Relations Act if they have “indirect” control over the terms and conditions of employment or have “reserved authority to do so.” The NLRB has not rescinded its interpretation. President Trump has yet to pick nominees for the five-member board’s two open seats, which will likely affect the NLRB’s interpretation of the joint employer doctrine and many other NLRB rules, interpretations, and guidance.

The DOL’s guidance does not affect actions taken by other federal agencies.

This post was written by James R. Hays and Jason P. Brown  Sheppard Mullin Richter & Hampton LLP.

The ERISA Fiduciary Advice Rule: What Happens on June 9?

This is an update on the upcoming effective date of the “fiduciary rule” or “fiduciary advice rule” (the “Rule”) that was issued under the US Employee Retirement Income Security Act of 1974 (ERISA). The Rule was published by the US Department of Labor (DOL) in April, 2016. The purpose of the Rule is to cause a person or entity to become a “fiduciary” under ERISA and the US Internal Revenue Code of 1986 (the “Code”) as a result of giving of certain types of advice involving investment of assets of employee benefit plans, such as 401(k) or pension plans, or of individual retirement accounts (IRAs) and receiving compensation for that advice.

calendar hundred daysThe Rule was originally intended to become effective April 10, but in April the DOL extended (the “Extension Notice”) the effective date of the Rule for 60 days (until June 9), and provided for reduced compliance obligations under the Rule from that date through the end of 2017 (the “Transition Period”). The effective date for Prohibited Transaction Exemptions (PTEs), both new and amended, that are related to the Rule also was extended until June 9, and further transitional relief was provided with respect to certain of those PTEs.

In a May 23 Op Ed in the Wall Street Journal, Labor Secretary Acosta announced that the Rule would go into effect on June 9, as provided for in the Extension Notice, and that the DOL would seek additional public comment on possible revisions to the Rule.  He indicated that the DOL “found no principled legal basis to change the June 9 date while we seek public input.”  The DOL also published, on May 23, FAQs on implementation of the Rule and an update of its previously-issued enforcement policy for the Transition Period. Therefore, it is important to review the rules that will go into effect on June 9.

Under the Rule, fiduciary status is triggered by investment “recommendations.” It provides, in general, that if a person (1) provides certain types of recommendations to a plan or its participants and/or beneficiaries, or to an IRA owner (collectively, “Protected Investors”); and (2) as a result, receives a fee or other compensation (direct or indirect), then that person is providing “investment advice for a fee” and therefore, in giving such advice, is a fiduciary to the Protected Investor. Receipt of compensation tied to such recommendations by a person or entity that is a fiduciary could result in prohibited transactions under ERISA and the Code. Under the Extension Notice, the DOL provided simplified compliance requirements under the Rule for the Transition Period.

This post was written by Gary W. HowellAustin S. LillingGabriel S. MarinaroRichard D. MarshallAndrew R. SkowronskiRobert A. Stone of Katten Muchin Rosenman LLP.

Challenges and Priorities for the New Secretary of Labor

secretary of labor alexander acostaAlex Acosta was confirmed by the Senate to be the next Secretary of Labor.  He now takes responsibility for several high-profile issues with critical implications for government contractors.

As we have previously written, the Labor Department was an exceptionally active regulator from 2013 through the end of the Obama Administration.  Although few of us expect that pace to continue, Secretary Acosta will have to balance two competing pressures.  On one hand, the President has already signed a law repealing one of the Labor Department’s most controversial regulations (the Fair Pay and Safe Workplaces rule) and directed agencies to review current regulations with a critical eye.  On the other hand, Acosta will be leading a department charged with enforcing the laws that protect or favor workers’ rights, which sometimes compete with the priorities of their employers.

These potentially opposing viewpoints were on display during Acosta’s confirmation hearing where he was pressed repeatedly by Senators to discuss his views on various regulations.  Asked by Senator Roberts to give his “overall philosophy on regulation,” Acosta emphasized the need to eliminate regulations “that are not serving a useful purpose,” and the need to enable small businesses to thrive.

Some uncertainty remains with respect to two specific cases that government contractors are watching closely.  First, the regulations governing paid sick leave were not raised during Acosta’s confirmation hearing, and Acosta has not publicly opined on them.  They were issued late in President Obama’s second term, and therefore fell within the window of the Congressional Review Act (“CRA”), but the level of chatter about repealing those regulations has lately been quite low.

Second, the Department is currently litigating proposed changes to overtime pay rules.  A district court held last year that the Department acted without authorization by doubling the salary threshold for defining executive, administrative, professional, outside sales, and computer employees (so-called “white collar” employees) from approximately $24,000 to $47,000.  Acosta demurred when Senators asked for his opinion on the merits of the case.  He acknowledged, however, that the large increase was partially a result of the long delay in adjusting the salary threshold, which had not been changed since 2004.  Adjusting for cost of living rises, Acosta suggested, would result in a revised threshold closer to $33,000.  He declined to say whether the Labor Department might change its position in the litigation in the Fifth Circuit, where briefing is scheduled to be complete in at the end of June, or withdraw the rule and propose an alternative.

On a positive note, Acosta expressed support for the practice of publishing detailed “opinion letters” from the Administrator of the Wage and Hour Division.  This practice has been halted since 2009.  This type of guidance, although not binding on a court, could provide helpful clarity to employers with contracts covered by the Service Contract Act and the Davis-Bacon Act.