Banning Salary History Questions, Subway Restaurant Partners with DOL, Non-Competes: Employment Law This Week – August 15, 2016 [VIDEO]

Massachusetts Bans Salary History Question

Subway, DOL, Pay EquityOur top story: Beginning in 2018, pay history will be off limits for Massachusetts job applications and interviews. In a unique attempt to close the gender wage gap, the state has passed a pay equity law that will bar employers from asking applicants about their previous salaries. Employers will also be prohibited from seeking that information from an applicant’s prior employers. While this provision is the first of its kind in the country, the new law also contains more common equal pay protections, broadens the definition of “equal work,” and prevents employers from banning the discussion of salary among employees. Mickey Neuhauser, from Epstein Becker Green, has more.

“The hope is that by taking the salary history question off the table, employers will rely only on relevant factors and won’t even unconsciously rely upon an irrelevant factor, such as the employee’s prior salary. . . . The law does not prohibit applicants from disclosing their current salaries or salary history, and it doesn’t prevent applicants and employers from negotiating over salary. However, the law does not protect employers from paying a salary lower than what would otherwise be permitted under the act simply because an individual has agreed to accept that salary. In other words, an employee cannot agree to be illegally underpaid.”

Subway Partners with the DOL

The U.S. Department of Labor (DOL) and Subway teamed up to break new ground. The world’s largest fast-food franchisor has reached a voluntary agreement with the DOL to provide wage and hour compliance training to franchisees. The agency conducted more 800 investigations into underpayment of workers at Subway franchises in recent years. This partnership will focus on helping the franchises comply with federal wage and hour laws moving forward. While the DOL hopes to enter into more agreements like this one, franchisors are hesitant, noting that the deal could make them joint employers under the National Labor Relations Board’s standard.

New York Attorney General Cracks Down on Non-Competes

New York’s crackdown on non-compete agreements continues. An investigation by New York Attorney General Eric Schneiderman revealed that Examination Management Services Inc. required all of its workers, even those who had no access to trade secrets or sensitive information, to sign non-compete agreements. Non-compete agreements in the state are usually permissible only for employees with a high level of access to trade secrets or sensitive information. Under the agreement, the company will stop using the non-competes for most employees in New York.

Citigroup Unit Pays Misclassified Workers After DOL Probe

A Citigroup affiliate shells out a hefty sum for misclassifying workers. A subsidiary of Citigroup in Florida recently paid almost $2 million to workers whom it had misclassified as exempt from overtime pay. An investigation by the DOL’s Wage and Hour Division found that the company mistakenly applied the Fair Labor Standards Act’s exemption to a group of 882 employees. This case serves as a reminder that salaried workers are not necessarily exempt from overtime.

Tip of the Week

Lisa Glass, Chief Human Resources Officer for The Child Center of NY, is here with advice on how to create an effective onboarding program.

“An important way organizations can help combat employee turnover and help employees adjust to the new organization is through an effective onboarding program. An onboarding program allows employees to understand the expectations of their role in terms of performance as well as social expectations. . . . Effective onboarding is key in creating employee expectations and sharing organization values. The goals must align with the goals of the organization, and the program initiative must be driven by senior management, and not solely driven by human resources.”

©2016 Epstein Becker & Green, P.C. All rights reserved.

What Does Subway’s “Voluntary Agreement” with the US Department of Labor Mean for Joint Employer Status?

Subway, DOL, Joint EmployerThis past week, Doctor’s Associates Inc.,  which is the owner and franchisor for the Subway sandwich restaurant chain entered into aVoluntary Agreement (the “Agreement”) with the US Department of Labor’s (DOL) Wage and Hour Division “as part of [Subway’s] broader efforts to make its franchised restaurants and overall business operationssocially responsible,” and as part of Subway’s “effort to promote and achieve compliance with labor standards to protect and enhance the welfare” of Subway’s own workforce and that of its franchisees.

While the Agreement appears intended to help reduce the number of wage and hour law claims arising at both Subway’s company owned stores and those operated by its franchisee across the country, the Agreement appears to add further support to efforts by unions, plaintiffs’ lawyers and other federal and state agencies such as the National Labor Relations Board (NLRB or Board), DOL’s own Occupational Safety and Health Administration (OSHA) and the EEOC to treat franchisors as joint employers with their franchisees.

What Is in the Agreement?

While on its face this may sound like a good idea and one that should not be controversial, in reality by entering into this Agreement, which among other things commits Subway to working with both the DOL and Subway’s franchisees, to develop and disseminate wage and hour compliance assistance materials and to work directly with the DOL to “explore ways to use technology to support franchisee compliance, such as building alerts into a payroll and scheduling platform that SUBWAY offers as a service to its franchisees,” and although the Agreement is notable for its silence on the question of whether the DOL considers Subway to be a joint employer with its franchisees, the Agreement is likely to be cited, by unions, plaintiffs’ lawyers and other government agencies such as the NLRB as evidence of the fact that Subway as franchisor possesses the ability, whether exercised or not, to directly or indirectly affect the terms and conditions of employment of its franchisees’ employees, and as such should be found to be a joint employer with them.

Notably, while the Agreement does not specifically address the exercise of any such authority on a day to day basis, it does suggest an ongoing monitoring, investigation and compliance role in franchisee operations and employment practices by Subway and a commitment by Subway as franchisor to take action and provide data to the DOL concerning Fair Labor Standards Act compliance.  In the past, courts have in reliance on similar factors held that a franchisor could be liable with its franchisees for overtime, minimum wage and similar wage and hour violations.

Of particular interest to many will be the final section of the Agreement, titled “Emphasizing consequences for FLSA noncompliance.”  This section not only notes that “SUBWAY requires franchisees to comply with all applicable laws, including the FLSA, as part of its franchise agreement,” but also what action it may take where it finds a franchisee has a “history of FLSA violations”:

SUBWAY may exercise its business judgment to terminate an existing franchise, deny a franchisee the opportunity to purchase additional franchises, or otherwise discipline a franchisee based on a franchisee’s history of FLSA violations.

Will Subway’s “Voluntary Agreement” with the DOL Have Any Impact Beyond Wage and Hour Matters?

As we approach the one year anniversary of the NLRB’s decision in Browning Ferris Industries, it is abundantly clear that not only the Board itself but unions and others seeking to represent and act on behalf of employees are continuing to push the boundaries and expand the application of Browning Ferris.  In fact the Board has been asked to find that policies and standards such as those evidencing a business’s commitment to “socially responsible” employment practices, the very phrase used in the Subway-DOL Agreement, should be evidence of indirect control sufficient to support a finding of a joint employer relationship between a business and its suppliers.

Moreover, the NLRB and unions such as UNITE HERE and the Service Employees International Union continue to aggressively pursue their argument that the terms of a franchise agreement and a franchisor’s efforts to ensure that its franchisees, who conduct business under its brand, can also be sufficient to support a finding of joint employer status.  No doubt they will also point to the Subway Agreement with the DOL as also being evidence of such direct or indirect control affecting franchisees’ employees’ terms and conditions.

What Should Employers Do Now?

Employers are well advised to review the full range of their operations and personnel decisions, including their use of contingent and temporaries and personnel supplied by temporary and other staffing agencies to assess their vulnerability to such action and to determine what steps they make take to better position themselves for the challenges that are surely coming.

Equally critical employers should carefully evaluate their relationships with suppliers, licensees, and others they do business with to ensure that their relationships, and the agreements, both written and verbal, governing those relationships do not create additional and avoidable risks.

©2016 Epstein Becker & Green, P.C. All rights reserved.

Civil Penalties Nearly Double for Form I-9 Violations

Significantly Increase for Other Immigration-Related Violations

Due to the implementation of the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (Sec. 701 of Public Law 114-74) (“Inflation Adjustment Act”), higher fines and civil penalties have now gone into effect for assessments that occur on or after August 1, 2016. These higher penalties can be applied to violations that occurred after November 2, 2015, the day the President signed the Act into law.

The Inflation Adjustment Act will be implemented by multiple federal agencies that have authority to assess civil penalties. The following is a summary, by federal agency, of the penalties covering violations for the unlawful employment of immigrant workers; violations related to Forms I-9; immigration-related discriminatory employment practices; and violations of the H-1B, H-2A and H-2B temporary visa for foreign worker programs. The increases in many categories are substantial. The penalties for Form I-9 paperwork violations are increased by an eye-catching 96 percent.

Department of Homeland Security fines:

Department of Homeland Security Fines i-9 violations

Department of Justice fines:

Department of Justice Fines

Department of Labor fines:

Department of Labor Fines

The consequence of the above is that employers should continue to aggressively monitor their immigration programs for compliance or suffer the harsher sting of these increased fines. Given that the penalties for I-9 errors are practically doubled, it is more important than ever to ensure I-9s are completed timely, correctly and are periodically audited. Moreover, most I-9 violations are considered continuing violations until they are corrected.

Huge Increase In OSHA And Certain MSHA Fines Announced

MSHA OSHAOSHA announced an increase to its penalties today of nearly 80 percent and some MSHA fines will increase by several thousand dollars as well.  The new civil penalty amounts, courtesy of the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, are applicable only to civil penalties assessed after Aug. 1, 2016, whose associated violations occurred after Nov. 2, 2015.

OSHA’s maximum penalties, which have not been raised since 1990, will increase by 78 percent. The top penalty for serious violations will rise from $7,000 to $12,471. The maximum penalty for willful or repeated violations will increase from $70,000 to $124,709.

MSHA’s penalties will increase in some areas and decease in others.  The new minimum penalty for a 104(d)(2) Order will be $4,553 rather than $4000 and the maximum penalty for a flagrant violation will rise to $250,433 from $242,000.  However, the maximum penalty for most other MSHA violations will decrease to $68,300 from $70,000.

Fact Sheet on the Labor Department’s interim rule is available here. A list of each agency’s individual penalty adjustments is available here.

DOL Announces Final Rule on Salary Threshold for Exempt White-Collar Employees

Today, the U.S. Department of Labor (DOL) announced its final rule on the minimum salary that white-collar employees must be paid to qualify as exempt from the overtime requirements under the Fair Labor Standards Act (FLSA). The new rule raises the current salary level that such employees must receive in order to qualify as “exempt” from $23,660 annually, to $47,476 annually. The new rule takes effect December 1, 2016.

Under current DOL regulations, most white collar employees – executives (supervisors), administrative employees, and professionals – are exempt from the FLSA overtime rules and need not be paid overtime for hours worked over 40 in a workweek if they satisfy two conditions. First, they must perform “exempt” duties as defined by the DOL regulations. Second, they must be paid a guaranteed salary of at least $455 per week, or about $23,660 annually.

The new rule, first proposed in a slightly different form back in 2015, raises the salary level significantly to $913 per week, or about $47,476 annually. This new salary level is set at the 40th percentile of weekly earnings for full-time salaried workers in the lowest income Census region (currently the South). This number is less than the $970 per week, or about $50,440 annually, that the DOL had originally proposed. In addition, the DOL will now permit up to 10 percent of the salary level to come from non-discretionary bonuses and incentive payments (including commissions).

This new threshold of $913 per week/$47,476 annually will be tied to the 40th percentile for full-time salaried workers in the lowest income Census region going forward, and will be updated every three years. It is currently expected to rise to more than $51,000 annually when the first update takes effect on January 1, 2020.

In addition, under the new rule the salary level for employees who qualify for the “highly compensated employee” exemption will rise from $100,000 per year to $134,004 per year. This level is the annual equivalent of the 90th percentile of full-time salaried workers nationally.

One change contemplated by the DOL when the agency first proposed this new rule back in 2015 will not take effect: changes to the “duties” test. The DOL has announced that the final rule will leave the existing duties tests for the executive, administrative, and professional exemptions in place.

The DOL estimates that 4.2 million additional workers will become eligible for overtime as a result of this rule change, including approximately 101,000 workers in the State of Michigan. This is estimated to raise total wages for American workers by approximately $12 billion over the next 10 years.

Many employers will be impacted by this new rule, as many employers have at least one “exempt” employee who is paid less than $47,476 annually. Thus, employers should scrutinize their workforces carefully to determine if changes in exempt status are necessary. Options include:

  • increase the salary of an employee who meets the duties test to at least $47,476 annually to retain his or her exempt status;

  • convert the employee to non-exempt status and pay an overtime premium of one-and-one-half times the employee’s regular rate of pay for any overtime hours worked;

  • convert the employee to non-exempt status and reduce or eliminate overtime hours;

  • convert the employee to non-exempt status and reduce the amount of pay allocated to base salary (provided that the employee still earns at least the applicable hourly minimum wage) and add pay to account for overtime for hours worked over 40 in the workweek, to hold total weekly pay constant; or

  • use some combination of these responses.

Given the significance of these changes, and the expected impact on the American workforce, employers are encouraged to consult with legal counsel to discuss their options and strategies for implementing changes, if necessary.

U.S. Department of Labor Issues Final Rule Greatly Expanding Scope of Reportable “Persuader” Activities

DOLOn March 23, 2016, the U.S. Department of Labor (DOL) issued a final rule, first proposed in June 2011, requiring employers and their labor relations consultants, including law firms, to report to DOL any agreements pursuant to which the consultant undertakes activities with “an object directly or indirectly to persuade employees concerning their rights to organize and bargain collectively.” Reports are to be filed electronically and are subject to immediate public access. Failure to report is subject to criminal sanctions.

The new rule reverses a decades-old DOL interpretation of the “advice” exception to reporting requirements. Previously, if the agreement between the employer and consultant involved nothing more than the consultant providing the employer with materials or advice that the employer had the right to accept or reject, so long as the consultant had no direct contact with employees, no report was required.

The new rule requires an employer to report on Form LM-10 and consultants to report on Form LM-20 information relating to the scope of the agreement and fees paid for the provision of both direct and indirect persuader materials or activities.

The new rule narrows the “advice” exception to oral or written recommendations from the consultant regarding a decision or course of conduct by the employer including, for example, counseling a business about its plans to undertake a particular course of action, legal vulnerabilities and how they may be minimized, identification of unsettled areas of the law and representation of the employer in disputes or negotiations that may arise.

The greatly expanded definition of reportable persuader activities, provided the object is to directly or indirectly persuade employees concerning their rights to organize and bargain collectively, includes, among many other activities:

  • Planning, directing or coordinating activities undertaken by supervisors or other employer representatives with employees.

  • Providing persuader materials or communications to the employer in oral, electronic or written form for dissemination or distribution to employees, including drafting and revising of such materials. (The sale, rental or other use of “off the shelf” persuader materials not created for the particular employer is excluded, unless the consultant assists the employer in selecting materials).

  • Conducting a seminar for supervisors or other employer representatives if the seminar includes development of anti-union tactics and strategies.

  • Developing or implementing personnel policies or actions which have a direct or indirect object of persuading employees concerning their rights to organize and bargain collectively.

The rule is applicable to agreements and payments made on or after July 1, 2016. Legal challenges and an attempt to block enforcement of the new persuader rules are a certainty—the outcome is not.

© MICHAEL BEST & FRIEDRICH LLP

Does the DOL Consider You a Joint Employer under Its “Broad as Possible” Standard? You May Be Surprised at the Answer

DOLOn January 20, 2016, the U.S. Department of Labor’s Wage and Hour Division (DOL) articulated a new standard that it will use to identify joint employment relationships. Specifically, the DOL published Administrator’s Interpretation No. 2016-1 (AI 2016-1), which is the first Administrator’s Interpretation this year, following the DOL’s similar pronouncement regarding independent contractor classifications in July 2015.

AI 2016-1 broadly interprets the Fair Labor Standards Act (FLSA) and Migrant Seasonal Agricultural Worker Protection Act (MSPA) and narrowly interprets case law regarding joint employment, resulting in its conclusion that “the expansive definition of ‘employ’ . . . reject[s] the common law control standard and ensures that the scope of employment relationships and joint employment under the FLSA and MSPA is as broad as possible.”

AI 2016-1 also sets forth two approaches for analyzing whether a joint employment situation exists: (1) horizontal, which looks at the relationship of the employers to each other, and (2) vertical, which examines “the economic realities” of the employee in relation to a “potential joint employer.” The structure and nature of the relationship(s) will dictate which analysis applies. In some cases both may be applicable, for example, when two businesses share an employee provided by a third-party intermediary, such as a staffing agency, that is the direct employer.

Horizontal Joint Employment

Citing the FLSA regulations, the DOL explained horizontal joint employment as follows:

Where an employee’s work simultaneously benefits two or more employers, or an employee works for two or more employers throughout the week, a joint employment relationship “generally will be considered to exist” in circumstances such as where:

  1. the employers arrange to share or interchange the employee’s services;

  2. one employer acts directly or indirectly in the interest of the other employer(s) in relation to the employee; or

  3. “one employer controls, is controlled by, or is under common control with the other employer.”

In addition, the DOL set forth the following factors as potentially relevant in gauging the relationship between two or more employers and the degree of shared control over employees that might suggest a horizontal joint employment arrangement:

  • who owns the potential joint employers (i.e., does one employer own part or all of the other or do they have any common owners);

  • do the potential joint employers have any overlapping officers, directors, executives, or managers;

  • do the potential joint employers share control over operations (e.g., hiring, firing, payroll, advertising, overhead costs);

  • are the potential joint employers’ operations inter-mingled (for example, is there one administrative operation for both employers, or does the same person schedule and pay the employees regardless of which employer they work for);

  • does one potential joint employer supervise the work of the other;

  • do the potential joint employers share supervisory authority for the employee;

  • do the potential joint employers treat the employees as a pool of employees available to both of them;

  • do the potential joint employers share clients or customers; and

  • are there any agreements between the potential joint employers.

According to the DOL, not all (or even most) of these factors need to be present for a horizontal joint employment relationship to exist. The agency set forth an example of a server who works at two separate restaurants owned by the same entity. The managers at each restaurant share the employee and coordinate the employee’s schedule between the two locations. Both employers use the same payroll processor and share supervisory authority over the employee. The DOL would find this to be a horizontal joint employment relationship. The agency distinguished this from a scenario where an employee works at two restaurants, one in the mornings and the other in the afternoons, and while each restaurant’s owners and managers know of the employee’s other job, the restaurants are completely unrelated. However, these examples leave quite a bit of grey area where the DOL apparently envisions a fact-intensive analysis under “as broad a standard as possible.”

Vertical Joint Employment

When it comes to vertical joint employment, the DOL maintains that the proper analysis is an economic realities test, and not the traditional inquiry focused on control. AI 2016-1 focuses on an employee’s “economic dependence” on the “potential joint employer” as the critical inquiry. This view appears to conflate the principles underlying the DOL’s recent independent contractor analysis with the question of whether an additional employment relationship exists beyond the one already established between an employee and his/her direct employer. The resulting approach likely will result in the DOL (and many courts) finding more entities to be joint employers under the FLSA where they otherwise would not—and in situations where a joint employer determination has largely been unnecessary because the employees in question already receive FLSA protections in their employment relationships with their direct employers.

To explain what it views to be the proper analytical approach, the DOL heavily relies on an MSPA regulation listing seven factors to consider under that statute’s version of the economic realities test for farm laborers. While the DOL acknowledges that the MSPA regulation does not actually apply to the FLSA, the agency believes the MSPA’s factors are “useful guidance in a FLSA case” and that “an economic realities analysis of the type described in the MSPA joint employment regulation should be applied in [FLSA] cases” to determine whether a situation is one of vertical joint employment. The MSPA’s seven factors are as follows:

  • Directing, Controlling, or Supervising the Work Performed. “To the extent that the work performed by the employee is controlled or supervised by the potential joint employer [i.e., the end user] beyond a reasonable degree of contract performance oversight, such control suggests that the employee is economically dependent on the potential joint employer.” The DOL goes on to clarify, as did the National Labor Relations Board recently, that such control need not be direct, but can be exercised through the intermediary employer. Likewise, the end user need not exercise as much control as the direct employer for it “to indicate economic dependence by the employee.”

  • Controlling Employment Conditions. Along the same lines, if an end user “has the power to hire or fire the employee, modify employment conditions, or determine the rate or method of pay,” this indicates economic dependence on the end user, even if the control is indirect or not exclusive.

  • Permanency and Duration of Relationship. If a work assignment for the end user is “indefinite, permanent, full-time, or long-term,” this suggests economic dependence. The DOL further instructs that analysis of this factor should consider “the particular industry at issue” such as “if the work . . . is by its nature seasonal, intermittent, or part-time.”

  • Repetitive and Rote Nature of Work. If the employee’s work for the end user “is repetitive and rote, is relatively unskilled, and/or requires little or no training,” this indicates economic dependence on the end user.

  • Integral to Business. “If the employee’s work is an integral part of the potential joint employer’s business, that fact indicates that the employee is economically dependent on the potential joint employer. . . . .”

  • Work Performed on Premises. If the work is performed “on premises owned or controlled by” the end user, this indicates economic dependence on the end user.

  • Performing Administrative Functions Commonly Performed by Employers. Economic reliance also can be imputed if the end user performs “administrative functions for the employee, such as handling payroll, providing workers’ compensation insurance, providing necessary facilities and safety equipment, housing, or transportation, or providing tools and materials required for the work.”

The DOL acknowledges that there are other possible factors that courts consider, but states that “regardless, it is not a control test.” To the extent that some, if not many, courts still do apply a control test, the DOL responds that doing so “is not consistent with the breadth of employment under the FLSA.” The agency buttresses its stance with citations to case law from the Second Circuit (covering New York, Vermont and Connecticut), while noting elsewhere that other circuits have not followed suit.

Despite the lack of consensus among jurisdictions to apply an economic realities test to determine joint employment, the DOL encourages application of the test in a way that would drastically expand the scope of joint-employment liability. In a footnote, for example, the agency notes that in general, an employee need not even economically depend more on the end user than on his/her direct employer for a finding of vertical joint employment. “The focus . . . is not a comparison [of the two relationships].”

In summary, businesses must carefully monitor their relationships with affiliated companies or business partners. If affiliated entities employ the same person and do not take measures to maintain the separateness of their operations and management, the DOL likely would find horizontal joint employment, requiring the aggregation of work hours for purposes of overtime pay. Likewise, under the DOL’s interpretation of vertical joint employment, if a worker tends to economically depend on the end user business, which could be imputed from a wide variety of factors, the DOL likely would deem that end user business a joint employer for purposes of wage and hour liability—regardless of the employee’s primary economic reliance on his/her direct employer. These expansive interpretations could be especially problematic for staffing agencies and other types of tiered business models.

AI 2016-1 signifies the latest effort by the DOL to expand the FLSA’s reach to nontraditional work arrangements. Like its other recent effort, this may result in more DOL investigations and litigation. The AI 2016-1 almost certainly will be challenged in court. Additionally, legislation has been proposed (but not passed) to curtail similar attempts by federal agencies to expand joint employment liability. Nonetheless, based on the DOL’s new guidance, companies should reassess their business and staffing arrangements to manage the risks associated with costly governmental investigations.

Article By Elizabeth Gotham of Honigman Miller Schwartz and Cohn LLP

Executive Action: Obama’s Legacy and 2016 Predictions (Part 2 of 2)

As promised in our previous post, today we conclude our predictions on President Obama’s 2016 executive activity.  While we believe the President’s final executive orders will target immigration and perhaps even corporate political expenditures, we predict executive agency action will cover a broad range of pressing labor and employment issues.  With federal legislative gridlock expected to continue through 2016, employers should prepare themselves for a barrage of agency activity, especially from the Equal Employment Opportunity Commission (“EEOC”), National Labor Relations Board (“NLRB”), and Department of Labor (“DOL”).  Our summary is below.

Expected Agency Activity of 2016

Based on the 2015 Supreme Court decisions in Young v. UPS and EEOC v. Abercrombie & Fitch Stores, Inc. and the EEOC’s interest in systematic discrimination in the workplace, we predict the EEOC will focus heavily on companies’ policies regarding pregnancy and religious discrimination and accommodation in 2016.  As a refresher, in Young the Court held a genuine factual dispute existed as to whether UPS provided more favorable treatment to at least some employees whose situation “cannot reasonably be distinguished” from Ms. Young’s —e.g., workers unable to lift up to 70 pounds due to reasons other than pregnancy limitations such as a workplace injury or a recognized disability.  In Abercrombie (blogged about here) the Court concluded an employer violates Title VII by rejecting an applicant in order to avoid making a religious accommodation, even if the employer only has an “unsubstantiated suspicion” that the applicant may eventually request an accommodation.

Along with discrimination/accommodation policies, we predict the EEOC and NLRB will focus on company-wide social media policies in 2016. While the NLRB has been hounding employers on social media policies since 2010, the EEOC did not really begin gathering information on the issue until 2014.   We believe 2016 will be the year the EEOC begins targeting employers’ social media policies to evidence discrimination.  We also predict the EEOC’s focus on gender identity discrimination and the NLRB’s focus on FLSA class action settlements will continue with full force into 2016.

With the DOL’s Final Rule on overtime exemption updates expected to roll out this year, we predict the agency will focus on wage-hour reform and that employers will be expected to get into compliance sooner rather than later. Although Solicitor of Labor Patricia Smith stated in November 2015 that final guidelines will not likely be issued until “late 2016,” we believe the DOL will push them out before November’s presidential election.  Employers should expect the Final Rule to increase the minimum salary exemption requirement from $455/week to $970/week.  We would not be surprised if the DOL also finalizes revisions to the duties test, which is a factor along with salary level used to determine whether an employee qualifies under a white collar exemption to minimum wage and overtime rules.

Although the 2016 federal legislation horizon looks bleak, President Obama and his executive agencies are poised for a busy final year. Stay tuned for further developments.

DOL’s Recent Guidance on State Retirement Initiatives for Private Sector Employees Part II: Interpretive Bulletin

140px-US-DeptOfLabor-Seal.svg__0This post continues our two-part series discussing the Department of Labor’s (DOL’s) recent guidance on state retirement initiatives. The first part of this series, “The Proposed Rule—State-Sponsored IRAs,” discusses the DOL’s proposed rule that would create an ERISA “safe harbor” for state-sponsored IRAs. In Part II, we discuss the DOL’s Interpretive Bulletin (Interpretive Bulletin), which addresses other types of state retirement initiatives for workers in the private sector.

The Interpretive Bulletin sets out, in a summary format, the DOL’s views on state-offered 401(k) plans for private sector employees and other state initiatives. Beginning with the DOL’s strong support for ERISA-covered plans (for reasons including the availability of employer contributions, higher contribution limits, and the protection of ERISA accounts from creditors), the Interpretive Bulletin surveys a range of current and potential state-sponsored programs and offers the DOL’s views on how ERISA coverage may apply to each of these initiatives.

The Interpretive Bulletin reviews programs in

  • Washington State, where the state’s proposed retirement program is not considered to be an ERISA-covered plan, but instead by design establishes a marketplace for the offering of ERISA plans and IRAs;

  • the Commonwealth of Massachusetts, where a state law allowing nonprofit organizations to adopt a contributory retirement plan developed and administered by the state is shown as an example of how states may set up their own 401(k) prototype plans for private employers to adopt; and

  • the State of Maryland, where a Governor’s Task Force report considered the possibility of the state establishing and obtaining IRS tax qualification for a state multiple-employer plan (MEP).

The DOL closes by providing its views on ERISA preemption, including the view that the types of programs outlined in the Interpretive Bulletin would not be preempted by ERISA because they do not “undermine ERISA’s exclusive regulation of ERISA-covered plans” and that they “contemplate a state acting as a participant in a market rather than as a regulator.”

Several issues addressed in the Interpretive Bulletin are giving rise to debate, including the DOL’s view that a state’s unique “representational interest in the health and welfare of its citizens” allows a state to sponsor an MEP for in-state employers. What is new here is that the DOL is providing states a different standard for the establishment of an MEP than the “employment based nexus” standard that the DOL established for private enterprises that wish to do the same. This issue is critical because MEPs can have streamlined regulatory reporting and disclosure requirements, allowing them to provide competitive cost savings to adopting employers. Another issue to watch is the DOL’s query (included as a footnote in the bulletin) on whether state sovereign immunity laws need to be reviewed in light of ERISA’s remedial provisions.

While the DOL’s Interpretive Bulletin became effective on November 18, 2015, the impact of the Interpretive Bulletin and the proposed rules on IRAs are worth keeping an eye on. We recognize that change is often the rule and not the exception, but how these state-sponsored programs will play out has yet to be determined. A significant impact to the retirement industry could be on the horizon.

In addition to this DOL guidance package discussed in this series, there is also talk of possible legislative proposals, and the Treasury Department recently announced the federal myRA program as a voluntary national initiative.

© 2015 by Morgan, Lewis & Bockius LLP. All Rights Reserved.

Act Now: The Department of Labor may experience a shutdown on 10/1/2015

DOLAlthough Congress continues to discuss the Fiscal Year 2016 budget, if an agreement is not reached or continuing resolution passed, the Department of Labor (DOL) will experience a shut down as of October 1, 2015. Should this happen, both the iCERT and PERM online filing systems will not accept applications and users will no longer have access to the system.  This shutdown will impact immigration cases including: E-3, H-1B, H-2A, H-2B, and PERM applications. In addition, the DOL will not be able to receive or review any filings received by mail. Employers are urged to review their upcoming expiration dates and deadlines to ensure they submit all necessary applications and responses on or before September 30, 2015.

©2015 Greenberg Traurig, LLP. All rights reserved.