December 2015

Overtime Pay Changes May Be Delayed Until Mid-to-Late 2016

The Department of Labor (DOL) does not expect to issue its final rules changing the overtime exemptions until mid-to-late 2016, according to a recent report in the Wall Street Journal. The report states that Solicitor of Labor, Patricia Smith, provided the new timeline at an American Bar Association Labor and Employment Law conference in Philadelphia this fall. The final rules are expected to greatly expand the number of employees who are eligible for minimum wage and overtime pay. It’s anticipated that if the final rules are delayed until mid-to-late next year, the changes probably won’t go into effect until sometime in 2017.

How Did We Get Here?
In March 2014, President Obama directed the DOL to update its regulations defining which white collar employees are exempt from the minimum wage and overtime pay requirements of the Fair Labor Standards Act (FLSA). It took more than a year – until July 6, 2015 – for the DOL to issue its proposed changes. The proposed rules raise the salary threshold for white collar exemptions to the 40th percentile of weekly earnings for full-time salaried workers nationwide, or an estimated $970 per week/$50,440 per year. The salary threshold for highly compensated exempt employees would go up from $100,000 to about $122,148 per year. The proposed rules include a mechanism for automatic annual increases to the salary thresholds.

After the proposed rules came out in July, businesses and organizations were up in arms and the DOL received an estimated 290,000 comments. Solicitor Smith reportedly told the ABA conference attendees that the large volume of comments and the complex nature of the changes were the cause of the delay in issuing the final rules. It’s also possible that wanting to wait until the 2016 election year is over, is also the cause of the delay.

Interestingly, in the DOL’s “frequently asked questions” release with the Notice of Proposed Rulemaking, the DOL indicates that it believes that the increased wage level “represents the most appropriate line of demarcation between exempt and nonexempt employees.” By raising the threshold significantly, the DOL believes this should adequately distinguish between those workers who may be properly classified as exempt and those who likely are not, without the need for immediate change to the duties tests (at least for now).

What’s Next?
Employers may have more time to prepare for the expected overtime pay changes, but when there last was a change (2004), employers had 120 days to comply. Employers should plan to review the employees currently considered to be exempt and note those positions and persons that are being paid close to the salary threshold. Those will be the ones who may no longer be exempt after the salary thresholds change. Although no changes to the duties requirements were part of proposed rules, the DOL asked for comments on the duty rules. Thus, the FLSA white collar exemption duty requirements could change after the final rules come out. We will keep you posted on any new developments.

Independent Contractors: The DOL Issues an Administrator's Interpretation, Concludes Most Workers are Employees Under the FLSA

On July 15, 2015, the DOL issued an interpretative guidance memo addressing the misclassification of employees as independent contractors. The DOL’s position is that most workers qualify as employees under the Fair Labor Standards Act (FLSA) in its broad definition of “employ.”

Perceived employee misclassification has become a hot topic in recent years as the economy has changed and growing businesses turn increasingly to enlist the help of contract workers. In fact, since announcing its Misclassification Initiative in September 2011, the DOL continues to make employer compliance with the FLSA a top priority.

This year has been a particularly big year for wage and hour litigation. From January to September 2015 almost 9,000 federal wage and hour suits were filed and thousands more in state courts. This is about a 450 percent increase in the last 15 years, according to a recent study by Seyfarth Shaw. This trend is likely to continue into the foreseeable future.

In a 15-page interpretation memo, David Weil, the Wage and Hour Division Administrator for the DOL, highlights the FLSA’s broad definition of “employ.” The term “employ” is defined by the FLSA, in part, as to “suffer or permit to work.” Applying the FLSA’s definition, Weil stresses that workers who are economically dependent on the business of the employer, regardless of skill level, are considered employees. On the other hand, independent contractors are workers with economic independence who are in business for themselves. The “suffer or permit” standard is intended to offer the broadest definition of employment under the law because it covers work that the employer directs or allows to take place.

The Administrator focused on the “economic reality” factors developed by the courts which include:

the extent to which the work performed is an integral part of the employer’s business;
the worker’s opportunity for profit or loss depending on his or her managerial skill;
the extent of the relative investments of the employer and the worker;
whether the work performed requires special skills and initiative;
the permanency of the relationship; and
the degree of control exercised or retained by the employer.

The Administrator stressed that given connectivity, work can be considered “integral” even if it is performed away from the company’s premises, such as at the worker’s home, or on the premises of the company’s customer.

The Administrator noted that no one factor is controlling. Rather, when classifying workers, employers should consider each factor in light of the ultimate determination of whether the worker is really in business for him or herself (and thus a true independent contractor) or is economically dependent on the company (and thus is truly an employee).

The DOL has also stressed that certain factors are immaterial in determining the existence of an employment relationship. For example, the fact that a worker has signed an agreement stating that the worker is an independent contractor is not controlling because the reality of the working relationship – and not the label given to the relationship in an agreement – is determinative.

RLG Takeaway
To avoid liability under the new interpretation of “employ,” employers should review any independent contractor relationships they currently use. Employers should next ensure these relationships satisfy the six criteria outlined above. Because of the complexity of this analysis, it is recommended that employers consult with legal counsel to help in this evaluation.

Avoiding FMLA Interference Claims: Walking a Fine Line Between What an Employer Can and Cannot Say

When it comes to Family and Medical Leave Act (“FMLA”) leave, some comments may be deemed to discourage an employee from using FMLA leave, thereby interfering with the employee’s FMLA rights and creating employer liability. At the same time, some comments may be completely permissible and do not violate the FMLA. Distinguishing between the two can be a challenge employers and supervisors.

The FMLA prohibits employers from interfering with, restraining, or denying an employee from using or trying to use FMLA leave rights. The term “interfering with” includes not only refusing to authorize FMLA leave, but discouraging an employee from using such leave. An employee may have an actionable FMLA interference claim where a supervisor or manager takes any action that could “chill” an employee’s desire to take FMLA leave, even when the employer ultimately permits the leave.

When an employee requests foreseeable or planned FMLA leave, such as for a surgery, the FMLA imposes an obligation on the employee to make reasonable efforts to schedule that medical treatment whenever possible to avoid undue disruption of an employer’s business. The statutory language of the FMLA actually requires the employee not to inconvenience the employer by scheduling a foreseeable treatment in an avoidably disruptive way. Applying this section of the statute and regulation, courts have held that it is perfectly acceptable for a supervisor or manager to request that an employee schedule a surgery a few weeks later, if possible, when there might be less disruption in the employer’s business. Of course, an employer may not simply deny FMLA leave altogether, but can comment about the timing of the leave without “chilling” or interfering with FMLA rights.

Context matters when it comes to a supervisor’s comments to an employee about exercising FMLA leave. Managers should be reminded not to make any comments to an employee about the use of intermittent FMLA leave that could discourage the employee from exercising future FMLA rights. Only in cases of scheduled or planned FMLA leave can the manager engage in a productive conversation to determine the best timing of the employee’s leave, making it clear that the goal of the conversation is to minimize the potential disruption that the leave will cause and not to discourage the employee from taking leave.

EEOC Issues Proposed Rule on Wellness Programs

On October 30, 2015, the Equal Employment Opportunity Commission (EEOC) issued a Notice of Proposed Rulemaking (NPRM) to amend the regulations implementing Title II of the Genetic Information Nondiscrimination Act (GINA) as they relate to employer wellness programs that are part of group health plans. The proposed rule clarifies that an employer may offer, as part of its health plan, a limited incentive (in the form of a reward or penalty) to an employee whose spouse (1) is covered under the employee’s health plan; (2) receives health or genetic services offered by the employer, including such services as part of a wellness program; and (3) provides information about his or her current or past health status. The proposal carves a narrow exception to the general prohibition on providing incentives in exchange for an employee’s genetic information. The long-awaited rule comes after the EEOC issued a proposed rule on the treatment of wellness programs under the Americans with Disabilities Act (ADA) in April 2015.

GINA prohibits employers from acquiring an employee’s genetic information, except in limited circumstances. One of the exceptions permits employers offering health or genetic services, including those offered as part of voluntary wellness programs, to request genetic information as part of these programs, as long as certain requirements are satisfied. The EEOC’s final rule on Title II of GINA explained that an employer could not offer a financial inducement for providing genetic information as part of a wellness program. However, the final rule did not expressly address the issue of spousal incentives. Employers were left without clear direction about whether a financial inducement for the spouse to provide health status information in connection with a wellness program was permissible.

In the proposed rule, the EEOC states that such inducement could be seen to violate the prohibition on providing financial inducements in return for an employee’s protected genetic information. When an employer seeks information from a spouse (who is a “family member” under GINA) about his or her current or past health status, the employer is also treated under GINA as requesting genetic information about the employee. Why? Because GINA defines the term “genetic information” of an employee broadly to include information about a family member’s (including a spouse’s) current or past health status. However, the EEOC’s final GINA rule specifically permits employers to seek such information from a family member who is receiving health or genetic services from the employer, including such services offered as part of a voluntary wellness program, as long as each of the requirements concerning health or genetic services provided on a voluntary basis is met. The proposed rule seeks to resolve this apparent conflict Federal Register | Genetic Information Nondiscrimination Act of 2008.

The EEOC’s decision to follow the rulemaking process for its proposed rule on wellness programs is contrary to the agency’s standard practice of merely issuing “guidance” such as the recently issued pregnancy discrimination guidance and the agency’s 2012 criminal history guidance. Establishing its position through formal rulemaking will likely strengthen the EEOC’s argument that courts should defer to the agency’s position on this issue.

RLG Takeaway
Although the EEOC’s proposed changes to the GINA regulations are not final, we recommend that employers review their current wellness programs and identify where changes may need to be made to ensure compliance. Please seek legal counsel with specific questions regarding your wellness programs.

The ADA: Why Employers Should Care about a Lawsuit involving a Trucking Company

A recently settled lawsuit brought by the EEOC against an Arizona trucking company highlights the importance of always considering unpaid leave as a reasonable accommodation and ensuring managers and supervisors are trained on all federal, state, and local discrimination laws.

In September 2013, the EEOC sued Chemical Transportation, Inc. (“CTI”), alleging that its policies violated the ADA by prohibiting employees from working with any medical restriction and by terminating employees if they are unable to return to “full, unrestricted duty” after twelve weeks of leave. The EEOC also alleged that the company unlawfully denied disabled employees’ requests for transfer to open positions for which they were qualified.

On September 22, 2015, after almost two (2) full years of litigation – and likely significant attorneys’ fees and costs – CTI agreed to pay $300,000 and take other affirmative actions to resolve this matter, according to the EEOC’s press release on this case. In addition to the monetary settlement, CTI agreed to hire a neutral consultant to ensure compliance with the ADA, eliminate its policies prohibiting employees from working with medical restrictions or requiring termination after twelve (12) weeks of leave, and institute a system of evaluating managers and supervisors based upon their compliance with EEOC laws.

RLG Takeaway
This lawsuit and settlement send a message that companies must be vigilant in ensuring their practices and policies do not offend or contradict their duty to engage in the interactive process and provide reasonable accommodations to employees. In particular, this matter demonstrates that compliance with the FMLA is not enough and that all supervisors and managers must be fully aware of and be trained on their duties under all federal, state, and local discrimination laws with respect to accommodating disabled employees.

This newsletter is provided for informational purposes only, not as legal advice. The reader of these materials should seek legal advice before using this or any other materials from this author.