July 2015

… They’re Here!

The Department of Labor’s Wage & Hour Division (WHD) announced its long-awaited proposal to amend the Fair Labor Standards Act (FLSA) Regulations and, in particular, the regulations governing the “white collar” exemption for executive, administrative, and professional employees.  The Notice of Proposed Rulemaking (NPRM) is as surprising for what it includes as what it did not include.

One thing is clear: the goal of these changes is higher minimum salaries for exempt employees, even those who are highly compensated.  Everything else in the regulations will stay the same, at least for now.  The WHD has asked for comments on a number of topics in order to assess future changes.  The impact of these proposed changes will be far reaching and employers should start planning now for the impact on their operations and finances.

What Are The Changes?

HighlightIncrease in wages for highly compensated employees.

The feature change in the DOL’s proposed FLSA rules is an increase in the minimum weekly salary to the 40thpercentile of weekly earnings for full-time salaried workers. In 2013, that number would have equaled $921 per week (or just under $48,000 per year).  The DOL projects that the 2016 level will increase to $970 per week, or $50,440 per year. 

For highly compensated employees, the threshold would be set to the annualized value of the 90th percentile of earnings for full-time salaried workers, or $122,148 annually. More importantly, for the first time in the FLSA’s history, the salary and compensation levels would be indexed to the Bureau of Labor Statistics (BLS) data and updated annually, without the need to go through further rule-making.

The DOL’s frequently asked questions, released with the NPRM explains that the DOL believes the 40th percentile 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). 

In the preamble DOL considers whether to also permit non-discretionary bonuses and incentive payments to count toward a portion of the standard salary level test for the white collar exemptions and if so, how to include such payments as part of the salary level test.  Even if such payments were ultimately considered, the DOL is likely to put a cap on the amount of the salary requirement that could be satisfied through non-discretionary bonuses and incentive pay. 

What Does Not Change in the Proposed FLSA Regulations

Highlight: Everything else stays the same…for now. 

The new salary levels still do not apply to outside sales employees, and they still exclude other professionals like lawyers, teachers, and doctors. 

But the key is that the WHD did not propose any changes to the duties tests for the white-collar exemptions.  Instead, the NPRM explains that the significant salary threshold increase should eliminate a majority of the “continued extensive litigation regarding employees for whom employers assert the [white collar exemptions].” 

What the Proposed FLSA Regulations Mean for Employers 

Highlight: This could be expensive.

Keep in mind that these are just proposed regulations.  After publication in the Federal Register (which we expect will occur shortly), the DOL estimates that the Final Rule resulting from the NPRM will not be released until mid-2016, since the DOL plans to “rely on data from the first quarter of 2016” in setting the salary level.

The proposed salary level increase to $50,440 is substantial and employers will need to consider the impact that this proposal will have on their bottom line.  We agree with the NPRM that the biggest impact will be on educational and health services, with substantial impacts on wholesale/retail trade, professional and business services, and the leisure and hospitality industries. 

Yet, because of the differences in standards of living, businesses in the South and in rural areas will feel the salary level increase most acutely.  The salary level will also likely wipe out exempt positions offered on a part-time basis, which are still possible at the current $455/week level.

While this is far-reaching, legal (and internally) disputes over whether one of the white-collar exemptions applies (the duties test) should be far less frequent.

What to Watch For

Highlight:  This could go fast. 

Remember, in 2004, the DOL gave employers only 120 days to comply with those new rules and we can expect that the DOL will provide the same or shorter period this time around.  Planning now will help avoid abrupt impacts next year (which is when we believe these changes will be approved). 

Employers should work with counsel to complete a preliminary assessment of all positions they currently treat as exempt to determine whether they would be impacted by the proposed changes and whether any potential duties test changes could similarly impact things.  Many employers will need to budget for salary increases and/or increased overtime costs for at least part of 2016.

Developing a Consistent Accommodation Process

When a qualified employee requests an accommodation, employers should make ensure they have made every effort to meet the request unless it truly has a significant impact on their business. The first question an employer is likely to get is a request a change in the way the employee’s job is performed. And, this request will often come after the employee has exhausted all job-protected leave.  When this happens, you’ll want to walk through the following process:

  1. Receive and document the request: Ensure that you clearly understand the request and its parameters.  If you are a supervisor or manager, send the request to Human Resources.
  2. Follow the interactive process: The request will trigger an interactive process review and discussion with the employee.
  3. Certify the need for the accommodation: You should request documentation to determine if the employee is disabled and if they can perform their jobs with an accommodation.
  4. Continue the interactive process: Once the healthcare provider has established that the employee has an impairment but is able to perform job functions with an accommodation, the employer should engage in an interactive discussion with the employee and discuss possible accommodations.
  5. Choose the accommodation: Review and select the accommodation (or multiple options if there is more than one) that will allow the employee to do his or her job most effectively. This may involve looking at technical solutions and adaptive equipment.  However, the employer has the right to decide between options.
  6. Implement the accommodation: Inform the employee of the accommodation and implement as soon as possible. In some cases, a reasonable accommodation may be unpaid leave.
An employee’s request for a job accommodation may arise as part of a claim for short- or long-term disability, FMLA or workers’ compensation. It may also stem from a condition that does not qualify for any of these.  Thus, information regarding all of the employee’s absences will help you track the process and enables comprehensive documentation and compliance.  The most complicated part is choosing or analyzing additional options prior to accommodation.  These are discussions that should occur with legal counsel if you anticipate difficulties with the process.

The bottom line: State and federal regulations for ADA/ADAAA, FMLA and workers’ compensation are becoming increasingly complex. Thus, it is important to develop an accommodation plan that includes identifying and responding to an accommodation request with the flexibility required of the statutes (and the courts).

Just in Case you Forgot the New Forms

In late May, the Department of Labor (DOL) issued its updated model FMLA forms.  The new forms expire on May 31, 2018 –  and can be downloadedhere.  There are only two material differences between these forms and the old ones – and it’s in the instructions for the various medical certifications:
 
Instructions to the Employer – The DOL added the the following language to the instruction about employers’ record-keeping obligations: “Employers must generally maintain records and documents relating to medical certifications, recertifications, or medical histories of employees’ family members, created for FMLA purposes as confidential medical records in separate files/records from the usual personnel files and in accordance with 29 C.F.R.  § 1630.14(c)(1), if the Americans with Disabilities Act applies, and in accordance with 29 C.F.R. § 1635.9, if the Genetic Information Nondiscrimination Act applies.”
 
Instructions to the Health Care Provider – The DOL added the following sentence to the medical certification form for the employee’s own serious health condition: “Do not provide information about genetic tests, as defined in 29 C.F.R. § 1635.3(f), or genetic services, as defined in 29 C.F.R. § 1635.3(e), or the manifestation of a disease or disorder in the employee’s family members, 29 C.F.R. § 1635.3(b).”  This sentence also appears in the other medical certification forms, but without the language about “the manifestation of a disease or disorder in the employee’s family members.

Both changes to the forms appear to have been made to improve compliance with the Genetic Information Nondiscrimination Act (GINA).  GINA prohibits employers from receiving “genetic information” (including family health history) about employees, unless the receipt is what the GINA regulations call “inadvertent.”  The GINA regulations include the following “safe harbor” notice that employers can give to health care providers and likely should have on the FMLA forms:
 
The Genetic Information Nondiscrimination Act of 2008 (GINA) prohibits employers and other entities covered by GINA Title II from requesting or requiring genetic information of an individual or family member of the individual, except as specifically allowed by this law. To comply with this law, we are asking that you not provide any genetic information when responding to this request for medical information. ‘Genetic information’ as defined by GINA, includes an individual’s family medical history, the results of an individual’s or family member’s genetic tests, the fact that an individual or an individual’s family member sought or received genetic services, and genetic information of a fetus carried by an individual or an individual’s family member or an embryo lawfully held by an individual or family member receiving assistive reproductive services.
 
Although it’s not clear why the DOL didn’t add the GINA “safe harbor” notice to the new FMLA medical certifications,employers should consider adding the notice to the forms or attaching a copy of the notice to the forms before they are given to 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.

Copyright © 2018 Roe Law Group, PLLC, All rights reserved.

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