• About Us

    Welcome to the Labor and Employment Law Update where attorneys from SmithAmundsen blog about management side labor and employment issues. We cover topics including addressing harassment and discrimination in the workplace, developing labor law, navigating through ADA(AA), FMLA and workers’ compensation issues, avoiding wage and hour landmines, key legislative, case law and regulatory changes and much more!
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    The Labor and Employment Law Update is provided for information purposes only, and should not be construed as legal advice on any subject matter, nor should it be construed as creating an attorney client relationship. Do not send confidential information or facts about a legal matter. The opinions of this blog's contributors do not reflect the opinions of SmithAmundsen LLC as a whole. See the disclaimer page for further information.

Urgent Alert: U.S. DOL Proposes Major Changes to Exempt Salary Status

Contributed by Jeff Risch and Sara Zorich

Today, the U.S. Department of Labor (“DOL”) has announced that they are issuing a proposed rule to increase the minimum salary requirements under the Fair Labor Standards Act for exempt employees. A draft version can be found at: http://www.dol.gov/whd/overtime/NPRM2015/OT-NPRM.pdf. The final proposed rule will be issued in the Federal Register and will provide a comment period for the public.

The proposed rule sets forth guidance and requests comment on the following proposed changes:

  1. Set the minimum salary level to qualify for the white collar exemptions at 40% of the national weekly earnings for full-time salaried employees ($921 per week or $47,892 annually but expected to increase to $970 a week and $50,440 annually in 2016);
  2. Increase the minimum salary for Highly Compensated Employees to 90% of the national weekly earnings of full-time salaried workers ($122,148 annually);
  3. Establish a mechanism for automatically updating the minimum salary to meet the exemption on a yearly basis. While the proposed rule sets forth different types of mechanisms for calculating the automatic update (using a fixed percentile of wage earnings or using the CPI-U (an economic indicator for measuring inflation)) they do not identify which mechanism will be utilized;
  4. Increase the minimum salary level for exempt employees in American Samoa to $774 per week; and
  5. Change 29 CFR 541.709 to increase the current base rate for employees in the motion picture industry from $695 to $1,404 per week.

As stated, this is a proposed rule that is subject to a required comment period. The rule will not go into effect until the comment period has ended. However, employers MUST be cognizant of the proposed salary increases and begin contemplating how this is going to affect your current workforce.

Further, while not proposing any current rulemaking on the issues identified below, the proposed rule requests public comment on the following:

  1. Whether to allow non-discretionary, incentive bonuses and/or commissions to satisfy 10% of the standard salary requirement for the white collar exemptions and if such are allowed how often these bonuses/commissions must be paid (monthly or more frequently);
  2. Whether changesshould be made to the duties test for thewhite collar exemptions including:
    1. Whether employees should be required to spend a minimum amount of time performing work that is their primary duty for qualifying for the exemption and what that minimum amount should be, if any?
    2. Should the DOL follow the California state model and require 50% of an employee’s time be spent performing the employee’s exempt primary duty?
    3. Does the current duties test appropriately distinguish between exempt and non-exempt employees? Should the long/short tests be brought back?
    4. Is the concurrent duties regulation for executive employees (allowing the performance of both exempt and non-exempt duties concurrently) working or should there be a limit on the amount of non-exempt work?
  3. Whether the Department should add examples of additional occupations to provide guidance for employers in administering the exemptions?
  4. Examples from employers in the computer and technology industries as to what additional occupational titles or categories should be included in the examples along with duties that would generally meet or fail the exemption.

These additional inquiries are indications that the DOL is looking to potentially make further revisions to the exemptions.

In Light of the Proposed Regulations, Employers Should Analyze the Following:

  1. How many of your current employees will be affected by this new rule?
  2. Is a salary increase for those who do not currently meet the salary requirement a plausible financial decision to the required increases?
  3. Are there job positions that should now be reclassified as non-exempt and the employees will now be entitled to overtime if they work over 40 hours?
  4. Tightening up policies regarding working overtime and working with management to limit the number of overtime hours worked for non-exempt employees.
  5. Reviewing handbooks and policies regarding exempt and non-exempt status.
  6. Reviewing benefits applicable to exempt and non-exempt employees and how a change in status may impact the benefits to your employees.

Employers have OPTIONS Regarding these Proposed DOL Changes:

  1. Increase the employee’s salary to that proposed in the new regulations so they continue to meet the exemption;
  2. Keep the salary the same and pay the required overtime payments based on the employee’s regular rate of pay;
  3. Reduce the employee’s salary or change the employee to hourly at a lower rate so the total earnings do not change after overtime is paid;
  4. Eliminate the employee working any overtime hours; or
  5. Some combination of the above options.

The attorneys at SmithAmundsen are here to assist employers in navigating these business changes.

REMINDER – Chicago Minimum Wage Ordinance Requires Notices and Wage Increases Starting July 1st!

Contributed by Michael Wong and Sara Zorich

This Wednesday, July 1, 2015, Chicago’s Minimum Wage Ordinance (Chicago Municipal Code §1-24) goes into effect, increasing the minimum wage to $10.00 per hour for non-tipped employees and $5.45 for tipped employees.

IMPORTANT NOTICE REQUIREMENTS: All employers that maintain a business facility within the geographic boundaries of  Chicago AND/OR are subject to one or more of the license requirements in Title 4 of the Municipal Code of Chicago are covered by Chicago’s Minimum Wage Ordinance and MUST do the following starting July 1st:

  1. Post Chicago’s Minimum Wage Poster by July 1st! (Click here for a Copy of the Poster)
  2. Include a copy of Chicago’s Minimum Wage Poster with the first paycheck issued after July 1st to each employee that is subject to the Ordinance (i.e. works at least 2 hours in Chicago, or at some point may work at least 2 hours in Chicago)!
  3. Include a copy of Chicago’s Minimum Wage Poster with the first paycheck of any employee hired after July 1st!

From our prior Chicago Minimum Wage Ordinance Post, here are points that you need to know about the Chicago Minimum Wage Ordinance:

  1. Covered Employers: Any individual, partnership, association, corporation, limited liability company, business trust, or any person or group of persons that has at least one employee and (1) maintains a business facility within the geographic boundaries of Chicago AND/OR (2) is subject to one or more of the license requirements in Title 4 of the Municipal Code of Chicago.
  2. Covered Employees: Any employee who works for at least 2 hours in any two-week period within Chicago’s geographic boundaries, including driving through Chicago during work (e.g., that delivery driver that takes Route 94 from Evanston to Gary and gets stuck in rush hour traffic is covered!).
  3. Hours subject to Chicago’s Minimum Wage: Chicago’s Minimum Wage only has to be paid for hours worked by the employee when he or she is physically present within the geographic boundaries of Chicago. This includes time spent driving during working hours, but does not include time commuting between home and work.
  4. Non-Tipped Employees’ Hourly Rate: Chicago’s Minimum Wage for non-tipped employees starting July 1, 2015 will be $10.00/hour, and increase as follows: July 1, 2016 to $10.50/hour; July 1, 2017 to $11.00/hour; July 1, 2018 to $12.00/hour; July 1, 2019 to $13.00/hour; and each July 1st thereafter, Chicago’s Minimum Wage will increase by an amount announced by the Commissioner of Business Affairs and Consumer Protection (and, of course, if the CCMW is less than the Illinois or Federal minimum wage, then the highest wage rate applies).
  5. Tipped Employees’ Hourly Rate: Chicago’s Minimum Wage for tipped employees starting July 1, 2015 will be the greater of the Federal or Illinois minimum wage for tipped employees plus $0.50/hour, and increase as follows: July 1, 2016 by an additional $0.50 ($1.00 total); and each July 1st thereafter, Chicago’s Minimum Wage will increase by an amount announced by the Commissioner.
  6. Penalties & Damages: A fine of $500.00 to $1,000.00 per day for each offense that is not corrected. Potential license suspension or revocations and an order to pay restitution to underpaid employees. Additionally, employees can pursue a private cause of action to recover THREE times the underpayment, attorney fees and costs.
  7. Union/CBA Issues: There is no grandfathering for current “in-force” collective bargaining agreements! This means that, depending on the provisions of a current CBA, there could be an automatic increase in all employees’ wages (i.e., if only the lowest paid employee’s rates are defined and each other level is based a percentage higher), or the union could even demand to re-open bargaining mid-contract.  We anticipate that there will be substantial controversies over this.

Attention CA & MA Employers – Paid Sick Leave Goes Into Effect July 1!!

California

Gov. Jerry Brown signed into law Assembly Bill 1522, the “Healthy Workplaces, Healthy Families Act of 2014.” Under this new law, effective July 1, 2015, California employers, with few exceptions, must provide at least 24 hours (3 working days) of paid sick leave per year to their employees.  Read more here!

Massachusetts

On November 4, 2014, Massachusetts voters approved a ballot referendum requiring Massachusetts employers to provide paid sick leave. The new law will take effect on July 1, 2015. Massachusetts joins California and Connecticut as states requiring employers to provide paid sick leave, along with cities such as San Francisco, Newark and New York City.  Read more here!

BREAKING NEWS: Supreme Court Upholds Affordable Care Act Tax Credits

Contributed by Kelly Haab-Tallitsch

In a major decision announced earlier today, the Supreme Court upheld the tax credits under the Affordable Care Act (ACA) in states that have a federal health care exchange, affirming the 4th Circuit’s ruling in King v. Burwell.  The Court’s ruling confirms the legality of tax credits for the purchase of individual health coverage in the 37 states that have a health care exchange run by, or in partnership with, the federal government – including Illinois, Indiana, Wisconsin and Missouri.

At issue was the interpretation of language in Section 36B of the ACA authorizing individual tax credits for insurance purchased through an “exchange established by the state.”  Currently, only 13 states run their own exchanges, with the remaining 37 states using the federal exchange or a state-federal partnership exchange. Plaintiffs in King argued that an “exchange established by the state” did not include the federal exchange – an interpretation that would have made the tax credits illegal in 37 states.

Agreeing that the phrase “an exchange established by the state” was ambiguous, the Court looked to the context and structure of the statute to determine the meaning. Finding that language used elsewhere in the ACA indicated state and federal exchanges should be treated the same, the Court interpreted Section 36B to allow tax credits for insurance purchased on any health care exchange created under the ACA.

The Court further reasoned that interpreting the language to prohibit tax credits in states with a federal exchange would be incompatible with the rest of the law and that the tax credits are necessary for the ACA to function as Congress intended. Without individual tax credits two of the ACA’s three major reforms – the tax credits and the coverage requirements – would not apply. The Court further noted that certain other provisions would “make little sense” if tax credits were not available on the federal exchange.

What Does This Mean for Employers?

In affirming the individual tax credits in the 37 states with a federal exchange, the Court has indirectly upheld the employer penalties for failing to offer health coverage.  Penalties for not offering mandated coverage are only imposed on an employer if one or more employees receive a tax credit to purchase individual coverage on the exchange. Employers should continue to analyze their risk of penalty exposure and manage their benefit offerings accordingly.

Perhaps more importantly, the Court’s ruling in King v. Burwell further illustrates the staying power of the ACA and decreases the likelihood of relief for employers any time soon.

OSHA Revises Whistleblower Manual to Clarify Issues Related to Remedies and Settlement of Whistleblower Claims

Contributed by Jonathan Hoag

OSHA continues to focus enforcement efforts on whistleblower/retaliation claims.  Whistleblower claims have been on the rise and this trend is expected to continue for the coming years.  OSHA recently updated its Whistleblower Investigations Manual to offer clarity to remedies and settlements when handling a whistleblower claim under the Act.

The revised manual states that in some cases OSHA may issue a preliminary reinstatement and employers must make a bona fide job offer upon receipt of such findings.  This would be a bold order, but it might be used with greater frequency as OSHA continues to step-up enforcement of retaliation claims.  In addition, the manual now contains a section explaining that emotional distress/mental anguish, pain and suffering can be part of compensatory damages awarded under the OSHA whistleblower provisions.  Of particular concern is that OSHA expressly states that it may rely solely on a complainant’s own statement to prove objective manifestations of distress and statements by health care professions are not required.

whistleThe whistleblower manual now includes detailed guidance as to when punitive damages should be awarded in whistleblower cases.  OSHA will likely consider punitive damages in cases when a management official knew his/her action violated the whistleblower statute or had reason to believe action was unlawful but did not act to stop or prevent the conduct.  OSHA will focus on statements made by company officials, the amount of whistleblower training provided to staff, prior complaints about retaliation, and the company’s policies and manuals.  OSHA expressly acknowledges that punitive damages are likely not appropriate if the employer has a good faith defense, such as an effectively-enforced policy against retaliation.  Employers should review current policies and handbooks to be sure it is clearly communicated that retaliation is not tolerated and that there are no obstacles for employees in reporting complaints to OSHA (i.e. employees are not required to first report concerns to management before going to OSHA).

OSHA continues to recognize the value in settling matters, including whistleblower claims, as opposed to litigating the claims.  OSHA investigators are required to adhere to specific requirements when discussing settlement and employers should expect OSHA to seek 100% relief in order to settle (although full relief is not an absolute requirement for settlement).  If a private settlement is reached and not submitted to OSHA (or if not approved by OSHA), the complaint may still be dismissed.  However, if OSHA’s investigation has gathered enough information to establish a violation or if OSHA determines it needs to protect other employees, OSHA may issue merit findings.

Based on the revised guidance issued by OSHA, employers can provide substantial protection from damages, including punitive damages, by updating policies and handbooks to strictly prohibit retaliation.  In addition, all employers should provide regular training to employees (especially supervisors) about the rights of whistleblowers and the company’s zero tolerance policy on retaliation.  These simple steps will go a long way in avoiding liability and damages for whistleblower claims.

 

Employees That Are Erratic and Disruptive, While Suffering From A Mental Illness, Can Still Be Terminated Under The ADA

Contributed by Julie Proscia

Erratic behavior, caused by an underlying medical condition, does not necessarily mean a free pass under the Americans with Disabilities Act (ADA). In March, the Eighth Circuit Court of Appeals, in Walz v. Ameriprise Financial, Inc., upheld the termination of a bipolar employee, finding that the termination did not violate the ADA. Identifying and accommodating employees with overt physical disabilities is substantially easier than accommodating behavior that is disruptive and/or erratic and caused by mental illness. Because of the difficulty in addressing these types of issues, employers are often unsure of what to do–and thus do nothing. This ruling is good news for employers that struggle with disciplining and ultimately terminating individuals that are disruptive in the workplace and who cannot perform the essential functions of their position with or without a reasonable accommodation.

In Walz v. Ameriprise Financial, Inc., the plaintiff worked for Ameriprise as a process analyst. The position required not only good communication skills but also the ability to work well in a team. Starting in 2012, the plaintiff began to interrupt meetings, disturb coworkers, and disrespect her supervisor. After Walz’s supervisor had repeated discussions with her about her behavior, including offers of assistance and time off, she was eventually issued a disciplinary warning. Walz then applied for FMLA leave which was granted by a third party vendor that administers the leave requests for Ameriprise. Neither the third party vendor nor Walz ever informed Ameriprise of the reason for the FMLA leave. Upon her return to work, Walz provided a doctor’s note stating that her medications had been stabilized and was released for duty. The plaintiff was then given, reviewed, and signed a document that explained Ameriprise’s policy against disability discrimination and the procedure for requesting a reasonable accommodation. Within months of her return to work, Walz again began to engage in disruptive and erratic behavior to both her colleagues and supervisor, and was ultimately terminated. Throughout this time, Walz never requested a reasonable accommodation or reported the nature of her illness.

Walz subsequently sued Ameriprise alleging that it violated the ADA and should have known that she had a disability and forced her to take additional time off, despite the fact that she never disclosed the illness nor requested an accommodation. On appeal, the Eighth Circuit rejected her arguments and upheld the district court’s ruling. In doing so, the court found that Walz was not a qualified individual under the ADA because she could not perform the essential functions of her position with or without accommodation. Moreover, it held that the employer does not have a duty to “guess” an employee’s disability when the employee does not inform it of the illness or injury.

Bottom Line: Employers can discipline and terminate employees for erratic, rude and disruptive behavior even if the cause is ultimately related to an underlying medical condition. In a note of caution, employers still need to engage in the interactive process and investigate reasonable accommodations if the employee has disclosed a medication condition causing the behavior.

Medical Marijuana Update: Colorado Supreme Court Upholds That Employers May Enforce Drug Free Workplace Policies

Contributed by Michael Wong

On June 15, 2015, the Colorado Supreme Court upheld the appellate court’s ruling that employers can lawfully terminate employees for use of medical marijuana outside of work in compliance with a drug free workplace policy in Coats v. Dish Network, 2015 CO 44 (June 15, 2015).

This is an important decision for employers as many of the state laws “legalizing” marijuana for medical and/or recreational use have been recognized as providing protections from criminal laws, but are unclear as to how much, if any, civil or employment protections are provided to employees under those laws and other state laws.

In Coats v. Dish Network, an employee in an administrative position tested positive during a random drug test. The employee advised the employer that he had a state-licensed medical marijuana card and only used marijuana at home outside of work. After reviewing this information the employer terminated the employee for violating its drug free workplace policy.

The employee then sued the employer under Colorado’s Lawful Activities Act, Colo. Rev. Stat. Ann. § 24-34-402.5 (West), which prohibits employers from disciplining or terminating an employee for lawful activities engaged in off the premises of the employer during non-working hours. Colorado’s Lawful Activities Act is similar to many other state laws, including Illinois, California, Minnesota and New York, which were primarily enacted to prohibit employers from having policies that would prohibit employees from engaging in lawful activities, such as tobacco and alcohol use, outside of work.

The Colorado Supreme Court held that the Colorado Lawful Activities Act only protected outside-of-work activities that are lawful under both Colorado law and federal law. As such, any activities that are unlawful under federal law, like the use of marijuana (medically or recreationally), are not protected under Colorado’s Lawful Activities Act.

This is important, as Colorado employers are able to enforce drug free workplace policies without violating Colorado’s Lawful Activities Act. Additionally, it provides employers in other states some indication that their state courts may follow the Colorado Supreme Court’s lead and find that employers may still enforce drug free workplace policies without violating their state laws. It should be noted that the Colorado Supreme Court relied in part on the federal classification of marijuana as a Schedule I drug that has no medically accepted use, a high risk of abuse and a lack of accepted safety for use under medical supervision, and that a change to the federal classification of marijuana could impact this decision.

The takeaway from the Coats v. Dish Network decision for employers is that until there is clear statutory language or case law stating otherwise, employers are able to enforce their drug free workplace policies. That being said, since this is an issue in which case law is still developing and each state has different statutory language and regulations, employers should consult with legal counsel in addressing these types of issues prior to making any discipline or termination decision.

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