Employers with tipped employees, take note: the U.S. Department of Labor (DOL) released its long-awaited final rule on tip regulations, which was officially published on September 24 and becomes effective November 23, 2021. The final rule makes a number of changes that will impact tipped employees and their employers, including:
Civil Money Penalties
The DOL may assess a penalty up to $1,100 per violation against employers who take tips earned by their employees – regardless of whether the violations are repeated or willful. This means a penalty could be assessed on an initial, even unwilful, violation. The final rule also makes it clear that, in assessing penalties, the DOL must consider the seriousness of the violation and the size of the employer’s business.
Manager & Supervisor Tips
The final rule clarifies that managers and supervisors may hold on to tips they receive from customers — but only if they directly and solely provide the service to the tipping customer. Management may not hold on to tips received when they are assisting workers who regularly rely on tips.
For example, if a supervisor receives a tip after personally waiting on the table in a short-staffed restaurant, or personally styling the customer’s hair, and so on, they can keep the tips they earned – assuming that no other tipped employee helped wait on the table, style the hair, etc. If the supervisor is merely helping to run food to a table to aid the server, however, they cannot take a cut of the tip. This will be an important distinction to make while running an employer’s operations when it comes to who gets the tip.
Manager & Supervisor Participation in Tip Pools
With respect to tip pools, while managers and supervisors may never receive tips from worker tip pools, they are not prohibited from contributing tips to eligible employees in such pools. So, for example, employers can require managers and supervisors to share a portion of their own tips with bussers, shampoo assistants, or anyone else in the tip pool – but management cannot receive tips from a tip pool or sharing arrangement.
The bottom line is that employers with tipped employees must take care to comply with the new regulations, especially given that the DOL appears to be particularly focused on tipped employees. One way for employers to protect themselves is to have a written compliant policy on how tipping is going to work for the establishment. Training on tipping practices amongst the employees is a plus as well. As always, questions regarding these issues should be directed to experienced labor and employment counsel.
Contractors beware – the Illinois Department of Labor (IDOL) has ramped up audits of contractors as labor unions and related organizations flood the IDOL with “complaints. Remember, under the Illinois Prevailing Wage Act (IPWA), a prevailing wage “complaint” need not be verified or even submitted to the IDOL under penalty of perjury. The IDOL will investigate each and every “complaint” regardless of merit and, while historically the main focus of the IDOL was to ensure proper and full payment of the actual prevailing wage, it is now seeking to issue violations and debar contractors for technical violations (i.e. failure to post rates or provide written notice to contractors or lower tiered contracts).
Typically, debarment from contracting for public works (for up to 4 years) occurs only after the IDOL issues two distinct formal written notices of IPWA violations to a contractor within 5 years. Until recently, the IDOL considered the severity of the violation, the contractor’s history, and whether the contractor generally complied with other IPWA obligations before issuing a violation notice. The IDOL is now moving towards a philosophy of issuing a formal notice of violation for technical violations – especially when it comes to non-union contractors.
The IDOL’s increased activity is exceptionally troubling for all contractors given the IPWA’s broad definition of “violation” under its Administrative Rules. Pursuant to the IDOL’s prevailing wage rules, a violation occurs whenever the IDOL determines that the contractor: • failed to pay the prevailing wage to one or more employees performing work covered under a public works contract; • failed to keep, produce, or submit accurate records demonstrating compliance with the IPWA; • refused to comply with the certified payroll filing obligations (this now requires the use of the IDOL’s own online electronic portal system); • refused to allow the IDOL’s access to inspect the contractor’s records; • failed to insert a written stipulation that prevailing wage rates be paid into each subcontract and into the project specifications; • failed to obtain a bond guaranteeing performance of the prevailing wage clause (when required by the public body to do so); or • failed to post or communicate to the workers the applicable prevailing wage rates on the public works project site.
There’s clearly a lot of room for the IDOL to issue violation notices for technical violations that have nothing to do with the actual payment of the prevailing wage to the worker. The IPWA arguably has the most complex and administratively burdensome laws in the country. That’s on purpose!
All contractors must be acutely aware of the IDOL’s increased audit activity – and unprecedented scrutiny. And, in light of Springfield’s allegiance to organized labor these days, non-union contractors are in particular need to be doing everything possible to make certain they are complying with the IPWA’s technical requirements, beyond the payment of the actual prevailing wage.
On the last day of 2020, the US Department of Labor (DOL) issued an opinion letter impacting employers using telework arrangements in light of the COVID-19 pandemic. While a vaccine is now rolling out and we will hopefully get the pandemic under control in 2021, this opinion letter provides guidance to employers that have had to institute remote and hybrid work policies and/or arrangements with their workforce.
Specifically, the opinion letter addressed two general scenarios:
Employee has a parent-teacher conference in the middle of the day and works from the office, attends the conference and then goes home to finish her workday in her “home office”; and
Employee has doctor’s appointment scheduled for mid-morning. She works a couple of hours from home, goes to her appointment and then travels to her office for the rest of the day. At the end of the day, she returns home.
So is the employee’s travel time compensable? The opinion letter concludes it is not. Travel time under either scenario is deemed “off duty” or normal commuting time. Even if travel time occurs during the regular work or “office hours,” the employee is interrupting her work time to attend to personal matters. The time is off-duty and the employee “is free to use her time effectively and for her own purposes before resuming work.”
The opinion letter also finds that the travel time at issue is not compensable pursuant to the worksite-to-worksite travel or continuous workday doctrine. First, for the worksite-to-worksite travel analysis to apply travel must be part of the employee’s principal activity – here the employee is not being required to travel as part of her job so it is not compensable. Second, while regulations “contemplate that the period between an employee’s first and last principal activities will ‘in general’ be compensable,” this will not be the case when the employee uses the time for her own purposes. To support its opinion, the DOL examines a number of court decisions that emphasize the employee’s flexibility and freedom to use time for their own purposes. As may be appropriate, employers should consult with competent counsel to ensure that these policies and arrangements comply with relevant law.
In light of the “new normal” that has emerged in response to the COVID-19 pandemic, employers are encouraged to examine policies and/or telework arrangement to make sure that despite the flexibility such documents are intended to provide, it is clear to employees that time “effectively used for their own purposes” during their workday will not be compensable.
They say that the only constant in life is change. Here is a quick overview of the shift that we expect to see in the realm of labor and employment after President-elect Joe Biden takes office.
National Labor Relations Board (NLRB)
The NLRB is expected to have a Democratic majority as early as August 2021. The five-member Board currently has three Republican members, one Democrat, and one vacancy. The expectation is that the Biden administration will move quickly to fill the vacancy. In addition, the term of William Emmanuel, a Trump appointee, will expire in August 2021 – opening the door to a third Democrat.
The current NLRB General Counsel, Peter Robb – who has pushed a strong pro-employer stance in his role as prosecutor of unfair labor practice charges – will see his term expire in November 2021. There is some speculation that due to pressures from organized labor, President-elect Biden will find a way to terminate Robb’s terms prior to that.
As with prior administration changes, the expectation is that a Democratic Board majority and new General Counsel will lead the Board’s policy and enforcement priorities will go back to a pro-labor agenda. With this expected change will likely come easier roads to organizing, broadening of joint-employer liability, a return to post-contract continuation of union dues, and stricter restrictions on an employer’s ability to exercise discretion even when contract language provides for it. Not all changes will be immediate, of course, as case precedents established by President Trump’s appointees are not subject to reversal until cases presenting the relevant issues come before the Board.
We will be keeping an eye out for components of (or the entirety of) the Protecting the Right to Organize Act (PRO Act), which passed in the House in early 2020 with a vote of 224 to 194, largely along party lines. The legislation went nowhere in the Senate in 2020, but it is 2021. The results of the Georgia runoff elections have changed the political landscape. Among other things, the PRO Act was aimed at giving workers more equal footing during disputes at work, prohibiting employers from permanently replacing economic strikers, creating a private cause of action for unfair labor practices, authorizing the NLRB to add penalties for employers who retaliate against workers who organize, and allowing for secondary boycotts. President-elect Biden is a strong supporter of the PRO Act provisions, making clear that significant, pro-labor changes will be made through and within the NLRB.
Equal Employment Opportunity Commission (EEOC)
The EEOC enforces federal laws that prohibit employment discrimination, such as the Americans with Disabilities Act, the Age Discrimination in Employment Act and Title VII of the Civil Rights Act of 1964. The EEOC will have a Republican majority until July 2022. The EEOC’s current Strategic Enforcement Plan, which establishes the EEOC’s enforcement priorities, will also be in place until 2022. Therefore, changes to the agency initiatives will be even less immediate than at the NLRB, but the expectation is that the EEOC will return to its aggressive enforcement of these federal employment laws against employers, likely focused on workplace harassment, equal pay, and LGBT discrimination/harassment claims (especially in light of the June 2020 U.S. Supreme Court decision in Bostock, which holds that an employer who fires an individual merely for being gay or transgender violates Title VII).
U.S. Department of Labor
President-Elect Joe Biden has formally nominated Boston Mayor, Marty Walsh for Secretary of Labor. In response to the announcement of his nomination, Walsh tweeted, “Working people, labor unions, and those fighting every day for their shot at the middle class are the backbone of our economy and of this country. As Secretary of Labor, I’ll work just as hard for you as you do for your families and livelihoods.” Some media outlets are reporting that Walsh, like Biden, is more moderate than meets the eye, willing to reach across the aisle in order to make things happen. However, there is no question that unions expect robust support from Walsh due to his strong ties to organized labor, including a role as head of the Boston Building and Construction Trades Council. If confirmed by the Senate (which is very likely in light of the results of the Georgia runoff elections), Walsh would be the first union member to serve in this role in almost 50 years.
With Walsh at the helm, we expect that federal minimum wage and paid sick leave benefits will be top priorities. Walsh was a strong supporter of the state-wide Massachusetts law requiring paid family and medical leave benefits, and the forthcoming state minimum wage requirement of $15 an hour. We also anticipate that the DOL will revisit overtime standards, rules dealing with pay entitlement for off-the-clock work (especially in this time of widespread remote work), and the joint employer standard. It is also very likely that the DOL’s recently issued independent contractor classification regulations will be rescinded or superseded by new regulations that would be more worker-friendly. Enforcement will likely be aggressive, especially in industries like food manufacturing, fast food, and construction, which are priorities for organized labor, especially in terms of wages and workplace safety (especially, COVID-19-related complaints). Indeed, there is some expectation that this DOL will be even more aggressive and progressive than that of the Obama administration.
Bottom line: Employers must be focused on compliance. While we cannot specifically predict what will come over the next few months and years, it is imperative for employers to anticipate the pendulum swing and assume stricter enforcement of rules and regulations against employers, sooner rather than later.
The U.S. Department of Labor (DOL) issued additional guidance to employers as to the compensability of time employees spend attending voluntary training programs under the Fair Labor Standards Act (FLSA). In other words, if an employee attends a training program related to work, on his or her own volition and not under compulsion by the employer, must he or she be compensated?
The answer, according to the DOL: it depends.
Stepping back, the FLSA generally requires that non-exempt employees receive the federal minimum wage for all hours worked and overtime at 1.5x the regular rate of pay for any hours worked over 40 hours per week. Over time, courts have held that an employee’s time is – or is not – compensable depending on whether the time is spent predominantly for the employer’s or the employee’s benefit. If it is deemed for the employer’s benefit, it is compensable. If for the employee’s benefit, it is not.
In answering whether it is for the employer’s benefit or employee’s benefit, the DOL has traditionally followed guidelines which say that attendance at lectures, training programs and similar activities is NOT compensable work if four criteria are met:
It is outside of regular work hours,
Attendance is in fact voluntary,
The programming is not “directly related to the employee’s job,” AND
The employee didn’t perform any productive work while attending.
However, there are two more “special situations” in which the DOL recognizes training time does not have to be paid:
an employee, outside of normal working hours, voluntarily attends programming established by an employer that corresponds to courses offered separately by learning institutions, or
where the employee on his or her own initiative attends an independent school or college outside of normal working hours, even if the courses are related to the employee’s job.
While these regulations may seem straightforward, the DOL’s recent guidance proves, as always, that the devil will be in the details. In the recent guidance, the DOL addresses several situations:
If an employer approves an employee’s request to use continuing education funds (provided by the employer) to attend a pre-recorded webinar that has a continuing education component, which the employee then voluntarily attends during off-work time, does the employee have to be paid?
The DOL’s answer is no, it is unpaid time. It does not matter if the course does not have a continuing education component. Rather, what matters is that it was voluntary and not required by the employer and when the employee actually viewed the webinar – which in this scenario was outside of work. Thus, the “special situation” exception above applies and the time is not considered hours worked under the FLSA.
What about an employee who requests and is approved to use continuing education funds for an on-demand webinar, directly related to his job (but does not have a continuing education component) and watches it during working hours. You recognize this is compensable work time, but can you require the employee to use PTO or vacation time since the employee viewed it during work hours?
While it’s a creative idea, the DOL says not so fast. Once again, the fact that it can be viewed outside of work hours doesn’t matter. What matters is that it was participated in during working hours. Since the employee watched it during work hours, it is compensable and the employee cannot be forced to burn PTO or vacation time for it. In fact, the DOL cautions that it likely would still be paid work time if the webinar was not directly related to his job duties. It is noteworthy though that the DOL states that it is within an employer’s ability to establish a policy prohibiting the viewing of these types of training during work hours – such that while the employee would still have to be paid for the time, the employee could be disciplined for violating the employer’s policy.
The DOL’s guidance here is not necessarily new. However, it does serve as a timely reminder to employers that the question of whether to compensate employees for time spent in voluntary trainings is very fact-specific. To avoid running into tough decisions like these, employers are well advised to work with their labor and employment counsel to adopt clear, unambiguous policies so employees know what is – and is not – compensable and allowed when employees voluntarily decide to attend these programs.
Finally, it should be noted that if you are in a state or municipality that requires training, such as mandatory sexual harassment training in California, Connecticut, Delaware, Illinois, Maine, New York, and New York City, that training time is considered time worked that has to be paid under the FLSA, even if the employee completes the training during non-work hours via an on-demand webinar or live webinar.
On March 28, 2020, the U.S. Department of Labor (DOL) issued an update to its “Families First Coronavirus Response Act: Questions and Answers” to address, among other things, the Families First Coronavirus Response Act (FFCRA) provisions that allow employers of “health care providers” and “emergency responders” to exclude such employees from the FFCRA’s emergency sick leave and expanded FMLA provisions. The specific questions that address the provisions for health care providers and emergency responders shown in this article can be found on the DOL website and read as follows:
Who is a “health care provider” who may be excluded by their employer from paid sick leave and/or expanded family and medical leave?
For the purposes of employees who may be exempted from paid sick leave or expanded family and medical leave by their employer under the FFCRA, a health care provider is anyone employed at any doctor’s office, hospital, health care center, clinic, post-secondary educational institution offering health care instruction, medical school, local health department or agency, nursing facility, retirement facility, nursing home, home health care provider, any facility that performs laboratory or medical testing, pharmacy, or any similar institution, employer, or entity. This includes any permanent or temporary institution, facility, location, or site where medical services are provided that are similar to such institutions.
This definition includes any individual employed by an entity that contracts with any of the above institutions, employers, or entities institutions to provide services or to maintain the operation of the facility. This also includes anyone employed by any entity that provides medical services, produces medical products, or is otherwise involved in the making of COVID-19 related medical equipment, tests, drugs, vaccines, diagnostic vehicles, or treatments. This also includes any individual that the highest official of a state or territory, including the District of Columbia, determines is a health care provider necessary for that state’s or territory’s or the District of Columbia’s response to COVID-19.
To minimize the spread of the virus associated with COVID-19, the Department encourages employers to be judicious when using this definition to exempt health care providers from the provisions of the FFCRA.
The DOL also defined “emergency responder” for purposes of the FFCRA exclusions:
Who is an emergency responder?
For the purposes of employees who may be excluded from paid sick leave or expanded family and medical leave by their employer under the FFCRA, an emergency responder is an employee who is necessary for the provision of transport, care, health care, comfort, and nutrition of such patients, or whose services are otherwise needed to limit the spread of COVID-19. This includes but is not limited to military or national guard, law enforcement officers, correctional institution personnel, fire fighters, emergency medical services personnel, physicians, nurses, public health personnel, emergency medical technicians, paramedics, emergency management personnel, 911 operators, public works personnel, and persons with skills or training in operating specialized equipment or other skills needed to provide aid in a declared emergency as well as individuals who work for such facilities employing these individuals and whose work is necessary to maintain the operation of the facility. This also includes any individual that the highest official of a state or territory, including the District of Columbia, determines is an emergency responder necessary for that state’s or territory’s or the District of Columbia’s response to COVID-19.
To minimize the spread of the virus associated with COVID-19, the Department encourages employers to be judicious when using this definition to exempt emergency responders from the provisions of the FFCRA.
Employers having employees fitting the definitions above need to remember that the health care provider and emergency responder exclusions are discretionary, not automatic. As such, and in order to avoid confusion (and litigation down the road), we recommend that employers that intend to use either exclusion provide a short, simple notice to their employees to inform them of the fact that because they are included within the DOL’s definition of “health care provider” and/or “emergency responder,” and are essential to the fight against COVID-19, they are not eligible for emergency sick leave or expanded FMLA leave under the FFCRA. Such a notice should also advise employees that these exclusions do not affect their eligibility for FMLA leave under the terms of the FMLA in place prior to FFCRA enactment.
And all employers should bear in mind that the fairly expansive definition of health care provider discussed above does not apply to the definition of a health care provider who can certify an employee’s need for FMLA leave. That definition remains limited to, essentially, licensed doctors of medicine, nurse practitioners, and certain others as discussed in FMLA regulations in place prior to FFCRA enactment.
While there is some “chatter” from Washington concerning potential “hazard pay” for these workers, employers who use these exclusions are permitted to implement their own policies and benefit programs unique to their workers. Employers should also remember to keep in mind any local or state paid leave mandates currently in place or that may develop in the coming weeks.
On March 25, 2020 the Department of Labor (DOL) released digital versions of the required notice of The Families First Coronavirus Response Act (FFCRA). Under the FFCRA every covered employer (covered employers include most public sector employers and all private sector employers with fewer than 500 employees) must post a notice of the Families First Coronavirus Response Act (FFCRA) requirements in a conspicuous place on its premises. Obviously, where should you post the notice if you are remote in whole or in part? According to the DOL, since many employers have all or part of their workforce working remotely an employer may satisfy this requirement by emailing or direct mailing this notice to employees, or posting this notice on an employee information internal or external website. Employers are not required to post the notice in multiple languages nor are they required to give the notice to job applicants. The notice only has to be given to current employees, as such you do not have to send the notice to recently laid-off individuals.
In a follow up to our recent
post, the US Department of Labor (DOL) has now issued its final rule regarding the
salary thresholds for exempt status. The final rule will go into effect on
January 1, 2020 and establishes the following rules:
Salary exempt employees must earn at least $684/week (equivalent to $35,568 per year for a full-year worker) (which is slightly more than was proposed in March 2019 due to inflation/updated data but less than was proposed during the Obama Era);
Employers can use non-discretionary bonuses and incentive payments that are paid at least annually to satisfy up to 10% of the salary basis for the white collar exemptions (if this is utilized the minimum salary paid can be no less than $615.60/week) (however, it should be noted that (1) if the employee does not earn the bonus the employer will need to pay the amount anyway no later than one week from the end of the 52 week period or the salary basis will not be met and (2) if the employee leaves employment before the bonus is paid/earned the employer will have to pay the pro-rata share of the bonus at termination to ensure the minimum salary threshold was met);
In order to qualify for the “highly compensated exemption” employees must earn at least $107,432/year (formerly $100,000/year) and must be paid at least $684/week (however, Illinois employers should note this is not applicable in Illinois because Illinois did not adopt the highly compensated exemption); and
Revises the special salary level for the motion picture industry and US territories.
We anticipate the new rule will receive legal challenge. However, litigation is unpredictable, so employers should begin preparing now to ensure they are ready for January 1, 2020.
The workplace is changing: Millennials, Generation Z-ers,
and Baby Boomers looking to supplement their retirement income. These
individuals are more interested in autonomy and avoiding bad managers, office
politics and lengthy, non-productive staff meetings. Plus, the tax-savvy
individual knows the economic advantage of having access to traditional
business deductions through a Schedule C, rather than being limited to the
standard deduction or itemizing as a W-2 employee would be.
More and more businesses also seem to be interested in the advantages of a gig workforce, also called freelancers, subcontractors, contingent workforce, and more. After all, it allows a business to gain access to skills and talent without having to commit to hiring an individual as a full-time employee. According to Deloitte’s 2018 Global Human Capital Trends study, more than 40% of workers in the U.S. are employed in “alternative work arrangements.” These arrangements include contingent, part-time, or gig work.
So, is it a win-win for all involved? The problem is that current employment laws are simply not evolving at the pace required to keep up with this modern-day independent contractor. With this, a minefield is created for the unwary business.
Under the Obama administration, the DOL had issued broad guidance suggesting that gig workers were likely to be considered “employees.” That guidance was rescinded with the change in administration. Then, on April 29, 2019, the DOL issued an atypical, 10-page opinion letter on the subject. The opinion letter lays out a detailed analysis of all the relevant factors for independent contractor status and then comes to the conclusion that the gig workers at issue are not employees.
For now, if your business is participating in the trend of the gig worker, you want to make sure the relevant factors are met. Those factors and the analysis change depending on which law the issue is being examined under. Some of the more common factors are: control, permanency of the relationship, integrality to business operations, ability to sustain a profit or loss, accountability for operating expenses, etc. In other words, is the individual truly operating as a stand-alone business?
If you choose to engage gig workers, make sure to avoid these common mistakes:
Do not treat the individuals as employees. Do not even use the word “hire.” Instead, you are “engaging” their services, or “contracting” with them. And, commit to the arrangement in writing.
Do not be tempted to offer them benefits. Putting them in your health plan or letting them participate in a 401(k) will jeopardize any argument that they are not otherwise an employee. If it walks like a duck, quacks like a duck….
Do not make them sign a non-compete agreement. A critical factor in most cases is whether the individual is free to take on work from others or whether they are completely dependent on your business for work. If the individual is subject to a non-compete agreement and effectively being prevented from working for others, you will not win on this factor.
Because of the amount of exposure involved with a
misclassification lawsuit, it is worthwhile to have competent employment
counsel review your situation and any independent
contractor agreement or contracts that you are using to help you make
sure it’s being handled in the best possible manner to strengthen the
individual’s status as an independent contractor.
Last Fall, the Department of Labor (DOL) announced that it intended to issue a Notice of Proposed Rulemaking (NPRM) in March 2019 regarding the salary levels applicable to the executive, administrative and professional exemptions that exclude certain employees from the coverage of the Fair Labor Standards Act’s minimum wage and overtime provisions. The DOL has been reviewing the regulations at 29 CFR 541, which implement the exemptions, and is expected to seek public comment on the salary level before issuing a final rule.
Of course, we all recall the most recent final rule on the subject. The Obama administration’s final rule, announced on May 23, 2016, would have increased the minimum salary level for exempt employees from $455 per week ($23,660 annually) to $913 per week ($47,476 annually). This rule was challenged in the latter part of 2016 in the Eastern District of Texas. U.S. District Judge Amos Mazzant blocked the rule’s December 1, 2016, implementation when he issued a preliminary injunction in favor of the plaintiffs (21 states and over 50 business organizations). In his ruling, Judge Mazzant noted that the DOL exceeded “its delegated authority and ignore[d] Congress’ intent by raising the minimum salary level such that it supplants the duties test.” He also added that the Supreme Court routinely strikes down “agency interpretations that clearly exceed a permissible interpretation based on the plain language of the statute, particularly if they have a great economic or political significance.” The appeal of Judge Mazzant’s ruling was dismissed in September 2017.
Based on current
Secretary of Labor Alexander Acosta’s
comments that the jump to $47,476 was excessive, it has been expected that the
DOL’s NPRM would propose an updated salary
level test of somewhere between $30,000 and $35,000.
At this time, there is nothing employers need to do. And while it could be months, perhaps even longer, before a new final rule is issued, we expect that the current salary level will be increased. At this rate, though, the salary levels may once again become an issue in the next presidential election. Whatever happens, stay tuned – we will keep an eye on any action by the DOL and will keep you updated!