Category Archives: department of labor

President Trump Orders Immediate Freeze on Pending Regulations

Contributed by Carlos Arévalo, January 26, 2017

18108277_sOn January 20, 2017 shortly after taking office, newly sworn in President Donald Trump directed White House Chief of Staff Reince Priebus to issue a memorandum to the heads of executive departments and agencies directing them not to send any regulations to the Federal Registry until further notice, to withdraw any proposed regulations that have not been published and to postpone for 60 days the effective dates of regulations that have been published by the Officer of the Federal Register. As stated in Priebus’ memorandum, the purpose is to ensure the President’s appointees or designees “have the opportunity to review any new or pending regulations” and to consider “questions of fact, law, and policy that [such regulations] raise.”

With the change in administrations, this is not a surprising action. In fact, former President Barack Obama took a similar action in January 2009, at the beginning of his first term, by effectively freezing regulations that were pending from the former President George W. Bush’s administration.

What Does This Mean for Employers?

This means that any proposed or pending regulations are now facing uncertainty as to whether they will go forward, be overhauled or discarded. The most prominent pending regulations that this could impact is the Department of Labor (DOL) Final Overtime Rule. While the Final Overtime Rule was set to go into effect December 1, 2016, it was blocked from taking effect by United States District Court Judge Amos Mazzant in his November 22, 2016 ruling. Since the Final Overtime Rule did not go into effect the freeze on regulations could impact the Final Overtime Rule. However, it is likely that in order to repeal or reverse the Final Overtime Rule or any other regulations that have been finalized, President Trump would need an act of Congress or have the federal department or agency propose and enact a new regulation to replace the current one. Alternatively, since the DOL has appealed Judge Mazzant’s decision and pursued an expedited briefing schedule on December 1, 2016, President Trump could direct the DOL to abandon or withdraw the appeal. Thus, until the Fifth Circuit Appellate Court issues a decision on the appeal, or until such time as the President or DOL take action on the Final Overtime Rule, our recommendation, just as we suggested last November 2016 in response to the District Court granting an injunction on the DOL Final Overtime Rule, is that no action be taken until the issue is resolved.

With respect to other regulations, just like we stated with respect to President Trump’s executive order regarding the Affordable Care Act, it is too early to tell how or when employers will be impacted and what the new administration will ultimately do with respect to different regulations enacted during President Obama’s administration and regulations that impact businesses.

For our part, we will continue to monitor developments and provide additional information as it becomes available.

URGENT ALERT: Court Enjoins DOL Overtime Rule!

Contributed by Noah A. Frank, November 23, 2016

On November 22, 2016, a Texas federal district court granted a nationwide preliminary injunction against the U.S. Department of Labor’s overtime rule. State of Nevada v. U.S. Dept. of Labor, No. 4:16-cv-00731-ALM (E.D. Tex. 11/22/2016).

This injunction halted the rule’s December 1, 2016 implementation that would have more-than-doubled the salary level to $913 per week for overtime-exempt executive, administrative, and professional white collar workers.

We will provide additional details on what this preliminary injunction means for employers after the Thanksgiving holiday.

DOL FLSA Overtime Rule May Be Suspended

Contributed by Heather Bailey, November 17, 2016

The Honorable Judge Amos L. Mazzant III in the pending DOL overtime preliminary injunction lawsuit, State of Nevada et al v. United States Department of Labor et al. (Case No. 4:16-cv-00731-ALM, Eastern District of Texas), heard arguments yesterday as to whether the DOL should be enjoined at this time from implementing the new overtime and salary increase rule. The court – questioning the nationwide implications at stake here – was not interested in what the next administration will do come 2017 and wanted to focus on the law now.

After hearing arguments, the judge took them under advisement and stated he “hopes” to have a ruling by November 22, 2016. If he denies the preliminary injunction motion, he will have an additional hearing on November 28, 2016 before the December 1 implementation deadline.

What does this mean for employers who have been preparing for the new rule come December 1?  Keep preparing, however, it is perfectly permissible (and probably a good idea) to wait and see how Judge Mazzant rules next week before actually implementing any salary increases. Stay tuned as we will keep you updated come the judge’s ruling on November 22nd.  

Are you ready for December 1st? The FLSA Salary Changes Are Almost Here

Contributed by Sara Zorich, October 13, 2016

The U.S. Department of Labor’s (DOL) implementation of its Final Overtime Rule and an increase for salaried exempt employees to $913/week is set to go into effect on December 1st. We want to debunk the myths of what could and could not derail the implementation:

  1. 63527433 - december 1. calendar on white background. 3d illustration.New Litigation – On September 20, 2016, two lawsuits were filed to enjoin the new regulation from taking effect: States of Nevada et. al v. U.S. Department of Labor et. al., Case 4:16-cv-00731, Eastern Dist. TX and Plano Chamber of Commerce et. al v. Thomas Perez et. al., Case 4:16-cv-00732, Eastern Dist. TX. Both lawsuits are seeking to enjoin the DOL from implementing the salary increase on the basis that the promulgation of the rule was done in violation of the Administrative Procedure Act and the DOL has exceeded its authority. As of today’s date, there has been no date for a hearing on the request for injunctive relief. While we anticipate that a hearing may be held on the request for a stay of the salary increase before the December 1, 2016, no date is currently set. The court could enjoin the DOL from implementing the new rule but there is no certainty that such will occur.
  1. Presidential Race – While Presidential candidate Donald Trump has expressed opposition to the DOL’s salary increase, his potential election to President of the United States will likely have little impact on the implementation of the new salary increase. If he is elected, his inauguration will not occur until after the new rule goes into effect, thus making it highly unlikely that any reversal of the regulation would take effect until 2017.
  1. New Bills –In March 2016, the Protecting Workplace Advancement and Opportunity Act (S. 2707 and H.R. 4773) to nullify the DOL proposed rule was introduced. These bills have not been sent for vote by either the House or Senate. On September 21, 2016, the Regulatory Relief for Small Businesses, Schools, and Nonprofits Act (H.R. 6094) was introduced which requests postponement of the the DOL’s new overtime regulation from December 1, 2016 to June 1, 2017 for small businesses, schools and nonprofits. The House passed H.R. 6094 on September 28th and it was sent to the Senate on September 29th. To date, the Senate has not voted on the bill.

The bottom line is that there is great uncertainty if the DOL’s Final Overtime Rule can or will be derailed prior to December 1st. Thus, employers must continue to push forward with analyzing their exempt positions and making determinations as to whether each position meets both the salary basis and duties tests for exemption from overtime under the Fair Labor Standards Act. While you do not need to implement any salary increases until December 1, 2016, companies should be ready to make changes on or before that day and should not rely on the “hope” that the DOL’s implementation will be delayed.

URGENT ALERT: U.S. DOL PUBLISHES FINAL OVERTIME RULE

Contributed by Jeff Risch and Sara Zorich, May 18, 2016

Today the US Department of Labor (“DOL”) issued its long awaited final rule increasing the minimum salary requirements under the Fair Labor Standards Act (“FLSA”).

Key Provisions of the Final Rule

The Final Rule focuses primarily on updating the salary and compensation levels needed for Executive, Administrative and Professional workers to be exempt.

Of particular significance, the Final Rule:

  1. Sets the standard salary level at $913 per week – $47,476 annually;
  2. Sets the total annual compensation requirement for highly compensated employees (HCE) subject to a minimal duties test to $134,00; and
  3. Establishes a mechanism for automatically updating the salary and compensation levels every three years to maintain the levels using the above percentiles.

Additionally, the Final Rule amends the salary basis test to allow employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level.

The effective date of the final rule is December 1, 2016. The initial increases to the standard salary level (from $455 to $913 per week) and HCE total annual compensation requirement (from $100,000 to $134,004 per year) will be effective on that date. Future automatic updates to those thresholds will occur every three years, beginning on January 1, 2020.

A copy of the final rule as well as other information can be found here.

In Light of these Final Regulations, Employers MUST Analyze the Following:

  1. How many of your current employees are affected by this final rule?
  1. Is a salary increase for those who do not currently meet the salary requirement a plausible financial decision to the required increases?
  1. 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?
  1. Review your handbooks and policies regarding exempt and non-exempt status.
  1. Tighten up your policies regarding working overtime and analyze the possibility of limiting the number of overtime hours worked for non-exempt employees.
  1. Review and update policies and practices concerning “off the clock” time and ensure that there are proper controls regarding all hours actually worked by non-exempt employees.
  1. Review 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 meet the new regulations so the employee continues to meet the exemption;
  1. Keep the salary the same and pay the required overtime payments based on the employee’s regular rate of pay when the employee works over 40 hours (but you must track all hours worked);
  1. Reduce the employee’s salary or change the employee’s pay to a lower hourly rate so the total earnings do not change after overtime is paid;
  1. Eliminate the employee working any overtime hours; or
  1. Some combination of the above options including possible Reductions in Force.

Legal counsel will be able to assist employers in navigating these business changes.

Overpaying for Company Stock Lands ESOP Fiduciaries in Hot Water

Contributed by Kelly Haab-Tallitsch

The U.S. Department of Labor (DOL) recently announced a $1.1M judgment in favor of employees in the Gruber Systems Inc. Employee Stock Ownership Plan (ESOP). The department filed suit against Gruber Systems Inc., a California corporation, and its CEO in May of 2015 alleging they caused Gruber ESOP participants to lose money when the ESOP bought company stock at considerably more than fair market value. The DOL alleged that money used to fund stock purchases to shore up the company during financial troubles should have been used to fund the retirement accounts of Gruber employees. The consent judgment requires Gruber and its CEO to return $1.1 million to the Gruber ESOP and pay $220,000 in civil penalties, and permanently bars them from serving as a fiduciary or service provider to any ERISA-covered employee benefit plan.

CashThe announcement of the Gruber consent judgment came on the heels of another DOL suit filed January 20, 2016, against Florida-based Commodity Control Corp. to recover losses to its ESOP due to alleged overvaluation of the company stock. In 2009, the owners of Commodity Control sold their entire ownership interest to the Commodity Control Employee Stock Ownership Plan resulting in the ESOP owning 100% of the company. In its complaint, the DOL alleges the ESOP overpaid for the company stock due to a failure on the part of the defendants, including the former owners, the company and the ESOP, to obtain an accurate and current appraisal of the company stock. The DOL is asking the court to require the defendants to restore the losses to the ESOP and to require the former owners to disgorge any payments or proceeds they received from the sale of their stock to the ESOP.

These targeted suits by the DOL illustrate the department’s continued focus on ESOPs, and valuations of private companies in particular.

So how can you stay out of the headlines as an owner or manager of an ESOP company or other ESOP fiduciary?

Ensure an accurate valuation of your company with the following guidelines:

  1. Choose your valuation advisor carefully. Use a reputable source that won’t be influenced by conflicts of interest.
  2. Provide complete, accurate, and up-to-date information and data to the valuation advisor.
  3. Check and double-check the valuation report you receive and assess it for consistency and accuracy. Review assumptions about growth projections, financial statements, business risks and other factors that might influence stock value, and make sure it’s reasonable.

 

Too Hot in the Kitchen for Restaurant With Prior Notice from the DOL of Wage Violations

Contributed by Heather Bailey

restaurant kitchenA recent case out of the Northern District of Texas demonstrates just how important it is to listen to the Department of Labor (DOL) when they come knocking on your door.  (Solano v. Ali Baba Mediterranean Grille, Inc., 2016 BL 62687, N.D.Tex. No. 3:15-cv-00555, 3/2/16). Here, the DOL investigated allegations against the restaurant for failing to track time records, failing to properly pay a chef for the time he spent traveling between restaurants and improperly paying overtime on a bi-weekly basis instead of weekly. The DOL informed the restaurant of its improper pay practices, but was not sufficiently staffed for the DOL to take on the chef’s case. The chef ended up suing the restaurant in federal court on his own behalf and other employees.

Generally under federal law, the look back period for a non-willful wage violation is 2 years. However, when the employer’s actions are found to be willful – meaning it either knew or showed “reckless disregard” for the law – a court may look back into the employee’s work history for 3 years to determine damages. The court here found that a reasonable jury could find the restaurant’s violations “willful” because the DOL put it on notice that the restaurant was not properly paying this chef.

Practice Tips: Once the Department of Labor puts you on notice that you are improperly paying your employees and you do not heed its advice, it is a hard argument to win later down the road in court that you did not do so willfully. All this does is subject you to increased damages and penalties. Due to the nature and nuisances in the restaurant industry like proper roll out and administration of the tip credit and tip pools, we recommend you work with your legal counsel under the attorney client privilege to best determine how you are going to pay various categories of employees (e.g., chefs, bussers, servers, bartenders, door men and management).