Category Archives: DOL

US DOL Issues Final Rule on Salary Threshold for Exempt Status

Contributed by Sara Zorich, September 24, 2019

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:

  1. 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);
  2. 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);
  3. 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
  4. 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.

Gig Workers: An Evolving Trend or a Class Action Waiting to Happen?

Contributed by Rebecca Dobbs Bush, June 4, 2019

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.

Business concept. Isolated on white

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.

DOL Announces Long-Awaited Proposed OT Rule

Contributed by Carlos Arévalo and Sara Zorich, March 11, 2019

Overtime – blue binder in the office

As a follow up to our March 4th blog, three days later the DOL announced a proposed OT rule increasing the minimum salary required for an employee to qualify for exemption from federal overtime pay requirements. The proposed increase in salary level is from $455 per week ($23,660 annually) to $679 per week ($35,308 annually). In addition, the proposed rule includes the following changes: 

  • The proposal increases the total annual compensation requirement for “highly compensated employees” from the currently-enforced level of $100,000 to $147,414 per year (note, this overtime exemption is not applicable in Illinois as it was not adopted by the Illinois Minimum Wage Law);
  • A commitment to periodic review to update the salary threshold, but not an automatic adjustment as was the case with the 2016 proposed rule. Updates would continue to require notice-and-comment rulemaking;
  • A special salary level for Puerto Rico, the Virgin Islands, Guam, and the Commonwealth of the Northern Mariana Islands, a separate special salary level for American Samoa and an updated special weekly “base rate” for the motion picture producing industry; and
  • Allowing employers to use nondiscretionary bonuses and incentive payments (including commissions) that are paid annually or more frequently to satisfy up to 10 percent of the standard salary level, which was also part of the 2016 proposed rule. (Note, the proposed rule would allow a one-time yearly catch up payment if the employee does not earn the anticipated bonuses. The proposed rule states that as long as an employer pays 90% of the standard level ($611.10) and if at the end of the 52-week period the salary paid plus the nondiscretionary bonuses and incentive payments (including commissions) paid does not equal the standard salary level for 52 weeks ($35,308), the employer would have one pay period to make up for the shortfall (up to 10 percent of the standard salary level, $3,530.80).) 

There were no changes to overtime protections for police officers, firefighters, paramedics or nurses. There were also no changes impacting laborers including non-management production-line or non-management employees in maintenance, construction and related occupations.   

Most notably, the proposed rule stayed away from any changes to the job duties test.  We anticipate legal challenges to the proposed rule may be lodged by both the business community and employee rights groups as this rulemaking is a significant change from the current law and a deviation from the 2016 proposed rule.  Employers will have 60 days to submit comments to the DOL. Once the comments are considered, the DOL will issue and publish a final rule. In light of the proposed rule, we encourage employers to begin examining how it might impact them. This includes review of applicable state law as employers are required to comply with whichever law is most favorable to employees. We will be available to address any concerns or questions you may have.  And as always, we will keep an eye on any other developments and will keep you updated. 

After Decade of Silence, DOL on Opinion Letter Spree

Contributed by Noah A. Frank, January 8, 2019

We previously reported that in 2018, the U.S. Department of Labor (DOL) began issuing opinion letters again after nearly a decade of silence. While the legislature makes laws, the consequences of presidential elections flow into the executive agencies charged with administering and enforcing the laws. 

As of the close of 2018, the DOL had issued more than 30 new opinion letters involving the Family and Medical Leave Act (FMLA) or Fair Labor Standards Act (FLSA), and those letters addressed a variety of topics including minimum wage and overtime for employees paid varying rates, the compensability of frequent rest breaks required as a reasonable accommodation for a disability, and travel time. The DOL’s opinion letters represent the agency’s official interpretation of how it would enforce the statutes under its jurisdiction. Employers, especially those operating close to the margins of the law, should pay careful attention to these opinions and adjust their practices accordingly. 

Companies with questions or concerns relating to FMLA and FLSA practices may also wish to seek their own opinions letters—which may be submitted anonymously, through counsel—for clarity regarding complicated compliance matters. Additionally, given the substantial risks and liabilities that may arise from medical leave and wage & hour administration, companies should also err on the side of caution by seeking the advice of knowledgeable employment counsel, and regularly undertaking audits of FMLA and FLSA-related policies and practices.

U.S. DOL Issues First FMLA Opinion Letters In Nearly A Decade

Contributed by Noah A. Frank, August 31, 2018

Constantly evolving employment risk, often brought on by a change of administration (federal or state), is one of the most difficult aspects of running a successful business. Overnight, a lawful employment practice might be interpreted as unlawful, necessitating change to avoid charges of discrimination, unfair labor practice charges, agency scrutiny, and other issues related to running the business.

66028068 - fmla family medical leave act ,fmla

FMLA, family medical leave act

Agency opinion letters – guidance on how an agency interprets a fact-specific situation under the laws it enforces – are one useful tool to stay abreast of these developments.  On August 28, 2018, the U.S. DOL issued FMLA opinion letters FMLA2018-1-A and FMLA2018-2-A.  The last FMLA opinion letter was issued in January 2009.

FMLA2018-1-A – Organ Donor Leave

In FMLA2018-1-A, the DOL opined that an otherwise healthy employee that chooses to donate an organ may be entitled to FMLA leave because the resulting recovery generally is a serious health condition requiring one (or more) night’s stay in the hospital. As a result, an employee’s organ donation may be protected by both state and federal mandated leave laws, requiring case-by-case analysis.

FMLA2018-2-A – Application of Points Systems to Employees on FMLA Leave

FMLA2018-2-A is likely to impact many more employers. Here, the DOL issued guidance on the appropriateness of a no-fault attendance policy that have features that suspend attendance point accumulation and also suspend attendance point dissipation during a period of FMLA leave.  The DOL found such policies do not violate the FMLA, if applied in a nondiscriminatory manner.  Point reduction is a reward for working, and thus a benefit to which an employee on FMLA leave might not be entitled – as long as employees on other types of leave are treated the same.

FMLA2018-2-A is significant. Under such a policy, an employee who has accumulated attendance points and is getting close to disciplinary action (or termination) cannot “game the system” by taking FMLA leave, because the employee’s point total will remain frozen (and not automatically reduced by operation of time) during the period of the leave, up to 12 weeks.

But, proceed with caution!  FMLA2018-2-A does not embody the EEOC’s interpretation or enforcement of the Americans with Disabilities Act, nor any other agencies’ enforcement of similar laws. Of course, no points may be accumulated as a result of taking FMLA leave.

Best Practices

Policies must be applied in a nondiscriminatory fashion – including treating employees on FMLA in the same fashion as employees on other types of leave. For example, if there would be no “freeze” of the points policy for an employee taking a 2-week vacation or intermittent personal days, then an employee taking a 2-week FMLA leave or using intermittent FMLA should be treated the same.

Experienced counsel should review attendance and leave policies in conjunction with other conduct policies to ensure a cohesive and comprehensive scheme.

Similarly, careful analysis of the specific facts of a particular issue may help avoid legal complications down the road.

DOL Opinion Letter: Excessive 15-Minute Breaks Are Not Compensable

Contributed by JT Charron, April 25, 2018

On April 12, 2018, the Department of Labor (DOL) issued an opinion letter addressing the intersection between the Fair Labor Standards Act (FLSA) and the Family and Medical Leave Act (FMLA) when an employee needs multiple rest breaks throughout the day due to an FMLA covered serious health condition.

employee with clock in background

Employee working with clock in background

Background

The FLSA generally requires employers to compensate employees for all time spent working. Although the Act does not require employers to provide rest or meal breaks, it does regulate whether such breaks—if provided by the employer—must be paid as compensable working time. Specifically, breaks of up to 20 minutes are generally considered primarily for the benefit of the employer and must be paid.

The FMLA, on the other hand, provides eligible employees with up to 12 weeks of unpaid job-protected leave for employees with a serious health condition. FMLA leave may be taken incrementally and, in certain circumstances, in periods of less than one hour.

Employers are not required to pay for excessive breaks

What if an employee needs to take multiple breaks during the work day due to his/her serious health condition? According to Opinion Letter FLSA 2018-19, such breaks are not compensable because they are not “primarily for the benefit of the employer.” Importantly, however, the DOL noted that an employer must still compensate the employee for breaks she would have received regardless of her serious health condition. To illustrate this point, the DOL provided the following example:

[I]f an employer generally allows all of its employees to take two paid 15-minute rest breaks during an 8-hour shift, an employee needing 15-minute rest breaks every hour due to a serious health condition should likewise receive compensation for two 15-minute rest breaks during his or her 8-hour shift.

Employer takeaway

Employers can rest easy knowing that they do not have to pay employees for unlimited rest breaks simply because they are necessitated by an FMLA-approved serious health condition. Employers should carefully administer and track any such breaks to ensure compliance with both the FMLA and FLSA—along with any applicable state or local laws (e.g., local paid sick leave laws and required paid rest breaks).

 

Considerations for Utilizing the DOL’s Pilot “PAID” Program

Contributed by Sara Zorich and Michael Hughes, April 16, 2018

In April 2018, the US Department of Labor (DOL) Wage and Hour Division, launched  the six-month pilot Payroll Audit Independent Determination (PAID) program which provides a voluntary framework for employers to self-report potential FLSA overtime and minimum wage violations to the DOL and to resolve those violations without incurring additional penalties or liquidated damages. There are important benefits (and potential risks) to consider before signing up for PAID:

  • Wage Hour

    Dollar bills with clock in background

    The benefit of the program is that if an employer self-reports, the DOL will only require the employer to pay back wages owed to current and former employees, but not liquidated damages (double the back wages) or civil money penalties. The employer can obtain a release from the employees under the FLSA, thereby fully resolving the violation without paying attorney’s fees or engaging in a class action lawsuit.

  • One risk of the PAID program for employers is that the company is exposing itself to potential liability. The DOL has indicated the process will be fast (estimated 90 days start to finish), and the company will be required to pay 100% of the back wages due based on the audit on the next pay period after the DOL’s determination. But the biggest risk is that not all employees will accept the payment though the PAID program and instead will choose to file an individual or class-action lawsuit. The employer itself may have laid the groundwork for the employee to collect liquidated damages and attorney’s fees in federal court. Moreover, the PAID program will not provide a release for state wage and hour claims, even if employees cash their back wage check.
  • Additionally, the DOL has discretion to accept or decline any company from the PAID program; however the DOL has stated (in a webinar on April 10, 2018) if the company is declined, that declination will not be used to start a DOL audit.

PAID might be the right avenue for a company to address wage and hour compliance issues, but companies should speak with their labor and employment counsel to fully understand the risks and benefits of the PAID program prior to voluntary submission.