Category Archives: DOL

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.

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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.

DOL Says Goodbye to Six-Factor Unpaid Internship Test

Contributed by JT Charron, January 10, 2018

On Friday, the Department of Labor abandoned its six-part test for determining whether an intern must be paid, and replaced with the more employer-friendly “primary beneficiary test.” This announcement came less than a month after the Ninth Circuit became the fourth federal appellate court to expressly reject the DOL’s six-factor test in favor of the primary beneficiary test.

Background

Under the Fair Labor Standards Act (FLSA) employers must generally pay employees minimum wage for all hours worked, and overtime for all hours worked over 40 in a week. The FLSA, however, exempts certain individuals from these requirements, including bona fide interns. To determine whether an intern was bona fide, the DOL introduced a six-factor test in 2010, which required that:

  1. The internship was similar to training that would be offered in an education environment;
  2. The internship experience was for the benefit of the intern;
  3. The internship was not displacing a regular employee;
  4. The training provide by the employer to the intern may have impeded the employer’s operations;
  5. The intern was not expecting a permanent position at the conclusion of the internship; and
  6. Both the employer and the intern understand that there was no compensation.

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    “interns wanted” sign

According to the DOL, if even one of these factors did not apply, the individual was an employee — not an intern — and was required to be paid minimum wage and overtime.

The Primary Beneficiary Test

First articulated in 2015 by the Second Circuit Court of Appeals, the primary beneficiary test is a case-by-case approach that gives consideration to the following seven factors:

  1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee — and vice versa.
  2. The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.
  3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
  4. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
  5. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
  6. The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
  7. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

Importantly, no single factor is dispositive, and the employee/intern distinction will be based on the unique circumstances of each case.

Bottom Line

While the primary beneficiary test will provide more flexibility for businesses preparing for the 2018 internship season, employers must still be careful in designing internship programs. As the above factors indicate, the primary beneficiary of any program must still be the intern — not the employer.

Déjà Vu All Over Again? DOL Appeals Overtime Rule

Contributed by JT Charron, December 1, 2017

At this time last year, employers across the country were preparing for implementation of the DOL Final Overtime Rule, which would have more than doubled the minimum salary level for exempt employees. At the eleventh hour, employers were granted a reprieve when the Federal District Court for the Eastern District of Texas temporarily halted implementation, which was subsequently made permanent in August of this year.

In the interim, a presidential election occurred. And with the change in administration came uncertainty about what—if any—action the DOL would take regarding the now-defunct overtime regulations. We began to get answers following Alexander Acosta’s appointment as Secretary of Labor. Since his confirmation hearing in March Acosta has repeatedly stated that—while the jump to $47,476 was excessive—the salary level test should be increased to somewhere between $30,000 and $35,000.

In July, the DOL followed up on Acosta’s comments by issuing a request for information (RFI) regarding the overtime exemptions. The RFI sought responses to eleven sets of questions pertaining to the overtime exemptions, including questions regarding whether annual indexing of the salary test would be appropriate and the impact on the wages of exempt employees caused by the anticipation of the 2016 Final Rule. The comment period ended on September 25, 2017, with the DOL receiving over 200,000 comments.

On October 30, 2017, the DOL filed its appeal of the Texas court’s decision to permanently block the overtime rule. That appeal has been stayed while the DOL develops new overtime regulations. To be sure, the DOL is appealing this decision for one reason—to preserve its authority to revise the salary level test. In both its earlier decisions, the District Court repeatedly emphasized that the duties—not salary level—test should control the determination of exempt positions.

In its August 31 decision the Court attempted to clarify, in a footnote, that it was “not making any assessments regarding the general lawfulness of the salary-level test or the Departments authority to implement such a test.” However, the broad language used elsewhere in the opinion, is difficult to square with this narrow holding. In fact, in its appeal of the preliminary injunction—which was later dismissed as moot—the DOL asked the Fifth Circuit Court of Appeals to “address only the threshold legal question of the Department’s statutory authority to set a salary level, without addressing the specific salary level set by the 2016 final rule.” We expect the DOL to take a similar stance in the instant appeal.

What’s Next

There is nothing employers need to do at this point. The DOL is currently reviewing the comments it received in response to its RFI, after which it will publish a notice of proposed rulemaking. Following that notice there will be a comment period prior to the issuance of any new regulations. Although it could be months—or years—before we see any new regulations, we fully expect that the current salary level will be increased, the only question is by how much. Stayed tuned – we will keep an eye on any action by the DOL and will keep you updated!