Category Archives: Salary and Wage

Salary History Inquiry Bill Down But Far From Out

Contributed by Noah A. Frank, September 19, 2017

wage

On June 28, 2017, HB 2462, an amendment to the Illinois Equal Pay Act, passed both chambers of Illinois General Assembly. The bill would have made an employer’s inquiry into an applicants’ wage, benefits, and other compensation history an unlawful form of discrimination. Even worse for Illinois employers, the bill would allow for compensatory damages, special damages of up to $10,000, injunctive relief, and attorney fees through a private cause of action with a five (5) year statute of limitations.

On August 25, 2017, Governor Rauner vetoed the bill with a special message to the legislature that, while the gender wage gap must be eliminated, Illinois’ new law should be modeled after Massachusetts’s “best-in-the-country” law on the topic, and that he would support a bill that more closely resembled Massachusetts’ law.

The bill, which passed 91 to 24 in the House, and 35 to 18 in the Senate, could be reintroduced as new or amended legislation following the Governor’s statement, or the General Assembly could override the veto (71 votes are needed in the House, and 36 in the Senate, so this is possible) with the current language.

Why is this important?

With the Trump Administration, we have seen an increase in local regulation of labor and employment law. This means that employers located in multiple states, counties, and cities must carefully pay attention to the various laws impacting their workforces. Examples of this type of “piecemeal legislation” we have already seen in Illinois and across the country include local ordinances impacting minimum wage, paid sick leave, and other mandated leaves. Additionally, laws that go into effect in other jurisdictions may foreshadow changes at home as well (e.g., Illinois’s governor pointing towards Massachusetts’s exemplary statue).

Had it become law, this amendment would have effective required employers to keep applications and interview records (even for those they did not hire) for five years to comply with the statute of limitations for an unlawful wage inquiry (the Illinois Equal Pay Act already imposes a five year status of limitations for other discriminatory pay practices). By contrast, under Federal law, application records must be kept for only one year from the date of making the record or the personnel action involved (2 years for educational institutions and state and local governments).

What do you do now?

While the law has not gone into effect as of the date of this blog, it is likely that some form of the salary history amendment will ultimately become law in Illinois. Businesses should carefully review their job applications, interview questions, and related policies to avoid inquiries that may lead to challenges in the hiring process.

Additionally, record retention (and destruction!) policies should be reviewed for compliance with these and other statutes – as well as to ensure data integrity and security.

Finally, seek the advice of experienced employment counsel for best practices in light of national trends to remain proactive with an ounce of prevention

IMPORTANT DOL UPDATE: The Final Rule on Doubling White Collar Salaries Is Shot Down By Texas Judge

Contributed by Heather Bailey, September 6, 2017

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Concept of time with businessman holding a clock

Previously, we reported to you on the U.S. Department of Labor’s (“DOL”) Final Rule that raised the minimum salary threshold required to qualify for the Fair Labor Standards Act’s (“FLSA”) “white-collar” exemptions (executive, professional and administrative classification) from $455 per week ($23,660 annually) to $913 per week ($47,476 annually) as of December 1, 2016 (see our prior articles: U.S. DOL Publishes Final Overtime Rule and; Are you ready for December 1st? The FLSA Salary Changes Are Almost Here).

The Obama administration’s goal with this Final Rule, announced on 5/23/2016, was to give approximately 4 million workers the ability to earn overtime pay, instead of getting paid a fixed salary since many employers would not be able to afford to pay their otherwise exempt employees $47,476 annually. Implementation of this new rule had been temporarily stalled in a federal court in Texas just prior to it going into effect this past December 1st (see our prior articles: Court Enjoins DOL Overtime Rule and; Business Realities Under the Halted DOL Final Overtime Rule).

However, on August 31, 2017, Judge Amos L. Mazzant of the United States District Court, Eastern District of Texas answered many business owners’ prayers by ruling the DOL indeed exceeded its authority by more than doubling the minimum salary threshold for exempting white-collar employees (see the full case here).

The judge did not say the DOL could not raise the minimum salary at all. Rather, relying heavily on Chevron, USA, Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984), the judge stated that by more than doubling the current minimum threshold, the DOL effectively eliminated the need for looking to the employees’ actual duties and responsibilities—which was the essence of Congress’s intent when it created the FLSA white collar exemptions. The judge looked to the plain meaning of what it means to work in an executive, administrative and professional capacity concluding the primary focus was not the salary minimum but instead the actual duties and responsibilities.

What are the ramifications? The Department of Justice voluntarily dismissed its appeal of Judge Mazzant’s earlier preliminary injunction ruling putting the Final Rule on hold, so it seems unlikely it will appeal this ruling. However, this decision could catapult the Trump administration to issue a new rule providing for a more moderate increase in the minimum salary threshold – one that does not vitiate the primary focus of the “white collar” overtime exemptions: the employees’ actual duties and responsibilities.

Practice Tips:

  • The good news for now is that employers can continue to follow the previous DOL regulations for white collar exemptions (i.e., duties test and salary test).
  • If you did not do so previously, analyze your exempt positions to confirm they meet the duties test and are truly exempt positions. For example, is your manager truly a manager or is she really a lead worker? Is this manager hiring, firing and disciplining two or more employees?  Is your payroll clerk clearly just doing data entry or is he exercising independent discretion and judgment?  If the position does not meet the duties test, you transitioning the position to make it overtime eligible.
  • Ensure management is trained to enforce policies related to overtime pay such as those relating to working time, time clock procedures, meal and rest breaks, working off the clock issues, etc.
  • Did you already make changes to your employees’ pay or duties based upon the final rule going into effect on December 1, 2016?  While there are ways to change those decisions (i.e., you can change an employee’s pay moving forward for work not yet performed), you need to keep in mind morale issues for employees whose compensation may decrease either by way of a salary reduction or loss of overtime pay.  In these situations, it is highly recommended that you work with your counsel on determining the best practices for your business and your workforce.

With the judge’s ruling, many business owners will be able to find some comfort in being able to keep their exempt employees on a reasonable salary without having to break the bank.

Salary History — Time to Update Job Applications, Again

Contributed by Noah A. Frank, February 6, 2017

By now, employers should well know that they may not make unlawful inquiries of applicants based on protected classes (e.g., age, religion), as well as arrest history. In the past few years, we’ve seen an increase in legislation (and litigation) that impact employers’ ability to gather information and check an applicant or employees’ background, such as state and local “ban the box” laws, which generally prohibit employers from asking about criminal convictions until an applicant is made a conditional offer of employment. And, even when and where checking an applicant or employee’s background is permissible, employers are required to comply with the Federal Fair Credit Reporting Act and other applicable federal, state and local laws which limit and set strict requirements that must be complied with when doing background checks.

wageWhat’s New?

On January 23, 2017, Philadelphia’s newest restriction was signed into law, restricting an employer’s ability to ask applicants about their wage and salary history, effective May 23, 2017.  Philadelphia Bill No. 160840, amending Chapter 9-1100 of the Philadelphia Code. Except as specifically authorized by another law permitting disclosure or verification of wage history or “knowingly and willingly” disclosed by an applicant, this ordinance makes it unlawful for an employer to: inquire into or require disclosure of an applicant’s wage history, condition employment or an interview based on such disclosure, or even use information gained from the former employer at any stage of the employment process, including negotiating an employment agreement!!

This Is Significant!

First, Philadelphia has been on the forefront of employment regulations, and is often followed by other cities, so employers should be prepared for the possibility that their state, county, or city may adopt or implement similar rules.

Second, laws precluding inquiry into salary and wage history substantially inhibits salary negotiation, and may even encourage applicant dishonesty. An employer would be unable to verify an applicant or employee’s statement of their prior wages (for example, by reviewing a recent W2 or paystub from a prior employer) in reviewing and determining what salary or wage should be offered in order to meet-or-beat an applicant’s current compensation.

Third, as the ordinance makes it unlawful to “condition employment” on such wage history, the discovery of falsified information later on may not be a valid basis to protest unemployment or cut off damages in a civil matter – unlike in states where falsification of application and employment documents may be considered misconduct that could subject the employee to discipline up to and including termination (like Illinois).

What To Do About This

The new Philadelphia ordinance will require that Philadelphia employers make changes to their job applications and other onboarding materials and practices to limit inquiries into wage/salary history. Additionally, it serves as a reminder to all employers, no matter where they are located, of the importance in regularly reviewing their job applications and other onboarding materials and practices to ensure that they comply with the most current labor and employment laws on a federal, state, and local level, including but not limited to laws limiting employer inquiries into statuses protected by law such as wage/salary history, age, marital, housing status, military statuses, and credit/criminal conviction history. Competent employment counsel should be consulted for an audit of employment forms, policies and practices to ensure that the company is doing “it” right.