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 recent decision in Dyer v. Ventra Sandusky, LLC, issued by the U.S. Sixth Circuit Court of Appeals (which has jurisdiction over Kentucky, Michigan, Ohio, and Tennessee), should motivate employers to take another look at whether their attendance policies run afoul of the Family and Medical Leave Act (FMLA).
There are plenty of gray areas in the law, but it is generally clear that employees are not to be disciplined because they are absent for FMLA-covered reasons. That also means that employees should not accumulate attendance “points,” e.g., under a no-fault attendance policy, for FMLA-covered absences when such points can contribute to discipline up to and including termination of employment.
To its credit, the employer in Dyer did not assign attendance points for FMLA-covered absences. But unfortunately for the employer, that is not the end of the story.
Under the employer’s attendance policy, employees were eligible for a one-point “reduction” of their attendance point balance for every 30-day period in which the employee had “perfect attendance.” The employer’s definition of perfect attendance was not self-explanatory. For instance, an employee could be absent for several different reasons — including vacation, bereavement, jury duty, military duty, holidays, and union leave — and still have “perfect attendance” and eligibility for attendance point reductions.
However, FMLA-covered absences were not included among the types of absences that preserved perfect attendance status and point-reduction eligibility. And if an employee had a FMLA-covered absence, his progress toward the 30-day point reduction goal was reset to zero.
The Sixth Circuit noted that the FMLA’s regulations generally require that an employee not lose benefits while on FMLA leave. Because attendance point reductions (and progress toward such reductions) are benefits, the Sixth Circuit noted that, at the very least, progress toward the 30-day goal should be frozen while employees are on FMLA leave, rather than being reset to zero. The court also indicated that if other “equivalent,” but non-FMLA forms of leave were counted toward the 30-day goal, then FMLA-covered absences should also be counted toward the 30-day goal.
The bottom line is that the Dyer decision instructs employers that disciplinary and benefit policies must be closely scrutinized to determine whether they might dissuade employees from taking FMLA leave — or otherwise harm employees who take FMLA leave. If harm results, or if employees are faced with the decision of taking FMLA leave or forgoing benefits, potential exposure to liability under the FMLA may exist.
A U.S. Citizenship and Immigration Services (USCIS) memorandum-issued policy is at the heart of a court case challenging recent H-1B visa denials.
The “Contracts and Itineraries Requirements for H-1B Petitions Involving Third-Party Worksites” memo was issued on February 20, 2018 without any notice or comment period required by the Administrative Procedure Act (APA). The memo directs adjudicators to ensure a contractor has actual and exclusive “control” of the contractor’s employees at the third-party site as a criterion for visa approval. This requirement comes from a rigid interpretation of the Department of Labor’s definition of “employer” which reads: “Has an employer-employee relationship with respect to employees under this part, as indicated by the fact that it may hire, pay, fire, supervise, or otherwise control the work of any such employee….” Instead of considering any one of these circumstances as qualifying, USCIS effectively changed the “or” to an “and,” requiring all of them.
H-1B visa denial rates skyrocketed the past two years, especially
for contractors working at third-party worksites. Denial rates for initial H-1B
petitions in Fiscal Year (FY) 2018 were 1 % for large technology companies but
34%-80% for companies that put H-1B visa holders at third-party sites.
Third-party site work factors highly in IT consulting.
After having many H-1B visas denied or issued for short
validity periods, several IT consulting firms filed lawsuits against USCIS.
Those lawsuits have been consolidated into one under the aegis of the IT
industry trade association ITServe Alliance.
Judge Rosemary Collyer presided over a court hearing of ITServe
Alliance v. USCIS on 05/09/2019. Plaintiff attorneys produced data showing
from FY 2012 to FY 2017, USCIS approved 94 % of their client’s ERP analysts’
H-1B petitions. During FY 2018 to FY 2019, the approval rate dropped to 19%.
Judge Collyer has taken issue with the disparate visa
approval rates between different industries and USCIS’s requirement that
contractors show three years’ worth of specific work assignments for H-1B
petitioners when they are allowed “nonproductive” time as long as they are
As Judge Collyer considers the case, she will rule on
whether discovery is warranted to find out what has caused the different
adjudications of H-1B petitions. Not only are H-1B approval rates markedly down
for the IT industry, but requests for evidence and H-1B petition processing
times have ballooned.
Requests for evidence (RFE) for all H-1B petitions have
jumped from below 30% in first quarter FY 2017 to 60% in first quarter FY 2019.
Meanwhile the number of petitions approved with a completed RFE has sunk from
80 % to just over 60 %.
Stay tuned as we will continue to provide updates as new
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.
It appears Illinois will become the 11th state to permit recreational cannabis. Once Governor Pritzker signs the legislation, as promised, beginning January 1, 2020, the Cannabis Regulation and Tax Act (“Act”), will allow adults (21+) in Illinois to possess and consume cannabis. While there is a lot “rolled” into the 600 plus page law (pun intended), there are significant employment pitfalls for employers with regard to enforcing drug free workplaces.
The Act expressly permits employers to adopt and enforce “reasonable” and nondiscriminatory zero tolerance and drug free workplace policies, including policies on drug testing, smoking, consumption, storage, and use of cannabis in the workplace or while on-call – which is good for employers.
However, the Act’s language indicates that employers are not allowed to take an adverse action against an applicant or employee for marijuana usage outside the workplace. This is bad for employers, as it makes it much more difficult for employers to identify and address use of marijuana by employees. In particular, the Act amends the Illinois Right to Privacy in the Workplace Act (“Right to Privacy Act”), which prohibits employers from restricting employees from using legal products outside of work. Specifically, the Right to Privacy Act is amended to provide that “lawful products” means products that are legal under state law, indicating that recreational and medical marijuana are legal products that must be treated like alcohol and tobacco. Thus, employers may not discriminate against an employee or applicant who lawfully uses cannabis (recreationally or medically) off-premises during nonworking and non-call hours.
Much like with the Illinois medical marijuana law, the Act changes the emphasis from whether an employee “used” marijuana while employed, to whether the employee was “impaired” or “under the influence” of marijuana while at work or working. As a result, drug testing without any other evidence of the employee being impaired at work or while working will open the door to legal challenges. Specifically, refusing to hire, disciplining, terminating, refusing to return an employee to work or taking an adverse action against an employee or applicant who fails a pre-employment, random, or post-leave return to duty drug test for marijuana will arguably create a claim for the employee against an employer for a violation of Illinois law. For example, an employee who undergoes a urine drug test (which shows use of marijuana within 30-45 days) following a workplace accident may argue that “recreational cannabis was lawfully used outside of work, and the accident/injury was unrelated to the employee’s legal use of cannabis outside of work.” Without more than the drug test result, the employer would be in a vulnerable position to argue against or defend such a claim. However, if the employer completed a post-accident report, which included a reasonable suspicion checklist, in which a trained supervisor observed and recorded symptoms/behaviors of drug use, the employer would be in a much better position to take an adverse action against the employee and dispute any such claim by an employee based on the observations and positive drug test.
With the changes to the Right to Privacy Act, it is important for employers to understand the potential exposure and damages. Under the Right to Privacy Act, aggrieved employees can recover actual damages, costs, attorneys’ fees and fines. As such, employers should make sure their practices and procedures are practical in light of these changes, until and unless the legislature or a court provides further clarity. Of course, the Illinois Department of Labor can provide such clarity through administrative rulemaking. However, that will likely not happen any time soon.
Interestingly, the Act neither diminishes nor enhances the protections afforded to registered patients under the medical cannabis and opioid pilot programs (while cannabis use is not protected under federal law, the underlying medical condition is likely an ADA and IHRA-covered disability!). Much like under the Illinois medical marijuana law, the Act appears to require employers to take an additional step before disciplining or terminating an employee based on a “good faith belief” that the employee was impaired or under the influence of cannabis while at work or performing the job. After the employer has made a “good faith belief” determination and drug tested the employee, but before disciplining or terminating an employee, the employer must provide the employee with a reasonable opportunity to contest that determination. Once the employee is provided a reasonable opportunity to explain, an employer may then make a final determination regarding its good faith belief that the employee was impaired or under the influence of cannabis while on the job or while working, and what, if any, adverse employment action it will take against the employee without violating the Act. Requiring an employee to go through drug testing is still currently the best practice as a positive drug test will provide additional support for a supervisor’s reasonable suspicion determination.
What Employers Should Do to Diminish Legal Risks and Protect their Workforce?
First, get educated and evaluate all policies and practices that touch on providing and ensuring a safe workplace, including job descriptions. Review the law. Talk to legal counsel on an intimate basis. Assess workplace cannabis-tolerance (in general) and implement policies that can be enforced consistently amongst similarly situated employees. Policies that should be reviewed (and that could be affected) include those addressing health and safety (including accident reporting, smoking, and distracted driving), equal employment opportunity policies, workplace search/privacy policies and drug testing policies. Companies should also review with legal counsel, their drug testing vendor as well as their Medical Review Officer, the drug testing methodology being used to make sure that such is producing results that are useful, accurate and well vetted.
Second, ensure managers and supervisors are well trained and capable of enforcing policies. Remember – exceptions and favoritism lead to discrimination claims. Conducting training, especially training on reasonable suspicion detection, will be necessary to avoid legal challenges to a supervisor’s reasonable suspicion determination. Creating and/or updating forms for accident reporting (including witness statements), reasonable suspicion checklists, and established protocols for addressing suspected impairment in the workplace, is now more critical than ever.
Third, clearly communicate management’s position and policies to employees, especially where there is a shift in current policy or practice. Educate employees on the effect of lawful and unlawful drug use and the employer’s policies regarding marijuana.
Fourth, engage competent legal counsel to assist you in this process and in addressing difficult situations before they lead to costly and time-consuming litigation.
Finally, stay tuned for further state and national developments in this growing area of law. Be assured that SmithAmundsen’s Labor & Employment Group will be presenting timely webinars and seminars on this subject in the coming weeks and months.
Join Suzanne Newcombat noon ET on June 19 for an in-depth look at workplace accommodations, specifically legal obligations, best practices, and emerging trends.
Workplace accommodations take many forms. Most often, accommodations are thought of as modifications which allow individuals with disabilities to perform essential functions of positions for which they are otherwise qualified.
While certainly the most common, workplace accommodations are not limited to an employer’s obligations under the ADA. Accommodations can also allow employees to practice their religious beliefs, allow pregnant employees to continue working until they give birth, allow new mothers to return to work and breastfeed their newborns, and assist transgender employees to navigate workplace obstacles.
During this webinar attendees will learn:
How to determine whether an individual is entitled to ADA protection
How to distinguish between “reasonable” accommodations and those that impose “undue hardship”
How to properly document the ADA-mandated “interactive process”