Are You Ready? Reminder: New White-Collar Exemption Rule is Effective January 1, 2020.

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Under the Federal Fair Labor Standards Act (FLSA) “white collar” exemption, employees are exempt and not entitled to overtime if:

(1)       a “duties” test establishing that the employees are executive, administrative or professional employees as defined by federal rules is met;

(2)       employees are paid on a salary or fee basis; and

(3)       employees are paid at least a specified threshold amount per week.

Currently, the threshold amount equates to $23,660 per year.  As most employers know by now, the federal Department of Labor (DOL) recently raised the threshold amount.  The new rate, which goes into effect on January 1, 2020, raises that amount to $684 per week, or $35,568 per year.  Previously exempt employees who are paid less than $684 per week will no longer be exempt from overtime, even if they are paid a salary and meet the duties test.  The DOL estimates this change will have an impact on approximately 1.3 million workers. 

Other significant changes to the rules include:

(1)       raising the minimum compensation required to be eligible for the “highly compensated employees” exemption to $107,432 per year; and

(2)       allowing employers to count non-discretionary bonuses, incentives and commissions as up to 10% of the $684 per week salary threshold as long as the bonuses are paid at least annually.

While the DOL intends to propose updates to the salary threshold every four years, the updates will not be automatic, but will require notice and public comment periods.

Employers should start preparing now for the January 1, 2020 implementation date.  A good first step would be to identify currently exempt employees whose salary is below the threshold amount.  Once that is done, consider which employees you want to keep as exempt and adjust the salary accordingly.  Now is also be a good time to conduct a comprehensive audit to correct any potential misclassification issues, e.g. whether the position meets the duties test for a white-collar exemption. 

As always, employers should check with state and local laws to make sure any changes that might be considered are consistent with those laws. 

Use It Or Lose It:  SCOTUS Ruling Means Employer Defense To Discrimination Claims Can Be Waived

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On June 3, 2019, the U.S. Supreme Court unanimously held that failure of an employee to file a discrimination claim with the EEOC prior to bringing a discrimination lawsuit does not deprive a court of jurisdiction over the suit.  That means that an employer can waive the defense to a discrimination claim based on failure to timely file with the EEOC.  Consequently, employers should raise the defense as early as possible in the litigation. 

Title VII of the Civil Rights Act of 1964—a federal anti-discrimination law—requires employees to file discrimination and retaliation claims with the Equal Employment Opportunity Commission (EEOC) before filing a lawsuit against their employers regarding those claims.  Title VII further requires that such claims be filed within a specified period of time.  So, what happens if an employee fails to follow the rules?  The federal appellate courts split on the issue.  Some ruled that it was jurisdictional and so could be raised at any time in the litigation.  Other courts held that the rule was merely procedural and so could be waived if not raised early in the litigation.

In Fort Bend County v. Davis, the Supreme Court settled the split.  It held that the failure-to-file defense was not jurisdictional.  That is, the failure to file a claim with the EEOC did not deprive a court of constitutional authority to hear the claim.  Rather, the requirement that an employee filed a claim with the EEOC before proceeding to court is a claims-processing rule.  This distinction is significant because jurisdictional defenses can be raised at any time in the litigation and cannot be waived.  Failure to follow a claims-processing rule—a non-jurisdictional failure—can be waived if not timely raised.  The bottom line?  Employers need to raise the failure-to-file defense at the earliest possible point in the litigation, either in a motion to dismiss or in an answer.  Otherwise, the defense may be deemed waived. 

Under Wisconsin Law, Commute Time is Non-Compensable Even if Using Employer’s Vehicle

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The Wisconsin Supreme Court recently decided that Wisconsin law does not require employers to pay employees for the time spent driving company vehicles between their homes and job sites.  Kieninger v. Crown Equipment Corp.  Federal law has a similar rule, but it is subject to more limitations than the Wisconsin rule.  Under federal law, employees are not entitled to pay for the time spent driving company vehicles between their homes and job sites if the travel is within the normal commuting area for the employer’s business and the employer and employee agree to such a set up.  Where state and federal wage and hour law apply, the law that is most favorable to the employee must be followed.  In this case, the federal law is more favorable to employees and therefore controls on this issue. 

DOL Proposes Regular Rate of Pay Regulations

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The federal Fair Labor Standards Act (FLSA) requires employers to pay non-exempt employees overtime pay at 1½ times their “regular rate of pay” for hours worked over 40 in a workweek.  In calculating the regular rate of pay, employers must count all “remuneration for employment,” unless expressly excluded by the FSLA or DOL’s regulations implementing the FLSA.  Most of the regular rate of pay regulations have been in place for 50 years and have not kept up with benefits offered in the modern work place.  Therefore, the DOL has issued a proposed rule that would exclude the following benefits from the regular rate of pay:

  • The cost of providing wellness programs, onsite specialist treatment, gym access and fitness classes;
  • Employee discounts on retail goods and services;
  • Payments for accrued but unpaid leave;
  • Reimbursed expenses;
  • Pay for off-duty meal periods, except if there is an agreement or course of conduct that establish that the employer and employee have treated the time as hours worked;
  • Contributions to benefits plans that provide accident, unemployment and legal services benefits;
  • Tuition programs, e.g., reimbursement programs or repayment of student loan debt.

The proposed rule would also clarify whether and when other forms of compensation must be included in the regular rate of pay.  The forms of compensation include holiday and weekend work premiums, discretionary bonuses, reporting time pay and call back pay.  The proposed rule also clarifies when penalties imposed on employers for violating “predicative scheduling laws” enacted by state and local governments may be excluded from the regular rate of pay. 

One of the goals of the proposed rule is to encourage employers to provide benefits without concern about whether the benefits will affect how much they have to pay in overtime.  The hope is that this will positively affect morale, compensation and employee retention. 

DOL will issue the final rule after a 60-day period for notice and comment.  Comments must be submitted by May 28, 2019. 

Supreme Court to Decide if Prohibition on Sex Discrimination covers Sexual Orientation/Identity

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The U.S. Supreme Court has announced that it will hear three cases addressing whether discrimination on the basis of sexual orientation and transgendered status constitutes discrimination “because of sex” and therefore prohibited under Title VII. 

The Court agreed to hear two of the cases together to resolve a split in the U.S. Circuit Courts as to whether discrimination based on sexual orientation is prohibited by Title VII.  In one case, Zarda v. Altitude Express, Inc., 883 F.3d 100 (2nd Cir. 2018), the Second Circuit held that such discrimination is prohibited; in the other, Bostock v. Clayton County, 723 F. App’x 964 (11th Cir. 2018), the Eleventh Circuit held that is it not.  The third case will decide whether discrimination based on gender identity is prohibited by Title VII.

The cases have been set for argument during next year’s term.  The Court will likely issue a decision by early summer, 2020. 

Employers Must Now File EEO-1 Component 2 Data By September 30, 2019

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A district court has ordered that employers covered by EEO-1 reporting requirements must submit 2018 wage and hour data for their workforces by September 30, 2019.  The EEOC has also determined that 2017 wage and hour data must also be reported by September 30, 2019.  Employers will submit these reports as “Component 2” of the EEO-1 form.  Information regarding 2018 race/ethnicity and gender data, which employers will now submit as part of “Component 1” of the EEO-1 form, must still be provided by May 31, 2019. 

An employer must file the components of an EEO-1 form if any of the following are true:

  • The employer has 100 or more employees;
  • The employer is affiliated through common ownership and/or centralized management with other entities in an enterprise with 100 or more employees; or
  • The employer or any of its establishments has 50 or more employees and a prime contract or first-tier subcontract with the federal government of at least $50,000.

The court’s decision is subject to appeal, but covered employers should nonetheless begin the process of collecting the necessary data in order to ensure that they can report on time if no appeal is taken. 

Employers Beware: Governor to Focus on Rooting Out Misclassification of Independent Contractors

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Figuring out whether you can lawfully classify a worker as an independent contractor can be complicated.  There are different standards for different laws.  In Wisconsin, worker’s compensation and unemployment compensation laws each have their own definition of “independent contractor.”  There is yet a different test for the purposes of wage and hour laws.  Employers may not be aware of all of the applicable tests and, in many instances, misclassify workers who should be considered employees as independent contractors.  However, ensuring proper classification of workers is now even more important in Wisconsin. 

On April 15, 2019, Wisconsin governor Tony Evers issued an executive order creating a joint task force of leaders from the Wisconsin Attorney General’s office, Department of Revenue and Department of Workforce Development, including that Department’s Unemployment Insurance, Equal Rights and Worker’s Compensation divisions, among others.  The task force will “facilitate coordination of investigation and enforcement of worker misclassification” by state agencies.  It is expected that this will entail the sharing of information between agencies, the development of recommendations for pooling investigative and enforcement resources and fostering cooperation and participation from district attorneys and federal agencies.  The task force will also propose potential legislative and administrative changes in its annual report to Governor Evers. 

All of this points to increased scrutiny of independent contractor relationships going forward.  Therefore, now is the time for Wisconsin businesses to review current arrangements to determine whether they are in fact properly classifying workers.

Under Federal FMLA, Employers Cannot Allow Employees to Exhaust Other Paid Leave

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Some employers voluntarily permit employees to exhaust some or all available paid leave prior to designating the leave as federal Family and Medical Leave Act (FMLA) leave, even when the leave is clearly FMLA-qualifying.  In March, 2019, the Acting Administrator of the U.S. Department of Labor’s (DOL) Wage and Hour Division issued an opinion letter stating that doing so violates the FMLA.  The FMLA regulations require an employer to provide a written designation notice to an employee within, absent extenuating circumstances, five days after the employer has enough information to determine whether the leave is being taken for a FMLA-qualifying reason.  The Acting Administrator explained that failure to follow this notice requirement may constitute an interference with, restraint of or denial of the exercise of an employee’s FMLA rights.  Once an eligible employee communicates a need to take leave for a FMLA-qualifying reason, neither the employer nor the employee may decline FMLA protection for the leave.  Rather, the employer must provide notice of the designation within the required five-business-day time period.  The leave then counts toward the employee’s 12-week FMLA leave period (or 26-week period for military caregiver leave), even if the employee substitutes paid leave for the unpaid FMLA leave.       

Note:  the DOL opinion letter applies only with respect to the federal FMLA.  It does not apply to any state family and medical leave statutes.  Employers should check to see what rule applies with respect to the state laws when designating periods of state family and medical leave.

NLRB Further Defines Concerted Activity

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The National Labor Relations Act protects employees—even those in non-union workplaces—engaged in protected concerted activity for the purposes of mutual aid and protection.  But what does “concerted” activity mean?  A recent National Labor Relations Board decision, Alstate Maintenance, 367 NLRB No. 68, helps define the contours of the term. 

In Alstate, the employer provided skycap services at an airport.  Passenger tips made up the biggest part of the skycaps’ compensation.  The issue in this case arose when a supervisor instructed a group of skycaps to assist with a soccer team’s equipment and a skycap responded—in front of other skycaps—that “we did a similar job a year prior and we didn’t get a tip for it.”  After the comment, the skycaps initially refused to assist in loading the equipment, but later did so.  Alstate fired the employee who had complained about the lack of tip. 

In its analysis, the Board reiterated the principle that an action by an employee is only concerted if the employee brings a group complaint to management or if the employee tries to induce group action.  Considering the facts before it, the Board concluded that the skycap had not engaged in concerted activity. The fact that the employee had indicated that other employees had not received a tip either did not communicate that the group had previously discussed the soccer team’s failure to tip in the prior year.  Rather, it merely described what had happened to the group.  There was no indication that the employees had discussed it amongst themselves prior to the statement.  Further, there was no evidence that the employee was trying to induce group activity.    

In reaching its decision, the court went back to the rule that the fact that a complaint is made in front of a group of employees does not in and of itself indicate that the employee was engaging in concerted activity.  In doing so, it overruled an Obama-era decision that conflicted with the prior rule. 

The court also identified factors that would tend to support drawing an inference of concerted activity.  The factors include that:

  • the statement was made in an employee meeting called by the employer to announce a decision affecting wages, hours, or some other term or condition of employment;
  • the decision affects multiple employees attending the meeting;
  • the employee who speaks up in response to the announcement did so to protest or complain about the decision, not merely to ask questions about how the decision has been or will be implemented;
  • the speaker protested or complained about the decision’s effect on the work force generally or some portion of the work force, not solely about its effect on the speaker him- or herself; and
  • the meeting presented the first opportunity employees had to address the decision, so that the speaker had no opportunity to discuss it with other employees beforehand.

The court noted that, “of course,” other factors may be relevant, such as an express call for employees to act collectively.

Workplace Civility Rules Upheld by National Labor Relations Board

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In the wake of the National Labor Relations Board’s (the Board) decision in Boeing Co., 365 NLRB No. 154 (Dec. 14, 2017), the office of the Board’s General Counsel recently released a memo finding that a company’s “Commitment to My Co-Workers” policy was a lawful workplace-civility rule.  The policy required workers to, among other things, maintain healthy relationships with co-workers and address conflicts directly.  The General Counsel concluded that the employer could require employees to sign off on the policy and could terminate those who refused to do so.  The case is a reminder to employers that they may be able to restore civility rules that would have been found to violate National Labor Relations Act rights prior to Boeing.

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