Court Enjoins New Overtime Rule

The United States District Court for the Eastern District of Texas on November 22 issued a nationwide injunction against the implementation of the U.S. Department of Labor’s Final Rule on, among other things, increasing the minimum salary threshold for an employee to be exempt from overtime. State of Nevada vs. U.S. Dept. of Labor. The Rule had been scheduled to become effective on December 1, 2016.

There remain several ways the saga might continue to unfold. The appellate court could stay the injunction pending resolution of an appeal. The appellate court could also keep the injunction in place while the appeal proceeds. As of this writing, the chances appear unscientifically to be about fifty-fifty. (The appellant would be the Secretary of Labor, but note that the next Secretary would not be obligated to continue an appeal begun by the current Secretary.)

If you have already restructured your compensation and/or staffing in order to comply with the new rule, you have the choice between retaining the new structure, which most organizations are likely to do, or reverting to the previous structure, which carries the risk that you will have to change once again if the injunction is stayed or the rule is reinstated after appeal.

The District Court’s reasoning for issuing the injunction is sound. The Court decided that the new rule had the effect of making an employee’s salary as important as their duties when determining whether the person should be exempt. Raising the importance of an employee’s salary to the level of their duties was contrary, the Court ruled, to the intent of Congress.

Still Using Old F.M.L.A. Forms?

Many employers covered by the federal Family and Medical Leave Act are still using forms from the U.S. Department of Labor that expired in 2012. Newer forms, which are good through May 31, 2018, are available from Labor’s web site.

There are several reasons to use the current forms. Perhaps the most important reason is that the current F.M.L.A.-related forms include “safe harbor” text to avoid inadvertently violating the Genetic Information Nondisclosure Act (“GINA”). That law prohibits an employer’s discriminating against an employee “because of genetic information with respect to the employee….” The safe harbor text, incorporated into the newer F.M.L.A. forms, precludes liability under GINA from an employer’s unintential receipt of an employee’s genetic information during the interactive process or other F.M.L.A.-related activities.

If you’re not already using the current Department of Labor forms or other forms revised to include the GINA safe harbor provided at 29 C.F.R. §1635.8(b)(1)(i)(B), it would be prudent to update soon.

Bargaining with Unions that Represent a Minority of Employees

Generally, a private-sector employer that is not in the construction industry has an obligation to bargain with a union only when that union represents a majority of employees in the relevant unit. Sometimes the union is recognized voluntarily by the employer; sometimes they are certified by the National Labor Relations Board (“N.L.R.B.”), a federal agency. Either way, that union becomes the “exclusive bargaining representative” for covered employees. Now, though, employers may soon receive demands to bargain with unions that do not represent a majority of employees.

In the recent case of Children’s Hosp. of Oakland, 364 N.L.R.B. No. 114 (2016), the National Labor Relations Board held that an employer was required “to  arbitrate pending grievances arising under an expired collective-bargaining agreement with the union that was party to that agreement, even if the union has been superseded by another union….” That part is important, but there was another piece of the case that may prove to be more difficult to implement.

In a concurrence, Member Hirozawa wrote with approval about a doctrine that many labor lawyers thought had been put to rest. He articulated the basis for an employer’s duty to bargain with a union on behalf of that union’s members, even if the union does not represent a majority of the unit employees. Noting that a covered employer’s statutory obligation to bargain is “subject to the provisions of” Section 9(a) of the National Labor Relations Act , he wrote, “I think it is also useful, however, to consider what the subject-to-Section-9(a) clause does not mean.  It does not mean that for an employer to have a duty to bargain with a union on behalf of its employees, the union must be a Section 9(a) exclusive representative.”

That non-exclusivity doctrine, which had been argued by, among others, Charles Morris, a well-respected author and law professor, appeared to have been struck down for good after the N.L.R.B.’s Office of General Counsel issued an “Advice Memorandum” ten years ago. Now, though, Member Hirozawa’s concurrence has breathed into it new life, and Prof. Morris, sensing that the doctrine might once again be stirring, has posted a comment on the topic.

What does it all mean? It means that employers may soon be receiving demands to bargain from unions which concede that they represent only a minority of employees. How to respond depends, as always, on an assessment of each employer’s values, situation, goals, and options.

Please let us know if you would like additional information or assistance.

Guidance on Implementing the New Overtime Salary Threshold

When a new development arises in employment or labor law, our clients often learn about it from their newsletter subscriptions. Then they come to us for guidance on implementation: the implications of various options, managing conflicts with other policies or procedures, harmonious drafting, etc. That pattern does not appear to be working for the recent change in federal overtime regulations.

While the newsletters did a good job of announcing the change, our clients and others have been left asking many questions. Fortunately, those questions have answers.

How Should the Rule Change Be Implemented?

One of the questions concerns the fundamental issue of how to implement the change for currently exempt employees whose compensation is below the new threshold. In Minnesota there are four ways to manage this, when increasing the worker’s salary to retain the exemption is not practical. Some states do not allow all of these options.

The simplest way is to compute the person’s average hourly wage based on their current schedule and compensation; work backward to determine what the hourly rate should be, given the specific frequency of overtime hours; pay them as nonexempt, including overtime at the 1.5 rate. This approach, which would work in most situations, entails the least disruption.

A second way is to continue paying them a fixed salary, which would compensate them for a workweek of fluctuating hours. This approach still requires that overtime be paid, but at the reduced rate of 0.5 their regular rate. Again, there should be a preliminary computation of the current average hourly rate, factor in the frequency of overtime, and calculate a new weekly salary. The regular rate in these cases must be recalculated weekly, and there are several preconditions necessary for this approach to be lawful.

The third approach is still to pay a fixed salary for a fluctuating workweek, but the salary includes all overtime (up to an aggregate of sixty hours worked per workweek). This third approach requires more preconditions in place than the second approach, and therefore applies to the fewest situations.

Finally, the only approach which does not involve overtime is to reduce the affected employee’s hours to forty per week, and to hire or assign a different person to work the balance of hours necessary to accomplish the job’s requirements. This approach is the most disruptive, because it reduces the affected employee’s compensation, inserts an additional person into the mix, and risks increasing the employer’s non-wage benefit costs.

Selecting which approach to use in restructuring an affected employee’s compensation depends on several factors, including the requirements of the specific jobs; the employer’s budget, in terms of both dollars and flexibility; the terms of any applicable contracts; retention issues; and the employer’s objectives. Implementing the first and fourth approaches may not require an attorney’s assistance. The second and third approaches should be undertaken only after consulting with a knowledgeable attorney or other specialist in wage and hour law.

What Effect Will the Rule Change Have On Labor Costs?

Another concern being voiced frequently is how to fit the rule change into an existing personnel cost structure. The budget is one of the drivers in selecting one of the four options above. If the appropriate preconditions exist, implementing the rule change could be cost-neutral; otherwise, there will be a change to the labor cost. Selecting an implementation option, therefore, involves understanding the alternatives, defining the relevant factors noted above, and ranking them.

How Can These Changes Be Communicated With Least Disruption?

Another question heard frequently is how to communicate these changes. The first step in addressing this issue is to determine whether the possible problem is one of prestige or money. Some employees may bristle at no longer being considered exempt. Most employees would bristle at a decrease in compensation, particularly if their overtime hours and associated wages will be given to a different person. Changes in label from exempt to nonexempt are easier to manage, although the emotional aspect of a classification change should not be underestimated. Communicating financial changes is more difficult. In those cases, it is often advisable to explain the problem with the affected employee and to solicit ideas; again, the emotional piece is important.

Additional issues are discussed in another article on this site. See “Trade Secrets, Overtime, and Other Priority Developments.”

Do you have questions or solutions not discussed above? We’re interested to hear them. You can add a Comment or send us an e-mail. And, of course, we’re available to answer questions and to assist with the transition.

Trade Secrets, Overtime, and Other Priority Developments

It’s been a busy time in the world of employment law. A few recent developments have particular priority for human resources managers and general business lawyers. This post concerns three of those developments: trade secrets, overtime exemptions, and changes to the E.E.O.-1 form.

New Trade Secret Protections and Requirements

One development concerns proprietary and confidential information. A new law offers the first federal protections for trade secrets. It’s an important law. Part of it authorizes the seizure of things that were used in the process of allegedly diverting trade secrets, such as computers and storage media. That’s an important contingency that should be considered when provisioning critical hardware, proprietary software, and network access.

Another part of the law requires the supplementation of all agreements with employees and contractors which addresses confidential information or trade secrets. Those materials must now contain a notice to employees (or reference to a separate, available document) to the effect that trade secrets may be used in a limited fashion to engage in whistleblowing activity or in employment litigation alleging whistleblower retaliation.

In light of the Defend Trade Secrets Act, employee agreements, handbook policies, and other materials which contain provisions on trade secrets should be reviewed and supplemented with appropriate text as soon as possible. (And, of course, this is a good opportunity to be sure that other developments from the past few years are properly implemented, such as Minnesota’s Women’s Economic Security Act and the N.L.R.B.’s application of Section 7 to handbook and other employee policies.)

New Overtime Eligibility Rule, Pay Equity, and the E.E.O.-1

Most employers by now have received multiple announcements of the final rule issued last month by the U.S. Department of Labor concerning the increased salary threshold required to be exempt from overtime. Organizations should review their options on classifying and compensating affected employees. There are several ways to proceed in compliance with the regulation, depending on employer objectives.

Just complying with the new rule, though, could leave an organization vulnerable to adverse assessments in the near future, assuming that the categories of data required for the E.E.O.-1 form expand as planned. Here’s why, and what to do:

All organizations with 100 employees and many smaller organizations must file an E.E.O.-1 annually with the U.S. Equal Employment Opportunity Commission. The form includes information on current employees by job category, ethnicity, and sex. If the current rulemaking proceeds as planned, the form will also include twelve compensation bands. Now hold that thought….

There’s been a resumption in the discussions among some circles about comparable worth analyses. The comparable worth approach seeks to close the gender-based pay gap by comparing compensation by gender within “comparable,” but not “equal,” jobs. Minnesota and California have long required comparable pay assessments in the public sector. Minnesota now also requires comparable pay for private and third sector employers with at least forty employees having government contracts of at least a half-million dollars. There is an increased focus, and in some areas also legislative activity, around employee protections for discussing compensation issues. Add in the increase in data collection, analysis, and dissemination that current technologies and vendors are providing, and it seems likely that there will be an increase in lawsuits attempting to prove sex discrimination through a deep analysis of how employers have arrived at gender disparities in the compensation of comparable, but not equal, jobs. Let’s go back to those E.E.O.-1 changes.

The new form will funnel multiple jobs and job categories into a dozen compensation-based bands for employers (and sufficiently related employer groups) having 100 employees. By doing so, the information will help the government to assess the distribution of jobs by compensation level as well as by the various other attributes entered into the form.

The information should also help employers to smooth out gender- (and other non-job-) based inequities, whether derived from bias, history, or other sources. Smoothing out those arguable inequities would minimize exposure to a range of problems based on a comparable worth analysis, including investor inquiries, government contract compliance, and even discrimination claims, which have generally been unsuccessful but are showing signs of making a comeback. And what might happen if the EEO-1 shows inequities that are not self-remedied? In litigation, the information would likely become available (from the employer, not the government) to plaintiffs challenging job bias.

Now let’s go back to that new F.L.S.A. regulation. Employers should review the overtime classifications of currently exempt workers who make less than the new salary threshold. They could take this opportunity to review, as well, their other employees’ overtime classifications. But any adjustments employers make—e.g., to classification, compensation levels, compensation mechanisms, reporting lines—should anticipate the forthcoming E.E.O.-1 requirements. This is a good time to rationalize classifications and compensation, and to develop a plan to squeeze out any vestige of bias in the way that employees are compensated and assigned. More guidance on ways to implement the new rule will appear in a later post.

A comprehensive approach to these issues also answers one of the common questions raised by the new F.L.S.A. regulation: “How do I communicate the effects of the rule change to my workforce?” Communicating a systematic review of compensation to make the process more transparent and more equitable can increase an employee’s perception of fairness; and research indicates that increased perceptions of fairness result in a decreased litigation risk. (Other elements to communicate in the course of implementing the regulation depend on employer objectives and choices, but the message to employees need not be negative and the effect on employer budgets need not be extreme.) More information on the subject of communication will appear in a later post.

Note that employers are likely to have an obligation to bargain over one or more aspects of compensation adjustments for unionized employees. The scope of the bargaining duty will depend on the specific collective bargaining relationship, including both contract language and past practice.

A careful implementation of the new overtime salary rule could be an affordable opportunity to improve morale, enhance recruiting and retention, minimize bias-related exposure to liability, and promote regulatory compliance. Let us know if we can help.

Workplace Speech: What is Permitted, and What is Prohibited

Employee speech is a complex and developing area. The rules are scattered among otherwise unrelated laws, enforcement guidelines, and employer policies. The reputational, morale, and financial consequences of noncompliance can be significant.

Employers are expected to comply with laws affecting speech in the workplace, but they have few helpful resources. The professional and lay resources that are available tend to focus on single areas such as free speech rights for public employees or protected concerted action in the context of social media. In contrast, the laws governing speech in the workplace derive from many sources, including constitutional and statutory restrictions on a government’s use or disclosure of data; Section 7 of the National Labor Relations Act (N.L.R.A.), which applies to many nonunion as well as unionized workplaces; the Privacy and Security Rules of the Health Insurance Portability and Accountability Act (HIPAA); Title VII (of the Civil Rights Act of 1964); Title IX (of the Education Amendments of 1972); and many other sources.

Assisting employers to navigate these waters, Joe Nierenberg delivered a presentation on the topic to the 2015 Minnesota conference of the Society of Human Resources Managers (MN SHRM). The session addressed the types of employee speech that an employer must allow and the types of speech that an employer can restrict. Attendees learned the general principles that apply, and discussed specific policies that had been ruled lawful or unlawful. The presentation wove together the most common rules on workplace speech, and assessed them under four principles: what speech is prohibited; what speech is permitted; when the allowance or proscription is mandatory; and when the allowance or proscription depends on context. The session objectives included more compliant and confident management of policies, procedures, training, and discipline.

Presentation slides never tell the whole story of a live training program with audience discussion, but here’s the deck that was part of the session. Please note that all rights are reserved to Nierenberg Employment Law; that, because viewing alone is an incomplete experience, the slides alone should not be relied upon as legal advice; and that the slides are current only as of October 13, 2015.

You can view or download the slides here.

If you are interested in training your executives or managers to comply with workplace speech rules, or wish to discuss other available topics, please contact us.

Update stream from publisher Wolters Kluwer

N.L.R.B. on Recent Decisions Regarding Employee Rights Posting

The following text is the entire public announcement by the National Labor Relations Board on April 17, 2012, concerning the requirement that employers post notices of certain federal labor law rights:

“In light of conflicting decisions at the district court level, the D.C. Circuit Court of Appeals has temporarily enjoined the N.L.R.B.’s rule requiring the posting of employee rights, which had been scheduled to take effect on April 30, 2012.

“In view of the D.C. Circuit’s order, and in light of the strong interest in the uniform implementation and administration of agency rules, regional offices will not implement the rule pending the resolution of the issues before the court.

“In March, the D.C. District Court found that the agency had the authority to issue the rule. The NLRB supports that decision, but plans to appeal a separate part that raised questions about enforcement mechanisms. The agency disagrees with and will appeal last week’s decision by the South Carolina District Court, which found the N.L.R.B. lacked authority to promulgate the rule.

“Chairman Mark Gaston Pearce said of the recent decisions, ‘We continue to believe that requiring employers to post this notice is well within the Board’s authority, and that it provides a genuine service to employees who may not otherwise know their rights under our law.'”

New Online Resource Steps through F.M.L.A. Eligibility

The U.S. Department of Labor recently released an updated version of its Family and Medical Leave Act Advisor. The F.M.L.A. Advisor is an online resource that, through an interactive question-and-answer program, helps to clarify which employers are required to provide F.M.L.A. leave and which employees are eligible to take such leave. The resource also provides links and information concerning valid reasons for leave, notice requirements, certification steps, citations to regulations, and other information.

The Advisor may not answer all difficult F.M.L.A. questions, and it does not provide information on how to handle cases that involve not only F.M.L.A. but also the Americans with Disabilities Act or state worker’s compensation law. Nevertheless, it is a helpful first step that, in some cases, may provide all the assistance that a human resources manager needs.

Genetic Discrimination

The subject of this post is not a recent development, but, because many employers remain out of compliance, it is still a timely item. The U.S. Equal Employment Opportunity Commission has revised its “E.E.O. Is The Law” poster to include information about the Genetic Information Nondiscrimination Act of 2008 (“GINA”), which became effective near the end of 2009. The poster also includes information about the Americans with Disabilities Act Amendments Act of 2008 and some updates from the U.S. Department of Labor. To order or print the revised poster or a supplement to go next to your existing (2008) poster, go here. (To review posters on other subjects currently available from the Department of Labor, go here.)

As a reminder–or perhaps a first look–here is how the E.E.O.C. currently interprets the law, which affects employers having fifteen or more employees:

Overview

Under Title II of GINA, it is illegal to discriminate against employees or applicants because of genetic information. Title II of GINA prohibits the use of genetic information in making employment decisions, restricts employers and other entities covered by Title II (employment agencies, labor organizations and joint labor-management training and apprenticeship programs – referred to as “covered entities”) from requesting, requiring or purchasing genetic information, and strictly limits the disclosure of genetic information. The E.E.O.C. enforces Title II of GINA, which addresses genetic discrimination in employment. (The Departments of Labor, Health and Human Services and the Treasury have responsibility for issuing regulations for Title I of GINA, which addresses the use of genetic information in health insurance.)

Definition of “Genetic Information”

Genetic information includes information about an individual’s genetic tests and the genetic tests of an individual’s family members, as well as information about the manifestation of a disease or disorder in an individual’s family members (i.e. family medical history). Family medical history is included in the definition of genetic information because it is often used to determine whether someone has an increased risk of getting a disease, disorder, or condition in the future. Genetic information also includes an individual’s request for, or receipt of, genetic services, or the participation in clinical research that includes genetic services by the individual or a family member of the individual, and the genetic information of a fetus carried by an individual or by a pregnant woman who is a family member of the individual and the genetic information of any embryo legally held by the individual or family member using an assisted reproductive technology.

Discrimination because of Genetic Information

The law forbids discrimination on the basis of genetic information when it comes to any aspect of employment, including hiring, firing, pay, job assignments, promotions, layoffs, training, fringe benefits, or any other term or condition of employment. An employer may never use genetic information to make an employment decision, because genetic information is not relevant to an individual’s current ability to work.

Harassment because of Genetic Information

Under GINA, it is also illegal to harass a person because of his or her genetic information. Harassment can include, for example, making offensive or derogatory remarks about an applicant or employee’s genetic information, or about the genetic information of a relative of the applicant or employee. Although the law doesn’t prohibit simple teasing, offhand comments, or isolated incidents that are not very serious, harassment is illegal when it is so severe or pervasive that it creates a hostile or offensive work environment or when it results in an adverse employment decision (such as the victim’s being fired or demoted). The harasser can be the victim’s supervisor, a supervisor in another area of the workplace, a co-worker, or someone who is not an employee, such as a client or customer.

Retaliation

Under GINA, it is illegal to fire, demote, harass, or otherwise retaliate against an applicant or employee for filing a charge of discrimination, participating in a discrimination proceeding (such as a discrimination investigation or lawsuit), or otherwise opposing discrimination.

Rules against Acquiring Genetic Information

It will usually be unlawful for a covered entity to get genetic information. There are, however, six narrow exceptions to this prohibition:

  • Inadvertent acquisitions of genetic information do not violate GINA, such as in situations where a manager or supervisor overhears someone talking about a family member’s illness.
  • Genetic information (such as family medical history) may be obtained as part of health or genetic services, including wellness programs, offered by the employer on a voluntary basis, if certain specific requirements are met.
  • Family medical history may be acquired as part of the certification process for FMLA leave (or leave under similar state or local laws or pursuant to an employer policy), where an employee is asking for leave to care for a family member with a serious health condition.
  • Genetic information may be acquired through commercially and publicly available documents like newspapers, as long as the employer is not searching those sources with the intent of finding genetic information or accessing sources from which they are likely to acquire genetic information (such as websites and on-line discussion groups that focus on issues such as genetic testing of individuals and genetic discrimination).
  • Genetic information may be acquired through a genetic monitoring program that monitors the biological effects of toxic substances in the workplace where the monitoring is required by law or, under carefully defined conditions, where the program is voluntary.
  • Acquisition of genetic information of employees by employers who engage in DNA testing for law enforcement purposes as a forensic lab or for purposes of human remains identification is permitted, but the genetic information may only be used for analysis of DNA markers for quality control to detect sample contamination.

Confidentiality of Genetic Information

It is also unlawful for a covered entity to disclose genetic information about applicants, employees or members. Covered entities must keep genetic information confidential and in a separate medical file. (Genetic information may be kept in the same file as other medical information in compliance with the Americans with Disabilities Act.) There are limited exceptions to this non-disclosure rule, such as exceptions that provide for the disclosure of relevant genetic information to government officials investigating compliance with Title II of GINA and for disclosures made pursuant to a court order.

As with other workplace laws, employers should review their policies and procedures to ensure that they are current and that the appropriate contact people are knowledgeable about the requirements.

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