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Religious Preference in Federal Contracting

Background

Executive Order 11246 requires affirmative action and prohibits federal contractors from discriminating on the basis of race, color, religion, sex, sexual orientation, gender identity, or national origin. (Contractors also are prohibited from discriminating against applicants or employees because they inquire about, discuss, or disclose their compensation or that of others, subject to certain limitations.) Title VII of the Civil Rights Act of 1964, prohibits employment discrimination based on race, color, religion, sex and national origin.

There is a limited exemption in Title VII for religious organizations to give hiring preference to members of their own religion. This exemption was carried over to E.O. 11246.

Despite the exemptions for religious organizations in Title VII and E.O. 11246 and the myriad court cases that developed related standards, the U.S. Department of Labor in December 2020 adopted a rule “Implementing Legal Requirements Regarding the Equal Opportunity Clause’s Religious Exemption,” which was billed as an effort to clarify the applicable rules.

Recent Development

The U.S. Department of Labor has now rescinded the December 2020 rule. As the Labor Department put it in their press release, “The rescission ensures a return to the department’s prior policy and practice in place during the presidencies of George W. Bush and Barack Obama – of interpreting and applying the religious exemption in Executive Order 11246 consistent with Title VII principles and case law.” The Office of Federal Contract Compliance Programs (OFCCP) explained in their FAQ on the subject that there was a need to return to prior standards, because the December 2020 rule “resulted in increased uncertainty about the religious exemption because of its divergence from the approach to the Title VII religious exemption taken by courts and the Equal Employment Opportunity Commission, as well as from OFCCP’s past practice.”

Result

As the Agency noted, “OFCCP is rescinding the entire rule to return to the agency’s prior approach of aligning the Executive Order 11246 religious exemption with Title VII case law as applied to the facts and circumstances of each case. The rescission preserves the Executive Order 11246 religious exemption and does not change religious entities’ ability to pursue federal contracts.:

Assistance

This firm frequently represents organizations that qualify for the religious exemption in Title VII, federal contractors that qualify for the religious exemption in the regulations implementing E.O. 11246, and organizations with activities that fit within the “ministerial exception” to the First Amendment. If your organization would benefit from additional information or assistance about any of these topics, please contact us.

Revised F.M.L.A. Forms Now Available

The U.S. Department of Labor has revised its approved forms for various stages of the F.M.L.A. process. The new forms, which are valid for the next three years, can be found here.

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.

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.

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.

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