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In This Issue
May-June 2016 | Volume 4 Issue 3

Federal Law

Many employers not ready for overtime rule, report finds

By: Kate McGovern Tornone  

Many employers are still taking a “wait-and-see” approach on the new Fair Labor Standards Act (FLSA) overtime regulations, according to a recent survey.

Twenty-eight percent of employers have not taken any steps to prepare, Littler Mendelson P.C.’s 2016 Executive Employer Survey Report found. And that’s risky, according to Tammy McCutchen, an attorney in the firm’s D.C. office and former administrator of the U.S. Department of Labor’s (DOL) Wage and Hour Division (WHD). “I do not think employers should be waiting,” she told HR Compliance Expert.

Survey findings

The survey, which polled 844 Littler clients, asked in-house counsel, human resource professionals and C-suite executives to share their level of preparation for the changes that take effect December 1. The rules will increase the salary threshold for the FLSA’s overtime exemptions to $913 per week, which amounts to $47,476 annually. The current threshold comes out to $23,660 annually.

The polling took place before the final rules were released in May but still found that 65 percent of employers were conducting audits. Twenty-eight percent, however, had done nothing.

Man working on tablet with COMPLIANCE on a screen

McCutchen said she was surprised how many employers had taken no action, even considering the rules were only in the proposed stage. “We knew there was going to be a salary increase; we knew that,” she said, referring to the proposed $50,400 threshold. “It was a fairly easy thing for employers—even before the final rule—to check and see who was below that. Twenty-eight percent of Littler clients had not even done that.”

“Talking to clients now, it seems like everybody is on the move but my instinct is that there are still many who haven’t done anything,” McCutchen said. The number of employers who are unprepared probably would be higher if the survey had included all employers nationwide, not just those who are Littler clients. It’s not the employers with human resources staff, that read trade publications or that are Society for Human Resource Management members who aren’t ready; it’s small businesses that may not even know about these

regulations, she said.

Littler’s report also asked employers whether they had:

  • raised salaries or reclassified some employees as non-exempt in anticipation of the rule going into effect (18 percent said they had);
  • reviewed and updated job descriptions for exempt employees (28 percent);
  • updated internal systems to better track hours for employees that will be reclassified as non-exempt (14 percent); and
  • revised or adopted new wage and hour policies (8 percent).

Enforcement expectations

Despite various efforts to block the rule, it likely will take effect, McCutchen said, and employers can expect DOL to be “out on the street” enforcing the provisions December 1.

Luckily, it seems that most employers realize this. Eighty-two percent of employers polled told Littler they expect DOL enforcement to impact their workplaces next year but only 31 percent said that impact will be “significant.” McCutchen said that number doesn’t surprise her: “DOL has limited resources.”

“To me, the significance is the jump from 18 percent in the prior year. I think what that tells you is that employers are experiencing more interactions with DOL than in prior years.” DOL’s enforcement numbers support that theory: “In the last five years we’ve had a significant increase in wages collected, and I don’t see any reversal in that trend,” McCutchen said; employers are becoming more and more aware that DOL is out there investigating and going after maximum damages and penalties.

Employers also probably remember how McCutchen’s WHD enforced the last overtime update in 2004. Rather than waiting for employee complaints, the department exercised its authority to initiate investigations. Employers probably are expecting that to happen again, she said.

Employer steps

DOL’s preparedness—coupled with employers’ lack of preparedness—is a problem because the reclassification process can take up to six months, McCutchen said in a statement accompanying the report.

“You have to look at everybody in your workforce who you’re currently treating as exempt who doesn’t meet that threshold and decide what you’re going to do with them,” she said.

If an employee is just a few thousand dollars shy of the threshold, McCutchen says she’s seeing employers choose to increase wages. But more than that and employers are opting to reclassify.

But overall, “I don’t think—based on the clients I’ve been helping—that employees are going to see their take-home pay increased,” McCutchen said. Employers are instead creating “cost-neutral” compensation plans, ensuring that employees’ pay neither increases nor decreases.

Numbers aside, employers may find that workers are most unhappy about punching a clock and loss of flexibility, McCutchen said, adding that the full effect won’t be seen until December.

The ‘wait-and-see’ approach

If employers still want to take a “wait-and-see” approach, they should delay implementation—not preparation, McCutchen said.

Some trade associations have discussed challenging the rule in court but McCutchen said employers shouldn’t bank on that. “It’s not an easy case to bring,” and litigation is always uncertain. “Even if a suit was filed tomorrow, would they be successful in getting a stay? It’s always hit or miss,” McCutchen said.

If you want to wait and make sure the rule really is taking effect, that’s fine, McCutchen said. But you need to be ready to implement the changes by December 1.

McCutchen previously recommended that employers adopt the necessary changes during Thanksgiving week because the effective date falls on a Thursday—an indication that nobody involved ever worked in the private sector, she said. (Her 2004 rules took effect on August 23, a Monday.) Adopting the changes a few days early would allow employers to avoid reclassifying an employee as non-exempt in the middle of a workweek, which could create wage and hour problems.

That recommendation is even more important now in light of recent litigation. McCutchen said she is involved with a case in which an employer had to reclassify an employee in light of the new home care exemption regulations. Those rules also took effect in the middle of a workweek and the employer did not implement the reclassification until the week after the effective date. DOL is seeking back wages for the half a week that the employee was misclassified.

“We’re trying to talk DOL out of it because it’s going to have an impact here,” McCutchen said; but, either way, “you’ve got to get it changed before—or at least by the week that contains—December 1.”

Allowing transgender workers to use bathroom consistent with gender identity, experts say

By: Kate McGovern Tornone 

In light of pending litigation, employers should allow transgender workers to use the bathroom for the gender with which they identify, experts say.

Both the U.S. Equal Employment Opportunity Commission (EEOC) and the American Civil Liberties Union (ACLU) have recently filed lawsuits alleging that transgender discrimination amounts to sex discrimination under Title VII of the Civil Rights Act of 1964.

EEOC’s most recent suit, filed July 18, alleges that Rent-a-Center fired an employee from an Illinois store because of her gender identity. The commission has identified discrimination against LGBT individuals as one of its main enforcement initiatives and John Hendrickson, EEOC’s regional attorney in Chicago, said in a statement that the agency “is committed to making sure such individuals’ rights under Title VII are protected.”

A July 21 ACLU lawsuit alleges that the Iowa Department of Corrections refused to allow an employee to use the men’s bathroom and locker rooms because he is a transgender man. Instead, it required him to use a private unisex bathroom with no shower, according to the complaint. “The state should be setting an example by creating a work environment that is free from discrimination on the basis of gender identity,” said Rita Bettis, legal director of ACLU of Iowa, in a statement.

And while not an employment discrimination suit, the U.S. Supreme Court will soon review an emergency appeal from a school that was ordered to allow a transgender male student to use the boys’ bathroom. Because a Supreme Court petition would not be reviewed before the next school year starts, the school filed the emergency appeal asking the Court to stay the order. According to attorneys at Kelley Drye & Warren LLP, the plaintiff’s response is due July 27.

Matthew C. Luzadder and Janine N. Fletcher said in a blog post that employers should play it safe. “Based on recent court rulings, federal regulations, and public opinions trends, it is advisable for employers to allow individuals to use the bathroom with the gender the individual identifies with, not the one assigned at birth,” they wrote.

EEOC’s position on bathroom access rights for transgender employees

In EEOC’s Fact Sheet: Bathroom Access Rights for Transgender Employees Under Title VII of the Civil Rights Act of 1964, the commission offers employers additional information. The following EEOC positions are adapted from the fact sheet.

Denying an employee equal access to a common restroom corresponding to the employee’s gender identity is sex discrimination.

An employer cannot condition this right on the employee undergoing or providing proof of surgery or any other medical procedure.

An employer cannot avoid the requirement to provide equal access to a common restroom by restricting a transgender employee to a single-user restroom instead (though the employer can make a single-user restroom available to all employees who might choose to use it).

Contrary state law is not a defense under Title VII.

Supervisory or co-worker confusion or anxiety cannot justify discriminatory terms and conditions of employment. Title VII prohibits discrimination based on sex whether motivated by hostility, by a desire to protect people of a certain gender, by gender stereotypes, or by the desire to accommodate other people’s prejudices or discomfort.

Puerto Rico Employers Get Reprieve from Overtime Rule

By: Kate McGovern Tornone

Employers with operations in Puerto Rico will not have to abide by the new overtime regulations there come December.

The new rule will “have no force or effect” in the commonwealth, under a provision of the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) signed June 30 by President Obama. PROMESA was aimed at resolving Puerto Rico’s debt crisis but lawmakers added the overtime rule exception to the legislation in recent weeks.

The bill states that the rule cannot take effect there until: (1) the Comptroller General submits a report to Congress assessing the effect the rule will have on Puerto Rico’s economy; and (2) the Secretary of Labor provides a written determination to Congress that applying the rule in Puerto Rico will not have a negative effect on its economy.

The comptroller’s report—which the secretary must consider—must take into account “regional, metropolitan, and non-metropolitan salary and cost-of-living differences.” It is due to Congress June 30, 2018.

The U.S. Department of Labor (DOL) in its new regulations set the salary threshold for overtime exemption at $913 per week, which amounts to $47,476 annually. The change will take effect for the rest of the country Dec. 1.

EEOC Document Helps Employers Navigate Employees’ Rights to ADA Leave

By: Robert Teachout

A new technical assistance document addressing employees’ rights to leave as an Americans with Disabilities Act reasonable accommodation was released May 9 by the U.S. Equal Employment Opportunity Commission. Employer-Provided Leave and the Americans with Disabilities Act is meant to educate employers and employees on the Commission’s positions about ADA leave, to help prevent discriminatory denials of leave.

The ADA requires employers with 15 or more employees to provide reasonable accommodations that allow people with disabilities to perform the essential functions of their jobs, unless doing so creates an undue hardship for the employer. That can include modifying

Anxiety, mental health, and the Americans with Disabilities Act

current leave policies or providing leave when needed for a disability, even in situations where an employer does not offer leave to other employees.

EEOC Sees Need for Assistance

Disability charges filed with the agency increased more than 6 percent from the previous year, according to EEOC, reaching a new high in fiscal year 2015. One trend that EEOC has found “troubling” in ADA charges is the pervasiveness of employer policies that the agency says “deny or unlawfully restrict the use of leave as a reasonable accommodation.”

These policies often are systemic barriers to the employment of workers with disabilities, EEOC stated in its press release, and may cause the termination of many employees who otherwise could have returned to work after needed leave without causing the employer undue hardship.

The new resource document does not introduce or advance any new agency policy or position. EEOC regulations already establish that leave may be a reasonable accommodation, including unpaid leave that may exceed the limits of an employer’s normal leave policy. (Note: The document does not constitute “guidance,” which EEOC reserves for documents that set out new clarifying policy. See further explanation at https://www.eeoc.gov/eeoc/newsroom/wysk/regulations_guidance_resources.cfm.)

“We didn’t set new policy in this technical assistance document,” said EEOC Commissioner Chai Feldblum. “But it is our effort to provide some user-friendly information on what is a complex issue for employers — and an incredibly important right for people with disabilities.”

Document Addresses Key Topics

The document addresses six key areas about leave and the ADA about which employers and employees often raise questions, and explains how existing EEOC policies and guidance apply to specific situations. The topics discussed are:

  • Equal Access to Leave Under an Employer’s Leave Policy — requirements that an employer provide access to leave to employees with disabilities on the same basis as all other similarly situated employees.
  • Granting Leave as a Reasonable Accommodation — requirements that an employer grant unpaid leave as a reasonable accommodation if the leave enables an employee to be able to return to work afterwards, even if the employer does not offer leave as an employment benefit or the employee is not eligible or has exhausted leave under the employer’s policy.
  • Leave and the Interactive Process Generally — the need for an employer to: engage in an “interactive process” after an employee requests leave as a reasonable accommodation; obtain relevant information to determine whether granting the leave is feasible; and continue communication with the employee during leave and before the employee returns to work.
  • Maximum Leave Policies — the interaction of ADA requirements with an employer’s maximum leave policy, and the obligation to grant exceptions to such policies unless the employer can show that doing so will result in an undue hardship.
  • Return to Work and Reasonable Accommodation (Including Reassignment) — employment policies that violate the ADA by requiring employees to have no medical restrictions when returning to work (that is, “100 percent” healed). Employers must consider requests for reasonable accommodations (including possibly transferring the employee to a vacant position) that will enable an employee to return to work without being “100 percent” healed or recovered.
  • Undue Hardship — factors for determining whether a request for leave as a reasonable accommodation will create an undue hardship. These include the amount and frequency of leave required, the predictability of intermittent leave and the impact of the leave on the employer’s operations and ability to serve customers and clients in a timely manner.

The technical assistance document also provides links to additional EEOC documents discussing how the ADA addresses various leave issues.

Designed to Benefit Both Employers and Employees

EEOC intends the new resource document to provide employers much-needed help in complying with the ADA by providing clear explanations and examples. Employees are expected to benefit from increased understanding of their ADA leave rights and improved access to leave as employers gain a better understanding of their obligations under the law.

“Providing employees with a period of leave for medical treatment or recovery can be a critical reasonable accommodation for people with disabilities,” said EEOC Chair Jenny Yang. “This resource document explains to employers and employees in a clear and practical way how to approach requests for leave as a reasonable accommodation so that employees can manage their health and employers can meet their business needs.”

“I believe [this resource document] will be helpful to both employers and employees,” Commissioner Victoria Lipnic added. “Leave issues often present some of the toughest situations for employers and employees to deal with in our workplaces. This document provides needed one-stop guidance on how the EEOC approaches many of the common issues we see.”