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In This Issue
April-July 2017 | Volume 5 Issue 2

Federal Law

DOL Seeking Feedback on Long-Debated Overtime Rule

By: Tammy Binford, Thompson Information Service

Employers will get the opportunity to offer feedback on changes to the regulation governing which workers are eligible for overtime pay after the U.S. Department of Labor (DOL) published a Request for Information (RFI) in the Federal Register on July 26.

On July 25, the DOL announced it would publish the RFI and released a preliminary copy. The RFI is the latest action on a rule issued in May 2016 during the Obama administration. Implementation of the rule would have added approximately 4.2 million employees to the ranks of workers eligible for overtime pay of at least 1½ times their regular rate of pay for hours worked in excess of 40 in a workweek.

The rule hasn’t taken effect because of a federal court injunction. In June, the DOL announced that it had decided not to defend the rule in court.

The rule, as issued in 2016, more than doubles the current minimum salary workers must earn to be exempt from the Fair Labor Standards Act (FLSA). Being exempt from the FLSA makes workers ineligible to collect overtime pay, even when they work more than 40 hours in a workweek. The current threshold is $23,660 a year ($455 a week). The new rule puts the threshold at $47,476 a year ($913 a week).

To determine whether an employee can be classified as exempt, both her salary and her duties are considered. In addition to meeting the minimum salary threshold, a worker must perform duties that are primarily executive, administrative, or professional. The 2016 rule immediately triggered opposition from employers, which maintained that the salary test change was too drastic.

What to Expect Now

“We may be back at square one on revisions to the overtime rule,” says Mark B. Wiletsky, a contributor to Colorado Employment Law Letter and attorney in the Boulder, Colorado, office of Holland & Hart LLP. In publishing the RFI, “the DOL essentially starts the whole process of revising the overtime rule again. It suggests that the rule in its current form is unlikely to go into effect.”

Wiletsky says Labor Secretary Alexander Acosta has indicated that the DOL isn’t opposed to raising the minimum salary level for the white-collar exemptions. Instead, the opposition is to raising the salary level as high as it’s set in the 2016 rule.

The DOL may seek to simplify the exemption tests and offer employers more time to comply with the changes, Wiletsky says.

Reggie Gay, a contributor to South Carolina Employment Law Letter and attorney with the McNair Law Firm in Greenville, South Carolina, says the new development on the overtime rule likely means that employers can expect an increase in the minimum salary threshold but not as much as under the 2016 rule.

“It has been a considerable period of time since the last increase, and in fairness[,] an increase is overdue,” Gay says. “This being said, the increase should be reasonable and not overly burdensome on employers.”

One of the questions the DOL asks in the RFI concerns whether the salary threshold should be automatically updated on a periodic basis. Gay says such an adjustment may be appropriate. “This could be based on something similar to Social Security adjustments, and, if it is every three years or so, it will enable an employer to plan and budget,” he says. He said that in addition to changes in the salary test, the duties test should be updated to conform with modern-day forms of employment.

RFI Questions

The text of the RFI traces the history of the salary test and explains that for more than 75 years, the law has interpreted exempt employees to be workers whose job primarily involves executive, administrative, or professional duties. Since the FLSA became law in 1938, the minimum salary level for exempt employees has been updated as salary levels have increased. The current $455-per-week level has been in effect since 2004.

The RFI seeks comments on 11 questions. One question asks for comments on whether updating the 2004 salary level for inflation is an appropriate basis for setting a standard salary level. The question also asks what measure of inflation commenters think should be used.

Another question asks for comments on whether the regulation should contain multiple standard salary levels and, if so, how the levels should be set­—for example, by employer size, census region, census division, state, metropolitan statistical area, or another method.

Another question asks whether the DOL should set different standard salary levels for the executive, administrative, and professional exemptions and, if so, whether there should be a lower salary for executive and administrative employees. The RFI also asks whether the standard salary level in the 2016 rule effectively eclipses the role of the duties test in determining exempt status.

Further, the RFI seeks information from employers that increased the salaries of exempt employees in anticipation of the 2016 rule taking effect. It asks what actions were taken and what impact they have had.

Another question asks if relying solely on a duties test—and not considering salary at all—would be preferable to the current system, which considers an employee’s duties and pay. During his confirmation hearing in March, Acosta questioned whether a salary test is even appropriate under the law.

 

New Bill Latest Effort to Tackle Definition of Joint Employment

By: Tammy Binford, Thompson Information Service

The definition of “joint employment” may be heading for another turnaround. Legislation introduced in Congress on July 27 takes aim at a 2015 National Labor Relations Board (NLRB) decision that raised the ire of many in the business community, especially employers that work with franchisees, contractors, and staffing agencies.

The NLRB’s 2015 Browning-Ferris decision broadened the joint-employment standard so that a business that exercises only indirect control over another employer’s workers still can be considered a joint employer for purposes of collective bargaining. The new bill introduced in the House—dubbed the Save Local Business Act—seeks to clarify the joint-employment standard and provide relief to businesses that are in a relationship with another employer.

“The business community is going to rally around this bill because it promises a return to clarity,” said Sean D. Lee, a frequent contributor to Federal Employment Law Insider and attorney with Fortney & Scott, LLC in Washington, D.C. “And employers need that clarity to develop effective workplace practices, promote compliance, and . . . understand liabilities that can arise from business models like contracting and franchising.”

Lee said the Browning-Ferris decision “upended clear, settled standards” employers once relied on to determine when they could be considered joint employers. “We’ll see this bill touted as a return to a commonsense definition of joint employment that’s based on an established body of law,” he said.

Bill’s Limits

The bill may not provide the “clarity” many in the business community want, according to JW Furman, a frequent contributor to Alabama Employment Law Letter and attorney with Lehr Middlebrooks Vreeland & Thompson, P.C., in Birmingham, Alabama. The bill affects the National Labor Relations Act (NLRA) and the Fair Labor Standards Act (FLSA) without mentioning any of the antidiscrimination laws enforced by the Equal Employment Opportunity Commission (EEOC), she said. She added that the EEOC “has consistently used the most liberal definition of ‘joint employer’ of any of the federal agencies that deal with employment.”

Even if the bill becomes law, the EEOC’s interpretation will stand for now, and the NLRB’s expanded definition under Browning-Ferris matches the EEOC’s interpretation, Furman said. But the bill is encouraging for employers, she said, because it would protect some companies from liability for violations of the FLSA and the NLRA. She also pointed out that some of the EEOC’s legal interpretations may change as Republicans gain a majority on the commission.

As for the bill’s prospects for passage, Lee is optimistic that it will eventually be signed into law. “What’s being considered here is not radical,” he said. If the bill becomes law, it will return to the definition used for decades before the Browning-Ferris decision, he said.

Other Joint-Employment Issues

Other developments affecting joint employment also bear watching, Lee said, since the Browning-Ferris decision is being appealed. Also, the makeup of the NLRB is likely to change soon since President Donald Trump has nominated Republicans for two open seats on the Board.

The nominees, Marvin Kaplan and William Emanuel, have advanced out of committee and, if confirmed by the Senate, will give Republicans control over the five-member Board for the first time in a decade. Lee points out that the new Board may revisit the Browning-Ferris decision.

The 2015 decision dealt with collective bargaining, but joint employment exists in other contexts as well, said Angela N. Johnson, an editor of Indiana Employment Law Letterand attorney with Faegre Baker Daniels LLP in South Bend, Indiana. For example, if a franchisee fails to pay employees appropriately under the FLSA, the franchisor also could be liable, depending on the level of control it exercised in the employment relationship.

“The issue with joint employment is that it loops in a purported ‘employer’ that may have only had indirect control in the employment relationship, whereas the franchisee was actually making the employment decisions and dealing directly with the employee,” Johnson said.

With the expanded definition of “joint employment,” employees and their attorneys “are able to reach into deeper pockets,” Johnson said. “Even more, having the ability to name as a codefendant a national franchisor makes class action suits more achievable.”

Johnson said the broader definition of joint employment has caused franchisors to refrain from exercising oversight of the employment relationship out of fear that if too much control is exercised, they will be deemed joint employers.

“That can mean, as a practical matter, that now franchisees, who are essentially small businesses, no longer have the services and support previously provided by the franchisor,” Johnson said. “For instance, they may now have to calculate their own payroll and provide health insurance. This also means employees lose out on the benefit of a larger or better health plan that was previously sponsored by the larger franchisor.”

Johnson points to recent reports that Microsoft has withdrawn its policy of requiring contractors to provide paid sick leave to employees since the policy might constitute enough control to require Microsoft to negotiate with a union under the Browning-Ferris definition of joint employment.

Issue to Watch

Even if the new bill isn’t successful, Johnson says the issue is one to watch in the next year. The U.S. Department of Labor (DOL) recently withdrew its Obama-era guidance on joint employment, “signaling a more ‘pro-employer’ shift,” she said. Also, in the coming months, the U.S. Supreme Court will decide whether it will hear a joint-employer case under the FLSA.

Johnson also pointed out that states are taking steps to define joint employment. She said New Hampshire Governor Chris Sununu last week signed into law a measure aimed at clarifying the Browning-Ferris decision by defining the employer relationship to reduce the likelihood that a franchisor will be deemed a joint employer under New Hampshire law.

 

DOJ Says Title VII Doesn’t Apply to Sexual Orientation Discrimination

By: Joan Farrell, JD, Senior Legal Editor, Thompson Information Service

The Department of Justice (DOJ) has filed an amicus brief in the case of an employee who claimed his employer violated Title VII of the Civil Rights Act when it discriminated against him on the basis of his sexual orientation. The DOJ’s brief asserts that Title VII’s prohibition of sex discrimination does not extend to discrimination based on sexual orientation.

The case (Zarda v. Altitude Express, 855 F.3d 76 (2d Cir. 2017)) is pending in the 2nd Circuit Court of Appeals and could overturn current precedent in that circuit on the application of Title VII to sexual orientation discrimination.

A three-judge panel of the court had ruled that Title VII does not extend to sexual orientationclaims, but following a decision by the 7th Circuit Court of Appeal that sexual orientation discrimination violates Title VII, the 2nd Circuit agreed to rehear the case with the full court.

The DOJ’s position is in stark contrast to the position taken by the Equal Employment Opportunity Commission (EEOC) which is that discrimination on the basis of sexual orientation or transgender status constitutes sex discrimination in violation of Title VII.

In July 2015, the EEOC ruled that a complaint alleging discrimination based on sexual orientation in violation of Title VII is within EEOC’s jurisdiction (Baldwin v. Foxx, Appeal No. 0120133080 (2015)).

The EEOC noted that Title VII prohibits employers from relying on sex-based considerations when taking employment action and that there is an “inescapable link” between allegations of sexual orientation discrimination and sex discrimination. The EEOC concluded that claims of sexual orientation discrimination should be treated as complaints of sex discrimination under Title VII.

Twenty-two states, the District of Columbia, and many counties and cities have laws or ordinances that prohibit employers from discriminating on the basis of sexual orientation.

 

Alert: Get Ready to Switch to Another—Yes, Another—Revised I-9

By: Thompson Information Service

The new form is available for download, here.

On July 17, U.S. Citizenship and Immigration Services (USCIS) will release a new revision of Form I-9—Revision 07/17/17 N—to be used for employment eligibility verification. The new form will be available from the USCIS website at https://www.uscis.gov/i-9-central/whats-new.

Employers will need to use the new version of the form beginning on September 18.

Most of the changes will be minor, technical changes. For example, in the form’s instructions the name of the Office of Special Counsel for Immigration-Related Unfair Employment Practices will be amended to its newer name, “Immigrant and Employee Rights Section.” The instructions will also be updated to remove “the end of” from instructions regarding required actions to be taken no later than “the first day of employment.”

Revisions will also be made to the List of Acceptable Documents for employment verification.

Specifically, per the USCIS press release:

  • We will add the Consular Report of Birth Abroad (Form FS-240) to List C.

Employers completing Form I-9 on a computer will be able to select Form FS-240 from the drop-down menus available in List C of Section 2 and Section 3. E-Verify users will also be able to select Form FS-240 when creating a case for an employee who has presented this document for Form I-9.

  • We will combine all the certifications of report of birth issued by the Department of State (Form FS-545, Form DS-1350 and Form FS-240) into selection C#2 in List C.
  • We will renumber all List C documents except the Social Security card.

For example, the employment authorization document issued by the Department of Homeland Security on List C will change from List C #8 to List C #7.
Per these changes, the USCIS will also release a revised Handbook for Employers: Guidance for Completing Form I-9 (M-274), which is intended to be easier for users to navigate.

Overall, the key takeaway is that there is another new form and employers will need to transition new hire verification to that form as soon as practical, but no later than September 18.

 

Compensation Terminology 101

By: Sharon McKnight, CCP, SPHR, BLR Senior Editor, Thompson Information Service

Like other professionals, compensation professionals can throw around a bunch of terms and acronyms that may or may not make a lot of sense to those not in the field. And, when we’re asked what they mean, we’re sometimes stymied when providing easy to understand definitions that are clear and concise.

Other times, however, we get some terms all muddled up with each other. Just last week, I was asked the difference between compa-ratio and range penetration and had to check to be sure I was accurately explaining both terms. With that in mind, here’s a short overview of compensation terms that are sometimes confused with one another.

Blended Job vs. Hybrid Job
Blended and hybrid jobs are the same. Both are a job with multifunctional responsibility for a combination of different areas, often found within the administration and/or operations area of an organization.

Call-In/Callback Pay vs. Reporting Pay
All of these terms refer to the minimum pay guaranteed to a worker. Call-in, callback pay is the term used when an employee is recalled to work after completing the regular work shift. Reporting pay, however, is the term used when a worker who is scheduled to work, reports for work, and finds no work available, or less work than can be done in the guaranteed period, usually 2 to 4 hours in all three situations.

Comparable Worth vs. Equal Pay for Equal Work
A method of setting compensation that provides equal pay for work of equal value, comparable worth is often used as a means of achieving parity in pay for employees in jobs with pay traditionally lower than comparable positions.

Equal pay for equal work refers to a policy denoting, or a demand for, payment of equal compensation to all employees in an establishment performing the same kind or amount of work, regardless of race, sex, or other characteristics of individual workers not related to ability or performance.

Compa-Ratio vs. Range Penetration
The relationship of base pay to the market, expressed as a percentage of the midpoint of the salary range, is the compa-ratio. To determine compa-ratio, an employee’s base salary is divided by the midpoint of the salary range for his/her position.

Range penetration, however, is the level of an individual salary compared to the total pay range. To determine range penetration, an employee’s base salary is divided by the maximum of the salary range for his or her position.

Defined Benefit Plan vs. Defined Contribution Plan
A defined benefit plan is a retirement plan that uses a specific, predetermined formula to calculate the amount of an employee’s future benefit. In the private sector, defined benefit plans are typically funded exclusively by employer contributions. In the public sector, defined benefit plans often require employee contributions.

A defined contribution plan, including 401(k), 403 (b), 457 plans, are retirement plans in which the employer makes specified contributions but the amount of the retirement benefit is not specified. Also, defined contribution plans may be wholly or partially funded by employers but, generally, require employee contribution.

Green Circle Rate vs. Red Circle Rate
Also known as a blue circle rate, the pay rate of a nonprobationary worker that falls below the established rate range for workers performing the same duties is considered a green circle rate.

A red circle rate (aka, an out of line rate or flagged rate) is a wage rate that exceeds the formal pay rate or range of rates for a job, often due to the employee’s long service with the company, superior skills, or other factors.

Hazard pay is additional pay made to an individual worker or a group of workers working under dangerous or undesirable conditions. High time pay, however, refers to extra pay for workers engaged in a job high above ground, though it is sometimes also applied to work below ground level with extra dangers or discomforts.

Mean Vs. Median
The mean is the average of a set of numbers. It is used in market pricing as a straight average—each survey source gets one “vote.” The median, or midpoint, is the value that lies at the middle of a distribution of numbers. In salary survey data, the median is the 50th percentile.

Range Spread vs. Rate Range
Also known as grade spread, range spread is the difference between the minimum and the maximum dollar amounts within a salary range or job grade, expressed as a percentage. Typically, range spread can be as low as 20% for hourly jobs and up to 50% or more for high-level positions.

Expressed in dollar amounts, rate range is the spread of salaries paid for jobs assigned to the same salary grade. Essentially, the lower and upper limits of wage rates paid to workers in a given occupation. For example, the rate range for an administrative assistant might be $20,000 to $35,000 per year or expressed as $10 to $17 dollars per hour.