Job descriptions can be a shield or a sword for employers. In addition to setting clear job expectations, informing candidates of what the job entails, and providing a framework for evaluations, they are often used in litigation arising from workplace claims.
Job descriptions can be critical in litigating actions under the Fair Labor Standard Act, the Americans with Disabilities Act and the FMLA. Most employers know job descriptions are important, but are you doing them right? Let’s look at how they can be used in different workplace claims.
Wage and Hour litigation
Wage and hour litigation often involves claims that employees were not properly treated as exempt from overtime and record-keeping requirements of the Fair Labor Standards Act. In order to be exempt under the FLSA, an employee must both 1) be paid on a salary basis (meaning he/she receives a guaranteed minimum for each week in which the employee performs any work), and 2) meet the duties tests of one or more of the recognized exemptions.
Employers should draft job descriptions using the targeted exemption as the starting point. Let’s say you are hiring a new head of your three-person marketing department and anticipate that person will be exempt under the executive exemption. Let’s say your job description says: “Provide oversight and direction in the operating unit in accordance with the organization’s policies and procedures.” In litigation concerning whether the employee is properly treated as exempt, that description isn’t likely to be much help – it doesn’t describe the actual duties in a way that aligns with the duties test for the executive exemption. To better align with the duties test, your job description should identify specific responsibilities that show the employee’s primary duty will be managing the department and that he/she will have substantial authority when it comes to hiring, firing, promotion and discipline of employees.
Be careful using terms like “support,” “help with,” and “assist with,” as those words can reflect diluted responsibilities of an employee. Merely “supporting” another employee who is fulfilling an exempt task may not be enough to impute the exempt task to the supporting employee. For example, if you are describing an IT employee, saying he/she “provides support to the software team” won’t likely cut it. Instead, highlight the employee’s underlying activity that supports the software team, such as “responsible for modifying computer systems or programs related to user or system design specifications.”
Remember, while it’s important to highlight exempt functions, such functions shouldn’t be added to exaggerate the employee’s actual duties. If the employee doesn’t actually perform the duties listed, a plaintiff’s attorney will use that against you.
Americans with Disabilities Act Litigation
Much of ADA litigation centers around whether an employee can perform the essential functions of the job. Job descriptions should make clear what job functions are essential, as the description will be Exhibit A in any litigation.
Employers should be aware that the EEOC makes a distinction between qualification standards and essential functions. EEOC’s regulations say that qualification standards are: “personal professional attributes including the skill, experience, education, medical, physical, safety and other requirements.” In contrast, “essential functions” are those duties that an employee actually performs on the job, such as waiting on tables, sorting packages, repairing computers or whatever.
According to the EEOC, “qualification standards,” should predict whether an applicant can perform the essential functions of the job. For example, the requirement that an applicant be able to lift 30 pounds, seems like an essential function of a job, but the EEOC takes the position it is actually a qualification standard. And employers must always keep in mind that an employee may still be able to perform the essential functions of the job, even if it appears he/she does not meet the qualification standard. Employers must make an individualized assessment and engage in the interactive process if an accommodation is necessary.
Employers should avoid language in job descriptions that, on its face, is discriminatory. For example, don’t use words such as “youthful,” “strong,” or “able-bodied.” Job descriptions should include adjectives that describe the pace of work (“deadline-driven,” “fast-paced”) or the work environment (“exposure to heat and cold,” “enclosed area,” or “noisy setting”).
Multi-site employers should ensure the description is tailored to the specific location because what is essential at one location may not be essential at another.
When an employee is having a medical condition that impacts performance, employers should provide the employee a job description with a list of the essential functions of the job to review with their doctor. It may not be the published job description, as the job may have changed over time. With that list of essential job functions, the employer and employee can work together to determine whether there is a reasonable accommodation that would enable the employee to perform the essential functions of the job.
Family and Medical Leave Act
Job descriptions that reflect actual job duties are equally critical under the FMLA and should be attached to two of the FMLA forms.
First, employers should attach job descriptions showing the essential functions of the job to the FMLA Designation Notice, DOL Form 382. If the employer attaches that description, the employee must provide a fitness for duty certification that addresses the employee’s ability to perform those particular functions to be restored to employment. Again, the description attached should reflect the employee’s actual day-to-day duties and responsibilities. Second, employers should attach the same listing of essential job functions to the Certification of Health Care Provider, DOL Form 380-E, so that the physician can evaluate how the employee’s serious health condition impacts the employee’s ability to perform each of the job functions listed.
Job descriptions present an opportunity for an employer to define a working relationship and set clear expectations. Crafting thoughtful, effective job descriptions are also critical in defending legal claims. They will invariably become exhibits in legal proceedings. If you need assistance with job descriptions or handling leave issues where they come into play, contact your Akerman Labor & Employment lawyer.
Employers should be careful about designating Employee Handbooks confidential as, according to the National Labor Relations Board’s advice division, that would be unlawful. That advice was contained in one of five memoranda issued by the advice division last month. While not binding on the Board and not official Board precedent, advice memoranda provide guidance to the Board’s Regional Offices on how to handle difficult and novel issues that arise. The recent memoranda cover a variety of workplace issues and apply to both unionized and non-unionized worksites. While the advice division found that particular handbook confidentiality rule to be unlawful, it greenlit several other work rules providing employers with useful guidance when drafting and updating their employee handbooks.
Two of the memoranda weighed in on the validity of eight different workplace rules or policies, applying the National Labor Relations Board’s Boeing test. That test weighs an employer’s interests in maintaining work rules against their effects on employees’ National Labor Relations Act rights. For a discussion of the Boeing decision, see our January 5, 2018 HR Defense blog post and for a discussion of the Board’s General Counsel’s Memorandum providing guidance on applying the Boeing test, see our August 7, 2018 HR Defense blog post.
One of the two “workplace rules” memoranda discussed not only the previously mentioned employee handbook confidentiality policy but also policies preventing employees from disclosing payroll information and placing restrictions on employees’ use of employer email. The handbook confidentiality rule designated the entire employee handbook and its contents confidential and prohibited employees from disclosing that information to non-employees. This rule is unlawful because it effectively precludes employees from discussing handbook policies regarding employee pay, benefits, and working conditions with unions and other third parties (even though the rule did not prohibit discussions with other employees).
The policy restricting the disclosure of payroll information was also found to be unlawful because employees could reasonably interpret the rule as prohibiting them from discussing wages and benefits with each other or with third parties, a fundamental NLRA right.
The employer’s rule banning personal use of its email system, even on non-work time, was found to be in blatant violation of the NLRA. Under current Board law, employers that provide employees with access to email as part of their work must allow employees personal use of the email system during non-working time such as meal or break periods and before and after work, unless they can show “special circumstances” necessary to maintain production and discipline. While the employer’s policy did permit “incidental personal use,” the memorandum stated that this did not save the policy since it specifically forbids such use for messages that “are not considered in support of the [Employer] objective,” which could be interpreted as a reference to union or protected concerted activity.
The memorandum did find that the employer’s directive to an employee requiring him to participate in employer investigations was lawful. While an employer may not require an employee to participate in an investigation regarding NLRA violations, an employee would not construe a rule merely requiring cooperation with employee investigations as requiring participation in an NLRA investigation. Unless the employer specifically referenced an unfair labor practice or NLRA investigation, an employee would reasonably interpret the rule to apply to employer investigations of workplace misconduct.
The other “workplace rules” memorandum, also examined four employer workplace rules, finding three of those rules to be lawful. First, the memorandum found that an employer rule preventing workers from wearing “items of apparel with inappropriate commercial advertising or insignia” was lawful because workers would not interpret it to prohibit wearing items with a union logo, which could violate the NLRA. The rule instead focused on appropriate and professional attire, which could include clothing with a union insignia; it would only restrict inappropriate or unprofessional attire.
Also found to be lawful was the Employer’s rule on the handling of confidential information. This rule directed employees to “exercise a high degree of caution” when handling confidential information, which is defined in three categories: (1) “business plans, internal correspondence, [and] customer lists . . .”; (2)“[p]ersonally identifiable customer and employee information, including name, address, social security, credit card and bank account numbers, and similarly personally identifiable information”; and (3) HIPAA-related information. The rule further explained that certain employees, particularly those in positions supporting managers or performing human resource and timekeeping functions, may have access to personal information concerning employees or confidential information about the employer or its customers, which is maintained by the employer, and those employees should not discuss or divulge the information. This rule was found to be lawful because employees would not reasonably interpret it as limiting their NLRA rights or preventing them from sharing employee names and addresses obtained without resort to an employer’s files. Moreover, the employer had a legitimate business interest and, in some instances, a legal duty, to maintain the confidentiality of certain employee data such as HIPAA information.
The memorandum also validated the employer’s rule on media relations. This rule allowed only employer designated spokespeople to speak to the media, financial analysts, or investors about the employer to avoid sharing information that “could be incorrectly interpreted as an official position” of the employer. The memorandum stated that the rule is clearly directed to when employees are (or are not) authorized to speak on the employer’s behalf. Employees would not interpret this rule as blocking them from discussing workplace grievances with the media.
The employer’s rule barring employees’ from using their personal cellphones during non-work time was found to be unlawful, however, because the Board has long protected employee’ rights to communicate through non-employer methods during lunch or break periods.
While both memoranda provide employers with additional clarity on what types of workplace rules and policies the Board might find to be lawful or unlawful, employers must continue to evaluate the specific language of their rules, the particular employer interests at stake, and employee NLRA rights. Also, employers should keep in mind that even if a policy or rule is lawful, if inconsistently applied it may be found to interfere with employee rights.
If you have questions about your employee handbook or any of your workplace rules or policies, contact your Akerman Labor & Employment lawyer.
A recent ruling by the United States District Court for the District of Columbia calls into question the recently expanded regulations allowing small employers to band together to establish Association Health Plans. This development should be monitored closely by employers and employer organizations currently sponsoring, or considering sponsoring, these plans.
A group of unrelated employers wishing to establish an Association Health Plan (AHP) must satisfy a bona fide association test, as defined by regulations issued by the U.S. Department of Labor (DOL) interpreting the definition of employer under ERISA. Through advisory opinions issued to groups of employers wishing to establish an AHP, the DOL explained that satisfying the bona fide association test requires, among other things, that a commonality of interest be established among the employers. On June 21, 2018, the DOL published final regulations relaxing the long-standing factors required to establish a commonality of interest under the bona fide association test (the Final Rule). Additionally, the Final Rule expanded the scope of prior AHP guidance to allow working owners (i.e., self-employed individuals) to participate in an AHP. In doing so, the DOL made it easier for groups of small employers and sole proprietors to band together to form an AHP in order to avoid some of the more onerous requirements that apply to the small and individual group markets, including community rating.
Previously, under the more stringent AHP guidance, groups of employers generally needed to be in the same line of business and geographic area in order to satisfy the commonality of interest component of the bona fide association test. Before the Final Rule, “geography, alone, was not sufficient to establish commonality.” However, under the Final Rule, the commonality of interest component may be satisfied if the group of employers is in the same line of business or the same geographic area. The Final Rule can be found here.
In July 2018, a coalition of 12 attorneys general, led by New York and Massachusetts, filed a lawsuit challenging the Final Rule. The attorneys general argued that the expansion of the commonality of interest component of the bona fide association test, and the inclusion of working owners under the Final Rule was inconsistent with the purpose of ERISA and the Congressional intent of the Affordable Care Act (“ACA”).
On March 29, 2019, Judge John D. Bates of the United States District Court for the District of Columbia (the “Court”) invalidated two major portions of the Final Rule – the modified commonality of interest component of the bona fide association test, and the working owner provision. The Court was concerned that expanding the scope of the bona fide association test to allow small employers to band together without a true “commonality of interest” so that they may offer large group health insurance was an unlawful expansion of the existing AHP regulations. Additionally, the court found it “absurd” that working owners with no common law employees could take advantage of the group health insurance market. The court was concerned that this expansion by the DOL was “clearly an end-run around the [Affordable Care Act].” The Court ruled that these provisions of the Final Rule misinterpreted the definition of Employer under ERISA to unlawfully expand the term’s meaning by ignoring “Congress’s clear intent” for the ACA to distinguish between large group, small group, and individual markets.
The Court set aside these sections of the Final Rule, remanded the Final Rule, and directed the DOL to revise the Final Rule in accordance with the Court’s ruling. Moving forward, the DOL has the option to rescind the Final Rule altogether, revise the Final Rule in accordance with the Court’s decision, or appeal the decision to the Court of Appeals for the D.C. Circuit. Judge Bates’ ruling can be found here.
Next Steps for Employers
Although a change to the Final Rule will not occur overnight, and though it is extremely likely that the DOL will appeal the decision, we believe that this is something that employers that have implemented an AHP or are considering implementing an AHP should monitor closely. AHPs created since the Final Rule should also consult with their service providers and benefits counsel to determine whether they should make any changes pending final resolution of this issue.
As of April 1, 2019, U.S. employers requesting a change of status for H-1B hopefuls should request Premium Processing by concurrently filing visa petitions with Form I-907, Request for Premium Processing Service, available here. But don’t expect the Federal Immigration Service to begin working immediately. In a statement released on March 19, 2019, the U.S. Citizenship and Immigration Services (“USCIS”) announced that “Premium Processing” – a 15-day expedited service available in exchange for a $1,410 filing fee – will not immediately begin for H-1B cap cases this fiscal year. While USCIS plans to formally notify the public when Premium Processing begins for lottery (“cap-subject”) H-1B visa petitions, employers should expect Premium Processing to commence for H-1B cases requesting a change of status by no later than May 20, 2019. Employers looking to hire foreign national students who are currently inside the U.S. and maintaining lawful immigration status are expected to benefit most from the Immigration Services’ latest procedural shift.
Employers Take Note: Any employer who, during the first five business days of April 2019, fails to request Premium Processing service at the time of filing a cap-subject H-1B petition seeking a change of status might very well have to wait until May 20 to take advantage of expedited service. According to the Federal Immigration Agency, USCIS will reject any Premium Processing request that is not filed concurrently with an eligible H-1B petition during the specified time period. Employers must appropriately select response “b” for Item 4 in Part 2 of Form I-129, Petition for a Nonimmigrant Worker, to be eligible to concurrently file Form I-907, Request for Premium Processing Service.
The situation is further complicated for U.S. employers eager to hire H-1B workers who are currently outside of the U.S. In an effort “to prioritize data entry for cap-subject H-1B petitions,” USCIS will postpone Premium Processing for all other FY 2020 cap-subject H-1B petitions until at least June 2019. U.S. employers planning to file a lottery-subject H-1B petition on behalf of any foreign national who is presently outside the United States, or out of lawful-status, will not be eligible to concurrently request Premium Processing service. Instead, these employers are now forced to wait until USCIS announces a confirmed date when Premium Processing will become available for cap-subject H-1B petitions not requesting a change of status.
At this time, Premium Processing remains available for U.S. employers whose H-1B petitions are exempt from the annual randomized lottery-selection process, such as extension of stay requests and other cap-exempt categories.
To avoid adverse consequences under the two-phase Premium Processing policy, employers are encouraged to file H-1B petitions with Premium Processing on April 1 for any H-1B worker who is requesting a change of status to ensure uninterrupted work authorization. For F-1 students who are inside the U.S. and currently employed pursuant to valid Optional Practical Training (OPT), failure to concurrently request Premium Processing on April 1 may result in a lapse in employment authorization if H-1B petitions are not approved by October 1. Under the H-1B “Cap-Gap” extension, F-1 students will be permitted to remain in the United States if their H-1B petition remains pending on October 1, but will have to forego any employment after September 30 until their H-1B status is approved. Employers are also alerted that international travel should be avoided after an H-1B petition is filed for any applicant requesting an initial change of status to H-1B classification. Travel outside of the U.S. after April 1 could give rise to a determination by USCIS that the applicant has abandoned the change of status petition. Travel during this timeframe also revokes Cap-Gap privileges, including legal work status for F-1/OPT students.
Employers are advised to contact an immigration attorney regarding any H-1B applicant who may be impacted by anticipated processing delays or may experience difficulty with driver’s license renewals or international travel.
Akerman continues to monitor this situation and will keep clients informed of immigration developments as they occur.
A second federal appellate circuit has ruled that the Age Discrimination in Employment Act (the ADEA) does not apply to job applicants’ claims that a policy or practice has a disparate impact on older individuals. In so holding, the Seventh Circuit Court of Appeals, covering Illinois, Indiana, and Wisconsin, joins the Eleventh Circuit, covering Florida, Georgia, and Alabama.
However, while employers in those states may now successfully argue that job applicants’ disparate impact claims cannot be brought under the ADEA, the same is not necessarily true of state laws. It is possible that more plaintiffs will now simply pursue such claims in state court.
The Seventh Circuit case involved Dale Kleber, a 58-year-old attorney who applied for a job in CareFusion Corporation’s legal department. The job description specified that applicants should have three to seven (and not more than seven) years of experience. Kleber was not interviewed or hired for the position, and CareFusion ultimately hired a 29-year-old individual for the position, who met, but did not exceed, the prescribed experience.
Kleber sued under the ADEA, initially pursuing both disparate treatment and disparate impact claims. It has long been understood that disparate treatment claims involve intentional discrimination and that ADEA applies to claims of intentional discrimination for employees and applicants alike. In contrast, disparate impact claims do not require proof of intentional discrimination. Instead, they require a showing that a facially neutral employment practice has a disproportionately adverse impact on a protected group, such as individuals over 40 years of age.
The trial court granted CareFusion’s motion to dismiss Kleber’s disparate impact claim, finding that the relevant provision of the ADEA does not protect job applicants. Kleber voluntarily dismissed his disparate treatment claim and appealed the ruling on his disparate impact claim. In April 2018, a split panel of appellate judges reversed the trial court and found that the ADEA does cover disparate impact claims for applicants. However, the court granted en banc review, where eight of ten appellate judges agreed with the trial court, confirming that the ADEA does not apply to job applicants’ disparate impact claims.
The majority found that the specific language used in the relevant provision (which makes it unlawful for an “employer to limit, segregate or classify his employees in any way which would deprive or would tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee, because of such individual’s age”) only applies to employees. In reaching this conclusion, the majority looked at the surrounding provisions, which explicitly reference the hiring process and therefore include job applicants, and found the provision about disparate impact claims does not include any such reference. Finding the absence notable, the majority stated it “is implausible that Congress intended no such distinction in [the relevant disparate impact provision], however, and instead used the term employee to cover both employees and applicants.” Two judges – Judges Easterbrook and Wood – dissented. Judge Easterbrook noted that “normally one word used in adjacent paragraphs means a single thing.”
The Seventh Circuit’s majority ruling is consistent with a 2016 decision from the Eleventh Circuit, the only other court of appeal to address the issue. The U.S. Supreme Court declined to hear an appeal of the Eleventh Circuit’s decision. Accordingly, if the Seventh Circuit decision is appealed, it seems unlikely that the Supreme Court would hear it.
Notwithstanding this decision, wise employers will still consider their recruiting practices carefully. If you have questions about this new Seventh Circuit decision and its impact on your company, contact your Akerman L&E lawyer.
Employers may need to begin collecting pay and hours data to report on EEO-1 forms, now that a federal district judge revived the controversial requirement put in place during the Obama administration. During that administration, the EEO-1 form was revised to require employers with 100 or more employees to report earnings and hours worked within 12 pay bands, in addition to reporting race, ethnicity, and sex. In August of 2017, the Office of Management and Budget (“OMB”) stayed the requirement, but a lawsuit was brought by The National Women’s Law Center and the Labor Council for Latin American Advancement in the federal district court in Washington D.C. On March 4, 2019, the federal district judge vacated the stay, finding that OMB did not sufficiently justify its rationale for blocking the rule. The judge then went a step further, pointedly stating that “OMB’s deficiencies were substantial, and the court finds it unlikely that the government could justify its decision on remand, despite its assertion that ‘OMB could easily cure the defects in its memorandum by further explanation of its reasoning.’”
The contents of covered employers’ reporting obligations have been in flux over recent years. As early as 2012, the EEOC (along with other federal agencies) honed in on the EEO-1 form as a potential means by which pay discrimination could be analyzed and addressed. In 2016, the EEOC published a Federal Register notice announcing its intention to seek a three-year approval from OMB of a revised EEO-1 form, which included data on employees’ W-2 earnings and hours worked. In a second Federal Register notice later that year, the EEOC explained that the EEO-1 should be revised to enforce equal pay laws. However, when the OMB reversed course in August of 2017, covered employers (those with 100 or more employees, or federal contractors or subcontractors with 50 or more employees) were allowed to continue using the old EEO-1 form without pay data.
That all has been upended by this recent court decision.
Employers have long objected to the inclusion of pay data reporting on EEO-1 forms, and critics argue that it would not actually expose pay discrimination. For example, employers who oppose the requirement point to the overly-broad “pay bands” that employees must be artificially grouped into on the EEO-1 form. Thus, for example, a hospital employer might have to count its surgeon, attorney, and accountant employees together in the “Professionals” category, when clearly those positions are vastly dissimilar. Another criticism has been that the EEO-1 form would be misleading in the event that similarly situated employees with identical salaries opt to take different deductions for their 401(k) contributions. In this case, such employees may be mistakenly viewed as having a pay disparity where none exists. Tellingly, and as we have observed before, the EEOC itself appears to recognize this issue, stating that “it does not intend or expect that this data will identify specific similarly situated comparators or that it will establish pay discrimination as a legal matter.” Further, the new reporting requirements require employers to report hours worked, even for employees who are exempt from the overtime and record-keeping requirements of the Fair Labor Standards Act.
It is unclear at this time whether the Trump administration plans to appeal the ruling. The EEOC officially opens the EEO-1 survey on March 18. The reporting deadline was extended to May 31, 2019, in light of the government shutdown. The EEOC may issue a further extension in light of the court ruling. In the meantime, employers may want to immediately begin collecting the required data.
Exempt employees would have to be paid a minimum annual salary of $35,308 in order to be exempt from the overtime and record keeping requirements of the Fair Labor Standards Act, under the Department of Labor’s long-awaited proposed new rule. The proposed new salary threshold represents almost a 50% increase over the current threshold of $23,660 but is substantially less than the 2016 threshold of $47,476 adopted under the Obama administration. A Texas court blocked the Obama era regulation from taking effect in November 2016, and the DOL later abandoned it.
As a result of the new threshold proposed by the Department of Labor on March 7, 2019, nearly 1.1 million employees previously exempt from overtime will likely become entitled to overtime based solely on their salary. The new regulation is now open for a 60-day public comment period, after which the DOL will issue a final rule. The final rule is not expected to go into effect until January of 2020, so employers have some time to prepare and adjust their policies and practices in anticipation of the change.
To be properly treated as exempt, employees must be paid on a salary basis, and must also fall under one or more of the recognized exemptions under the FLSA. Those exemptions include the so-called white collar (executive, administrative and professional) and computer-related exemptions. The FLSA also has a “highly compensated individual” exemption, which many states do not have, and allows for a more relaxed application of the job duties test based on the higher salary. In connection with that exemption, under the new regulation, an individual would need to be paid $147,414 (up from $100,000) to satisfy the salary threshold.
The DOL has established certain duties tests for each of the recognized exemptions. Unless employees are paid on a salary basis and meet the duties tests of one or more of the exemptions, employees still must be paid overtime if working more than 40 hours in a week.
Because the salary threshold has historically been relatively low, the main question for determining exempt status previously has been whether the job duties test was met. The new proposed rule now requires a more stringent review of the economic and business realities of maintaining certain positions as exempt, even if they otherwise meet the respective duties tests. Now, unless employees make at least $35,308 (or $147,414, for highly compensated employees), employers will likely be on the hook for overtime, even if those employees’ jobs otherwise qualify under white collar or highly compensated individual job tests. This is a significant change and may result in many positions being reclassified as non-exempt and subject to overtime and record-keeping requirements, as well as other protections that may be available under state law. For example, in many states (such as California), the exempt nature of a position also impacts the obligation to provide meal or rest periods. Employers must also be careful to ensure compliance with both state and federal laws covering these employees.
Calculation Of The Salary Threshold
To help offset the increased salary threshold, the DOL has provided some relief to employers by allowing them, for the first time, to use nondiscretionary bonuses and incentive payments to satisfy up to 10 percent of the standard salary level, provided these payments are made on a quarterly or more frequent basis. Previously, the DOL required the entire salary level to be satisfied proportionally in each work week.
Nondiscretionary bonuses and incentive payments are generally defined as forms of compensation promised to employees to induce them to work more efficiently or to remain with the company. These may include individual or group production bonuses, bonuses for quality and accuracy of work, and commission payments. Being able to include a portion of this form of compensation in determining the minimum threshold could help to defray some of the increased salary costs, but the minimum is still a substantial increase over the prior rule.
More specifically, under the new rule, if an employer applies a non-discretionary bonus or incentive pay towards the salary threshold, at least 90% of the salary ($611 per week) must be paid as a salary, while up to 10% of the salary ($68 per week) may be satisfied with non-discretionary bonuses or incentive payments. If an employee does not earn enough of a non-discretionary bonus or incentive payment in a given quarter to meet the standard salary level, the DOL is allowing an employer to make a “catch-up” payment no later than the next pay period after the end of the quarter. Any such “catch-up” payment counts only toward the prior quarter’s salary.
Nondiscretionary bonuses and incentive payments may also be counted toward the $147,414 total annual compensation minimum for highly compensated employees, but only so long as the employer pays at least the full standard salary level of $679 per week. If an employee’s total compensation in a given annual period fails to meet the $147,414 threshold, the DOL is also allowing an employer to make a “catch-up” payment within one month of the end of the annual period. Any such catch-up payment counts only toward the prior year’s total annual compensation. If such a catch-up payment is not made within the time frame allotted, the exemption is lost for the prior quarter and the overtime premium must be paid.
What To Do
Given the increase in the salary threshold, employers have a range of options to ensure compliance. Specifically, employers may (a) raise salaries to maintain the exemption, (b) pay current salaries but now include payment of overtime for hours worked in excess of 40 hours in a given workweek, (c) adjust/reduce wages to reallocate it between regular wages and overtime so that the total amount paid is relatively the same, or (d) reorganize workloads, spread/eliminate work hours, and/or adjust schedules. If an employer chooses to pay current salaries with overtime after 40 hours, the employer will need to ensure it has a method in place for the employees to track and record their hours.
Under the new regulations, the DOL will also review the salary threshold every four years, beginning on January 1, 2020, using a similar notice and comment process.
As if the above is not enough to put employers on edge, the new overtime rule is in line with a mounting national trend towards increasing wages for lower paid workers. Two of the largest marketplaces – New York and California – passed legislation to raise the states’ minimum wage to $15.00 per hour, and parts of New York have already implemented that increase. These types of changes may then have a ripple effect and, directly or indirectly, impact other wage obligations that employers may have under applicable state laws. Increases in the minimum wage combined with the new overtime rules will likely increase labor costs for many employers and require tough decisions regarding the composition, scope, and location of their workforce. Therefore, it will be important for employers to prepare for the effect of the new overtime rule and any other wage-related legislation in effect or on the horizon.
The National Labor Relations Board’s (NLRB) recent decision significantly revising the independent contractor standard will allow more workers to be so classified and therefore unable to unionize. This decision continues the Board’s growing trend towards employer-friendly positions and scaling back Obama-era developments. In other action this winter, the Board has proposed rulemaking modifying the joint employer test and limited its definition of “protected concerted activity.”
SuperShuttle: More Workers Likely Contractors as Board Reverts to Pre-Obama Era Independent Contractor Test
The Board’s January 25, 2019 decision in SuperShuttle DFW, Inc., significantly changes the standard for classifying independent contractors. Reinstating the traditional common law factor test, the Board reverses its 2014 decision in FedEx Home Delivery, emphasizing the importance of entrepreneurial opportunity as a factor in determining whether a worker is an employee or an independent contractor. Under the revised standard, workers are more likely to be classified as independent contractors and, therefore, excluded from the National Labor Relations Act (NLRA) and unable to unionize.
The Amalgamated Transit Union sought to represent SuperShuttle drivers at Dallas/Fort Worth International Airport (DFW). Since 2005, SuperShuttle has operated under a franchise model under which drivers supplied their own vans, paid franchise fees and controlled their own schedules. Before 2005, the drivers worked regular shifts, were paid at an hourly rate and were classified as employees. DFW argued that the drivers were independent contractors prohibited from unionizing under Section 2(3) of the NLRA.
The Board agreed, finding that the franchise drivers were independent contractors based, in part, on their ability to set their own schedules, lack of meaningful supervision, and requirement that they supply their own vans. In reaching that conclusion, the Board overruled the Obama-era FedEx Home Delivery decision, which modified the long-standing independent contractor test to reduce the importance of “entrepreneurial opportunity.” Rather than viewing “entrepreneurial opportunity as an “animating principle” guiding the determination of independent contractor status, FedEx limited it to evidence supporting a single factor in the analysis: whether the worker rendered services as part of an independent business. Reversing course, the SuperShuttle majority noted:
The Board majority’s decision in FedEx did far more than merely ‘refine’ the common-law independent-contractor test—it ‘fundamentally shifted the independent contractor analysis, for implicit policy-based reasons, to one of the economic realities, i.e., a test that greatly diminishes the significance of entrepreneurial opportunity and selectively overemphasizes the significance of ‘right to control’ factors relevant to perceived economic dependency.
SuperShuttle restores the Board’s traditional common law test, applying the non-exhaustive list of factors set forth in the Restatement (Second) of Agency and the 1968 Supreme Court decision, NLRB v. United Insurance Co. of America, which include:
1. The extent of control which, by the agreement, the master may exercise over the details of the work;
2. Whether or not the one employed is engaged in a distinct occupation or business;
3. The kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the employer or by a specialist without supervision;
4. The skill required in the particular occupation;
5. Whether the employer or the workman supplies the instrumentalities, tools, and the place of work for the person doing the work;
6. The length of time for which the person is employed;
7. The method of payment, whether by the time or by the job;
8. Whether or not the work is part of the regular business of the employer;
9. Whether or not the parties believe they are creating the relationship of master and servant; and
10. Whether the principal is or is not in business.
Under SuperShuttle, the Board reinstates the analysis of all factors to determine whether they demonstrate “entrepreneurial opportunity” and, therefore, independent contractor status. The decision likely means that more workers can be classified as independent contractors, especially in industries where franchise relationships are prevalent.
The Board’s decision emphasizes that no one factor will be dispositive. Employers should conduct a thorough analysis of their classifications and avoid relying on a single factor (i.e., the existence of an independent contractor agreement, payment as a 1099 worker, flexible scheduling, etc.) alone to make this determination.
Other Laws Use Different Tests
Properly classifying workers requires careful attention to overlapping state and federal laws; the Board’s decision in SuperShuttle clarifies that analysis only under the NLRA. Employers also need to consider guidance from the EEOC, IRS, Department of Labor, and the states in which they operate, as each imposes different standards for classifying workers as employees or independent contractors.
Rulemaking: Proposed Changes to Joint Employer Standard
The Board also has proposed significant changes to the standard for joint employer status. Comments to the proposed rule were accepted through January 14, 2019. It reads as follows: “an employer may be considered a joint employer of a separate employer’s employees only if the two employers share or co-determine the employee’s essential terms and conditions of employment, such as hiring, firing, discipline, supervision, and direction.”
The proposed changes are an attempt to alleviate some of the uncertainty regarding the joint employer standard, which has been in flux since the Board’s 2015 decision in Browning-Ferris Industries of California, Inc., 362 NLRB No. 186 (2016). Browning-Ferris determined joint employer status based on whether an employer reserved the right to control workplace conditions, even if it did not exercise that right. While the Board eventually overruled Browning-Ferris in its 2017 decision in Hy-Brand Industrial Contractors, Ltd., 365 NLRB No. 156 (December 14, 2017), that decision was subsequently vacated. Since that time, the Board has applied the Browning-Ferris standard.
The proposed rulemaking changes would mark a return to the pre-Browning-Ferris standard. Under the proposed rule, for an employer to be considered a joint employer, they must possess and exercise substantial, direct, and immediate control over the essential terms and conditions of employment in a manner that is neither limited nor routine. In a departure from the Browning-Ferris standard, indirect influence and minor contractual provisions would not be sufficient to establish a joint-employer relationship. The impact of the proposed changes will be felt the strongest in industries that rely on interconnected employment relationships like subcontractors, franchisees, and staffing agencies.
The issue remains hotly disputed. During the comment period, the U.S. Court of Appeals for the District of Columbia Circuit upheld the Board’s 2015 decision in Browning Ferris, specifically that an unexercised right to control determined joint employer status. Browning-Ferris Industries of California, Inc., No. 16-1028 (D.C. Cir., Dec. 28, 2018). Noting a lack of clarity from the Board, the D.C. Circuit remanded the action for the Board to specify the types of indirect control to be considered in determining whether a joint employer relationship exists. Ultimately, the Board’s direction may impact the final rule.
These decisions are just part of the Board’s increasingly employer-friendly shift. As featured on this blog, the NLRB recently rolled back the definition of “protected concerted activity” and returned to other prior precedents. Union and non-union employers should be prepared for changes resulting from similar Board action in the near future and should consult with experienced labor and employment counsel to determine how this changing landscape impacts their workforce.
While certain sales employees are exempt from minimum wage and overtime requirements under federal and state laws, others are not. Getting it wrong can be a costly mistake, so employers are well advised to ensure their salespeople are properly classified.
The federal Fair Labor Standards Act provides that employees engaged in “outside sales” are exempt from overtime, but those engaged in “inside sales” are not – except when they fall under a separate exemption. But what constitutes “outside” vs. “inside” sales? If your employee doesn’t have to come to the office and conducts sales from home, that’s outside sales, right? Actually, wrong. What about an employee who delivers, stocks, solicits sales and obtains orders for baked goods at customer locations? It depends.
Let’s take a look at the basics. And remember, in addition to federal law, other state laws may come into play.
Outside Sales Employees
To qualify for the “outside sales” exemption under the FLSA, the employee must meet a two-pronged test: 1) the employee’s primary duty must be making sales or obtaining orders or contracts for services or for the use of facilities; and 2) the employee must be customarily and regularly engaged away from the employer’s place of business in performing such primary duty.
“Primary duty” means the principal, main, major, or most important duty that the employee performs. The regulations provide that the determination is fact-specific, “with the major emphasis on the character of the employee’s job as a whole. Factors to consider when determining the primary duty of an employee include, but are not limited to, the relative importance of the exempt duties as compared with other types of duties; the amount of time spent performing exempt work; the employee’s relative freedom from direct supervision; and the relationship between the employee’s salary and the wages paid to other employees for the kind of nonexempt work performed by the employee.”
The regulations further provide that “[i]n determining the primary duty of an outside sales employee, work performed incidental to and in conjunction with the employee’s own outside sales or solicitations, including incidental deliveries and collections, shall be regarded as exempt outside sales work.”
So, what about workers who delivered baked goods, took inventory, stocked shelves, but also sold products, solicited accounts, participated in sales contests, and engaged in other activity related to sales? A court in North Carolina said the employer failed to show by clear and convincing evidence, as required, that sales were the plaintiffs’ principal, main, or most important duty, and allowed their wage claims to proceed to trial.
Even if the employee’s primary duty is sales, the sales duties also must be customarily and regularly performed “away from the employer’s place of business.” That means an employer must analyze the extent to which the employees engage in sales, solicitations, or related activities outside of the employer’s place of business. The regulations specifically provide that “any fixed site, whether home or office, used by a salesperson as a headquarters or for telephonic solicitation of sales is considered one of the employer’s places of business, even though the employer is not in any formal sense the owner or tenant of the property.” Thus, making sales from an employee’s home does not make the sales “outside.” However, an employee who customarily meets clients face to face outside of the employer’s place of business in order to initiate sales, such as at the client’s home or business, or at a restaurant or club, would meet the “outside” requirement of the outside sales exemption. The fact that employees perform some limited activities at their employer’s place of business won’t necessarily disqualify them from the exemption, as long as the inside activities are incidental to and in conjunction with their outside sales activity, such as making phone calls or sending emails setting up meetings.
Keep in mind that the qualifying exempt outside sales activities must be normally and recurrently performed every workweek; isolated or one-time sales tasks are not sufficient.
Inside Sales Employees at Retail or Service Establishments
The FLSA provides an overtime pay exemption – but, importantly, not a minimum wage exemption – for certain commissioned employees. However, only employers who operate “retail or service establishments” may take advantage of this exemption. To qualify as a “retail or service establishment,” 1) the business must engage in the making of sales of goods or services; 2) 75 percent of its sales of goods or services must be recognized as retail in the particular industry; and 3) not more than 25 percent of its sales of goods or services (or both) can be for resale.
If an employer qualifies as a retail or service establishment, the employer’s inside sales employees may qualify for an overtime exemption under the FLSA if the following tests are met:
1) The employee’s regular rate of pay is in excess of one and one-half of the minimum wage in the workweek in which he works overtime; and
2) More than half of the employee’s earnings in a representative period of at least one month consists of commissions.
Employers can still qualify as “retail or service” establishments even if the primary channel of sale is online. Just last year, in an opinion letter acknowledging that technology has changed the workplace, the Department of Labor recognized the exemption for sales representatives of a company that sells a technology platform to merchants that enables online and retail merchants to accept credit card payments from a mobile device, online or in person. In reaching its conclusion, the DOL expressly acknowledged a 2018 United States Supreme Court decision that held that exemptions under the FLSA deserve a “fair (rather than narrow) interpretation.”
State Law Concerns
Pay attention to your state’s laws, as they may impact the analysis. In California, for example, there is a minimum wage and overtime exemption for outside salespersons, but the standard for determining who is a salesperson is quantitative rather than qualitative as it is under the FLSA – only persons who customarily and regularly work more than half the working time away from the employer’s place of business selling tangible or intangible items or obtaining orders or contracts for products, services or use of facilities are exempt.
Another example: there is no “inside sales” exemption under New York state law.
The costs of misclassifying sales employees can be shocking for employers. Employees who were improperly classified as exempt may be entitled to payment not only of back pay for up to three years (if the violation is deemed willful), but also up to an equal amount in liquidated damages, injunctive relief, interest, attorneys’ fees, and other penalties depending on the applicable law.
Akerman attorneys are available to help determine whether employees are properly classified.
Employers must walk a tightrope when dealing with an employee or applicant seeking a religious accommodation as demonstrated by two recent court cases with opposite results.
In one case, a federal appellate court decided that a job applicant whose offer was rescinded after she asked for a religious accommodation did not have a retaliation claim because her request did not amount to “opposition” of an unlawful employment practice under Title VII of the Civil Rights Act. In the other, a jury awarded $21 million to a hotel dishwasher who was forced to work Sundays after being accommodated for her religion for years.
A little background on what the law requires: Under Title VII, an employer cannot discriminate against an employee or applicant because of his or her religion (or lack of religious belief) in hiring, firing, or any other terms and conditions of employment. An employer is required to reasonably accommodate an employee’s religious beliefs or practices, unless doing so would cause undue hardship to the employer. Reasonable accommodations include flexible scheduling, voluntary shift substitutions or swaps, job reassignments, and modifications to workplace policies or practices. An accommodation may cause undue hardship if it is costly, compromises workplace safety, decreases workplace efficiency, infringes on the rights of other employees, or requires other employees to do more than their share of potentially hazardous or burdensome work. If an employer fails to accommodate, an employee or applicant could bring a claim for discrimination under Title VII. In addition, Title VII allows an employee or applicant to bring a retaliation claim under either the “opposition” clause or the “participation” clause. The “opposition” clause makes it unlawful for an employer to discriminate against an employee or job applicant because he or she opposed any unlawful employment practice. In contrast, the “participation” clause makes it unlawful for an employer to discriminate against an employee or job applicant because he or she made a charge of discrimination or participated in any proceeding under the act.
In one of the recent cases, the plaintiff, a Seventh-day Adventist and registered nurse, applied for a position at a hospital in Minnesota. The hospital made the plaintiff a conditional job offer, and the position was accepted. However, while completing the pre-hire paperwork, she disclosed her need to have Friday nights off due to her religious beliefs. Since the collective bargaining agreement required unconditional availability on weekends, the request was denied, but the hospital invited her to apply for other positions.
After finding reasonable cause for a claim of retaliation, the Equal Employment Opportunity Commission (“EEOC”) brought a lawsuit alleging retaliation on behalf of the plaintiff. After the trial court ruled in favor of the EEOC, the EEOC appealed. In support of this appeal were several religious and civil rights organizations, including the Mid-America Union Conference of Seventh-day Adventists, the Minnesota Catholic Conference, American Jewish Committee, the Union of Orthodox Jewish Congregations of America, the Christian Legal Society, the American Civil Liberties Union, and the American Civil Liberties Union of Minnesota. Advocates for these organizations argued that religious workers have the right to request an accommodation even when it is unlikely to be given and that Title VII’s opposition clause is the only protection from being fired for merely making the request. Despite the support that the EEOC received, the U.S. Court of Appeals for the Eighth Circuit affirmed the lower court’s decision, finding that the hospital’s denial of the plaintiff’s request and rescission of the conditional job offer did not amount to retaliation. The EEOC petitioned the court for a rehearing, but that petition was recently denied.
Contrast that decision with the jury verdict reached by a Florida jury last month awarding a hotel more than $21 million because her employer refused to accommodate her religion after doing so for several years. The hotel claimed she was fired for, among other things, “unexcused absences.” The jury’s award will be reduced because of Title VII’s caps on damages, but it is still an expensive lesson. Following this verdict, the hotel asked the court to order a new trial or to rule in its favor as a matter of law. These motions are still pending before the court.
Both decisions serve as important reminders for employers. Employers are obligated to accommodate applicants or employees (absent undue hardship) when policies or practices create a conflict with an employee’s or applicant’s religious belief or practice. Federal law requires employers to fairly balance an employee’s right to practice his or her religion and the operation of the business. With this in mind, the following is a list of best practices for employers to keep in mind in carrying out the duties of a business:
Establish written criteria for evaluating candidates for hire or promotion and apply that criteria consistently to all candidates;
Develop internal procedures for processing religious accommodation requests;
Train managers and supervisors on how to recognize religious accommodation requests;
Individually assess each request and avoid assumptions or stereotypes about what constitutes a religious belief or practice or what type of accommodation is appropriate;
Consider the employee’s proposed method of accommodation, and if it is denied, explain to the employee why the proposed accommodation is not being granted;
Consider offering alternative methods of accommodation on a temporary basis, while a permanent accommodation is being evaluated;
Try to work with employees who need an adjustment to their work schedule to accommodate religious practices;
Provide training to inexperienced managers and encourage them to consult with more experienced managers or human resources personnel when addressing difficult issues;
Inform employees that the business will make reasonable efforts to accommodate religious practices;
Consider adopting flexible leave and scheduling policies and procedures that allow employees to meet their religious and other personal needs while meeting the company’s business needs;
Facilitate and encourage voluntary substitutions and swaps with employees of substantially similar qualifications by publicizing its policy permitting such arrangements, promoting an atmosphere in which substitutes are favorably regarded, and providing a means to help an employee with a religious conflict find a volunteer to substitute or swap.
The U.S. Court of Appeals for the Eighth Circuit decision is EEOC v. North Memorial Health Care and can be found here.
If you have questions or need assistance implementing policies or practices to assist in ensuring your business is meeting its obligations under Title VII, please contact your Akerman attorney.