As was previously reported, in March, a Federal District Judge in Washington D.C. lifted a stay on the EEOC’s collection of pay data (known as “Component 2” data) from employers with EEO-1 reporting obligations. The EEOC has now spoken regarding its collection of Component 2 data and stated that covered employers will be required to submit Component 2 data for both calendar years 2017 and 2018 by September 30, 2019. Component 2 data includes information concerning hours worked and employee pay. On its website, the EEOC specifically noted that covered employers must submit 2018 Component 1 data (i.e, numbers of employees by job category, race, ethnicity, and sex) by May 31, 2019. The September 30, 2019 deadline does not upset the May 31 reporting deadline for Component 1 data. Most private employers with 100 or more employees must comply with the EEO-1 reporting obligations.
Most private employers with 100 or more employees are required to submit an annual EEO-1 report to the Equal Employment Opportunity Commission regarding the number of workers employed in different categories, broken down by race, sex, and ethnicity. The Obama administration proposed adding pay data to the required report, as a means of quantifying pay disparities. The collection of pay data was initially approved by the Office of Management and Budget in September 2016, and the new requirement was set to take effect in 2018. Businesses argued that the new requirements were too burdensome. Following the election of President Trump, the OMB stayed implementation of the new requirement based on the Paperwork Reduction Act and alleged formatting issues. However, earlier this month, a Federal District Judge in Washington D.C. rejected the OMB’s argument and ordered the OMB to lift its stay on the collection of the pay data. Should the rule go into effect, employers who are required to submit the annual EEO-1 report will also have to submit pay data broken down by race, sex, and ethnicity. The EEOC’s portal for the submission of EEO-1 reports is now open, but the EEOC is apparently not asking for pay data at this time. What happens next is still to be determined, but additional legal challenges are possible. Stay tuned.
The Trump Administration has released the new proposed rule changes to the salary requirements to be exempt from the overtime pay requirement under the Fair Labor Standards Act (FLSA).
Under the new proposed rule, the U.S. Department of Labor wants to increase the minimum salary threshold that must be paid in order for most executive, administrative or professional employees to qualify for exemption from $455 per week ($23,660 annually) to approximately $679 per week ($35,308 annually). This salary level is expected to change before the rule becomes final (which most likely will happen sometime in 2020), and the final threshold will be based on the 20th percentile of earnings of full-time salaried workers in the lowest-wage census region (the South) and in the retail sector once data for 2018 is released and adjusted for inflation. The new salary threshold would not apply to teachers, doctors, lawyers, or certain other exempt professionals who are not currently subject to the salary basis or salary level tests. While the proposed new salary threshold is more than $12,000 less per year than what was sought by the Obama Administration in 2016, it still represents a 50% increase from the current minimum salary threshold and will present headaches for many employers who have exempt employees who are paid well below this new salary level. Contrary to what many expected, the proposed rule also does not seek to phase in the increase over time.
The proposed rule also raises the minimum required salary paid to an employee to qualify for the highly-compensated employee exemption, which under the proposal would go from $100,000/year to $147,414/year. This is significantly higher than the increase sought by the Obama DOL in 2016 (which was $134,000/year).
The proposed rule does not establish mechanisms for automatic increases to the salary requirements on a yearly basis, but the DOL said it will review the minimum salary threshold every four years and will seek public comment before changes are made. The proposed rule makes no changes to the duties requirements that these administrative, executive or professional employees must meet in order to qualify for exemption.
The DOL will accept public comment on the proposed rule for a period of 60 days, and a final rule can be expected over the next 12 months. Of course, this rule is likely to be subject to court challenge.
On May 12, 2016, the U.S. Occupational Safety and Health Administration (“OSHA”) published a rule that required a “reasonable procedure” for employees to report work-related injuries and illnesses and prohibited retaliation against employees who report such injuries or illnesses. The regulations defined an unreasonable procedure as one that deterred or discouraged a reasonable employee from accurately reporting a workplace injury or illness. Although no portion of the rule itself expressly prohibited post-accident drug and alcohol testing, commentary accompanying the rule stated drug testing policies should limit post-incident testing to situations in which employee drug use is likely to have contributed to the incident and for which the drug test can accurately identify impairment caused by drug use. Since then, there has been great uncertainty among employers as to when post-accident drug and alcohol testing policies and procedures could be applied. Last week, on October 11, 2018, OSHA issued a memorandum clarifying that the Department’s position is that the May 2016 rule does not prohibit post-incident drug testing. The memorandum stated that most instances of workplace drug testing are permissible under the rule and then listed the following as examples: (a) random drug testing; (b) drug testing unrelated to the reporting of a work-related injury or illness; (c) drug testing under a state workers’ compensation law; (d) drug testing under other federal law, such as a U.S. Department of Transportation rule; and (e) drug testing to evaluate the root cause of a workplace incident that harmed or could have harmed employees. Of course, the memorandum included the caveat that the testing must include all employees whose conduct could have contributed to the incident, not just employees who reported injuries. Assumedly, doing the latter could still subject the employer to retaliation. To read the complete memorandum, click here.
In a recent Supreme Court decision involving the Fourth Amendment, Justice Roberts noted that there are 396 million cell phones accounts in the United States for a nation of only 326 million people. The cell phone provides numerous functions including access to contacts, data, information and the internet. Some studies suggest people check cell phones every ten minutes and are less than five feet away from the phone most of the time. It seems the cell phone has become an integral part of daily living. While the development may be productive in terms of the overall access to information, it also creates certain risks that employers should consider.
In many instances companies operate on a platform of bring your own device to work (“BYOD”). Employers should consider what business information may be available to that employee on his or her personal cell phone. An employer is vulnerable if an employee is connected to the employer’s computer system and can access valuable confidential information through the cell phone. The risk is that the employer’s business information may “walk” out the door with the employee. Moreover, if the information gets comingled with the employee’s personal information, there could be a problem in terms of “unscrambling” or wiping the phone on departure. Certainly one approach is to not permit the employee to have access to the information on the phone. However, an employee may need access in order to perform his or her job responsibilities. Employers should consider whether to have a cellular phone policy that addresses how employees should use the phone, any issues regarding expectation of privacy, ownership of information, and wiping upon termination.
Additionally, a cell phone may cause distracted driving. Whether ringing, beeping, vibrating – the cell phone may cause drivers to lose focus. A driver’s perceived belief that the ever important text/email may have just come in can create an overwhelming desire to check/respond. To the extent an employee is on the road, the temptation to text, call or open an app may create serious risks. Distracted driving is alleged to be a contributing factor in 80% of the automobile accidents on the road today. Employers need to recognize this risk and be proactive in addressing it. Employers should consider having a policy regarding the use of cell phones while driving.
Cell phones are integrated into our daily activities – just look around at any restaurant, getting on an elevator, or at a stop light. No matter the time, place or circumstances, staying connected seems to be of utmost importance. A cell phone is certainly very beneficial in terms of facilitating access to people and information. However, cell phones may also bring about certain risks. Employers may want to consider the risks which that may be applicable to it and any policies to put in place to address them.
A recent story from New Orleans demonstrates that overtime violations can be costly. In the case of a New Orleans bakery that paid employees for overtime at their straight time rate and paid some workers in cash, the issue cost the employer over $125,000 in back wages alone. Pursuant to the federal Fair Labor Standards Act, non-exempt employees are entitled to a half-time premium for all hours worked over 40 in a workweek (i.e., employees must receive “time and a half” for overtime hours). In the case of the New Orleans bakery, the employees were paid their regular rate of pay for the hours worked, but were not paid the half-time premium for their overtime hours, a major issue under the FLSA. For more on the story, click here and here.
On April 2, 2018, the United States Supreme Court issued its opinion in Encino Motorcars, LLC v. Navarro. In a 5-4 decision, the Court ruled that automobile service advisors are not entitled to overtime under the federal Fair Labor Standards Act (“FLSA”). In the Encino Motorcars case, the Court was asked to decide whether automobile dealership service advisors were exempt from federal overtime requirements based on an FLSA exemption for salesmen, partsmen, or mechanics primarily engaged in selling or servicing automobiles, trucks, or farm implements. The Supreme Court held that the service advisors in question were exempt employees under the FLSA. As Fox Business reported, the decision affects more than 18,000 dealerships and more than 100,000 service advisors. However, the case has much broader implications, well beyond automobile dealerships. In its decision, the five justice majority stated that pursuant to “a fair reading” of the exemption in question, service advisors were exempt from overtime because the service advisors sell goods or services. Although the Court’s specific holding is somewhat narrow (applying to automobile service advisors), how the Court arrived at the holding represents a major shift in interpretation of the U.S. Department of Labor Wage and Hour Division’s regulations on the FLSA exemptions. For decades, exemptions from overtime requirements were narrowly construed to provide overtime coverage under the FLSA. In the Encino Motorcars case, the Supreme Court expressly rejected a narrow construction of the exemption “as a useful guidepost for interpreting the FLSA” in favor of a fair reading. As the Court remarked, “We have no license to give the exemption anything but a fair reading.” The door may now be open for employers and the courts to give less restrictive readings to FLSA exemptions in favor of a more “fair reading” of those exemptions, which may in turn lead to fewer employees being entitled to overtime, but may also certainly lead to more litigation. For more on the decision see: https://www.foxbusiness.com/markets/supreme-court-rules-for-car-dealerships-in-overtime-case or http://www.latimes.com/politics/la-na-pol-court-autos-overtime-20180402-story.html
Last week, the Equal Employment Opportunity Commission (“EEOC”) filed a lawsuit against United Airlines, Inc. and alleged that United violated Title VII of the Civil Rights Act of 1964 (which prohibits employment discrimination based on sex, including sexual harassment) by subjecting a female flight attendant to a hostile work environment.
According to the EEOC, a United pilot frequently posted sexually explicit images and personally identifying information of a United flight attendant (his ex-girlfriend) to various websites, and the posts, which were seen by co-workers, adversely affected her work environment. The EEOC contends that United failed to prevent and correct the pilot’s behavior, even after the flight attendant made numerous complaints and provided substantial evidence to support her complaints.
As explained by a trial attorney in the EEOC’s San Antonio Field Office: “Employers have an obligation to take steps to stop sexual harassment in the workplace when they learn it is occurring through cyber-bullying via the internet and social media.” According to the EEOC, by failing to take action to stop the harassment in response to the flight attendant’s complaints, United enabled the harassment to continue and created a hostile work environment. United has stated that it disagrees with the EEOC’s description of the situation.
Additional information about the lawsuit can be found in the EEOC’s press release, and summaries can be found here and here.
For those who think the chance of being assessed penalties for non-compliance with the Affordable Care Act are slim to none, think again. The IRS’ efforts to enforce the ACA’s employer mandate are alive and kicking. Since late November 2017, the IRS has been sending out proposed penalty notices to companies they believe were not compliant. For now, the IRS is only assessing proposed penalties for the 2015 calendar year. The notices are rolling out slowly, and the IRS has only mailed out a fraction of the total number of notices expected for 2015. Moreover, the IRS has indicated they have enough information to start sending out similar notices for 2016.
Because of unfamiliarity with these notices, we are seeing a trend where companies fail to deal with the notice in a timely manner. They don’t realize they generally only have 30 days from the date the notice was mailed to respond. In addition, the notices may not even be addressed to the right person at the company. Or the person receiving it may set it aside with the intention of figuring out how to deal with later.
This could be very costly for your company.
In every instance where Kean Miller has seen one of these notices, the estimated penalties have been grossly overestimated. The reasons for this are varied. The company may have filled out the informational forms incorrectly, which happens often because there is a lot of room for confusion and error in the IRS forms (e.g., incorrect or omitted indicator codes on the 1095 forms), or the employees themselves may have mistakenly provided incorrect information when applying for subsidized health care on the ACA marketplace website.
If your company receives one of these letters from the IRS and doesn’t dispute the penalty amount before the deadline you will have waived your rights to contest the amount. There are no second chances. Same can be said if you don’t timely exercise your appeal rights once you receive the IRS response to your protest.
If the company does not respond or appeal, the next thing they can expect from the IRS is a demand for payment letter. The time to dispute the amount will be over, and the IRS will start collection proceedings for non-payment.
In short, the penalty notice letters are real, there is a deadline, and the IRS is (as always) serious. Non-compliance with the ACA is a legal matter that demands prompt attention to ensure protection of your company’s rights.
In May the United States Supreme Court issued a long-awaited decision in a trio of cases that concerned whether employers can lawfully use mandatory arbitration agreements containing provisions that preclude employees from pursuing employment claims on a class action basis – and instead require them to pursue their claims in an individual private arbitration proceeding against the employer. In a 5-4 decision, the Supreme Court decided that such provisions are legal and do not violate the provisions of the National Labor Relations Act, which provide non-management employees with the right to take collective action (including, but not limited to the formation of a union) with respect the terms and conditions of their employment. See Epic Systems Corp. v. Lewis, Docket No. 16-285 (decided May 21, 2018).
The Epic Systems decision has paved the way for employers to use of such agreements to bar employees from participating in collective action lawsuit under the federal Fair Labor Standards Act, in which a single employee can file suit on behalf of themselves and other similarly situated employees to recover unpaid overtime or to recover for violation of the law’s minimum wage payment requirements. In these cases, one employee is often able to certify a collective action, and the employer is then required to provide the names and mailing addresses of all similarly situated current and former employees to facilitate the Plaintiff’s attorney solicitation for these employees to join (opt in) the collective action lawsuit. FLSA collective actions involving relatively small amounts of unpaid wages can result in significant liability, including liquidated (double) damages and an award of attorney fees to the Plaintiff’s counsel. FLSA collective actions have grown increasingly popular with the Plaintiff’s bar due to the relative ease of certification of a collective action and the availability of statutory attorney fees, which can often dwarf the amount of the wages actually owed.
With the benefit of the Epic decision, it is now clear that a well-drafted mandatory arbitration agreement can be used to prevent employees from pursuing collective action litigation in this manner. As the dust settles on this important decision, employers should take the opportunity to revisit whether or not mandatory arbitration agreements are appropriate for use with their workforce.
There are certainly benefits that may result from the use of employment arbitration agreements, including:
Avoidance of collective and class action lawsuits brought by employees under the FLSA and other state and federal statutes.
The employment dispute will be decided by an arbitrator (likely an attorney) who is well-versed in the law and on the average less likely to render a volatile decision than a jury.
Arbitration proceedings are private.
Discovery (depositions and document requests) is typically more streamlined in arbitration.
Arbitration proceedings can be resolved more quickly than some judicial proceedings.
But employers should also consider certain drawbacks presented by the arbitration process:
Arbitration of employment disputes are subject to certain “due process” considerations to make the process fair to employees – including the requirement that the employer pay the arbitrator’s fee (in court litigation neither party pays the judge’s salary).
Arbitrators are less likely to consider prehearing motions for summary judgment to dismiss the employee’s claims prior to an arbitration hearing. Although the likelihood for success varies with the judicial forum, employers generally have a good success rate on pretrial motions.
Some arbitrators have a propensity to try to reach a “fair” result, rather than the correct legal result. In these cases, an arbitrator may decide to “split the baby” and award something to an employee who was treated “unfairly,” even though the claim has no legal merit.
As a general matter, there is no right to appeal a bad arbitration award, even when it is clear that the arbitrator’s decision is factually or legally incorrect.
Also, employers should be aware that arbitration agreements will not be effective in preventing government agencies, such as the Equal Employment Opportunity Commission or the Department of Labor, from pursuing enforcement actions on behalf of its employees on a class-wide basis, as the Supreme Court has previously held that government agencies are not bound by the terms of private arbitration agreements.
The Supreme Court’s recent decision certainly provides another reason (avoidance of employee class action lawsuits) for employer’s to reconsider the benefits of mandatory arbitration agreements. But employers should carefully weigh the costs and benefits unique to their workforce, employment claims experience, the court system in which employment claims are typically brought against the company and other factors before deciding. Employers who decide to establish an arbitration program for use with employees should also work closely with counsel to ensure that the agreement is tailored to meet the employer’s needs and to ensure that the agreement is drafted in a manner that will be enforceable.