Tuesday, December 20, 2016
Wednesday, March 16, 2016
Tuesday, February 2, 2016
Already this year, the EEOC has introduced two very significant measures that are sure to delight plaintiff lawyers while causing serious concerns for employers and their management-side attorneys, including your friends here at Wessels Sherman. The more troublesome new measure is the EEOC’s proposal to significantly modify the information employers must report each year as part of the agency’s EEO-1 reporting requirements. Specifically, starting in September of 2017 the proposal is to require employers to include additional information in their annual EEO-1 reports to the government, setting out pay ranges and hours worked for their employees. It takes little imagination to think of how a federal governmental agency such as the EEOC might use this kind of information if employers are made to disclose it, annually. Another new proposal involves new guidelines on retaliation prohibited under the various laws administered by the EEOC, such as Title VII, ADA, ADEA and EPA. These guidelines are designed to educate the public on how the EEOC views retaliation claims, which continue to be the fastest growing type of claim filed with this agency. No doubt they also will educate more plaintiffs on how to sue.
According to the EEOC the additional data gathered under its proposed new EEO-1 reporting requirement, would be used to assess discrimination complaints of all types (race, sex, age, disability, religion, national origin, etc.). If in the course of such investigations it identifies any pay disparities in the employer’s EEO-1 reports, the EEOC would expand its investigation to include scrutiny of the employers wage and hour practices. Under this scenario, while investigating an individual applicant’s or employee’s charge of discrimination the EEOC would look at the employer’s EEO-1 reports for any indication of disparity among all employees regarding pay or hours worked. The data could be used to launch a full-scale investigation into potential “systemic pay discrimination,” followed by class-action claims in the discretion of the EEOC’s investigator and Regional Director. Obviously, if the proposal goes through and employers are required to disclose pay and hour ranges in their annual EEO-1 reports, employers can expect more lawsuits along with dissemination of information that is otherwise regarded as proprietary and confidential.
The EEOC’s proposed revisions to its guidance on retaliation claims are the first since 1998. This new guidance broadens the definition of the sorts of “adverse employment actions” employees can challenge as the basis for a claim of unlawful retaliation. For instance, terminating an employee has always been regarded as the consummate unlawful “adverse employment action” if done in retaliation for an employee’s exercise of rights under Title VII, ADA, ADEA, etc. But what if an employee claims retaliation based on less severe actions, such as denying a requested vacation, or being spoken to more harshly by a supervisor? Different courts have addressed this question with different results and, as one might expect, the EEOC’s proposed definition is very employee friendly, and even includes non-work related actions, as long as they might deter reasonable individuals from engaging in protected activity. In addition, the proposed new guidance attempts to usurp the role of courts to determine how evidence is weighed to prove retaliation by connecting an employee’s protected activity (e.g., complaining of discrimination, participating in an investigation, etc.) to a challenged adverse employment action. This guidance states that an employee can discredit the employer’s explanation for taking the adverse action and show a causal connection between the protected activity and the adverse action through a “convincing mosaic” of evidence that would support a claim of retaliation.
Both of these actions are just proposals at this point, and interested employers and other parties can submit comments before any final action is taken. Comments will be accepted on the pay data proposal through April 1, and on the retaliation proposal through February 24. Employers are advised to use 2016 to audit in preparation for the possibility that employers may be essentially open to inspection by the federal government, in 2017.
Questions? Contact Mr. Sherman at (952) 746-1700 or at email@example.com.
Wednesday, January 27, 2016
With the new year underway there are a number of resolutions employers of all sizes and industries should act on if they wish to avoid winding up in the crosshairs of governmental workplace watchdogs bent on expanding their influence in 2016. Here are 5 highly recommended areas deserving of employers’ immediate attention:
1. Avoiding “joint employer” status and liability under newly adopted standards –
Last year, the National Labor Relations Board (NLRB) overhauled the test to determine whether two (or more) employers are “joint employers” for purposes of labor law, with its Browning-Ferris Industries decision. The new test makes it much easier to establish joint employer status and is now being used to pursue claims against McDonald’s Corp. for the actions of its franchisees. The NLRB’s test is being used to hold multiple employers liable for unfair labor practices committed by one, as in the case of McDonald’s Corp. as a joint employer with its franchisees. Joint employer status may also be used to impose collective bargaining and union contract obligations, as well as determining whom can be subjected to picketing and other strike activity or economic pressure, from unions.
The Department of Labor (DOL) recently issued its own definition of “joint employers,” amid allegations from some United States Congressmen of collusion between the two agencies. Although some of the factors in the two tests are similar (the DOL definition is actually broader than that of the NLRB), the consequences of finding a joint employer relationship by the different agencies differ significantly. The DOL’s guidance is relevant for the Fair Labor Standards Act (FLSA) and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA). Under these laws, the hours worked for joint employers will be aggregated for purposes of determining if an employee has worked overtime during a workweek. In either case, both joint employers will be jointly liable for any violations under these laws.
Because of the severe ramifications at stake and the current heightened focus on the issue, we highly recommend that employers make the New Year’s resolution of auditing any potential joint employment relationships with the help of someone knowledgeable in these areas.
2. Ensuring those regarded as “independent contractors” are not employees, again, under newly adopted standards –
Last summer the Department of Labor (DOL) issued a new interpretation of when a worker is an independent contractor rather than an employee for purposes of wage and hour requirements under the Fair Labor Standards Act (FLSA). According to the new interpretation, the key question is whether the worker is economically dependent on the employer or in business for him or herself, and can be determined by considering several factors. The DOL boldly stated that under its new analysis, “most workers will be considered employees rather than independent contractors.”
Workers that might be reclassified under this interpretation as employees rather than independent contractors could include subcontractors, salespeople, drivers, cleaners, nurses and caretakers, etc. Companies that use these types of workers risk being held liable for tracking hours and paying minimum wage and overtime under the law. Additionally, the DOL has signed an agreement with the Minnesota Department of Labor and Industry to share information and to coordinate investigations and enforcement with regard to the misclassification of workers as independent contractors. Unwary companies could find themselves taken by surprise with liability under a number of laws for their assumed “independent contractors” when the DOL defines these workers as employees under its new stringent standard.
Given the DOL’s war on independent contractors, once again an audit of these relationships is in order.
3. Thoroughly preparing for anticipated changes to exempt vs nonexempt status and the explosion of rest break and meal wage/hour claims –
American businesses are bracing in 2016 for the DOL to issue its final regulations on minimum salary levels for white-collar exemptions, which potentially could convert over 6 million workers from exempt to non-exempt hourly employees, regardless of their exempt duties. Proactive business and Human Resources professionals are auditing their current exempt employees and preparing contingency plans to deal with these regulations. In the meantime, however, the onslaught of class action wage and hour lawsuits continues, unabated. In addition to overtime suits based on employee misclassifications under the state and federal FLSA, claims of employers mishandling meal and rest breaks are proving to be fertile ground for plaintiff lawyers.
Given the explosion of wage and hour lawsuits, coupled with what could well be monumental changes in employee classifications necessitated by the DOL’s regulations expected to issue sometime this year, resolving to conduct an internal audit of employee pay practices is one New Year’s resolution every employer ought to have high on its “to do” list.
4. Becoming politically active to oppose an onslaught of proposed anti-business legislation (2016 is, after all, an election year) –
In the current Minnesota legislative session, among the more controversial proposals to impact employers, include:
· Outlawing an “abusive work environment” (i.e., bullying), and providing a private cause of action for employees to bring a lawsuit. While most employers oppose bullying in their workplaces, most lawsuits do not have merit, and this right to a private cause of action would allow employees to bring lawsuits for frivolous claims of bullying;
· Imposing fines on employers for discriminating against unemployed individuals;
· Preventing employers from providing different pay or benefits to employees based on the number of hours worked;
· Impinging on employers’ ability to set and change work schedules, as needed; and
· Providing for paid family leave, as well as earned “sick and safe time,” which would allow the employee to use the earned leave for absences caused by the illness or injury of the employee or the employee’s family member, or for domestic abuse, sexual assault, or stalking of the employee or the employee’s family member.
Employers who oppose these intrusions into their operations should resolve to become active in their local business groups in 2016 and otherwise contest these and other similar pieces of legislation.
5. Updating employee handbooks or policies, especially any that are 2 years or older; chances are they are seriously outdated –
The passage of the Women’s Economic Security Act brought several changes to Minnesota law within the past two years—including a new law requiring language relating to employees’ rights to discuss and disclose their compensation to be included in employee handbooks, and changes to Minnesota’s parental leave law and the Minnesota Human Rights Act, as well as a new law regarding pregnancy accommodations—leave many employee handbooks with out-of-date or illegal policies. Additionally, several federal agencies—most notably the National Labor Relations Board—have been increasing their scrutiny of many common handbook policies, such as provisions regarding confidentiality, e-mail use, social media, use of cameras and recording devices, communications with the media and other parties, conduct toward the company and supervisors, and more.
Any employee handbooks that have not been updated within the past 2 years, with these important new legal developments in mind, can be presumed to be outdated and should be reviewed and revised ASAP.
Contact the experienced attorneys of Wessels Sherman for help with auditing and compliance measures as part of your company’s 2016 resolution to keep up with the developing law of the workplace. In many cases an hour or two of legal “prevention,” can be worth much more than what it may take to “cure” problems down the road. To arrange a free discussion of your issues with an experienced attorney and get a proposal or quote of the cost to address them, please email or call Ms. Christine Beggan at (952) 746-1700, or email her at firstname.lastname@example.org.
Tuesday, November 24, 2015
Proposed New DOL Regulations on Overtime Exemptions Pose Challenges/Offer Employers an Opportunity to Address Other Potentially Misclassified Employees
By: James B. Sherman, Esq.
The DOL’s proposal to more than double the minimum salary level for white collar workers – from $23,660 to $50,440 – may be finalized and put into effect any day now although expectations are that this will occur in a few months, sometime in the coming spring of 2016. When implemented the new regulations could “reclassify” more than six (6) million workers from exempt, to non-exempt status for purposes of overtime pay. Most employers have at least some employees whose status will change as a result of the new regulations. However, some employers foresee dozens if not hundreds of their employees becoming non-exempt and thus entitled to overtime pay. The most obvious challenge these new regulations present involves paying previously exempt individuals, time and one-half their “regular rate of pay” for all hours worked in excess of 40 hours in any given workweek. This will involve tracking all hours worked, meal and possibly rest breaks, sick days, etc. for previously exempt individuals who were paid by salary and worked unrecorded hours. The failure to track hours worked and/or to pay time and one-half for overtime, will leave unprepared employers open to wage and hour lawsuits that have become so commonplace in recent years. Yet the sweeping changes these new DOL regulations soon will bring, present at least one important opportunity for proactive employers – the best possible circumstances in which to switch potentially misclassified employees from exempt, to non-exempt, without causing a noticeable stir.
In today’s legal environment, where class action wage and hour lawsuits abound, it is hard to find a single employer that can say with confidence that its employees all are properly classified exempt/non-exempt from FLSA’s and related state law overtime requirements. Indeed, a great number of employers secretly acknowledge known problems with at least some of their employee classifications. However, the reason these employers do not act to correct the situation by reclassifying questionable workers currently treated as exempt, is that doing so will expose the fact that they have not been paying overtime to the employee(s) in question. The rationale is somewhat understandable: why make a change that can result in claims for overtime going back 2-3 years (the potential limitations period under the FLSA)? But this “ignorance is bliss” approach is likely to work only temporarily, as wage and hour lawsuits continue to grow at an alarming rate and plaintiff lawyers sniff out misclassified workers. So while the new DOL regulations surely pose concerns for most employers, there may be no better time than now to bite the bullet and make changes to questionably classified workers amid the tumultuous reclassification of some six (6) million workers resulting from the new DOL regulations!
Frankly it does not matter whether the new regulations will have a specific impact on a particular worker or class of jobs. The important thing is that sweeping changes are being made by the DOL. Moving employees from exempt to non-exempt to fix past misclassification of their status, at the same time as changes to the regulations are causing massive numbers of workers to be reclassified, provides an easy answer for the change. Employers asked by an employee why he or she was paid by salary yesterday but must now punch a time clock or fill out time cards, or why the employee now receives overtime pay but did not in the past, will have a simple, honest answer: the U.S. Department of Labor is changing the regulations and we as a company are reacting to those changes.
The last time the DOL overtime regulations were changed (the first time in 50 years) was in 2004, during the Bush administration. We assisted numerous employers in seizing the opportunity created by those changes, to make changes of their own to fix problems with their classification of exempt employees who probably should have been treated as non-exempt employees all along and paid overtime. While there are no guarantees that this approach will not cause affected employees to ask questions, coupling these changes with DOL changes to its wage and hour regulations resulted in relatively smooth sailing and, more importantly, no lawsuits. Today, 10 years later, these employers sit comfortably in having put their exposure to wage and hour lawsuits over employee misclassification and overtime claims behind them.
There are a number of additional measures an employer can take to minimize the chance of being challenged when reclassifying employees from exempt to non-exempt. Normally a basic strategy can be prepared through a consultation meeting of no more than an hour or two. For assistance with preparing for the new DOL regulations and/or to take advantage of their changes to evaluate a strategy to fix problematic exempt employee classifications, feel free to contact Wessels Sherman attorney James Sherman at (952) 746-1700 or email him email@example.com, or arrange a teleconference or meeting with him by contacting Christine Beggan at firstname.lastname@example.org.
Tuesday, August 11, 2015
By: James B. Sherman, Esq.
Answer: When the lawyer does not do enough "lawyerly" things to qualify for the professional exemption from overtime requirements under the Fair Labor Standards Act (FLSA).
The U.S. Department of Labor has long said that the determination of whether an employee is exempt or non-exempt from the FLSA's overtime requirements, is not governed by job titles but by job duties. A recent decision by the U.S. Court of Appeals for the Second Circuit, out of New York, is a somewhat surprising example of this rule in application to the legal field. The case involved a class of so-called "contract lawyers" who sued for overtime pay for "document review" work they performed through a temp agency for mega law firm Skadden Arps. The plaintiffs claimed their duties in reviewing documents were so mundane that "a machine could do them." Accordingly, although the plaintiffs were licensed professional attorneys they claimed that their duties did not meet the professional white-collar exemption and they were entitled to overtime pay under the FLSA.
The appellate court refused to dismiss the case, noting that if the attorneys' duties could be performed by a machine they clearly would not be exempt professional employees. If attorneys can be nonexempt and entitled to overtime pay, the same could apply to accountants, doctors, engineers and other "professionals" if their job duties fail to satisfy the exemption. This same principle applies equally to the executive and administrative exemptions, where the specific duties and not the title of the job determine whether or not it is exempt from overtime requirements. Much litigation - frequently class action litigation - arises out of employers' failure to recognize this principle.
For advice on determining exempt vs. non-exempt status, wage and hour audits, or competent defense against overtime claims, contact any of our Wessels Sherman offices in Minnesota, Wisconsin, Illinois, or Iowa and ask to speak to a shareholder in our wage and hour litigation team.
Thursday, July 23, 2015
Unprecedented Winds of Change at U.S. Department of Labor Aim to Require Overtime Pay for Millions by “Reclassifying” Workers - from Exempt to Non-exempt and from Independent Contractors to Employees
By: James B. Sherman, Esq.
Within the past month, the U.S. Department of Labor (DOL) has taken two separate actions to greatly expand the reach of the Fair Labor Standards Act (FLSA) to require overtime pay for millions more workers. The first action taken on June 30th, was the DOL's release of proposed regulations aimed at doubling the minimum salary needed to meet the so-called white collar exemption to the FLSA's minimum wage and overtime requirements. If the proposal becomes final it will result in the reclassification of an estimated 4.6 million workers from exempt to non-exempt status, entitling them to overtime pay. The DOL's second action was taken on July 15th, when the Wage and Hour Division of the DOL released an "Administrator's Interpretation" addressing what was termed the "misclassification" of workers as independent contractors rather than employees. This interpretation may result in many more workers who presently are treated as independent contractors, being reclassified as employees for purposes of the FLSA and, thus, entitled to overtime pay.
While many employers have heard about the DOL’s proposed new minimum salary for exempt employees, few have heard about its position on “misclassification” of independent contractors. In either case, employers should brace for the impending changes that these new measures will soon bring. In addition to keeping records on millions more workers who are expected to be entitled to overtime pay, all of those reclassified individuals represent a new pool of potential plaintiffs to join the ever growing surge of wage and hour lawsuits.
1. The Proposed New White Collar Exemption Regulations
This is only the second time in more than 50 years that the DOL has proposed revisions to its regulations implementing the exemption from minimum wage and overtime pay under the Fair Labor Standards Act (FLSA) for executive, administrative, professional, outside sales, and computer employees. The nearly 300 pages of bureaucratic data and legalese of the proposal can be summarized as follows:
- More than doubling the minimum salary for the white collar exemption, from $455/week ($23,660 annually) to a figure equivalent to the 40th percentile of earnings for all full-time salaried workers. The current estimate for the first quarter of 2016 when the proposed rule may go into effect, is a new minimum salary requirement of approximately $970/week ($50,440 annually).
- Increasing the “highly compensated employee” definition from $100,000 to $122,148 annually (equal to the 90th percentile of earnings for full-time salaried workers);
- Automatic annual updates to these foregoing minimum salaries based on a fixed percentile of earnings or cost of living indicators; and
- While not yet making specific proposals to modify the “duties test” for white collar exemptions, the DOL is seeking further comments from the public over its concern that some exempt employees may be performing a “disproportionate amount of non-exempt work.”
The DOL is accepting comments from the public on its proposed rule before it issues the final version. Timely comments must be recovered by the Department no later than August 29, 2015. To learn more about these proposed regulations and how they may impact whether employees currently regarded as exempt, may soon be non-exempt and entitled to overtime pay, attend our TIMELY WEBINAR (see below to register).
2. The Independent Contractor Administrative Interpretation
According to this new interpretation individuals previously thought to be independent contractors rather than employees, will now be assessed under a new standard. According to the DOL’s new interpretation, the key question in whether a worker is an independent contractor or an employee for purposes of the FLSA is whether the worker is economically dependent on the employer or in business for him or herself. The interpretation goes on to list and describe the following six factors to be considered in determining whether a worker is an employee or independent contractor (with examples for each): (1) Is the work an integral part of the employer’s business? (2) Does the worker’s managerial skill affect the worker’s opportunity for profit or loss? (3) How does the worker’s relative investment compare to the employer’s investment? (4) Does the work performed require special skill and initiative? (5) Is the relationship between the worker and the employer permanent or indefinite? (6) What is the nature and degree of the employer’s control? No single factor is determinative, and the interpretation states that these factors should all be interpreted within the broader concept of “economic dependence.”
The DOL’s new interpretation openly declares that under the foregoing analysis most workers will be considered employees rather than independent contractors. The close timing of these two measures highlights the DOL’s intention to expand the FLSA’s minimum wage and overtime requirements to millions more workers. Employers should act now to prepare for the potential of having numerous exempt employees and/or independent contractors who soon may be eligible for overtime pay and all the many related concerns of tracking time worked, lunch breaks, work from home, etc.
To prepare for these sweeping changes or for assistance in determining whether your workers are properly classified as employees vs. independent contractors, or exempt vs. non-exempt, contact attorney James Sherman in our Minneapolis office, at (952) 746-1700, or email him at email@example.com.