Five Essential New Year Resolutions Every Employer Should Have for 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 chbeggan@wesselssherman.com. 

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

July 2015

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 40^th 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. 

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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 jasherman@wesselssherman.com.