the year in review · eeoc v. abercrombie & fitch stores, inc., june 2015 • the district...

The Year in Review: Significant Employment Law Changes

from the Last Year 2014-2015

Presented By:

Dena H. Sokolow

[email protected]

850-425-7550

Twitter: FL_employ_law

FALL CONFERENCE 2015

mailto:[email protected]

2www.bakerdonelson.com© 2015 Baker, Donelson, Bearman, Caldwell & Berkowitz, PC

Who’s Stirring the “Employment” Pot??


The Two-Headed Monster

DOLEEOC

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0CAcQjRxqFQoTCOan_IP9rsgCFQqagAodpD0Elw&url=http://tallglassofwhat.blogspot.com/2010/12/tall-glass-of-two-headed-monster.html&bvm=bv.104615367,d.eXY&psig=AFQjCNEOYBESz3MKuynh3WcWXcFzPrvkNw&ust=1444259471644849

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0CAcQjRxqFQoTCOan_IP9rsgCFQqagAodpD0Elw&url=http://tallglassofwhat.blogspot.com/2010/12/tall-glass-of-two-headed-monster.html&bvm=bv.104615367,d.eXY&psig=AFQjCNEOYBESz3MKuynh3WcWXcFzPrvkNw&ust=1444259471644849


Equal Employment Opportunity

Commission (EEOC)

• Americans with Disabilities Act (ADA)

• Title VII of the Civil Rights Act (Title VII)

• Pregnancy Discrimination Act (PDA)

• Age Discrimination in Employment Act (ADEA)

• Equal Pay Act (EPA)

• Genetic Information Nondiscrimination Act

(GINA)


Extremely Active EEOC With An Agenda

Expansion of Title VII – LGBT rights

Religious Accommodations

Expansion of PDA

Attack on Settlement Agreements

Attack on Wellness Plans

Attack on Background Checks


EEOC Statistics

• Charges received:

− FY 2011 – 99,947

− FY 2012 – 99,632

− FY 2013 – 93,727

− FY 2014 – 88,778

• In 2013, EEOC secured more than $372.1 million in monetary

benefits for individuals – the highest level of relief obtained through

administrative enforcement in the EEOC's history.

• However, in 2014, EEOC "only" recovered $296.1 million in

monetary relief.

− Resolved 87,442 charges; 9,810 fewer than in FY 2013.

− Likely due to the government shutdown and the effects of

sequestration.

http://www.publicdomainpictures.net/view-image.php?image=31319&picture=business-graph-failure&large=1

http://www.publicdomainpictures.net/view-image.php?image=31319&picture=business-graph-failure&large=1


Expansion of Title VII –LGBT Rights


Title VII . . . Protection for Transgender or

Sexual Orientation?

• Title VII does not protect sexual orientation by its text; it

only prohibits discrimination based on race, color,

religion, sex, or national origin.

− Both district and circuit federal courts ruled “sex” did

not include “sexual orientation”

• Two critical Supreme Court cases, Price Waterhouse v.

Hopkins (1989) and Oncale v. Sundowner Services

(1998), recognized a right of action where the

discrimination was based on gender stereotypes, but

not for discrimination based on LGBT status directly.


Price Waterhouse and Oncale

• Price Waterhouse and Oncale, essentially held that

businesses could be liable under Title VII for

discrimination based on nonconformance with gender-

role stereotypes.

• Specifically, the plaintiff in Price Waterhouse was denied

partnership in part because of her lack of femininity.


Employment Non-Discrimination Act

“ENDA” (appropriate title)

• A bill to prohibit employment discrimination on the basis

of sexual orientation or gender identity

• Applies to employers with fifteen or more employees

• Has been introduced every year (except one) since

1994.

• Passed in the Senate on November 7, 2013, but died in

the House.

• In 2014, rejected by the House. Nothing significant since

then.


Limitations of Price Waterhouse and

Oncale

• While Price Waterhouse and Oncale recognized a right of

action for LGBT employees in certain instances, they did

not recognize a right of action for discrimination due to

LGBT status, but for related stereotypes.

• Employees were unlikely to be protected under PWC and

Oncale if they did conform to gender stereotypes (i.e., if a

gay male appeared and behaved masculine, etc.).


DOL Weighs In

• On June 1, 2015 (the same day Caitlin Jenner was featured on

Vanity Fair magazine) OSHA issued guidance on restroom

access for transgender employees.

− businesses should allow transgender employees to use

restrooms of the gender with which they identify

− bathroom use is a sanitation and health issue since many

transgender employees may refrain from bathroom use if

uncomfortable being forced to use a segregated bathroom

or a bathroom for the gender other than the gender with

which the employee identifies.


And then we hear from the Supremes . . .

Obergefell• The Supreme Court ruled on June 26, 2015 that the 14th

Amendment requires a state to license a marriage

between two people of the same sex and to recognize a

marriage between two people of the same sex when their

marriage was lawfully performed out-of-state

• Same-sex marriage is now a fundamental right in all 50

states.


What Obergefell Is Not

• Not a broad guarantee of protection against sexual

orientation discrimination.


What Obergefell Is

• Likely a preview of future developments in employment

law and a shift toward eventual recognition of sexual

orientation and gender identity as a protected class.

− The language of the opinion provides support for this

conclusion: Justice Kennedy states that the petitioners’

“immutable nature dictates that same-sex marriage is their

only real path to [the] profound commitment [of marriage].”


Obergefell Impacts Employee Benefits

• Relevance of domestic partner benefits

• FMLA Benefits

− Now settled that “spouse” includes same-sex and

opposite-sex spouses


The EEOC’s LGBT Game Changer

Complainant v. Foxx


EEOC Game Changer

• Complainant, an air traffic controller at MIA, alleged he

was not selected for promotion because of his sexual

orientation. (Went through FAA inter-agency procedures.

Foxx is Transportation Secretary Anthony Foxx).

− Supervisor made negative comments about the

Complainant's sexual orientation. For example, when

complainant spoke of vacation with partner,

supervisor said “We don’t need to hear about that gay

stuff.”


EEOC Game Changer

• The EEOC found that “[s]exual orientation

discrimination is sex discrimination because it

necessarily entails treating an employee less favorably

because of the employee’s sex.”

• Unlike PWC and Oncale, Foxx actually recognizes a

right of action for being discriminated against based

on LGBT status, not just associated characteristics.

• Not law . . . Still just the EEOC


EEOC Serious About Transgender and

Sexual Orientation Issue

• Two separate suits alleging transgender discrimination:

− EEOC v. Lakeland Eye Clinic, P.A., M.D. Florida

− EEOC v. R.G. & G.R. Harris Funeral Homes Inc., E.D.

Michigan

− Both filed in September 2014

− Lakeland settled in April of 2015 for $150k

• Three amicus briefs:

− Lewis v. Highpoint Reg'l Health Sys., E.D. North Carolina

− Muhammad v. Caterpillar Inc., 7th Cir.

Both filed October 2014

− Jamal v. Saks & Co., S.D. Texas

Filed January 2015


Will Congress Step In? Equality Act

• Introduced July 23, 2015 (post-Obergefell)

• Would amend the Civil Rights Act of 1964 to include

protections on the basis of sexual orientation and gender

identity areas of employment, housing, public

accommodations, public education, federal funding,

credit, and the jury system.

− White House said Tuesday President Obama isn’t

ready to endorse the Equality Act, although he backs

the idea of federal non-discrimination protections for

LGBT people.


Battle Between Religious Freedom and

LGBT Protections

• LGBT employees continue to win court battles and gain

rights, including under Title VII.

• Religious freedom in many instances inherently conflicts

with LGBT freedom.

• No case has yet addressed the conflict.


Collision of Obergefell and Religious

Rights

• Some government employees took a stand against the

Supreme Court’s Obergefell decision, refusing to marry

same-sex couples despite the ruling

• Most notably, five deputies in the office of a Kentucky

county clerk’s office were jailed on Thursday September

3, 2015 for contempt of court due to their refusal to issue

marriage licenses to same-sex couples.


RELIGIOUS ACCOMMODATIONS


Religious Discrimination

• Treating an applicant or employee unfavorably because

of his/her religious beliefs.

• Must reasonably accommodate unless "undue

hardship."


Religious Accommodation

• Employer required to accommodate "sincerely held"

religious beliefs.

− Includes all aspects of religious observances or

practices.

− Very few cases have rejected claims of religious-

based practices.



• Responsibilities of Employee:

− Notify employer about his/her need for religious

accommodation.

− Request must be clear.

• Responsibilities of Employer:

− Good faith attempt to resolve conflict.

− If unable to resolve conflict, identify why.



• Employer may avoid requirement of accommodating, if:

− Employer offered reasonable accommodation, refused

by employee/applicant; OR

− All accommodations would cause undue hardship.


Undue Hardship

• Causes more than a minimal burden on the operations

of the employer's business:

− Greater than ordinary administrative cost

− Compromises workplace safety

− Decreases workplace efficiency

− Infringes on other employees' rights

− Requires other employees to perform hazardous or

burdensome work

• Cannot be "too speculative."


Accommodating an Applicant

• Samantha Elauf, a Muslim teenager, wore a headscarf, hijab, to

an interview for a position with Abercrombie in Tulsa, OK

− She was interviewed by the store’s assistant manager who rated

Elauf as qualified to be hired but was concerned that her headscarf

would violate Abercrombie’s "Look Policy no "caps.” Elauf did not

disclose during the interview that she was Muslim.

− The assistant manager sought guidance by upper management on

whether a headscarf would violate the Look Policy.

− The district manager told her that any headwear, whether religious

or otherwise, would violate the Look Policy and instructed her not to

hire Elauf.

− EEOC sued on Elauf’s behalf.


EEOC v. Abercrombie & Fitch Stores, Inc., June

2015

• The District Court granted EEOC summary judgment on

the issue and awarded $20,000.

• The Tenth Circuit reversed concluding, "an employer

cannot be liable under Title VII for failing to accommodate

a religious practice until the applicant (or employee)

provides the employer with actual knowledge of his need

for an accommodation."



2015

Issue for the Supreme Court: whether Title VII prohibition

on refusing to hire an applicant in order to avoid

accommodating a religious practice, applies only where an

applicant has informed the employer of his/her need for an

accommodation.

i.e. does the applicant need to ask for

the accommodation??



2015

• Answer: NO! An applicant need not confirm his or her

need for a religious practice accommodation.

• The Supreme Court ruled 8-1 that an employer may not

refuse to hire an applicant if the employer was motivated

by avoiding the need to accommodate a religious

practice.

• “An employer may not make an applicant’s religious

practice, confirmed or otherwise, a factor in

employment decisions."


Common Religious Accommodations

• Leave without pay for religious observances.

• Temporary scheduling changes/shift swaps.

• Relaxation of clothing or personal grooming codes.

• Job reassignment.

• Employee speech or proselytizing.


Best Practices

• Establish a policy for religious accommodation;

• Set guidelines for acceptable work space décor;

• Establish boundaries for employees by indicating which

tools are for business use only;

• Well-publicized and consistently applied discrimination

and anti-harassment policy;

• Establish complaint procedure;

• Train supervisors and managers.


Expansion of PDA–Pregnancy Rights


PDA is NOT Public Display of Affection . . .

“Women affected by pregnancy, childbirth or

related medical conditions shall be treated the

same for all employment-related purposes,

including receipt of benefits under fringe benefit

programs, as other persons not so affected but

similar in their ability or inability to work.”


2014 Call to Action!

EEOC Chairwoman Jacqueline A. Berrien argued the

update was needed and timely. “Despite much progress,

we continue to see a significant number of charges alleging

pregnancy discrimination, and our investigations have

revealed the persistence of overt pregnancy discrimination,

as well as the emergence of more subtle discriminatory

practices.”

EEOC GUIDANCE JULY 14, 2014

http://www.eeoc.gov/laws/guidance/pregnancy_guidance.cfm

http://www.eeoc.gov/laws/guidance/pregnancy_guidance.cfm


A Fight! A Fight!

• 3 to 2 Split of the Commission

• Commissioner Constance Barker, “a novel interpretation

of the PDA for which there is no legal basis.”

• Commissioner Victoria Lipnic

− no public review

− questioned timing

− novel position unsupported by the law


The Supremes have their own opinion (sort of).

Supremes Have Something to Say . . .

Young v. UPS


Young v. UPS

• UPS only allowed light duty in the following

circumstances:

1. Employees with limitations arising from on-the-job

injuries.

2. Employees considered "disabled" under the ADA.

3. Employees who temporarily lost DOT certification.


The Facts . . . Young v. UPS

• Ms. Young gives her supervisor a doctor’s note stating she

should not lift more than twenty pounds for the first twenty

weeks of her pregnancy and not more than ten pounds

thereafter.

• HR informs Ms. Young that she is not among the categories

of employees that are entitled to light duty.

• Ms. Young takes unpaid leave for the duration of her

pregnancy losing income as well as her medical coverage

months before the birth of her child.

• Ms. Young sues UPS for pregnancy discrimination under Title

VII of the 1964 Civil Rights Act (Pregnancy Discrimination

Act).


And loses.


Twice.


Both the U.S. District Court for the District of

Maryland and the Fourth Circuit Court of Appeals

held that the company’s policy was lawful under

the PDA because “where a policy treats pregnant

workers and non-pregnant workers alike, the

employer has complied with the PDA.”


Supreme Court Opinion – March 25, 2015

WHAT DID THEY HAVE TO SAY?


• Court rejected the employee’s and UPS’s arguments

about the proper legal standard for judging pregnancy

discrimination.

• HOLDING: An employee claiming denial of

accommodation due to pregnancy makes out a prima

facie case of discrimination is she proves:

− she belongs to the protected class;

− she sought accommodation;

− the employer did not accommodate her; and

− the employer did accommodate others similar in

their ability or inability to work.

Young v. UPS - Supreme Court’s Opinion


Young v. UPS - Supreme Court’s Opinion

• The employer may then seek to justify its refusal to

accommodate the employee by relying on “legitimate,

nondiscriminatory” reasons for denying accommodation

• The employee must then show those reasons are

pretextual.

− Can do this by showing a "significant burden" on pregnant

employees and that the employer's legitimate, nondiscriminatory

reasons are not "sufficiently strong" to justify the burden.


EEOC Updates Pregnancy Discrimination

Enforcement Guidance June 25, 2015

• Covers the interaction between the ADAAA and

pregnancy discrimination.

• Clarifies who the pregnancy discrimination law covers.

• Defines who is similarly situated to a pregnant female with

work restrictions for the purpose of analyzing

discrimination claims.

• Discusses EEOC’s position on light duty and pregnancy.


EEOC’s Position on Pregnancy and the

ADAAA

• Pregnancy itself is still not a disability.

• Changes to the definition of the term "disability" make it much

easier for pregnant workers with pregnancy-related

impairments to demonstrate that they have disabilities for

which they may be entitled to a reasonable accommodation

under the ADAAA.

• Reasonable accommodations available to pregnant workers

with disabilities might include allowing a pregnant worker:

− to take more frequent breaks,

− to keep a water bottle at a work station,

− to use a stool

− altering how job functions are performed;

− or providing a temporary assignment to a light duty position.


Legislative (In)Action

Pregnant Workers Fairness Act – H.R. 5647

(Died in Committee)

Pregnant Workers Fairness Act – S. 942

(Also died in Committee)


Other EEOC Attacks

Settlement Agreements

Wellness Programs

Background Checks


Severance Agreements

• 2013-2016 Strategic Enforcement Plan – target "settlement

provisions that prohibit filing charges with the EEOC or

providing information to assist in the investigation or

prosecution of claims of unlawful discrimination."

− Non-disparagement clauses

− Cooperation clauses

− Nondisclosure provisions prohibiting disclosure of confidential

information

− No pending action provisions

− Covenants not to sue which require the employee to pay the

former employer’s attorneys’ fees in the event of a breach


Severance Agreements – CVS Lawsuit

• EEOC v. CVS Pharmacy, Inc., N.D. Illinois, February 2014

− CVS conditioned the receipt of severance benefits on an "overly

broad" severance agreement containing clauses just discussed.

− EEOC alleged the agreement interfered with employees' right to

file discrimination charges and/or communicate and cooperate with

the EEOC.

Interfering with these employee rights violates Section 707 of

Title VII of the Civil Rights Act of 1964, which prohibits employer

conduct that constitutes a pattern or practice of resistance to

the rights protected by Title VII.

− CVS argued it was a "standard severance agreement" that did not

overly interfere with employee rights.


District Court Had the Prescription!

• Summary Judgment in favor of CVS, October 2014.

• BUT the decision was not based on the merits.

− The Court ruled that the EEOC failed to engage in

conciliation efforts with CVS before filing the lawsuit.

− Under Title VII the Commission has a statutory duty to

engage in conciliation efforts before it is permitted to

file a lawsuit.


Supreme Court’s Prescription Mach Mining, LLC v. EEOC, April 2015

• A court can review whether the EEOC satisfied its obligation

to attempt conciliation before filing suit.

• The EEOC must "communicate in some way … about an

alleged unlawful employment practice in an 'endeavor' to

achieve an employer's voluntary compliance."

• The EEOC "must try to engage the employer in some form of

discussion … so as to give the ... opportunity to remedy the

allegedly discriminatory practice."

• This "ensures that the EEOC complies with the statute" while

still "allowing the EEOC to exercise all the expansive

discretion Title VII gives it to decide how to conduct

conciliation efforts and when to end them."


Supreme Court’s Prescription Mach Mining, LLC v. EEOC, April 2015

The Court held:

• Affidavit of failed efforts from the EEOC will usually suffice

to show that it has met the conciliation requirement.

• BUT if employer counters with “credible evidence’’ EEOC

did not provide the requisite information about the charge or

attempt to engage in a discussion about conciliating the

claim

• a court must conduct the fact finding necessary to decide

that limited dispute."

• "Should the court find in favor of the employer, the

appropriate remedy is to order the EEOC to undertake the

mandated efforts to obtain voluntary compliance."


Wellness Programs – Litigation over

Regulation• EEOC has taken aim at Wellness Programs with several 2014

lawsuits.

− Most significant is their suit against Honeywell for an injunction.

• Honeywell wellness program:

− Employees are asked to get blood drawn to test their cholesterol,

glucose and nicotine use, as well as have their body mass index

and blood pressure measured.

− If refused, subject to a surcharge on health insurance and could

lose significant funding of Honeywell contributions to health

savings account.

• EEOC argues:

− Under the Americans with Disabilities Act, medical testing of this

nature has to be voluntary. The employer cannot require it or

penalize employees who decide not to go through with it.


Wellness Programs – Some Guidance

• EEOC v. Honeywell

− Federal judge denied injunction (Honeywell can

proceed with plan… for now).

− Found that the program does not pose “irreparable

harm” to participants.

− EEOC continuing investigation.


Wellness Programs – EEOC Proposed

Rule April 2015

• A program must be reasonably likely to promote health or

prevent disease.

• Employees may not be required to participate in a wellness

program, and they may not be denied health coverage or

disciplined if they refuse to participate.

• Wellness programs are permitted under the ADA, but they

may not be used to discriminate based on disability.

• Medical information may be disclosed to employers only in

aggregate form that does not reveal the employee's

identity.


Wellness Programs – EEOC Proposed

Rule April 2015

• Employers may not subject employees to interference with

their ADA rights by using threats, intimidation or coercion

for refusing to participate in a wellness program.

• Individuals with disabilities must be provided with

reasonable accommodations that allow them to participate

in wellness programs.

• Employers must provide employees a notice that describes

what medical information will be collected, with whom it will

be shared, how it will be used and how it will be kept

confidential.


Criminal Background Checks

• On March 10, 2014, the EEOC and FTC jointly issued

documents intended to clarify expectations of

employers and employees with regard to background

checks.

• The reports are broken down into recommended steps

prior to obtaining a background check, how to use a

background check and how to dispose of a background

check.


EEOC Background Check Lawsuit Losers

• 6th Circuit: EEOC v. Kaplan Higher Education, April 2014

− Kaplan implemented employee credit checks after discovering that

some of their employees had stolen financial aid payments

belonging to students.

− Checks applied to applicants who, if hired, would have access to

company financials or cash, as well as student financial aid

information.

− Kaplan would review the file from their credit check vendor and

make a decision regarding applicant.

− The credit checks were racially blind: the vendors did not report the

applicant’s race with their credit information.

− Nonetheless, EEOC sued, alleging the use of the credit checks

causes it to screen out more African-American applicants than white

applicants, creating a disparate impact in violation of Title VII.



• The 6th Circuit was NOT happy with the EEOC.

- Refused to admit any of its statistical evidence on

disparate treatment.

- To determine race of applicants, EEOC expert

subpoenaed drivers’ license photos of applicants.

- “…homemade methodology, crafted by a witness with no

particular expertise to craft it, administered by persons

with no particular expertise to administer it, tested by no

one, and accepted only by the witness himself.”

- Court pointed out that EEOC used the same credit

checks!


• 4th Circuit: EEOC v. Freeman, February 2015

− Event-planning company started conducting criminal and

credit checks on all job applicants.

− EEOC determined that Freeman's background checks

disparately impacted African-American male applicants in

violation of Title VII.

− Sued Freeman on behalf of Freeman's applicants who

underwent background checks from 2007 to 2012.

− Despite the 6th Circuit opinion, EEOC again used the SAME

expert.



• 4th Circuit excluded the statistical evidence for similar

reasons and granted summary judgment to Freeman in

scathing opinion.

− Found the EEOC's continued use of the expert "troubling."

− Research was "fatally flawed" including "a plethora of analytical

fallacies.”

“…a meaningless, skewed statistic."

"The EEOC must be constantly vigilant that it does not

abuse the power conferred upon it by Congress, as its

significant resources, authority, and discretion will affect all

those outside parties they investigate or sue."



What’s New with the DOL?


Department of Labor - DOL

• Fair Labor Standards Act (FLSA)

• Family Medical Leave Act (FMLA)

• Occupational Safety & Health Act (OSHA)

• Uniformed Services Employment and

Reemployment Rights Act (USERRA)

• Federal Contractor Compliance


New Overtime Regs


STARTING AT THE BEGINNING . . .

WAGE & HOUR LAW

The Fair Labor Standards Act (FLSA) is the federal law that

governs wage and hour. The FLSA has three basic

requirements:

• Employees must be paid at least federal minimum

wage ($7.25) for all hours worked;

• Employees must be paid an overtime premium (at time

and one-half the regular rate of pay) for all hours worked

over 40 hours in a workweek; and,

• Record Keeping.



WAGE & HOUR LAW

The Fair Labor Standards Act (FLSA) is the federal law that

governs wage and hour. The FLSA has three basic

requirements:

• Employees must be paid at least federal minimum

wage ($7.25) for all hours worked;

• Employees must be paid an overtime premium (at time

and one-half the regular rate of pay) for all hours worked

over 40 hours in a workweek; and,

• Record Keeping. “EXEMPT”



WAGE & HOUR LAW

Non-exempt employees = eligible for overtime

Exempt employees = ineligible for overtime

SO WHICH EMPLOYEES ARE “EXEMPT”?

• for most employees whether they are exempt or non-

exempt depends on:

− how they are paid

− how much they are paid

− what kind of work do they do



WAGE & HOUR LAW

Non-exempt employees = eligible for overtime

Exempt employees = ineligible for overtime

SO WHICH EMPLOYEES ARE “EXEMPT”?

• Executive

• Administrative

• Professional

• Outside Salespersons

• Highly Skilled Computer Employees

• Highly Compensated Employees (HCE)


DOL’s Call to Action

March 13, 2014 Presidential Memorandum

to the Secretary of Labor• The “white collar” exemption regulations are outdated.

• Millions of Americans should be paid overtime and are not

because the regulations are outdated.

Therefore, I hereby direct you to propose revisions to

modernize and streamline the existing overtime regulations...

and simplify the regulations to make them easier for both

workers and businesses to understand and apply.”


WHAT CHANGES DID THE DOL

PROPOSE?

Remember, exemption depends on three things:

1. How employees are paid

2. How much they are paid

3. What kind of work do they do



PROPOSE?


1. How employees are paid SALARY BASIS

− employee must be paid a pre-determined and fixed salary that is

not subject to reduction because of variations in the quality or

quantity of work performed.

− no partial day deductions

2. How much they are paid SALARY LEVEL

− currently this is $455/week or $23,660 per year

3. What kind of work do they do JOB DUTIES TEST

− each category of exemption – Executive, Administrative &

Professional - has different required job duties as set forth in the

regulations (ex. regularly supervises 2 or more employees)



PROPOSE?


1.How employees are paid SALARY BASIS





2.How much they are paid SALARY LEVEL


3.What kind of work do they do JOB DUTIES TEST


Professional have different required white collar job duties as set

forth in the regulations (ex. regularly supervises 2 or more

employees)



PROPOSE?


1. How employees are paid SALARY BASIS





2. How much they are paid SALARY LEVEL


3. What kind of work do they do JOB DUTIES TEST


Professional have different required white collar job duties as set

forth in the regulations (ex. regularly supervises 2 or more

employees)



PROPOSE?

To currently qualify for exemption, employees be paid on a

salary basis at not less than $455 per week

($23,660.00 annually).

The new proposed salary threshold for

exemption is $50,440 ($970 per week)! • More than two times the current salary basis

• 40th percentile of weekly earnings for full-time salaried workers nationwide

− compared to 2004 – looked at 20th percentile of salaried employees in

South and retail industry


WHAT IS INCLUDED IN THE $50,044?

• Bonuses or Incentive Pay?? probably . . . but

− no “catch up” payments

− non-discretionary

− “strictly limit[ed]” – 10%?

− tied to productivity, profitability and/or specified

performance metrics

− paid frequently “employees would need to receive the

bonus payments monthly or more frequently”

• Commissions? doubtful but seeking comments

• Other paid benefits? no


AND THERE’S MORE . . .

DOL is also proposing to include a

mechanism to automatically update the

salary and compensation thresholds

annually using a fixed percentile of wages or

the Consumer Price Index.


WHAT DOES THIS MEAN?

Any of your salaried "exempt" employees (i.e.

currently ineligible for overtime pay) that make less

than $970 per week or $50,440 annually will be

re-classified as non-exempt and entitled to

overtime when the final rule goes into effect.

• also required to comply with the DOL’s record keeping

requirements for non-exempt employees:

− hours worked each day

− total hours worked each week

− daily/weekly straight time earnings for the workweek

− overtime earnings for the workweek


What Is The Process Now?

• “Notice and Comment” Rulemaking

− Comments were due before 11:59 p.m. on September

4, 2015 (60-day comment period).

− Over 200,000 comments submitted

• DOL will now:

− Proceed with the proposed changes (issue a final

rule);

− Issue a new or modified proposal (this will include a

new comment period); or,

− Take no action on the proposed rule.


Practical Impact

• More employees entitled to overtime

− DOL estimates almost 5 million employees will

become non-exempt under the new regulations.

• More overtime claims and lawsuits

− From 2004 (date of last revision) to 2007 the number

of new FLSA suits rose 40 percent and there was a

98 percent increase in collective actions.

• Expect increase in number of DOL audits.


What Do We Do Now?

AUDIT!

Self AuditIdentify affected

employees and possible

impact issues.

• Gather data for

compensation analysis.

• Review policies on pay

practices, leave, etc.

And impact on newly

classified non-exempt

employees.

Outside AuditPrivileged

•Assist in compiling data

and providing legal

alternatives on re-

classification.

•Golden opportunity to

analyze and correct any

misclassification… “The

law made us do it.”


Independent Contractors


DOL Focus on Independent Contractors

• DOL issued Administrator’s Interpretation No. 2015-1 on

July 15, 2015

• DOL intends to crack down on employers who are

misclassifying individuals as independent contractors.

• Focus for DOL is focused on the economic realities of

the situation and whether the individual is dependent

upon the employer. If so, an employment relationship

exists.


Independent Contractor

• IRS Test

− An individual over whom

the employer has the right

to control or direct only the

result of the work, not the

means and methods by

which the work is

accomplished.

− An IC generally has multiple

clients, maintains a

separate workplace, and is

not supervised or controlled

by the employer.

• DOL Test

− An individual who, as a

matter of economic reality,

is not dependent upon the

employer.

− An IC generally is someone

with economic

independence who is

operating a business of

his/her own.


DOL Memorandum on Independent

Contractors

“The ‘control factor’ should not play an outsized role in the

analysis of whether a worker is an employee or an

independent contractor . . . the FLSA covers workers of an

employer even if the employer does not exercise the

requisite control over the workers, assuming workers

are economically dependent on the employer.”


Other Red Flags

• Do you have employees performing essentially the same

duties as your independent contractors?

• Have you classified the independent contractor as an

employee in the past while she was performing

essentially the same tasks as she is now?

• If the answer to either of these questions is YES, you

may need to reconsider your classification of the worker

as an independent contractor.


Factors to Keep in Mind

• Employers have the burden to prove their classification

of a worker as an independent contractor is correct.

• If it’s a close question, the best choice is to classify the

worker as an employee.

• Penalties for misclassification include:

− Payments to the government: unpaid payroll taxes

(both portions), interest, statutory penalties; and/or

− Payments to the worker: back pay (typically overtime),

value of lost benefits, coverage of work-related

injuries under workers’ comp., unemployment comp.


The Value of Written Agreements

• Written agreements between an employer and

independent contractor define the relationship and avoid

confusion between the parties.

• Further, an accurate independent contractor agreement

can assist your efforts to defend the classification.

• Nevertheless, a written agreement will not control if the

classification is challenged; what the worker actually did

for the employer is what matters.

• Written agreements, therefore, must be accurate.


Conduct a Self-Audit … Soon!

• Don’t wait for a DOL investigation or a lawsuit; perform a

proactive self-audit of your independent contractor

relationships.

• Use the six-part economic realties test, but also consider

the new factors shown in the Administrator’s

Interpretation discussed above.

• We strongly recommend having your counsel perform (or

at least coordinate) the audit to maintain the attorney-

client privilege.

• Immediately reclassify anyone whose classification

presents a close question.


Questions?

the year in review · eeoc v. abercrombie & fitch stores, inc., june 2015 • the district...

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