California Legislature Embraces the Dynamex Standard for Evaluating Independent Contractor Arrangements

The California legislature is considering a bill that would codify in the Labor Code and Unemployment Insurance Code the California Supreme Court’s decision in Dynamexshutterstock_litigationwhich adopted a standard that made it significantly more difficult for employers to classify workers as independent contractors, ignoring the realities of the modern workplace and gig economy.  Assembly Bill 5 was introduced back in December 2018, and has passed the Assembly and is making its way through the Senate. 

As this blog previously noted, last year the Supreme Court in Dynamex interpreted the definition of “employee” under the California Wage Orders as placing the burden on the hiring entity seeking to characterize a worker as an independent contractor to establish each of these three factors: (A) that the worker is free from the control and direction of the hiring entity in performing the work; (B) that the worker performs work that is outside the usual course of the hiring entity’s business; and (C) that the worker is customarily engaged in an independently established trade, occupation or business of the same nature as the work performed.  This is known as the “ABC test.”

For years prior to the Dynamex decision, the California courts Continue reading

U.S. Department of Labor Receives Close to 60,000 Comments to its Proposed Overtime Rule Raising the Minimum Salary Threshold for Exempt Workers

Increasing Money GraphOn March 22, 2019, the U.S. Department of Labor (DOL) released its proposed rule to raise the annual salary threshold for a worker to qualify as exempt under its “white collar” regulations from $23,660.00 to $35,308.00.  The public comment period closed yesterday, May 21, 2019, with almost 60,000 comments from the business and worker communities.

History of the Proposed Rule

The road to a final rule over the salary threshold has been long and bumpy for the DOL.  In 2014, President Obama directed the DOL to “update and modernize” the existing Fair Labor Standards Act’s (“FLSA”) white collar exemptions.  Two years later, the DOL released its final rule revising the regulations by doubling the salary threshold to $47,476.00.

The final rule dramatically increased the number of workers who would qualify for overtime pay, forcing every employer in the country to carefully assess how to handle the additional financial burden. Continue reading

DOL Revises Field Operations Handbook to Clarify Interpretation of FLSA’s Dual Jobs Regulation

Department of LaborThe U.S. Department of Labor (“DOL”) has officially curtailed another controversial interpretation of its dual jobs regulation that has plagued employers for more than decade – i.e. the 20% rule.  This is welcome news for the hospitality industry and other employers who employ tipped employees, as the previous rule effectively forced employers to track and monitor the time that tipped employees spent on non-tipped tasks and “related duties.”  Although the DOL issued an opinion letter rescinding its interpretation of the 20% rule in November 2018, the DOL’s recent revisions to its Field Operations Handbook has official dispelled lingering concerns about the DOL’s interpretation of the Fair Labor Standards Act’s dual jobs regulation and potential enforcement of the 20% rule.

The Tip Credit

Under the federal Fair Labor Standards Act (“FLSA”), employers must pay employees a minimum wage of $7.25 per hour. Various state wage and hour laws impose higher minimum wage requirements, but employers covered Continue reading

California Employment Law Update for 2019 

By: Andrew J. Sommershutterstock_150165167

In the final days of California’s 2018 legislative session, and the end of his term, Governor Jerry Brown has signed into law a variety of employment bills, including a flurry of new legislation seeking to bolster the state’s workplace harassment laws in the aftermath of the #MeToo movement.  Conn Maciel Carey LLP provides this summary of key new employment laws impacting California private sector employers.  Unless otherwise indicated, these new laws just took effect on January 1, 2019.

#MeToo Legislation

Expanded Anti-Harassment Training Requirements

Existing law requires that employers with 50 or more employees provide at least two hours of sexual harassment training to all supervisory employees within six months of the individuals becoming supervisors, and at least once every two years thereafter.  Covered employers must provide classroom or other effective interactive training that incorporates the topics of sexual harassment and abusive conduct as well as harassment based on gender identity and expression and sexual orientation.

Senate Bill (SB) 1343 broadly expands the harassment training requirements to small employers and for the first time requires training of non-supervisory employees.

Continue reading

Fall 2018 Unified Agenda Forecasts Several Significant Employment-Related Regulatory & Deregulatory Actions

By: Mark M. Trapp and Aaron R. Gelb

On October 17, 2018, the Trump Administration released its Unified Agenda of Regulatory and Deregulatory Actions (“Agenda”). Reports such as these, usually issued twice a year, set forth each federal agency’s forecast of its anticipated actions and rulemaking priorities for the next six-month period. It also provides estimated timelines for completion. This regulatory to-do list provides insight into the administration’s upcoming priorities. The current Agenda emphasizes the Trump Administration’s efforts to deregulate industry, but also includes several regulatory items of importance to employers.

Here is a summary, broken down by department, of the most significant employment-related items addressed in the Agenda.

Department of LaborFall 2018 Agenda_DOL_3

Wage and Hour Division

Joint Employment. The Obama administration took a much broader view of “joint employment” – situations in which a worker may be considered an employee of two or more separate employers. Following the lead of the NLRB, which last month issued its own proposed rule re-tightening the standard for joint employment, the DOL announced its intention to “clarify the contours of the joint employment relationship to assist the regulated community in complying with the Fair Labor Standards Act.” A notice of proposed rulemaking is scheduled to issue as early as December 2018 and will hopefully modernize the method for determining joint employment in today’s workplace.

White Collar Overtime Exemption. The DOL has listed as a priority its long-awaited rule to update the salary level for the exemption of executive, administrative and professional employees under the FLSA (the so-called white-collar exemption). It is expected to raise the threshold exemption for such employees from the historical level under the FLSA ($23,660 annually), but not as high as the former rule adopted by the Obama administration, which would have more than doubled the minimum salary level but was enjoined by a court. The timeframe is somewhat unclear and has been pushed back twice already. The Agenda states it is now expected in March 2019.

Regular Rate. Under the FLSA, employers must pay covered employees time and a half their regular rate of pay for hours worked in excess of forty hours in a workweek. The DOL has stated its intent to amend its regulations “to clarify, update and define the regular rate requirements under the FLSA.” The new proposal is expected in December 2018.

Tip Regulations. In March of 2018, the omnibus budget bill amended the FLSA and addressed rules affecting tipped employees and so-called “tip pooling.” The DOL is expected to issue a proposed rule this month to clarify and address the impact of the 2018 FLSA amendments.

Occupational Safety and Health Administration

Tracking of Workplace Injuries and Illnesses. OSHA proposed to amend its recordkeeping regulation to remove the requirement to electronically submit to OSHA information from OSHA Form 300 (Log of Work-Related Injuries and Illnesses) and OSHA Form 301 (Injury and Illness Incident Report) for establishments with 250 or more employees which are required to routinely keep injury and illness records. Under the proposed rule, these establishments would be required to electronically submit only information from the OSHA Form 300A (Summary of Work-Related Injuries and Illnesses). OSHA also proposed to add the Employer Identification Number (EIN) to the data collection to increase the likelihood that the Bureau of Labor Statistics (BLS) would be able to match OSHA-collected data to BLS Survey of Occupational Injury and Illness (SOII) data and potentially reduce the burden on employers who are required to report injury and illness data both to OSHA (for the electronic recordkeeping requirement) and to BLS. OSHA is reviewing comments and is expected to publish a final rule in June 2019. Many entities submitted comments regarding the anti-retaliation provisions of the rule, but it is not known whether OSHA will make further changes to that aspect of the rule. Meanwhile, OSHA issued a memorandum on October 11, 2018 with the stated intent of clarifying that the rule does not prohibit workplace safety incentive programs or post-incident drug testing. Action taken under a safety incentive program or post-incident drug testing policy would only violate 29 C.F.R. § 1904.35(b)(1)(iv) if the employer took the action to penalize an employee for reporting a work-related injury or illness rather than for the legitimate purpose of promoting workplace safety and health. This rulemaking has been moved from the Proposed Rule Stage to the Final Rule Stage. Continue reading

DOL Announces FLSA Self-Audit Program

1On March 6, 2018, the U.S. Department of Labor (“DOL”) announced that it would soon be implementing its Payroll Audit Independent Determination (“PAID”) program, which will permit employers to self-report potential violations of the Fair Labor Standards Act (“FLSA”) without fear of exposure to liquidated damages.  Although the DOL’s news release frames this program as a boon for employees as they can receive back wages without the substantial cost of litigation, the program could also be beneficial to certain employers.  Indeed, the program is designed to encourage proactive resolution of potential minimum wage and overtime violations by limiting potential damages to solely the back wages owed.  The DOL’s Wage and Hour Division (“WHD”) intends to employ the PAID program nationwide for 6 months, at which time it will evaluate the effectiveness of the program and its future options.

Under the FLSA, an employee may be entitled to penalties and liquidated damages if she can successfully show that her employer failed to pay the required minimum wage or make overtime payments.  The FLSA establishes that liquidated damages are equal to the amount of back wages owed.  In other words, an employer could be required to pay double the employee’s back pay.  Courts have generally held there is a presumption in favor of liquidated damages unless the employer can show (1) it acted in good faith; and (2) it had reasonable grounds to believe it was complying with the law.  This puts a burden on the employer to provide evidence that substantiates both these elements.  If it cannot present such evidence, the employer faces a substantial financial burden in damages owed, particularly in the case of a collective action – a very common occurrence under the FLSA. Continue reading

DOL Provides Guidance on FLSA Issues in 17 Revived Opinion Letters

DOL LettersOn January 5, 2018, the Department of Labor’s (DOL) Wage and Hour Division issued 17 Opinion Letters addressing issues under the Fair Labor Standards Act (FLSA) that had been originally drafted in 2009.  Specifically, in the last days of the Bush Administration, the DOL prepared these Opinion Letters, which were pulled back less than two months later after President Obama took office.  Interestingly, these are the first Opinion Letters that have been issued since 2009.  These letters largely examine application of the White-Collar Exemptions under Section 13(a) of the Act, but they also explore treatment of on-call time, bonuses, commission compensation, and joint-employment vs. volunteer status.  Although none of these letters represent ground-breaking interpretations of the law and the DOL characterizes the guidance as very fact specific, issuing them provides some additional guidance on which employers may be able to rely, who are faced with similar factual situations, and indicates how the Trump Administration will interpret these topics going forward.

In relation to on-call time, two letters – FLSA2018-1 and FLSA2018-7 – address when on-call time is compensable, as well as deductions from exempt employee pay for failure to be available for an on-call shift.  FLSA2018-1 starts from the premise that on-call time need not be compensated if the employee can use the time for their own purposes “unless the restrictions [on their time] are so burdensome and the call-backs so frequent as to prevent free use of their time.”  In this context, the letter explains that requiring ambulance personnel in a small town to respond in five minutes to call-backs made on a relatively infrequent basis (about three per week) did not present the type of restrictions that would make the on-call time compensable.

In FLSA2018-7, the DOL explains when an employer can deduct time from an exempt employee’s pay, who is not available to be called in for her on-call hours.  According to the DOL’s interpretation, if the employee’s unavailability for on-call time would constitute a full day of work, the hours actually missed can be deducted from the employee’s pay.  Accordingly, this guidance indicates that the DOL under President Trump may take a narrower view of compensable on-call time and a broader view of when its permissible to deduct time from exempt employee pay, although the DOL did emphasize that the time away must be equivalent to a full day of work to be deducted.

Another common FLSA issue addressed by these reissued letters is the treatment of employee bonuses.  Specifically, in FLSA2018-9, the DOL revised a prior Wage and Hour interpretation and explained that providing a non-discretionary bonus paid at the end of the year, calculated as a percentage of straight-time and overtime earnings, is compliant.  As to the change to a prior interpretation, FLSA2018-9 explains that, to the extent Opinion Letter WH-241 requires all remuneration to be used in calculating a percentage bonus, even payments outside what’s required to be included in the regular rate of pay, this portion of the prior Opinion Letter is withdrawn.  Moreover, the DOL makes clear its understanding that a non-discretionary bonus calculated from a percentage of straight-time pay and overtime compensation does not require additional overtime compensation be provided because payment of the bonus would increase the straight-time and overtime compensation by the same percentage.

Under the FLSA employers are required to pay overtime based on the regular rate of pay, which includes non-discretionary bonuses, and this letter indicates that this requirement is met by calculating the bonus using a percentage of straight-time and overtime compensation.  Indeed, FLSA2018-11 reiterates this concept in verifying that a bonus paid to non-exempt employees for all days worked, and not conditioned on any other factor, must be included in determining each employees’ regular rate of pay.

Furthermore, several of the letters address which types of employees fall into one of the exemptions identified in Section 13(a)(1) based on the specific types of duties performed.  These letters generally start from the assumption that the employee is earning at least $455.00 per week – the former salary threshold level for exempt employees prior to the DOL’s 2016 rulemaking to increase that salary threshold level.  For example, in one letter, FLSA2018-4, the DOL addresses whether a project superintendent at a construction site can be classified as an exempt employee under the FLSA.  Assessments of this type of position have been split on whether an employee can be treated as exempt because the evaluation is so dependent on the specific type of duties assigned.  FLSA2018-4 opines that a project superintendent could fall within the administrative exemption where, as is the position is described in the letter, he or she primarily is responsible for overseeing the construction project from start to finish, exercises independent judgment in securing and hiring subcontractors and overseeing their work (among other, similar duties), and made significant decisions about how the project would be performed.  In addition to addressing the specific situation described in the inquiry, the Letter also demonstrates how the DOL would analyze a question of exempt status under Section 13(a)(1), as this letter considers three potential exemptions under Section 13(a)(1) – professional, executive, and administrative.

Although these guidance documents do not establish new law or even necessarily apply to many employers, companies should be aware of them because they may be very helpful in trying to determine how to navigate the FLSA under similar facts as those addressed in each letter.  Additionally, employers may be able to rely on these letters to show the DOL’s interpretation of a specific provision in defending itself against claims alleged by employees or enforcement actions initiated by the DOL.  We may see more guidance of this type once a new head of the Wage and Hour Division is confirmed.  On January 18, 2017, Cheryl Stanton was approved by the Senate Health, Education, Labor, and Pensions Committee, but her nomination must still face a full Senate vote before she can be confirmed.