Brunini Law

Christopher R. Fontan

Internal Revenue Service & Department of Labor Issue New Guidance on Employer Tax Credits under Families First Coronavirus Response Act

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As previously reported, President Trump signed the Families First Coronavirus Response Act (FFCRA) into law on Wednesday, March 18, 2020.  Among its provisions, the FFCRA set out several key mandates that impact employers, including:

  • New, separate paid sick leave rights for employees impacted by COVID-19 and those serving as caregivers for individuals with COVID-19; and
  • New, enhanced leave entitlements under the federal Family Medical Leave Act (“FMLA”), including paid leave under FMLA.

Since its passage, employers covered by the FFCRA—those with 500 employees or less—have expressed concerns with the FFCRA, ranging from interpretation of its exemption to financing of the new mandates.

Under the FFCRA, employers are entitled to reimbursement for up to 100% of the cost of wages for such leave, including health insurance costs in the form of payroll tax credits. The credits max out at $511 per day for employees who unable to work because they are in Coronavirus quarantine or self-quarantine or have Coronavirus symptoms and are seeking diagnosis and at $200 per day for employees who are caring for someone with Coronavirus or is caring for a child because the child’s school or child care facility is closed or provider is unavailable due to the Coronavirus.   An additional credit is available for health insurance costs for such affected employees during the time they are on leave from work.

Over the past few days, the Internal Revenue Service (IRS) and U.S. Department of Labor (DOL) each issued administrative guidance concerning the mechanics of the tax credits for small and midsized businesses to help cover the cost of providing COVID-19 related paid leave to employees. The highlights include:

  • Employers may keep, rather than deposit, the payroll taxes due in an amount equal to the employer’s cost of qualifying sick and childcare leave paid.
  • The federal government is offering a way to shorten the waiting time for employers to receive the payroll tax refund. A new refund request form is coming soon that may be filed immediately to cover employer costs of qualified sick or childcare leave if the costs exceed payroll withholdings due. Refunds should be processed within 2 weeks.
  • 30-day non-enforcement period for good faith compliance efforts.

The IRS and DOL plan to release additional information on the process for employers to receive an advance payment for the credit.  While circumstances remain fluid, we will continue to monitor further proposed legislation and its potential effects on employers.

https://www.dol.gov/newsroom/releases/osec/osec20200320

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President Trump Signs Revised Families First Coronavirus Response Act into Law

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On Wednesday (March 18, 2020), Congress passed a revised version of the Families First Coronavirus Response Act (“the Act”), which President Donald Trump wasted little time signing into law.  The final version of the Act mirrored much of the original version of the legislation passed by the U.S. House of Representatives on March 14, 2020, but also contained several substantive revisions.  The Act applies only to employers with fewer than 500 employees. Employers’ obligations under the Act become effective within 15 days of enactment—or on April 2, 2020—and automatically expire on December 31, 2020.

As outlined previously, the Act includes a variety of provisions, including:

  • Free COVID-19 testing
  • Multiple types of paid emergency leave
  • Enhanced unemployment insurance
  • Additional funding for nutritional programs
  • Protections for health care workers and employees responsible for cleaning at-risk places.
  • Additional federal funds for Medicaid

Among these provisions, the Act sets out several key mandates that impact employers: (1) new, separate paid sick leave rights for employees impacted by COVID-19 and those serving as caregivers for individuals with COVID-19; and (2) new, enhanced leave entitlements under the federal Family Medical Leave Act (“FMLA”), including paid leave under FMLA.

Emergency Paid Sick Leave Act

First, the Act requires employers with fewer than 500 employees to provide full-time employees (regardless of how long the employee had been employed prior to the leave) with 80 hours of paid sick leave for qualifying reasons. Part-time employees receive only the number of hours they have worked over an average two (2) week period.

The Emergency Paid Sick Leave benefits are available only to employees who are absent from work for qualified, Coronavirus-related. Specifically, to qualify for the Emergency Paid Sick Leave benefits under the Act, an employee’s leave must be for one of the following purposes:

  1. The employee is subject to a government quarantine/isolation order related to Coronavirus;
  2. The employee has been advised by a health care provider to quarantine for Coronavirus concerns;
  3. The employee is experiencing symptoms of Coronavirus and seeking a medical diagnosis;
  4. The employee is caring for an individual who is subject to an order as described above or has been advised by a health care provider as described above;
  5. The employee is caring for a son or daughter if the child’s school or place of care has been closed or the child’s child care provider is unavailable due to Coronavirus precautions; or
  6. The employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.

Employees who need leave to care for themselves (reasons 1-3 above) are entitled to their full regular rate of pay for the number of hours they would work per day. However, employers are now allowed to cap this amount of paid benefits at $511 per day ($5,110 aggregate) per employee. Employees who need leave to care for others—including children home from school or without childcare— (reasons 4-6 above) are entitled to only 2/3 of their regular rate of pay (or the applicable minimum wage, if greater). The amount of paid sick leave for this leave is capped at $200 per day ($2,000 aggregate) per employee.

Significantly, employers must provide these benefits in addition to any existing paid leave benefits. In other words, employees are entitled to exhaust all available emergency paid leave provided by this Act before they are required to use any otherwise available leave benefits their employer may offer.

The Act does not address employers’ right to request certification or documentation from employees in need of leave, or how the 500 employee threshold is determined. Many anticipate that the Department of Labor will issue regulations addressing these issue at a later time.

Emergency Family Medical Leave Expansion Act

The Act also significantly amends and expands FMLA on a temporary basis.  This FMLA expansion covers all employers with fewer than 500 employees—not just employers of 50 or more employees. It also lowers the eligibility threshold to employees who have worked for only 30 days (or more).  As a result, thousands of employers not previously subject to the FMLA may be required to provide job-protected leave to employees for a COVID-19 coronavirus-designated reason.

The Act now includes language allowing the Secretary of Labor to exclude “healthcare providers and emergency responders” from the definition of employees who are allowed to take such leave—although these terms themselves remain undefined.  The Act also allows the Labor Department to exempt small businesses with fewer than 50 employees, if the required leave would jeopardize the viability of their business.

Any individual employed by the employer for at least 30 days (before the first day of leave) may take up to 12 weeks of job-protected leave to allow an employee (who is unable to work or telework) to care for the employee’s child (under 18 years of age), if the child’s school or place of care is closed or the childcare provider is unavailable due to a public health emergency. Under the final version of the Act, this is now the only qualifying basis for Coronavirus-related FMLA leave, and represents a significant departure from the original version passed by the House (which contained several other COVID-19-related reasons to provide Emergency FMLA).

Employers may provide the first 10 days of this leave without pay. While employees can elect to substitute or use otherwise accrued paid leave during these initial 10 days, employers may not require employees to do so, no matter how their policies may read. Employees could elect to use their paid sick leave provided by the Emergency Paid Sick Leave Act (see above) for this time to be paid. After this initial 10-day period, employers must provide additional paid leave to their employees for the remaining 10 weeks, but only at two-thirds of the employee’s regular rate of pay for the number of hours the employee would normally be scheduled to work. The amount of pay during these 10 weeks is capped at $200 per day ($10,000 aggregate) per employee.

Employees are required to give their employers “as much notice as practicable” when this type of leave is foreseeable.  Like the Emergency Paid Sick Leave portion of the Act, the FMLA Expansion does not include any reference to an employer’s right to request certification or documentation of an employee’s need for leave.  Many anticipate that the Department of Labor will issue regulations addressing these issues at a later time.

Employers must also remain aware that the Act’s paid-leave obligations are supplemental to existing federal employee leave laws. Employers are still bound by traditional FMLA, FLSA and ADA analyses for employees. For example, although an employee diagnosed with COVID-19 may not qualify for paid leave under the Act’s expanded FMLA paid leave, that same employee may have a “serious health condition” under traditional FMLA analysis, which would entitle the employee to unpaid, job-protected leave.

Lastly, employers with 25 or more employees will have the same obligation as under traditional FMLA to return any employee who has taken Emergency FMLA to the same or equivalent position upon the return to work. Conversely, employers with fewer than 25 employees are generally excluded from this requirement if the employee’s position no longer exists due to an economic downtown or other circumstances caused by a public health emergency during the period of Emergency FMLA. This exclusion is subject to the employer making reasonable attempts to return the employee to an equivalent position and requires an employer to make efforts to return the employee to work for up to a year following the employee’s leave.

Employer Tax Credits

Many small-business owners are worried about how to pay for these benefits, especially at a time when business across numerous industries has basically come to a halt. The Act aims to defray these costs for employers through a tax credit.  In order to mitigate the cost of the Paid Sick Leave mandate, the Act grants to employers a credit against their federal payroll tax obligations (the 6.2 percent tax employers pay on each employee’s salary) equal to 100% of the cost of up to 10 days of Paid Sick Leave, subject to a maximum daily rate of $511 for each employee that is directly impacted by COVID-19 or $200 per day for each employee that is caring for a family member impacted by COVID-19 or a child whose school is closed or for whom childcare is unavailable due to COVID-19.  If the amount of the allowable credit exceeds the employer’s payroll tax liability, the U.S. Government will refund the excess amount back to the employer.

Employers are also entitled to a refundable payroll tax credit for 100% of the cost of wages for Paid Family & Medical Leave subject to maximum amounts of $200 per day per employee and $10,000 in the aggregate for all calendar quarters.  In addition, employers are entitled to a credit for an allocable share of the costs of providing group health plan coverage associated with such wages.  Self-employed individuals are granted a similar refundable credit against their federal income tax liability based upon their average daily self-employment income, subject to the same $511 and $200 daily limits that apply to Paid Sick Leave.

What Does This Mean For Your Business?

For employers with fewer than 500 employees, the Act obviously imposes new paid-leave requirements for certain employees. Although larger employers are not bound by the legal obligations set forth in this legislation, they should become familiar with the terms of this law to assist in formulating voluntary, temporary internal policies and answering questions from employees. It is also possible that legislation impacting larger employers will follow.

Employers must view these new paid leave obligations in conjunction with existing federal, state, and local leave laws when examining their employees’ rights to protected leave. While circumstances remain fluid, we will continue to monitor further proposed legislation and its potential effects on employers.

Paid Leave & COVID-19: House Passes Temporary, Sweeping Expansion of FMLA

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On Saturday (March 15, 2020), the U.S. House of Representatives passed H.R. 6201—the Families First Coronavirus Response Act  (“the Act”)—a sweeping economic stimulus plan aimed at addressing the on-going COVID-19 coronavirus outbreak and its continued impact on American workers and their families. The Act includes a variety of provisions, including:

  • Free COVID-19 testing
  • Multiple types of paid emergency leave (to be paid for by employers)
  • Enhanced unemployment insurance
  • Additional funding for nutritional programs
  • Protections for health care workers and employees responsible for cleaning at-risk places.
  • Additional federal funds for Medicaid

Among these provisions, the Act sets out several key mandates that impacts employers: (1) new, enhanced leave entitlements under the federal Family Medical Leave Act (“FMLA”), including paid leave under FMLA; and (2) new, separate paid sick leave rights for employees impacted by COVID-19 and those serving as caregivers for individuals with COVID-19.  Both of these emergency provisions would apply to all employers with less than 500 employees and would cover employees who have worked for the employer for at least 30 days.

At this point, the Act has not passed Congress.  While we expect the Senate to take quick action, key provisions could change, including those concerning employer coverage.  Brunini’s Labor & Employment Group is providing this report to let its clients know the current status of the legislation, as well as its potential effects.  However, we encourage readers to keep alert to further developments.

New FMLA Entitlements

Under the Act’s temporary expansion of FMLA, any individual employed by the employer for at least 30 days (before the first day of leave) may take up to 12 weeks of job-protected leave to allow the employee to:

  • Comply with a requirement or recommendation to quarantine due to exposure to, or symptoms of, coronavirus;
  • Care for an at-risk family member who is adhering to requirement or recommendation to quarantine due to exposure to, or symptoms of, coronavirus; or
  • Care for the employee’s child if the child’s school or place of care (including if the childcare provider is unavailable) has been closed due to a public emergency.

The first two weeks of this leave can be unpaid, although employees may elect to use other paid benefits to cover (including vacation or sick leave) some or all of the unpaid period.  After the initial two week period, the employer must pay full-time employees at two-thirds the employee’s regular rate for the number of hours the employee would otherwise be normally scheduled. (Part-time employees would be paid based on the average number of hours the employee worked for the 6 months prior to taking the leave, or the average number of hours the employee would normally be scheduled to work.) Employers with bargaining unit employees would apply the new FMLA provisions consistent with the bargaining agreement.

Of note, the Act also expands the definition of who is eligible as a “parent” under FMLA, to include a parent-in-law of the employee, a parent of a domestic partner of the employee, and a legal guardian or other person who served as the employee’s parent (also known as in loco parentis) when the employee was a child.

If enacted as written, thousands of employers not previously subject to the FMLA must provide job-protected leave to employees for a COVID-19 coronavirus-designated reason.  The Act allows subsequent regulations (to be crafted by the Secretary of Labor) to exclude certain healthcare providers and emergency responders from the definition of “eligible employee” and to exempt small businesses with less than 50 employees when it would jeopardize the viability of the business as a going concern.

New Paid Sick Leave Entitlement

In addition to the pay required under the expanded FMLA, covered employers (those with less than 500 employees) will be required to immediately provide employees (regardless of length of employment) with paid sick leave for use under the following circumstances:

  • To comply with a requirement/recommendation to quarantine due to exposure to, or symptoms of, COVID-19;
  • To self-isolate because the employee is diagnosed with COVID-19;
  • To obtain a diagnosis or care because the employee is exhibiting symptoms;
  • To care for or assist an at-risk family member who is self-isolating due to a diagnosis, who is exhibiting symptoms of COVID-19 and needs to obtain medical care, or who is adhering to the requirement or recommendation to quarantine due to a exposure to, or symptoms of, COVID-19; or
  • To take care of the employee’s child if the child’s school or place of care has been closed due to COVID-19 (including if the childcare provider is unavailable).

Under the Act, full-time employees would receive up to eighty (80) hours of paid sick leave at the employee’s regular rate of pay for reasons 1, 2 and 3.  For reasons 4 and 5, paid sick leave will be provided at 2/3 the employee’s regular rate of pay.  (Part-time employees would be paid based on the average number of hours the employee worked for the 6 months prior to taking the leave, or the average number of hours the employee would normally be scheduled to work.)

Importantly, this paid sick leave must be provided IN ADDITION to whatever the employer already provides.  An employer may not change its current paid leave policy after enactment of the Act to avoid the obligations of the additional mandated leave. At his/her request, an employee can seek this new paid sick leave in place of the initial 14 days of unpaid leave required by the new FMLA paid leave entitlements.

Tax Credits for Paid Sick Leave & Paid Family and Medical Leave

In order to mitigate the cost of the Paid Sick Leave mandate, the Act grants to employers a credit against their federal payroll tax obligations of up to 10 days of Paid Sick Leave pay each quarter, at a maximum rate of $511 per day for each employee that is directly impacted by the COVID-19 or up to $200 per day for each employee that is caring for a family member impacted by COVID-19 or a child whose school is closed or for whom childcare is unavailable due to COVID-19.  If the amount of the allowable credit exceeds the employer’s payroll tax liability, the excess will be refunded.   Employers are also entitled to a payroll tax credit for Paid Family & Medical Leave of up to $200 per day per employee, up to $10,000 in the aggregate for all calendar quarters.

Self-employed individuals are granted a similar refundable credit against their federal income tax liability based upon their average daily self-employment income, subject to the same $511 and $200 daily limits.

Based on its plain language, the Act does not provide paid leave coverage to employees who are not able to report to work solely due to business determinations or closures.  Under the Act, to qualify for paid sick leave pay or family and medical leave, employees must fall into one of the above leave situations. If an employer prohibits employees from reporting to work on-site due to Coronavirus/COVID-19 concerns, and employees are unable to work remotely and do not otherwise fall within the leave reasons discussed above, it appears they would not be eligible for benefits under the Act. In such circumstances, leave will be governed by state or local statutory sources and the company’s policies or collective bargaining agreements.

As mentioned above, the Senate is expected to pass the legislation, in some form or fashion, and the President is expected to sign it shortly thereafter.  However, commentators expect that there may be changes made by the Senate before the legislation is finalized. In addition, many states are proposing similar emergency legislation to enact or expand their own paid sick leave or family and medical leave laws to cover Coronavirus-related issues—in addition to any new requirements at the federal level.

Both the new FMLA entitlement and the new Paid Sick Leave entitlement will take effect 15 days after enacted.  As written, the Act is slated to remain in place until the end of 2020.  We will continue to monitor this rapidly evolving situation and provide updates as appropriate.

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ARE YOU READY (AGAIN)? – U.S. DOL FINALIZES EXPANDED EMPLOYEE OVERTIME ELIGIBLIITY RULES

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The United States Department of Labor (the DOL) has released its Final Rule that will broaden federal overtime pay regulations to cover up to 1.3 million additional workers who are currently exempt from overtime eligibility. The Final Rule updates the regulations governing which executive, administrative, and professional employees are entitled to minimum wage and overtime pay protections under the Fair Labor Standards Act (the FLSA).

The FLSA requires employers to pay its “non-exempt employees” overtime (1 ½ the workers’ “regular rate of pay”) for all hours worked in excess of forty (40) per week.  See 29 U.S.C. § 207.  The DOL’s regulations implementing the FLSA sets forth a variety of employment classifications that are “exempt” from the FLSA’s overtime requirement—including employees performing executive, administrative, and/or professional job duties.  Since the 1940’s, in order for an employee to qualify as an exempt “white collar” employee, he/she had to meet three “tests”:  (1) the employee must be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed; (2) the amount of salary paid must meet a minimum specified amount; and (3) the employee’s job duties must primarily involve executive, administrative, or professional duties (as defined by the regulations).

The DOL last updated these regulations in 2004, setting the minimum salary threshold at $455 per week (or $23,660 annually). In May 2016, the Obama-era DOL attempted change to the overtime rule that would have doubled the minimum salary level for the so-called “white collar” exemption from $23,660 to nearly $48,000 per year.  This proposal would have also increased the total annual compensation requirement needed to exempt “highly compensated employees” to $134,004 annually (previously set at $100,000), established a mechanism for automatically updating the minimum salary level every three years and allowed employers to use nondiscretionary bonuses and incentive payments to satisfy up to 10% of the new standard salary level.

The DOL’s new Final Rule, raises the minimum salary level for exempt employees to only $689 per week, or $35,568 annually.  The Proposed Rule does have many similarities to the 2016 proposal, including:

  • Allowing employers to count nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the standard salary level test (provided such bonuses are paid annually or more frequently);
  • Increasing the total annual compensation requirement needed to exempt “highly compensated employees” to $107,432 annually (of which $684 must be paid weekly on a salary or fee basis); and
  • Not proposing any changes to the standard duties test for the white collar exemptions.

The Final Rule will go into effect on January 1, 2020. Although the Final Rule does not become effective for several months, employers should be proactive and engage their legal counsel to begin planning for the change now.  Preparations should include auditing current practices and projecting the cost of change and FLSA compliance under the anticipated new framework. This includes evaluating the possibility and effects of significantly higher operating costs. Our professionals are available to discuss your organization’s current structure, as well as any steps needed to insure compliance with the ever-changing legal landscape facing employers.  Contact any one of our Labor & Employment Practice Group professionals with any questions concerning the upcoming transition.

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BREAKING: Take 2 – U.S. Department of Labor Unveils Updated Attempt to Expand Employee Overtime Eligibility

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On Thursday, March 7, 2019, the United States Department of Labor (the DOL) released its newest Proposed Rule that, if implemented, would broaden federal overtime pay regulations to cover millions of additional workers who are currently exempt from overtime eligibility.  Under the Proposed Rule, the DOL seeks to update the regulations governing which executive, administrative, and professional employees (the so-called “white collar” workers) are entitled to minimum wage and overtime pay protections under the Fair Labor Standards Act (the FLSA).

The FLSA requires employers to pay its “non-exempt employees” overtime (1 ½ the workers’ “regular rate of pay”) for all hours worked in excess of forty (40) per week.  See 29 U.S.C. § 207.  The DOL’s regulations implementing the FLSA sets forth a variety of employment classifications that are “exempt” from the FLSA’s overtime requirement—including employees performing executive, administrative, and/or professional job duties.  Since the 1940’s, in order for an employee to qualify as an exempt “white collar” employee, he/she had to meet three “tests”:  (1) the employee must be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed; (2) the amount of salary paid must meet a minimum specified amount; and (3) the employee’s job duties must primarily involve executive, administrative, or professional duties (as defined by the regulations).  The DOL last fully updated these regulations in 2004, setting the current minimum salary threshold at $455 per week (or $23,660 per year).

In May 2016, the Obama-era DOL attempted change to the overtime rule that would have doubled the minimum salary level for the so-called “white collar” exemption from $23,660 to nearly $48,000 per year.  This proposal would have also increased the total annual compensation requirement needed to exempt “highly compensated employees” to $134,004 annually (previously set at $100,000), established a mechanism for automatically updating the minimum salary level every three years and allowed employers to use nondiscretionary bonuses and incentive payments to satisfy up to 10% of the new standard salary level.

Ultimately, the May 2016 proposal was challenged in court. On November 22, 2016, the U.S. District Court for the Eastern District of Texas enjoined the DOL from implementing and enforcing the proposal. On August 31, 2017, the court granted summary judgment against the DOL, invalidating the May 2016 proposal.  Currently, the Department is enforcing the regulations that have been in place since 2004, including the $455 per week standard salary level.

While an appeal of that decision to the United States Court of Appeals for the Fifth Circuit is pending, the current DOL seeks to formally rescind the Obama-era DOL’s 2016 proposal with this Proposed Rule.  In its place, the new Proposed Rule would raise the minimum salary level for exempt employees to only $679 per week, or $35,308 annually.  The Proposed Rule does have many similarities to the 2016 proposal, including:

  • Allowing employers to count nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the standard salary level test (provided such bonuses are paid annually or more frequently);
  • Increasing the total annual compensation requirement needed to exempt “highly compensated employees” to $147,414 annually (currently set at $100,000 annually); and
  • Not proposing any changes to the standard duties test for the white collar exemptions.

If the Proposed Rule is adopted, the DOL estimates that over 1.3 million workers who are currently classified as “salaried exempt”—and thus, not eligible for overtime—will become eligible for overtime pay.  While an increase, this figure is lower than the estimated 5 million workers who would have become eligible for overtime under the 2016 proposal.  As with the prior proposal, observers feel the number could rise well above the projected increase.  If implemented, the Proposed Rules will undoubtedly result in greater expense or operational change for many employers as they struggle to deal with a shrinking pool of workers who are eligible for an exemption from the overtime pay.

The Proposed Rule is still subject to a lengthy comment period before implementation.  The DOL encourages any interested members of the public to submit comments about the proposed rule electronically at www.regulations.gov (Rulemaking docket RIN 1235-AA20).

Though the Proposed Rule has not yet been finalized, employers are encouraged to be proactive and engage their legal counsel to begin planning for the change now.  Preparations should include auditing current practices and projecting the cost of change and FLSA compliance under the anticipated new framework. This includes evaluating the possibility and effects of significantly higher operating costs.

E-Verify Website/Service Unavailable During Federal Government Shutdown

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“E-Verify”—the U.S. Government’s federal electronic employment eligibility verification service—has “expired”  due to a lapse in funding.  As a result, the e-Verify site and its services are not functioning and will not be available to participating U.S. employers during the partial shutdown of the federal government that began December 22, 2018.

The U.S. Department of Homeland Security (DHS), the federal agency that oversees the program, reported that “information on this website may not be up to date. Transactions submitted via this website might not be processed and we will not be able to respond to inquiries until after appropriations are enacted.” As a result, DHS announced that the website (www.e-verify.gov) will not be actively managed and will not be updated until after funding is restored.

During the shutdown, U.S. employers will not be able to:

  • Enroll in the program;
  • Access their E-Verify accounts;
  • Create a case;
  • View or take action on any case;
  • Add, delete or edit accounts; or
  • Reset passwords, edit company information, terminate accounts, or run reports.

Conversely, workers will not be able to resolve any E-Verify Tentative Nonconfirmations (TNCs) during the shutdown. In addition, “myE-Verify” will be unavailable and employees will not be able to access their myE-Verify accounts.

To minimize the burden on both employers and employees, DHS announced that:

  • The three-day rule for creating E-Verify cases is suspended for cases affected by the unavailability of the service.
  • The time period during which employees may resolve TNCs will be extended. The number of days E-Verify is not available will not count toward the days the employee has to begin the process of resolving their TNCs.

As with prior shutdowns, additional guidance regarding the three-day rule and time period to resolve TNC deadlines will be provided once operations resume.

Employers will not be penalized for any delays in creating E-Verify cases. However, the shutdown does not affect an employer’s responsibility to verify employment eligibility. Employers must still complete the Form I-9 no later than the third (3rd) business day after an employee starts work for pay and comply with all other Form I-9 requirements.

As a result of the shutdown and the unavailability of E-Verify, participating employers are warned not to take any adverse action against employees while an E-Verify case remains in an unresolved status. Federal contractors with the Federal Acquisition Regulation (FAR)/E-Verify clause should contact their contracting officer to inquire about extending federal contractor deadlines.

January 2, 2019 is the last day of the Republican-controlled 2017-2018 Congress. Democrats take control of the United States House of Representatives, effective January 3, 2019.

New Overtime Rule Proposal from Department of Labor Slated for Spring 2019

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Last week, the Trump Administration published its Fall 2018 Unified Agenda of Regulatory and Deregulatory Actions.  In it, the Trump Administration formally announced  the U.S. Department of Labor’s (“DOL”) intention to issue a Notice of Proposed Rulemaking (NPRM) in March 2019 “to determine the appropriate salary level for exemption of executive, administrative and professional employees.”  In its Spring 2018 Regulatory Agenda, the Administration had previously targeted January 2019 for the release of the NPRM.

Many will recall the rapid flurry of activity that accompanied the DOL’s previous attempt to overhaul the overtime exemptions to the Fair Labor Standards Act. In May 2016 , the Obama-era DOL “finalized” a change to the overtime rule that would have doubled the minimum salary level for the so-called “white collar” exemption from $23,660 to nearly $48,000 per year.  The proposed Final Rule never took effect.  Between May 2016 and November 2016, over 20 states and 50 business groups filed separate lawsuits  seeking to block enforcement of the Rule.

Then, in November 2016, a federal judge in Texas entered a nationwide preliminary injunction  blocking implementation of the highly controversial Rule—less than 10 days before the Rule was slated to take effect.  President Trump took office in January 2017, and the “new” DOL pushed the pause button on revisions to the overtime Rule.  In August 2017, U.S. District Judge Amos Mazzant of the Eastern District of Texas officially invalidated  the proposed Final Rule, thus temporarily halting the government’s highly-controversial attempt to expand overtime eligibility for millions for public and private sector employees.

Since that time, Labor Secretary Alexander Acosta, who assumed the post in late April 2017, repeatedly indicated that he favored some increase of the minimum salary threshold for exemption. In July 2017, the DOL began seeking public comment on a freshly revised overtime rule, publishing a Request for Information in the Federal Register.  The comment period closed in September 2017.

So, it appears that the Trump Administration is finally ready to unveil its proposal to revise a rule that was last modified in 2004 (and before that, in 1975). So what should employers expect in a new overtime rule?

  • Likely an increase in the minimum salary for exemption – but not nearly as drastic as the 2016 proposed Rule. Most commentators expect the increase to be something in the low-to-mid $30,000s. This would be consistent with Secretary Acosta’s comments on the issue, but still considerably lower than the increase proposed by the Obama Administration. Notably, the Society for Human Resource Management (SHRM) officially endorsed modestly raising the threshold to $32,000. Such an increase would still be lower—in some cases, significantly lower—than the current state law minimum salaries for exemption, such as New York (where the state minimum for exempt executive and administrative employees is set to climb to $58,500 at the end of 2018).
  • Modernization of examples within the Rule for application to the current workplace. With its most recent revision in 2004, the DOL included a number of new examples to assist employers in applying the tests. It would make sense to revisit those examples, and to consider additional examples, given how the workplace has evolved in the last 15 years.

Many commentators feel that the new proposed rule—whatever it may be—is not likely to take effect until early 2020. In all likelihood, the Trump Administration’s DOL will give employers plenty of lead time to plan and prepare for any increases in the minimum salary for exemption.  Regardless, employers need to be mindful of the potential changes and ready to implement them when the time comes, as 2019 looks to be an eventful year.

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U.S. Court of Appeals Reverses Course Concerning Title VII Protection of LGBTQ+ Rights

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On Monday, February 26, 2018, the U.S. Second Circuit Court of Appeals issued a landmark ruling in holding that workplace discrimination premised on an employee’s sexual orientation is covered by Title VII’s express prohibition against gender-based discrimination. In so doing, the Second Circuit reversed its own precedent established less than one year ago, and in doing so, offered further judicial support for the protections of the LGBTQ+ community.

In a divided, en banc opinion, the Second Circuit decided the case of Zarda v. Altitude Express.  In its decision, the Court revived a sex bias claim brought by Donald Zarda, a Long Island, New York sky-diving instructor who claimed that his employer, Altitude Express, had terminated his employment based on his sexual orientation.  In its decision, the Second Circuit held that it saw “no principled basis for recognizing a violation of Title VII for associational discrimination based on race, but not on sex.” With its ruling, the case was sent back to the trial court for further proceedings.

The federal lawsuit was brought on Mr. Zarda’s behalf, and against his former employer, by the U.S. Equal Employment Opportunity Commission (EEOC).  Interestingly, during the appeal, the U.S. Department of Justice filed an amicus brief in opposition to Zarda and the EEOC.  In its briefing, the Justice Department stated that “[t]he sole question here is whether, as a matter of law, Title VII reaches sexual orientation discrimination. . . . . It does not, as has been settled for decades. Any efforts to amend Title VII’s scope should be directed to Congress rather than the courts.”  Additionally, the Justice Department noted that the EEOC was “not speaking for the United States.”

For years, LGBTQ+ employees could only advance claims of workplace discrimination under a theory of “sex stereotyping” discrimination—that is, discrimination based on an employee’s failure to confirm to an employer’s perceived gender roles.  In July 2015, the U.S. Equal Employment Opportunity Commission (EEOC) issued its first administrative ruling declaring that Title VII’s use of the word “sex” meant both gender and sexual orientation. However, no federal court immediately adopted or mirrored the EEOC’s guidance.

In fact, the Second Circuit expressly rejected the EEOC’s guidance just last year when it decided the case of Christiansen v. Omnicom Group, Inc.  There, the Second Circuit ruled that employees did possess viable Title VII claims based on the theory of “sex stereotyping.”  However, the Court also expressly stated that Title VII’s definition of “sex” did not cover a person’s sexual orientation—a decision that tracked the historical rulings of other U.S. courts, in holding that the term “sex” within Title VII refers only to a person’s gender—meaning that discrimination had to be premised on whether a worker is male or female.

Then, only nine days after the Christensen ruling, on April 4, 2017, the U.S. Seventh Circuit Court of Appeals became the first federal appellate court to rule that Title VII does extend workplace protections on the basis of their sexual orientation.  In deciding the case of Hively v. Ivy Tech, the Seventh Circuit opted to expand the definition of “sex” under Title VII to include an individual’s “sexual orientation.” With its ruling in Zarda, the Second Circuit is now aligned with both the EEOC and Seventh Circuit, thus ruling that Title VII effectively presents two avenues of recovery for individuals asserting claims on the basis of their sexual orientation.

The Second Circuit’s majority ruling Zarda was written by the Court’s Chief Judge, Robert A. Katzmann. He was joined, either in whole or in part, by nine other judges on the court. The three remaining judges dissented. In addition to Judge Katzmann’s decision, seven judges wrote separate opinions, concurring and dissenting.

Either the Justice Department or Altitude Express could seek review of the decision before the United States Supreme Court. Neither party had any immediate comment on the ruling. In December 2017, the U.S. Supreme Court passed on an initial opportunity to weigh-in on the issue when it declined to hear an appeal from the Eleventh Circuit Court of Appeals, in which that Court held that Title VII did not extend to sexual orientation.

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BREAKING – U.S. FEDERAL JUDGE OFFICIALLY INVALIDATES OBAMA-ERA OVERTIME RULE CHANGE

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Late Thursday afternoon (August 31, 2017), a U.S. federal judge officially invalidated the Obama administration’s highly-controversial attempt to expand overtime eligibility for millions for public and private sector employees.  In November 2016, U.S. District Judge Amos Mazzant of the Eastern District of Texas made national news when he issued a nationwide preliminary injunction blocking implementation of a proposed rule that was set to take effect on December 1, 2016.

In September 2016, two separate lawsuits were filed  in U.S. District Court in the Eastern District of Texas challenging the legality of the U.S. Department of Labor’s (DOL) proposed changes.  The lawsuits—one filed by a group of 21 states and the other filed by a conglomerate of over 50 nationwide business groups and trade organizations—both sought to temporarily enjoin and permanently strike the DOL’s Proposed Overtime Rule from taking effect.  The federal court later consolidated the two suits into one case.

Judge Mazzant’s November 2016 ruling temporarily prevented the DOL from enforcing the Proposed Overtime Rule, which would have significantly expanded overtime eligibility for millions for public and private sector employees.  On Thursday, Judge Mazzant followed his preliminary injunction by granting summary judgment in favor of the plaintiffs.

If enacted, the Proposed Rule would double the minimum salary threshold—from the current $23,660 to the proposed $47,476—required for an employee to qualify for the Fair Labor Standards Act’s (FLSA) white collar exemptions.   In his ruling, Judge Mazzant ruled that the “significant increase” contemplated in the Proposed Overtime Rule would essentially render meaningless the duties, functions, or tasks that an employee performs if their salary falls below the new minimum salary level.  The Court further agreed with the states and business groups which argued that the DOL had “exceeded its authority and gone too far with the [Proposed Overtime Rule].”  According to Judge Mazzant, the Obama-era DOL proposal made overtime status “predominately dependent on a minimum salary level, thereby supplanting an analysis of an employee’s job duties.”

Representatives of the states and business groups who initiated the legal challenge, as well as those from the now Trump-era DOL, have yet to comment.  However, given the Trump administrations’ recent statements favoring an overhaul of the FLSA’s exemption analysis, the Court’s ruling on Thursday likely spelled the final chapter in the life of the much-maligned Proposed Overtime Rule.

Recent Federal Court Ruling Indicates Coverage for LGBTQ-Related Conditions Under the Americans with Disabilities Act

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In May 2017, a federal district court judge from the Eastern District of Pennsylvania ruled that the Americans with Disabilities Act (“ADA”) may cover “gender dysphoria,” as well as other conditions related to “gender identity disorder.” Though seen as a departure from previously established law, this ruling could open the door to expanding employment protections to some transgender individuals under the ADA.

What is “Gender Dysphoria”

By now, the term “transgender” is a common term in our national vocabulary.  “Transgender” is an umbrella term for people whose gender identity and/or gender expression is different from cultural expectations placed on them due to their biologically-assigned birth gender. An issue more and more transgender individuals are seeking treatment for is known as “gender dysphoria.” The Human Rights Campaign defines “gender dysphoria” as “clinically significant distress caused when a person’s biologically-assigned birth gender is not the same, or does not match, the gender with which that person “identifies.”

Historical Treatment of LGBTQ Issues under the ADA

Historically, the ADA has not recognized LGBTQ-related conditions as covered disabilities. Specifically, Section 12211 of the ADA contains a number of exclusions—including “homosexuality” and “bisexuality” on the grounds that they are not “impairments” at all. The ADA also excludes “transvestism, transsexualism, pedophilia, exhibitionism, voyeurism, gender identity disorders not resulting from physical impairments, or other sexual behavior disorders; compulsive gambling, kleptomania, or pyromania; or psychoactive substance use disorders resulting from current illegal use of drugs.”

“Transsexualism” and “gender identity disorders not resulting from physical impairments” seem to be 1990s-era terms for the state of being what we call today “transgender.” And based on the other conditions that “transsexualism” and “gender identity disorders” are grouped with, it appears that in 1990, Congress considered these to be “anti-social” behaviors. Other “anti-social” behaviors not covered under the ADA include peeping, child molestation, compulsive stealing, and compulsively setting things on fire.

Recent Third Circuit Ruling – Blatt v. Cabela’s Retail, Inc.

On August 15, 2014, a transgender woman filed Title VII and ADA claims against her former employer, claiming that she had suffered disability discrimination and retaliation based on her “gender dysphoria.” In her case (styled Blatt v. Cabela’s Retail, Inc., No. 5:14-cv-04822-JLS), the plaintiff alleged that her gender dysphoria was characterized by clinically significant stress and substantially limited one or more of her major life activities, including but not limited to, interacting with others, reproducing, and social and occupational functions.

The employer sought early dismissal of the ADA claims on the grounds that gender identity disorders are expressly excluded from coverage under Section 12211 of the ADA. In response, the plaintiff argued that excluding gender dysphoria from ADA protection violated the Equal Protection Clause of the Fourteenth Amendment—a particularly novel argument in light of recent U.S. Supreme Court, including the 2015 gay marriage opinion (Obergefell v. Hodges, 135 S. Ct. 2584 (2015)). However, the district court judge sidestepped this Equal Protection issue altogether.

Instead, the judge ruled that a plaintiff’s “gender dysphoria” could be an ADA-protected disability—despite the language in Section 12211 excluding “gender identity disorders not resulting from physical impairments”— if the dysphoria caused “clinically significant stress and other impairments.” In reaching its holding, the court noted that two categories of conditions are explicitly excluded from protection under the ADA: (1) non-disabling conditions concerning sexual orientation and identity (e.g., homosexuality and bisexuality), and (2) conditions associated with harmful or illegal conduct (e.g., pedophilia and kleptomania). The court then narrowly interpreted these exceptions and found that the ADA does not exclude protection of “conditions that are actually disabling but that are not associated with harmful or illegal conduct” – such as the gender dysphoria affecting the plaintiff.

In other words, the court ruled that a person with an ADA-excluded condition may also have medical conditions that are covered by the ADA. For many commentators, the judge relied on solid ADA-rationale applied to other conditions. For example, pregnancy is not an ADA-protected disability in itself. But if a pregnant woman develops a related condition such as preeclampsia (high blood pressure associated with pregnancy that can result in a stroke or permanent liver damage), she may have a protected disability based on the pregnancy-related medical condition, although not based on the pregnancy itself. Similarly, although homosexuality is not an ADA-protected disability, a gay man with HIV would have a disability based on the HIV condition.

Using the Blatt court’s rationale, a transgender individual with “gender dysphoria” would be no different.  For example, clinical depression caused by discrimination against an individual because he/she was transgender would clearly qualify as an ADA-protected condition under the rationale used in Blatt. Conversely, the individual’s transgender status—in and of itself—would not be entitled to ADA protection, as that is clearly excluded under Section 12211.

The court also noted that its interpretation of the ADA is consistent with the Third Circuit’s mandate that the ADA is “a remedial statute, designed to eliminate discrimination against the disabled in all facets of society. . . [and] must be broadly construed to effectuate its purposes.” Thus, the judge wrote any exceptions in the ADA “should be read narrowly in order to permit the statute to achieve a broad reach.”

This is yet another case in a recent wave of litigation concerning protections for LGBTQ individuals under the federal employment statutes. This ADA challenge represents a different approach to gender equity litigation that will warrant close monitoring to see how it impacts the development of jurisprudence—especially since it remains to be seen if the defendant will appeal the ruling, or if other jurisdictions will apply the Blatt rationale. In the meantime, employers should be mindful of their duties under the ADA to accommodate disabling impairments, even if the underlying condition is arguably not covered by the ADA.

 

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