Brunini Law

Labor and Employment

Federal Trade Commission Votes to Ban Employer Use of Noncompete Agreements

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On Tuesday, April 23, 2024, the U.S. Federal Trade Commission (“FTC”) voted 3-2, along party lines, to approve a final rule essentially banning virtually all new noncompete agreements and clauses in employment contracts—a potential change that would impact millions of U.S. workers.  If implemented, the final rule would also invalidate all existing noncompete agreements, except for those agreements pertaining to “senior executives.” As part of this retroactive invalidation, U.S. employers would be required to provide notice to current and former employees informing them that they are no longer subject to an enforceable noncompetition agreement.

 

How We Got Here:  President Biden’s July 2021 Executive Order

The Biden Administration began taking aim at corporate employers’ use of noncompetition agreements back in July 2021, when President Biden signed his Executive Order on Promoting Competition in the American Economy. In the Executive Order, President Biden issued a specific directive to the FTC to utilize its statutory rulemaking authority “to curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility.”

 

The FTC’s Proposed Rule

In early January 2023, the FTC, appearing to meet the President’s challenge, announced a proposed rule that would all but outright ban the use of non-compete agreements by employers in the United States. The FTC’s proposed rule was sweeping. With very limited exception, it would: (1) retroactively invalidate all existing non-compete agreements between employers and employees, and (2) prohibit employers from using such agreements in the future. As written, the FTC’s proposed rule governs non-compete agreements with employees, independent contractors, volunteers, and even interns. It would cover any employer, regardless of entity type or size.

 

The FTC’s definition of “non-compete” is very broad. It covers not only conventional non-compete agreements—where an employee cannot work for a contractually defined “competitor” for a set period of time after their current employment ends—but also any agreement that “has the effect of prohibiting the worker from seeking or accepting employment with a person or operating a business after the conclusion of the worker’s employment with the employer.” That means other widely used post-employment restrictions, such as non-solicitation agreements and non-disclosure agreements, could be prohibited by the rule if they are written too broadly.

 

Perhaps the most controversial feature of the proposed rule is its retroactive application—in other words, it would not only bar future non-compete agreements, but also retroactively invalidate any covered agreements that have already been entered into by employers and employees. In addition, the FTC’s proposed rule invalidates any state laws that offer workers less protection than the FTC’s rule.

 

The FTC’s 3-2 Vote

This brings us to the FTC’s 3-2 vote, adopting virtually all of the proposed rule as its final rule.  The “final rule” still has several hurdles it has to overcome before the FTC’s ban carries the rule of law.  The FTC must publish the Final Rule in the Federal Register for a period of 120 days.  But even before that happens, opponents of the FTC’s proposed rule have promised to challenge it in court. The U.S. Chamber of Commerce, the largest pro-business lobbying group in the country, has said it plans to file suit promptly to block the final rule from becoming law.

 

In the meantime, employers are encouraged to be proactive and engage their legal counsel to begin planning for potential impacts now.  Preparations should include auditing current restrictive covenants employers may have with current and former employees. These should not be limited to those agreements or clauses entitled “noncompetition” agreements—but any that could have the effect of being a noncompetition agreement or clause.

 

Brunini’s Labor & Employment specialists are monitoring these events and will update you accordingly.  In the meantime, feel free to contact any member of Brunini’s Labor & Employment Practice Group if you wish to discuss.

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UPDATE: U.S. Department of Labor Finalizes “Proposed Rule” Increasing White-Collar Overtime Exemption Threshold

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By: Hunter C. Ransom

Summary: Minimum salary threshold for overtime exemption to rise to $43,888 on July 1, 2024; then to $58,656 on January 1, 2025; then automatically every three years.

Last year, the United States Department of Labor released a Proposed Rule titled Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees. That’s a long-winded way of saying the DOL is substantially increasing the number of employees eligible for overtime.

Starting from the Bottom

The Fair Labor Standards Act generally requires employers to pay an overtime premium of 1.5 times an employee’s regular rate of pay for all hours worked beyond 40 in work week unless the employee falls under an exemption. See 29 U.S.C. § 207. One exemption is the so-called “White-Collar Exemption” for Executive, Administrative, and Professional employees.

To fall under the white-collar exemption, an employee must satisfy three requirements:

  • Salary Basis Test: The employee must receive a salary (i.e., the same amount each week regardless of quantity or quality of work performed);
  • Salary Level Test: The salary must meet the minimum threshold; and
  • Duties Test: The employee must meet a duties test for the applicable exemption (executive, administrative, or professional).

The DOL’s Final Rule affects the minimum threshold for the Salary Level Test. Until 2016, the minimum salary threshold for that exemption stayed at $455 per week ($23,660 annually). After a failed update by the Obama-era DOL in 2016, the Trump-era DOL raised the threshold to $679 per week ($35,308 annually), where it currently sits until July 1.

Proposed Rule becomes Final 

In September of last year, the DOL proposed a rule that would both significantly raise the threshold to $1,059 per week and automatically update the salary threshold every three years based on the latest earnings data. On April 23, 2024, the DOL released the final rule.

The DOL received over 30,000 comments since proposing its new rule, leading to small changes: it raises the final threshold (effective in 2025) higher than the proposed rule, and it drops a proposal to apply the new threshold to U.S. territories. To summarize, here’s what to expect:

  • Effective July 1, 2024, the overtime salary exemption threshold for white-collar employees will rise to $43,888;
  • Effective January 1, 2025, the threshold will rise to $58,656;
  • The threshold will rise every three years automatically based on latest earnings data.

How to prepare

The new rule will likely face legal challenges, but employers should prepare for higher operating costs. Specifically, employers should contact their legal counsel, audit their current practices, and project the increased costs resulting from the Final Rule. A specific action item may include, among other things, (a) re-classify employees as non-exempt or (b) adjust salaries to meet or exceed the new thresholds.

Feel free to contact any attorney in Brunini’s Labor & Employment Practice Group with any questions or concerns.

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Stephen J. Carmody Named Senior Fellow of Litigation Counsel of America

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SENIOR FELLOW PRESS RELEASE

FOR IMMEDIATE RELEASE

STEPHEN J. CARMODY NAMED SENIOR FELLOW OF LITIGATION COUNSEL OF AMERICA

Jackson attorney Stephen J. Carmody, of the law firm Brunini, Grantham, Grower & Hewes, PLCC, has been named a Senior Fellow of the Litigation Counsel of America (LCA). Carmody is a litigator in the firm’s Labor & Employment practice group. Steve’s practice emphasizes labor, employment, employee benefits, intellectual property, and construction litigation. He has handled a number of collective action lawsuits alleging wage and hour violations. He has taught food products litigation, seminars for the National Business Institute and the University of Mississippi Continuing Legal Education Department. He has served as a guest lecturer at Mississippi College School of Law.

The Litigation Counsel of America is a trial lawyer honorary society composed of less than one-half of one percent of American lawyers. Fellowship in the LCA is highly selective and by invitation only. Fellows are selected based upon excellence and accomplishment in litigation, both at the trial and appellate levels, and superior ethical reputation. Senior Fellow status in the society is reserved for advanced commitment to and support of the LCA, the Diversity Law Institute and the Trial Law Institute. The LCA is aggressively diverse in its composition. Established as a trial and appellate lawyer honorary society reflecting the American bar in the twenty-first century, the LCA represents the best in law among its membership. The number of Fellowships has been kept at an exclusive limit by design, allowing qualifications, diversity and inclusion to align effectively, with recognition of excellence in litigation across all segments of the bar. Fellows are generally at the partner or shareholder level, or are independent practitioners with recognized experience and accomplishment. In addition, the LCA is dedicated to promoting superior advocacy, professionalism and ethical standards among its Fellows.

Carmody is a member of the Catholic Foundation and Director of its Bishop’s Cup Charity Golf Tournament. He also serves as a Board Member, Legal Counsel, Vice President and Treasurer of the Board of Governors of the Country Club of Jackson.

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NLRB Issues (New) Final Rule Expanding the Definition of a “Joint Employer”

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By: Hunter C. Ransom

On October 26, 2023, the National Labor Relations Board (“NLRB”) released its new/final “joint employer” rule potentially allowing workers to constitute employees of more than one entity for labor relations purposes—a move that will result in increased union organizing and collective bargaining efforts across the country. Because that decision broadly expands the definition of a “joint employer” under the National Labor Relations Act (“NLRA”), employees of franchisees and staffing agencies will have an easier time bringing franchisors and user firms to the bargaining table.

The NLRB’s controversial new/final rule establishes “joint employment” not only when one company has the right to exert control over terms and conditions of another company’s employees, but also when evidence exists of reserved, unexercised, or indirect control over any working conditions. That includes obvious situations like hiring and firing, along with other conditions such as wages, benefits, scheduling, supervising, disciplining and directing.

Let’s see how we got here.

A brief history of the “joint employer” definition

Before 2015, the NLRB held that an entity had to share and actually exercise direct and immediate control over essential terms and conditions of employment to constitute a joint employer with another entity. Then, in 2015, the NLRB decided Browning-Ferris Industries of California, Inc., in which it expanded the definition of “joint employer” to include entities who had indirect or reserved control over employees.

Three years later, in 2018, a federal court of appeals required the NLRB to reconsider its indirect control standard under Browning-Ferris. The NLRB accordingly issued a “final rule” in 2020 that excused alleged joint employers from bargaining unless employees could show they had “direct and immediate control” over essential terms and conditions of employment to constitute a joint employer. That rule stood until October 26th.

The new rule

NLRB Board members referred to the 2020 policy as “contrary to common-law agency principles that must govern the joint-employer standard.” Consistent with common-law agency principles, the Board concluded it should require an entity to negotiate with unionized workers when the entity has the “authority to control essential terms and conditions of employment,” regardless of whether they exercise that control or whether they do it directly or indirectly.

Because of the new/final rule, two or more employers will now be considered “joint employers” merely by sharing or co-determining matters governing essential terms and conditions of employment, such as wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction.  Moreover, the NLRB will once again consider evidence of reserved and/or indirect control over these essential terms and conditions of employment when analyzing “joint-employer” status. In other words, instead of requiring actual direct control, the NLRB could consider even potential retained (but unexercised) indirect control over working conditions sufficient for a business to be a joint employer for labor relations purposes.

While the new rule is unquestionably broader, the NLRB did set some limitations. First, the NLRB classified the standard as fact-specific and noted it would consider whether an entity meets the joint-employer definition on a case-by-case basis. It also only requires a joint employer to bargain over the essential terms it has the authority to control. The party asserting that an entity is a joint employer has the burden of proof in making this determination.

What does the new rule mean for employers?

The new rule takes effect on December 26, 2023. The new/final rule will have implications obligating both businesses to potentially bargain with a duly certified union as exclusive bargaining representative—at least with respect to those working conditions over which they share control—while exposing both companies to joint unfair labor practice liability. The same is true for franchises and other business models where one company’s employees perform services benefitting another employer.

The rule could face legal challenges, but affected employers should review their relevant policies along with current and pending contracts with third parties to determine whether the policies or agreements reserve right to control any essential term or condition of another entity’s employees. Employers should also train their supervisors and managers to avoid actions that might leave the employer vulnerable to an argument it has direct or indirect control over another entity’s employees.

 

 

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U.S. Department of Labor Unveils Newest Effort to Expand Employee Overtime Eligibility

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To borrow a phrase from the incomparable Yogi Berra, “[i]t’s like déjà vu all over again.” On Wednesday, August 30, 2023, 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.  Entitled Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees, the Proposed Rule seeks to dramatically increase the standard salary level and the highly compensated employee total annual compensation threshold, as well as providing a built-in updating mechanism that would allow for automatic updating of all the thresholds.

 

New 2023 Proposed Rule

Under its new Proposed Rule, the DOL seeks to significantly raise the exempt salary threshold from $684 per week to $1,059 per week.  Stated another way, U.S. employees would need to earn $55,068 or more per year to be exempt from overtime pay – a change the agency says would impact 3.6 million workers who are currently exempt from overtime eligibility.  Additionally, the new Proposed Rule would make the following changes:

  • Automatically update the salary threshold every three (3) years.
  • Raise the threshold for the “highly compensated employee” exemption to $143,988 (from the current threshold of $107,432).
  • Apply salary thresholds in U.S. territories that are subject to federal minimum wage with some exceptions for American Samoa.

The Proposed Rule seeks to update the regulations that govern 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 (1.5x 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”:

  • 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;
  • The amount of salary paid must meet a minimum specified amount; and
  • The employee’s job duties must primarily involve executive, administrative, or professional duties (as defined by the regulations).

 

Stroll Down Memory Lane

Until rather recently, the DOL’s last update to these regulations came in 2004, when the agency set the minimum salary threshold at $455 per week (or $23,660 per year).  Then, in May 2016, the Obama-era DOL kicked off a highly-contentious legal fight when it attempted change to the overtime rule by nearly doubling the minimum salary level from $23,660 to nearly $48,000 per year.  At the same time, the 2016 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.

Ultimately, the Trump-era DOL formally rescind the Obama-era DOL’s 2016 proposal with its own new Proposed Rule, issued on March 7, 2019.  The Trump-era Proposal was formally adopted in 2020.  With its passage, the DOL officially raised the minimum salary level for exempt employees to $679 per week, or $35,308 annually—the level it currently sits at today.  Additionally, the 2020 rule change allowed employers to count nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10% of the standard salary level test (provided such bonuses are paid annually or more frequently); and increased the total annual compensation requirement needed to exempt “highly compensated employees” to $107,432 annually.  Additionally, the 2020 rule change did not adopt any changes to the standard duties test for the white collar exemptions.

 

Moving Forward

Make no mistake—the DOL’s goal with the new Proposed Rule is to increase the number of employees eligible for overtime. As with the prior proposals, observers feel the number could rise well above the projected increase.  If implemented, the Proposed Rule 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.

This newest Proposed Rule from the DOL is sure to face its own set of legal hurdles, especially in the face of an election cycle.  Experts predict another battle over whether or not the DOL actually possesses the statutory authority to issue a salary-basis or salary-level test.  The Proposed Rule is also still subject to a lengthy comment period before any final implementation.

In the meantime, 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.

Brunini’s Labor & Employment specialists are monitoring these events and will update you accordingly.  In the meantime, feel free to contact any member of Brunini’s Labor & Employment Practice Group if you wish to discuss.

 

 

 

 

 

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Federal Government Releases New Form I-9 for U.S. Employers

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Federal Government Releases New Form I-9 for U.S. Employers

By:  Chris Fontan

 

On August 1, 2023, the U.S. Citizenship and Immigration Services (“USCIS”) released its newest version of the federal Form I-9.  U.S. employers are allowed to continue using the previous version of the Form I-9 through October 31, 2023.  However, starting on November 1, 2023, all employers are required to use this new, updated form.

 

Updates to the Form I-9

The USCIS made a number of material changes to the Form I-9 with this latest update, including:

  • Reducing Sections 1 and 2 to a single page; previously, these sections took up two pages.
  • Relocating Section 1 (Preparer and/or Translator Certification area) to a separate, standalone supplement for employers to provide to its applicants or employees as needed.
  • Revising the Lists of Acceptable Documents page—for use with Section 2—to include:
    • Adding some acceptable receipts, and
    • Providing guidance and links to information on automatic extensions of employment authorization documentation
  • Moving Section 3 (Reverification and Rehire area) to a standalone supplement for employers to utilize as needed.
  • Including a checkbox that allows employers to indicate that they have examined an applicant’s/employee’s Form I-9 documentation remotely pursuant to newly authorized virtual procedures (as opposed to traditional physical examination).

 

The updated Form I-9 virtually cuts its instruction section in half, reducing it from fifteen pages down to eight pages.  Additionally, the form has also been re-designed to be fillable on mobile devices, such as tablets and other smart phones.

 

Remote Verification

 

The biggest change with the new Form I-9 is the ability for employers to indicate they “virtually” examined an applicant’s/employee’s identity and employment authorization documents—as opposed to the traditional method of reviewing these documents in person. To participate in the remote examination option, employers must:

 

  • Be enrolled in E-Verify and be in good standing,
  • Examine and retain “clear and legible” copies of all documents,
  • Conduct a live video interaction with the employee during the verification process, and
  • Create an E-Verify case if the employee is a new hire.

 

Employers who were participating in E-Verify and created cases for employees whose documents were examined virtually between March 20, 2020, and July 31, 2023, may choose to use the new alternative procedure to satisfy the physical document examination requirement by August 30, 2023. Note however, that employers who were not enrolled in E-Verify during the COVID-19 flexibilities time frame must complete an in-person physical examination by August 30, 2023.

While the new Form I-9 is shorter and more streamlined, employers and job applicants are advised to use caution.  While the Form I-9 began as a one page document, it has existed as a multi-page form for over a decade.  As a result, experts fear that employees or employers will accidentally supply information for each other’s sections, which is prohibited under federal law. In addition, there is an increased likelihood that employees and employers will make more mistakes in completing the document, which could lead to serious consequences since individuals execute the Form I-9 “under penalty of perjury.”

 

In addition, questions also remain concerning the remote verification option.  For example, how and where should employers note whether employees that went through remote verification over the prior three years have brought in new documents?  Do employers need to document and retain proof of the video call required for virtual review on file?  Employers are advised to remain alert for further guidance on these and additional issues from USCIS in the coming months.

 

Brunini’s Labor & Employment specialists are monitoring these events and will update you accordingly.  In the meantime, feel free to contact any member of Brunini’s Labor & Employment Practice Group if you wish to discuss.

 

 

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New Stimulus Package and the Families First Coronavirus Response Act

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On Sunday, December 27, 2020, President Donald Trump officially signed into law Congress’ most-recent major stimulus package, aimed at blunting the continuing economic effects of on-going COVID-19 pandemic.  Earlier this year, Congress passed a larger series of similar measures, including the $2.2 trillion Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), as well as $104 billion Families First Coronavirus Response Act (“FFCRA”).  This most recent stimulus package totals $900 billion, and was signed in conjunction with a separate $1.4 trillion government funding bill.

The December 2020 stimulus package provides continued funding for a wide range of governmental assistance programs initiated earlier this year—including the Paycheck Protection Program and expanded unemployment assistance.  One question most HR and employment professionals had concerning the December 2020 stimulus package was what, if any, impact it would have on the fate of the FFCRA.

 

The Families First Coronavirus Response Act (FFCRA)

Signed into law on March 18, 2020, the FFCRA contained two principal mandates: (1) the establishment of new, paid sick leave rights for workers impacted by COVID-19 and those serving as caregivers for others with COVID-19; and (2) the establishment of new, enhanced leave entitlements under the Family Medical Leave Act (FMLA), including limited paid leave rights.  Over the past nine months, human resources professionals have worked hard to interpret and implement these new leave provisions.

 

The December 2020 Stimulus Package’s Impact on the FFCRA

One key feature of the FFCRA was the fact that it was set to automatically expire on Thursday, December 31, 2020.  Many experts felt that Congress would use the December 2020 stimulus package as an opportunity to extend the obligations/benefits of the FFCRA.  However, the final text of the December 2020 stimulus package does not extend the paid sick leave and paid family and medical leave requirements of the FFCRA. Therefore, an employer’s obligation to provide paid leave under the FFCRA will cease at the end of the year.  (Note: It is possible that the employee could be entitled to normal unpaid leave under the FMLA even after the FFCRA expires, if they still have weeks available under the FMLA.)

Congress did take the opportunity to extend the tax credit contained for both the Emergency Paid Sick Leave and the Emergency Family and Medical Leave contained within the FFCRA.  So, while employers are not required to provide paid leave under the FFCRA after December 31st, if they voluntarily elect to do so (and assuming covered employees have eligible leave remaining), these employers can continue to claim the payroll tax credit for those payments through March 31, 2021.

Despite Congress’ decision not to extend the FFCRA with the December 2020 stimulus package, we strongly encourage employers to continue to monitor this issue into early 2021, as President-elect Biden has already discussed plans to pass an even larger stimulus package once both he and the “new” Congress take office.  It is possible that this legislation could expand/enhance the FFCRA.

U.S. Department of Labor Provides Additional Guidance on Employers’ OSHA Recordkeeping Responsibilities During COVID-19

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During the COVID-19 pandemic, employers have been forced to address the application of virtually every legal labor and employment obligation in the context of the pandemic.  One of these obligations includes an employer’s responsibilities under the federal Occupational Safety and Health Act (OSHA), which is administered by the U.S. Department of Labor (DOL).  The DOL previously published its Guidance on Preparing Workplaces for COVID-19, in which it outlined steps for employers to protect their employees.

On April 10, 2020, the DOL issued additional guidance addressing the agency’s enforcement of OSHA’s recordkeeping requirements amid the COVID-19 pandemic.  Generally, OSHA recordkeeping requirements command “covered employers” to record certain work-related injuries and illnesses on their OSHA 300 log. However, since the on-set of this pandemic, employers have wrestled with whether they are required to record an employee’s COVID-19 illness—and if so, when.

According to the DOL, COVID-19 is “recordable” and must be included on an employer’s OSHA 300 log, if:

  • The case is a confirmed case of COVID-19, as defined by Centers for Disease Control and Prevention (CDC);
  • The case is “work-related,” (as defined by 29 CFR § 1904.5); and
  • The case involves one or more of the general recording criteria, (as outlined by OSHA and set forth in 29 CFR §1904.7). Per OSHA, cases meet this recording criteria if it results in death, days away from work, restricted work or transfer to another job, medical treatment beyond “first aid,” or loss of consciousness.

In the same guidance, the DOL expressly stated that it will not require covered employers to make a determination regarding “work-relatedness” (Step # 2 above), except where:

  • There is objective evidence that a COVID-19 case may be work-related; and
  • The evidence was reasonably available to the employers.

The DOL expressly states that this limited recordkeeping waiver does not apply to employers in the healthcare industry, emergency response organizations (e.g., emergency medical, firefighting and law enforcement services), and correctional institutions.

The DOL’s stated goal of this limited enforcement is to “help employers focus their response efforts on implementing good hygiene practices in their workplaces, and otherwise mitigating COVID-19’s effects, rather than on making difficult work-relatedness decisions in circumstances where there is community transmission.”

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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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Employment and HR Law Brunch & Learn Presented by Chris Fontan and Lauren Lawhorn

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Chris Fontan and Lauren Lawhorn spoke at the Employment and HR Law Brunch & Learn Workshop given by Rankin County Chamber and TempStaff in Flowood on July 17, 2019.   Their presentations provided to attendees may be viewed in the links below.

Rankin County Chamber 2019 – Employment Verification Then and Now

Rankin County Chamber 2019 – Mississippi Employment Laws

Rankin County Chamber 2019 – FLSA New OT Rule

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