With less than 75 days before the U.S. Department of Labor’s (DOL) New Overtime Rules are scheduled to go into full effect (click here for a summary), two separate federal court lawsuits were recently filed challenging the legality of DOL’s proposed changes.  On September 21, 2016, a group of 21 states (lead by Texas and Nevada) sued the DOL, seeking to enjoin and ultimatelystrike the New Overtime Rule.  On the same day, several nationwide business groups and trade organizations filed a second lawsuit against the DOL concerning the controversial New Overtime Rule, which is slated to take effect on December 1, 2016.

In the first lawsuit (Nevada et al. v. U.S. Department of Labor et al., No. 1:16-cv-407, Eastern District of Texas), the 21 states argue that the New Overtime Rule—which raised the minimum salary threshold required to qualify for the Fair Labor Standards Act’s (FLSA) “white collar” overtime exemption to $47,476 per year—is unconstitutional on numerous grounds.  Specifically, the States argue that DOL overstepped its authority by imposing a salary requirement as the primary basis for determining exemption eligibility, instead of focusing on the bona fide job duties of an employee.  Similarly, the States claim that the FLSA’s statutory language does not permit the inclusion of the New Rule’s “automatic increase” provision.   Additionally, the States argue that by forcing them to comply with the New Rule, the Obama administration would unilaterally deplete individual states of their financial resources, in violation of the Tenth Amendment.

Joining Texas and Nevada in the lawsuit are Alabama, Arizona, Arkansas, Georgia, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Michigan, Mississippi, Nebraska, New Mexico, Ohio, Oklahoma, South Carolina, Utah and Wisconsin.  The States’ lawsuit seeks both declaratory and injunctive relief—meaning that the states are asking the Court to enter a temporary order blocking the New Rule’s scheduled enforcement on December 1^st, as well as a permanent judgment declaring the New Overtime Rule illegal.

In the second lawsuit (Plano Chamber of Commerce, et al. v. U.S. Department of Labor, et. al., No. 4:16-cv-00732, Eastern District of Texas), the U.S. Chamber of Commerce, along with over 50 other national business organizations, claims that the DOL exceeded its statutory authority under federal law in enacting key provisions of the New Overtime Rule, including the minimum salary threshold and the automatic increase provision.  Like the States, the Chamber of Commerce’s lawsuit seeks both declaratory and injunctive relief.

Both suits contend that, if implemented, the New Overtime Rule would require state governments, local municipalities, and private businesses alike to substantially increase their employment costs to the point that employers may ultimately be forced to either reduce services or lay off workers.  “Once again, President Obama is trying to unilaterally rewrite the law,” Texas Attorney General Ken Paxton said in a statement. “And this time, it may lead to disastrous consequences for our economy. The numerous crippling federal regulations that the Obama administration has imposed on businesses in this country have been bad enough. But to pass a rule like this, all in service of a radical leftist political agenda, is inexcusable.”

“The DOL went too far in the new overtime regulation,” said Randy Johnson, senior vice president of Labor, Immigration, and Employee Benefits for the U.S. Chamber. “We have heard from our members, small businesses, nonprofits, and other employers that the salary threshold is going to result in significant new labor costs and cause many disruptions in how work gets done. Furthermore, the automatic escalator provision means that employers will have to go through their reclassification analysis every three years. In combination, the new overtime rule will result in salaried professional employees being converted to hourly wages, and it will reduce workplace flexibility, remote electronic access to work, and opportunities for career advancement.”

The DOL did not immediately comment on the lawsuit, though it previously expressed confidence in the legality of the New Rule.

Experts predicted that the New Overtime Rule would face some type of legal challenge before its implementation at the end of this year.  However, not everyone agrees that the DOL exceeded its authority in enacting the regulations.  Many feel these challenges to the legality of New Overtime Rule are long-shots at best—with most feeling that the challenges to the automatic increase provision have the greatest likelihood of success.

While it is possible the federal court could enter an order staying the implementation of the New Overtime Rule, at this time, employers are best served to continue preparing as if the New Rule will go into effect on December 1^st.

 

 

 

 

 

 

By now, I’m sure everyone is aware of (or at least heard of) the U.S. Department of Labor’s upcoming changes to the Overtime Rules contained in the Fair Labor Standards Act (FLSA).  Brunini’s Labor & Employment Newsletter Subscribers have received numerous updates over the past year, alerting them to the pending change and its potential implications:

• https://www.brunini.com/update-u-s-department-of-labor-releases-proposed-rule-to-expand-employee-overtime-eligibility/
• https://www.brunini.com/u-s-department-of-labors-final-overtime-rule-not-expected-in-2nd-half-of-2016/
• https://www.brunini.com/ready-expanded-employee-overtime-eligibility/
• https://www.brunini.com/department-labor-announces-increase-wage-hour-penalties-employers/

Knowing about the upcoming change is one thing – being prepared for the change is something else altogether.  The New Rule is scheduled to go into effect on December 1, 2016.  That’s just 84 days from today.  Has your organization taken the steps to be in compliance with the New Rule when it goes into effect?

Brunini’s Labor & Employment Practice Group has prepared an article outlining practical considerations for employers to consider and implement in order to prepare for and comply with the New Rule.  You can access this article here: Ways to Prepare for the New Expanded Employee Overtime Eligibility.

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.

On July 13, 2016, the Occupational Safety and Health Administration (OSHA) announced a delay of  the implementation of its recently published Rule that amends requirements for reporting workplace injuries and illnesses.  The goal of the new Rule, originally scheduled to go into effect August 10, 2016, is to promote an employee’s right to report such injuries and illnesses without fear of retaliation.  Because it felt that post-accident drug testing rules were being used by employers to limit reporting of workplace accidents, OSHA also attempted to place restrictions on the use of drug and alcohol tests in the workplace.

Under the Proposed Rule, employers must electronically submit all work-related illness and injury records directly to OSHA, which, according to the Secretary of Labor, will be available to the public, with the exception of personally identifiable information.

OSHA’s announced delay came one day after the Manufacturers Center for Legal Action (MCLA) filed an action in the United States Federal District Court for the Northern District of Texas to enjoin the implementation of the Rule. In its Emergency Motion for Preliminary Injunction, the MCLA alleged the new Rule is contrary to and exceeds OSHA’s statutory authority and is “arbitrary, capricious and not in accordance with applicable law.” This follows a recent hearing before the U.S. House of Representatives’ Subcommittee on Workforce Protections, in which many employers expressed concerns over the Rule’s likely impact.

OSHA announced that it will not enforce the new Rule until November 1, 2016, allowing time “to conduct additional outreach and provide educational materials and guidance for employers.” However, the MCLA legal action remains active, and the District Court might address the matter prior to November 1.

When it comes to wage and hour issues, most U.S. employers are focused on preparing for the Department of Labor’s (DOL) much-debated New Overtime Rule that is set to go into effect on December 1, 2016.  Most notably, under the New Overtime Rule, the requisite salary level for exempt employees jumps from $23,660 annually (or $455/week) to $47,476 ($913 per week).  However, the federal agency has not closed up shop for the year.

On June 30, 2016, the DOL announced  an increase in the dollar value of the civil penalties that that agency assesses to employers for certain violations of the minimum wage and overtime provisions of the Fair Labor Standards Act.  Deemed an “interim adjustment,” pursuant to the 2015 Federal Civil Penalties Inflation Adjustment Act, the DOL’s Wage and Hour Division will increase the civil penalty assessed for “willful violations” from $1,100 to $1,894 per violation.

The DOL’s regulations define a “willful” violation of the minimum wage and overtime provisions as one in which the employer either knew that its conduct was prohibited by law, or showed a “reckless disregard” for the requirements of the law.  While there is no bright-line test on what qualifies as a willful violation, in 2015, the Fifth Circuit Court of Appeals ruled that an employer committed a willful violation of the FLSA by failing to keep adequate records of extended hours worked by an employee.  See Ramos v. Al-Bataineh, 5th Cir., No. 13-20749 (March 30, 2015).

The DOL’s proposed increase represents a 73% jump in the value of assessed penalties—on a per violation basis.  Importantly, the DOL assesses this penalty in addition to any actual back wages owed to the employee(s).  Plus, section 16(a) of the FLSA authorizes criminal sanctions against any person who is shown to have violated the FLSA intentionally, deliberately, and voluntarily, or with reckless indifference to or disregard for the law’s requirements.

 

AMERICANS WITH DISABILITIES ACT

The EEOC recently issued its final rule (“Final Rule”) on wellness programs (i.e.,
employee health programs) under Title I of the Americans with Disabilities Act (“ADA”).¹
These wellness programs may be offered within, or outside of, an employer’s group health plan.
The requirements of the Final Rule apply only to employee wellness programs that require
employees to respond to disability-related inquiries and/or undergo medical examinations. The
provisions of the Final Rule regarding notice and incentives will apply to employee wellness
programs as of the first day of the first plan year on or after January 1, 2017, for the health plan
used to determine the level of permissible incentive. The remainder of the Final Rule is effective
now, as it simply clarified existing regulations.

In the Final Rule, the EEOC responds to a number of comments from the public
regarding the operation of employee health programs. It specifically rejects commenters’
requests that an employee be allowed to provide a general certification or attestation that they are
receiving medical care for particular health risks factors in lieu of completing a health risk
assessment (“HRA”) or undergoing a medical examination. According to the EEOC, allowing
such an alternative would limit the effectiveness of the wellness programs as envisioned by the
ACA. The EEOC also declined to incorporate an “affordability standard” into the Final Rule
with respect to the incentive limits. Instead, it extended the 30% limit (under HIPAA and the
ACA) and agreed with the Treasury Regulations that the affordability of eligible employersponsored
coverage should be determined by assuming that employees will fail to satisfy the
requirements of a wellness program.

Not surprisingly, several commenters asked the EEOC to clarify what it means for a
wellness program “to be a part of, or provided by, a group health plan.” However, instead of
providing factors that would answer that question, the EEOC determined that all provisions of
the Final Rule should apply to wellness programs, regardless of whether they are offered within,
or outside of, an employer-sponsored group health plan, when the program includes disabilityrelated
inquiries and/or medical examinations.

The EEOC noted that wellness programs that include “a measurement, test, screening or
collection of health-related information without providing results, follow-up information, or advice designed to improve the health of participating employees would not be reasonably

designed to promote health or prevent disease, unless the collected information actually is used
to design a program that addresses at least a subset of conditions identified.” Furthermore, the
EEOC concluded that imposing a penalty solely based on an employee’s failure to achieve a
health outcome would, in many cases, discriminate based upon a disability.

Voluntariness

The Final Rule also clarifies that a wellness program is voluntary not simply because it
gives employees an option to participate, but also because offering an incentive of up to 30% of
the total cost of self-only coverage does not, without more, make a wellness program coercive.
While an employer may require an employee to pay more for a certain type of coverage if the
employee does not participate in a wellness program that includes disability-related inquiries or
medical examinations, an employer may not deny access “to a benefit available by virtue of
employment.” In other words, an employer cannot condition participation in a group health
plan upon participation in a wellness program, including an HRA. The EEOC expressly
rejected a commenter’s proposal to allow wellness program participants the opportunity to
participate in a comprehensive health plan while offering non-participants a less comprehensive
plan. Instead, the EEOC proposed that a non-participant could pay more for the same
comprehensive health plan by virtue of not receiving incentives of up to 30% of the total cost of
self-only coverage.

Notice Requirements

All wellness programs, whether a part of a group health plan or not, that require
employees to respond to disability-related inquiries and/or undergo medical examinations must
provide employees with a notice, in plain language, that explains the medical information that
will be collected, how it will be used, who will receive it, the restrictions on the disclosure of the
information, and the methods that will be used to prevent improper disclosure. Existing
notifications must be revised, or a new notification developed, when current notifications do not
meet these requirements. The EEOC will provide a sample notice in the next few weeks.

Incentives

The EEOC confirmed that an employer may offer incentives up to a maximum of 30% of
the total cost of self-only coverage (including the employee’s and the employer’s contribution),
whether as a reward or penalty. In cases where an employer offers a single group health plan but
an employee who does not enroll in the plan may still participate in the wellness program, the
employer may offer an incentive of up to 30% of the total cost of self-only coverage under the
plan. Where an employer has more than one group health plan, but participation in a wellness
program again does not depend on the employee’s enrollment in the plan, the employer may
offer an incentive of up to 30% of the total cost of the lowest cost self-only coverage under a
major medical group health plan offered by the employer. If the employer does not offer a group
health plan or group health insurance coverage, but an employee may participate in a wellness
program, the employer may offer an incentive of up to 30% of the cost that would be charged for
self-only coverage (for a 40-year-old nonsmoker) in the second lowest cost Silver Plan available
through the state or federal Exchange in the location that the employer identifies as its principal
place of business.

Non-financial and de minimis incentives must be included within the calculation of the
30% cap, despite any perceived difficulty in valuing them. Employers can use any “reasonable”
method to determine the value of in-kind incentives (e.g., a premier parking space).

The Final Rule does not address incentives wellness programs may offer for dependent or
spousal participation because the ADA’s prohibitions on discrimination apply only to applicants
and employees. Nonetheless, employers should be sure to abide by the requirements of Title II
of GINA (discussed herein) in collecting information on an employee’s family member in
exchange for incentives.

With smoking cessation programs, a covered entity may offer incentives as high as 50%
of the cost of self-only coverage, depending upon the type of program. The EEOC reiterates that
the interpretive guidance for the PHS Act states that “because any biometric screening or
other medical procedure that tests for the presence of nicotine or tobacco is a medical
examination under the ACA, the 30 percent incentive limit would apply to such a screening
or procedure.”² On the other hand, smoking cessation programs that simply ask employees
whether or not they use tobacco do not ask disability-related inquiries or include medical
examinations, and therefore may offer incentives of up to 50% of the cost of self-only coverage.

Confidentiality/Privacy

Medical information collected through an employee health program may only be
provided to a covered entity in aggregate terms that do not disclose the identity of specific
individuals, other than as needed to administer the health plan or as specifically permitted under
29 C.F.R. § 1630.14(d)(4). A covered entity is also prohibited from requiring an employee to
agree to the sale, exchange, transfer, or other disclosure of medical information (except as to
carry out the operations of the wellness program) or to waive any confidentiality provisions as a
condition of participating or earning incentives.

GENETIC INFORMATION NONDISCRIMINATION ACT

Title II of the Genetic Information Nondiscrimination Act (“GINA”) applies to
employers with 15 or more employees. In the context of GINA, “genetic information” is
interpreted to mean information about the manifestation of disease or disorder. The Title II Final
Rule (“Final Rule”) does not incorporate a restriction on the collection of genetic information to
the minimum necessary for the employer-sponsored wellness program activities or any limitation
on accessing genetic information from other sources. Rather, in the Final Rule, the EEOC
reiterates that employee wellness programs that collect genetic information must be “reasonably
designed”³ to promote health and prevent disease. Employers can request, require, or purchase
genetic information as part of health or genetic services only when these services are reasonably
designed to promote health or prevent disease.

The provisions of this Final Rule apply regardless of whether a wellness program is
offered as a part of, or outside of, an employer-sponsored group health plan.

The provisions of 29 C.F.R. § 1635.8(b)(2)(iii) on wellness program inducements will
apply prospectively, beginning on the first day of the first plan year on or after January 1, 2017,
for the health plan used to determine the incentives.

Inducements and Spouse Participation in Wellness Programs

A covered entity may offer an inducement to an individual for completion of a health
risk assessment, including one that has questions about family medical history or other genetic
information.⁴ The inducement, however, must be made available regardless of whether or not
the participant answers questions regarding genetic information, and the health risk assessment
must be administered in connection with the spouse’s receipt of health or genetic services offered
by the employer. Inducements otherwise may not be offered for individuals to provide genetic
information.

The same general inducement limits apply under the GINA Final Rule as the ADA Final
Rule (i.e., 30% of the total cost of self-only coverage) and are applied individually to the
employee and spouse. The portion of an inducement attributable to the spouse’s provision of
information about his or her manifestation of disease or disorder does not have to be paid to the
spouse but it may be paid in whatever way the remaining portion of the inducement is made.
As in the ADA Final Rule, the EEOC declines in the GINA Final Rule to adopt a medical
certification option in alternative to providing information about the manifestation of disease or
disorder when participating in an employer wellness program. The EEOC also declined to adopt
commenters’ suggestion that the employer only be required to comply with authorization
requirements when more than de minimis inducements are offered for genetic information in a
wellness program. “Inducements” include both financial and in-kind inducements, though
employers have flexibility in valuing in-kind incentives.

Medical Information of Employee’s Children

The Final Rule expressly prohibits inducements in return for information about the
manifestation of disease or disorder in an employee’s children and makes no distinction between
adult and minor children or between biological and adopted children. While an employee’s
children are permitted to participate in an employer’s wellness program on a voluntary basis, the
program may not offer any inducement in exchange for information about the manifestation of
disease or disorder in the child.

Confidentiality

The Final Rule reiterates that employers and other covered entities maintaining genetic
information must keep the information in medical files that are separate from personnel files, and
the information must be treated as confidential. Genetic information can only be disclosed in six
very limited circumstances set forth in 29 C.F.R. § 1635.9, none of which would likely occur
except for an employee’s request for the information. When employers obtain genetic
information as a part of an employer-sponsored wellness program, the authorization signed by
the participating individual must explain the restrictions on disclosure of the information; that the
individually identifiable genetic information is provided only to the individual receiving the
services and the providers involved in services; and that individually identifiable genetic
information is only available for health or genetic services and is only disclosed to the employer
in aggregate terms.

A covered entity may not condition participation in an employer-sponsored wellness
program or an inducement on an employee, his or her spouse, or other covered dependent
agreeing to the sale, exchange, sharing, transfer, or other disclosure of genetic information,
except where expressly permitted under the regulations

Notice/Authorization Requirements

Employers must provide authorizations to individuals to be signed prior to sharing
genetic information as part of health or genetic services, including prior to HRAs for employees
and spouses. The authorization must explain that individually identifiable genetic information is
provided only to the individual receiving the services and the licensed health care professionals
or board certified genetic counselors involved in providing the services and that individually
identifiable genetic information is only available for purposes of the health or genetic services.
The information cannot be disclosed to the employer other than in aggregate terms.

This material is intended for general information purposes only and does not constitute legal advice. For legal
issues that arise, legal counsel should be consulted.

¹ Other federal laws, including Title II of the Genetic Information Nondiscrimination Act and the Health
Insurance Portability and Accountability Act, apply to wellness programs that are offered through group health plans
as well.

² “Although the fact that someone smokes is not information about a disability, the ADA’s provisions
limiting disability-related inquiries and medical examinations apply to all applicants and employees, whether or not
they have disabilities. Moreover, whatever benefit smoking cessation programs that are part of wellness programs
may have, the Commission can discern no reason for treating medical examinations to detect the use of nicotine
differently from any other medical examinations when the ADA makes no such distinction.” 81 Fed. Reg. 31136.

³ Satisfaction of the “reasonably designed” standard is determined based on a review of the relevant facts
and circumstances. However, to meet the standard, the program must “have a reasonable chance of improving the
health of, or preventing disease in, participating individuals, and must not be overly burdensome, a subterfuge for
violating Title II of GINA or other laws prohibiting employment discrimination, or highly suspect in the method
chosen to promote health or prevent disease.”

⁴ The health risk assessment must include a requirement that the individual provide prior, knowing,
voluntary, and written authorization, and the authorization form must describe the confidentiality protections and
restrictions on the disclosure of genetic information. See 29 C.F.R. § 1635.8(b)(2)(iii).

The United States Department of Labor (the DOL) has released its Final Rule that will broaden federal overtime pay regulations to cover 4.2 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.   The DOL’s regulations implementing the FLSA set 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.  In order for an employee to qualify as an exempt “white collar” employee, he/she must 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).

The DOL’s Final Rule raises the minimum salary level for exempt employees to $913 per week (or $47,476 annually) and increases the total annual compensation requirement needed to exempt “highly compensated employees” to $134,004 annually (previously set at $100,000).  Additionally, the Final Rule establishes a mechanism for automatically updating the minimum salary level every three years.  Finally, the Final Rule allows employers to use nondiscretionary bonuses and incentive payments to satisfy up to 10% of the new standard salary level.  The Final Rule did not change the duties needed to qualify for the “white collar” exemption.

The Final Rule has been anticipated since the DOL released its proposed rule in July 2015.  The Final Rule’s salary level increase is less than the proposed rule’s projected salary level of $970 per week (or $50,440 annually).  However, the Final Rule’s salary level for “highly compensated employees” is more than the proposed rule’s projected salary level of $122,148.  Finally, the Final Rule’s mechanism for automatically updating the salary level every three years is different than the proposed rule’s mechanism for automatically updating the salary level annually.

In an email yesterday, President Obama stated that the Final Rule “is a step in the right direction to strengthen and secure the middle class by raising Americans’ wages.”  Vice President Biden, who characterized the Final Rule as “restoring and expanding access to the middle class,” is expected to promote the Final Rule today in Columbus, Ohio.  Opponents of the Final Rule have argued that it places a huge cost and burden on employers and demotes millions of workers.  Members of Congress who oppose the Final Rule have stated that they will attempt to block it during a mandated congressional review period.  However, any such attempts are expected to be vetoed by President Obama.

The Final Rule will go into effect on December 1, 2016.  Future automatic updates will occur every three years, beginning 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.

This Newsletter is a publication of the Labor and Employment Department of the law firm of Brunini, Grantham, Grower & Hewes, PLLC located in Jackson, Mississippi. This Newsletter is not designed or intended to provide legal or professional advice, as any such advice requires the consideration of the facts of the specific situation.

IRS Circular 230 Notice

To ensure compliance with requirements imposed by the IRS, we inform you that, unless specifically indicated otherwise, any tax advice contained in this communication (including any attachments) was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any tax-related matter addressed herein

Since the beginning of 2016, the U.S. Equal Employment Opportunity Commission (EEOC) has made several key changes to its standard operating procedures concerning the handling and investigation of charges of discrimination.  The result of these changes continues the recent trend of bolstering legal protections provided to employees by the EEOC.

Proposed Changes to Enforcement Guidance on Retaliation

At the end of January 2016, the EEOC issued a 76-page proposed update to its retaliation enforcement guidance—a document that hasn’t been updated since 1998.  The enforcement guidance serves as the EEOC’s interpretation of federal employment laws (Title VII, ADA, ADEA, GINA) based on court rulings.  Most notable among the 76-page update is the EEOC’s expansion of what activity it feels deserves protection from retaliation.

For example, the proposed guidance enhances the EEOC’s interpretation of retaliatory “causation”—that is, the requisite connection between a “protected activity,” such as reporting discrimination or sexual harassment, and an adverse employment action, such as termination.  Part of the expansion focuses on the ruling from one appellate court, which held that a charging party can discredit the employer’s explanation and demonstrate a causal connection by offering a “convincing mosaic of circumstantial evidence that would support the inference of retaliatory animus.” Many scholars agree that, for employers, this is too broad of an interpretation.

Currently, the EEOC is still seeking public comment on the proposed guidance.  And, even if adopted, the guidance is just that—it does not carry the weight of a statute or an administrative decision.  However, employers should be aware that the EEOC’s enforcement guidance remains a powerful tool, as it serves as a key reference for EEOC investigators during the investigation stage.  As such, many employers rely on the guidance in evaluating personnel decisions.

Charging Party Access to Employer Position Statements

In February 2016, the EEOC announced new procedures for its investigation of EEOC charges.  Under these new procedures, a Charging Party can obtain a responding employer’s position statement from the EEOC upon request, and then file his/her own response to that position statement within 20 days.  The new procedures apply to position statements requested by the EEOC on or after January 1, 2016.

This marks an important change in the process by which charges of discrimination are handled at the EEOC.  Previously, a charging party was not entitled to obtain an employer’s position statement until after the EEOC closed its investigation.  Even then, the charging party could only obtain the position statement through an official Freedom of Information Act (FOIA) request.  Additionally, the charging party did not have an opportunity to review and/or respond to a position statement during the course of the agency’s investigation.

The EEOC feels this new procedure “significantly improves” its investigative process, by facilitating a meaningful exchange of information and allowing investigators to consider responses.

Going forward, a typical EEOC investigation process proceeds as follows:  First, the charging party files a charge of discrimination with the EEOC.  The charge is then assigned to the EEOC’s Mediation Unit, which notifies each party of the opportunity to participate in its voluntary mediation program.  If both parties agree, mediation is scheduled with an EEOC Mediator.  If one or both parties do not agree to mediation—or mediation fails to resolve the issue—the charge is transferred to the EEOC’s Investigative Unit.  At that point, the employer is required to submit a written position statement to the EEOC within 30 days (although extensions of time are common).

With the new procedure in place, after the respondent submits its position statement, the charging party may request the position statement from the EEOC Investigator, who will provide the position statement (and all non-confidential attachments) to the charging party.  Then the charging party may submit a response to the position statement to the EEOC within 20 days.  The charging party is not required to provide his or her response to the respondent; and the respondent may not obtain the charging party’s response from the EEOC.

These changes to the EEOC’s internal handling signal an increased effort on behalf of the agency to provide employees with a strong shield in interactions with their employers.  In turn, employers are advised to become more diligent in dealing with personnel issues—especially those that raise the specter of potential EEOC involvement.

This Newsletter is a publication of the law firm of Brunini, Grantham, Grower & Hewes located in Jackson, Mississippi. This Newsletter is not designed or intended to provide legal or professional advice, as any such advice requires the consideration of the facts of the specific situation.

IRS Circular 230 Notice

To ensure compliance with requirements imposed by the IRS, we inform you that, unless specifically indicated otherwise, any tax advice contained in this communication (including any attachments) was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any tax-related matter addressed herein.

Earlier this year, the U.S. Department of Labor (DOL) announced a series of proposed changes to its federal regulations regarding worker classification.  If implemented, the highly controversial rule would require U.S. employers to potentially re-classify over 5 million workers as “non-exempt”—greatly expanding the number of U.S. employees eligible for overtime compensation.  The DOL received over 250,000 public comments on the proposed changes throughout its open comment period, which ended on September 4, 2015.

Since that time, employers have had three common questions: (1) when would the DOL release its final decision on the proposed changes; (2) what will the final changes (if any) entail; and (3) when will employers have to comply with any final changes.  Recent (yet conflicting) guidance from President Obama’s Administration indicates that the final ruling will not be issued before July 2016, and likely later into the year.

On November 20, 2015, the U.S. Office of Management and Budget (OMB) published its Fall 2015 Unified Agenda and Regulatory Plan

The important thing to know about these dates [in the Unified Agenda] is that they are estimates and rarely accurate.  The agency has no legal obligation to meet that published deadline.  Some rules have been on the regulatory agenda for years and they just change the date with the new agenda comes out.”

Prior to the publication of the Fall Unified Agenda, officials with the DOL, including Solicitor of Labor Patricia Smith, indicated that the final rule would likely be issued sometime in “late 2016.”  DOL officials also stated that any changes would be issued early enough to for the changes to take effect before the President Obama leaves office.

Under either scenario, employers should not have to comply with any of the proposed changes to the FLSA’s overtime exemptions during the 1^st half of 2016.  However, the “late 2016” predictions are important for employers if true, as it suggests that the time between publication of the final rule and its effective date will be short, because the later the final rule is published, the smaller the window of time the department can allow employers to review and adapt before the new regulations become effective.  In fact, it is very likely that employers may only have 30 to 60 days after the final changes are published before they become legally effective.

With a recent decision, the National Labor Relations Board (NLRB) announced broad changes to its “joint employer” standard by creating a new test that is virtually guaranteed to result in more findings of a “joint employer” relationship under the National Labor Relations Act (the Act).  Under this new test, the NLRB considers a company to be a “joint-employer” if it (1) exercises “indirect control” over working conditions, or (2) if it has “reserved authority” to do so. This marks a significant departure from the NLRB’s decades-old “joint-employer” standard that required the actual exercise of control—not just the ability to do so.   Affecting both unionized and non-union companies (and even entities that have no employees of their own) alike, the NLRB’s decision also has the potential for broad implications for other employment laws and government agencies such as the Department of Labor, EEOC and OFCCP.

On August 27, 2015, the NLRB issued a 3-2 ruling, involving Browning-Ferris Industries of California, Inc. (BFI), an owner/operator of a California-based recycling facility.  In its decision, the NLRB ruled that BFI should be considered a “joint employer” with a Leadpoint Business Services, a temporary staffing company that provided short-term labor to BFI’s recycling facility.  At the time, BFI employed approximately 60 employees—most of whom worked outside the recycling facility, moving and preparing materials to be sorted inside the facility.  BFI contracted with Leadpoint to provide over 200+ in-facility workers under a temporary labor services agreement.  In June 2013, the Teamsters Local 350 (the Union) filed a claim with the NLRB on behalf these in-facility employees, claiming that BFI and Leadpoint were actually their “joint-employers.”

Under the former joint-employer standard (utilized by the NLRB since 1984), the NLRB examined “whether alleged joint employers share the ability to control or co-determine essential terms and conditions of employment.” See TLI, Inc., 271 NLRB 798 (1984); Laerco Transp., 269 NLRB 324 (1984). The NLRB provided specific examples of what it considered to be “essential terms and conditions of employment,” including: hiring, firing, discipline, and supervision.  TLI, Inc., 271 NLRB 798.  In later decisions, NLRB emphasized the type of control exercised by alleged joint employers—requiring that the control be “direct and immediate.” See, e.g., Airborne Freight Co., 338 NLRB 597 (2002).

The NLRB’s Browning-Ferris decision overturns this 30 years of precedent.  Under the new test, the NLRB first asks if there is a common-law employment relationship between the employees and the alleged employer in question.  If this common-law employment relationship exists, the NLRB then asks if the alleged joint employer possesses “sufficient control” over the employees’ “essential terms and conditions of employment.”   Importantly, the NLRB stated that from now on, a company possesses “sufficient control” if it has the ability to exercise control over these terms and conditions of employment.  While the actual exercise of “direct and immediate” control is probative, it is no longer essential.

This decision by the NLRB vastly expands the types and number of entities that can be held responsible for unfair labor practice violations and who may be held to have collective bargaining obligations regarding employees of a totally separate, independent employer.  While the NLRB claims it is clarifying its joint-employer standard, in actuality, the NLRB is completely recasting the “joint employer test.”  In the past, the determination was based on a close analysis of the actual relationships between the alleged joint employers.  Going forward, the NLRB will consider what the relationship between the two entitiesmight be expanded to encompass.  Then, based upon that speculation, the NLRB’s decision shoehorns this “possible relationship” into a concrete joint-employer finding.

The NLRB’s Browning-Ferris decision follows on the heels of the July 2014 decision from the NLRB General Counsel stating that McDonald’s is a “joint-employer” of workers at franchised restaurants, along with the individual franchisees.   The NLRB’s expanded concept of a “joint employer” also parallels recent efforts by the U.S. Department of Labor, the U.S. Equal Employment Opportunity Commission and the Office of Federal Contract Compliance Programs—all seeking to hold large companies responsible for legal compliance as to individuals from whose services they benefit—regardless of whether a direct employment relationship exists.

The NLRB’s new theory of joint employment has the potential to have far-reaching and, if so, likely troubling impacts on employers throughout the United States.  In addition to facing joint liability for labor law violations, entities that are deemed to be joint employers under this new standard may face collective bargaining obligations and find themselves enmeshed in labor disputes between direct employers and labor organizations.  Any companies that utilize contingent workers employed by another entity or staffing company, as well as parties to franchise agreements, should consider reviewing their employment practices, contractual arrangements and course of dealing in light of this significant change in the law.

Unfortunately, there is no single or simple solution to the issue.  A company’s “joint employment” status is a factual inquiry that will vary from employer to employer.  Each relationship will need to be considered in light of (as the NLRB puts it) the “industrial realities” to develop the most effective responses.

This Newsletter is a publication of the Labor and Employment Department of the law firm of Brunini, Grantham, Grower & Hewes located in Jackson, Mississippi. This Newsletter is not designed or intended to provide legal or professional advice, as any such advice requires the consideration of the facts of the specific situation.

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