Category Archives: FLSA

Department of Labor (DOL) Issues its Final Overtime Rule

By: Sean E. Lees

On April 23, 2024, the Department of Labor (DOL) issued its final overtime rule, which raised the annual salary required for certain employees to be exempt from overtime under the Fair Labor Standards Act (FLSA).  While this rule will likely face legal challenges, it is scheduled to go into effect on July 1, 2024.

As a general rule, unless certain exemptions apply, employees who work more than forty (40) hours in a workweek must be paid overtime.  This new rule impacts two (2) exemptions – the executive, administrative, and professional (“EAP”) exemption and the highly compensated employee (“HCE”) exemption.  To qualify for the EAP exemption, the employee must meet three tests: 1) be paid a salary on a predetermined and fixed amount that is not subject to reduction based on the quality or quantity of work performed; 2) be paid at least a specified weekly salary level, and 3) perform primarily executive, administrative, or professional duties.  The HCE exemption applies to employees who are paid a salary, earn above a set annual compensation threshold, and satisfy a minimal duties test.

Effective July 1, 2024, the new rule raises the minimum salary threshold for the EAP and HCE exemptions:

  1. Under the EAP exemption, the minimum salary threshold will be raised from $684 per week ($35,568 per year) to $844 per week ($43,888 per year);
  2. Under the HCE exemption, the annual compensation threshold will be increased from $107,432 per year, including at least $684 per week paid on a salary or fee basis, to $132,964 per year, including at least $844 per week paid on a salary or fee basis.

Effective January 1, 2025, the salary thresholds for these exemptions will again be raised as follows:

  1. The EAP minimum salary threshold will be increased to $1,128 per week ($58,656 per year);
  2. The HCE annual compensation threshold will be increased to $151,164 per year, including at least $1,128 per week paid on a salary or fee basis.

Effective July 1, 2027, and every three (3) years thereafter, these thresholds will be updated based on the available data used to set the salary level in effect at the time of the update.

The practical result of this rule is that many employees currently classified as exempt under the FLSA overtime rules may now fall below the adjusted minimum salary thresholds described above.  Therefore, this subset of newly classified employees must be paid overtime if they work more than forty (40) hours in a given week.  Employers should prepare for the implementation of this rule by analyzing the salaries of all employees currently classified as exempt to determine whether the new rules may alter their classification.  During this analysis, employers should pay particular attention to employees who earn between $35,568 and $58,656 per year, as these employees are most likely to be impacted by this new rule.  Employers may consider adjusting an employee’s salary in accordance with the new rule to maintain their exempt status or otherwise convert them to non-exempt status, at which point they would be eligible for overtime payments.

BOOTING UP COMPUTER NOT COMPENSABLE UNDER THE FLSA

By Sally A. Piefer

Wage and hour cases in Wisconsin and across the country have been on the rise. A large percentage of wage and hour cases are filed as class action lawsuits. Often, unsuspecting employers are the targets of lawsuits, or a claim is filed as a result of an employee seeking legal advice on another employment-related topic. Wage and hour cases may not be covered by Employment Practices Liability Insurance (EPLI), and while a single employee claim can be a nuisance, a class-action claim can be very costly for employers, since an employer will be liable not only for the unpaid wages, but also an equal amount in liquidated damages, and attorney’s fees for the plaintiff.

In late 2022, the Ninth Circuit Court of Appeals, which has jurisdiction over much of the west coast, reversed a summary judgment decision which dismissed a lawsuit brought on behalf of a group of call center employees who alleged that the pre-shift and post-shift time they spent booting up and shutting down their computers was compensable.

The employees had to boot up their computers before they could clock into the employer’s timekeeping program, and also had to clock out of the timekeeping program before they could shut down their computers at the end of the day. They alleged that logging into the computer was “integral and necessary” and that following the call center’s protocol resulted in not being paid for all time they worked, which in turn resulted in unpaid overtime. The employees further alleged that the lost time was not de minimis.

The trial court dismissed this aspect of their claims, finding that booting up and shutting down computers was not a principal activity of the jobs of the call center employees. Rather, the employees were hired to answer customer phone calls and assist the customers. The trial court also determined that booting up and shutting down computers was also not integral and indispensable to the employee’s duties because they did not have to log in (or out) of the computer to take a customer’s call. The court likened the activity to an employee who was standing in line to clock in or out, which is normally not compensable.

On appeal, the Ninth Circuit concluded that the trial court erred in considering whether loading the timekeeping program to clock in was integral to the employee’s duties. The Ninth Circuit stated that the correct inquiry was whether “engaging the computer, which contains the phone program, scripts, customer information, and email programs, is integral to the employee’s duties.” Stated alternatively, the Ninth Circuit stated that the court should evaluate “the importance of booting up the computer to the employees’ primary duties of answering calls and scheduling rather than to their need to clock in using the electronic timekeeping system.” The Ninth Circuit reversed the dismissal of this claim and remanded the case back to the trial court to evaluate this question.

On remand, the trial court addressed whether the time the employees spent booting up and shutting down was de minimis. Activities under the Fair Labor Standards Act (FLSA) are considered de minimis when “the matter in issue concerns only a few seconds or minutes of work beyond the scheduled working hours.” This doctrine is generally concerned with the administrative practicality of recording small amounts of time.

The trial court again dismissed the plaintiffs’ claims, primarily because most of the employees testified it took mere seconds or a few minutes to turn the computer on and off. Therefore, the court determined the time was de minimis. If employees experienced some sort of delay in booting up or shutting down, the record contained evidence that employees sought to have their timecards adjusted.

The plaintiffs have again appealed the dismissal of their claims. Stay tuned for further developments on this issue, but employers should make sure they implement policies prohibiting off the clock work, and evaluating whether their time-keeping procedures comply with the FLSA and applicable state law.

REMINDER: EXPANDED PROTECTIONS FOR PREGNANT AND NURSING EMPLOYEES

By Samantha J. Wood

On June 27, 2023, the Pregnant Workers Fairness Act (“PWFA”) will go into effect.  This law, which was previously discussed here, extends the protections for pregnant workers by requiring employers with 15 or more employees to provide reasonable accommodations for pregnant employees and prohibits employment practices that discriminate against qualified employees affected by pregnancy, childbirth, or related medical conditions. The Act makes it unlawful for employers to take any of the following adverse actions:

  • Refuse to make reasonable accommodations to known limitations related to pregnancy, childbirth, or related medical conditions of a qualified employee, unless such accommodation would impose an undue hardship on the operation of the business;
  • Require a qualified employee to accept an accommodation other than a reasonable accommodation arrived at through an interactive process;
  • Deny employment opportunities to the employee if such denial is based on the need to make reasonable accommodations;
  • Require the employee to take paid or unpaid leave if another reasonable accommodation can be provided that would enable the employee to continue working; or
  • Take an adverse employment action against the employee because the employee requested or used a reasonable accommodation.

The EEOC has issued FAQs and a workplace poster, which are available here. The EEOC will begin accepting charges under the PWFA on Tuesday, June 27, 2023.

Also, the Providing Urgent Maternal Protections for Nursing Mothers (“PUMP”) Act, which was signed into law at the same time as the PWFA, went into effect on December 29, 2022. This law expanded workplace protections for employees who need to express breast milk following the birth of a child by requiring employers to provide to both exempt and non-exempt employees reasonable time to express breast milk in a private location other than a bathroom. The PUMP Act applies to all employers covered by the Fair Labor Standards Act, regardless of the size of their businesses. Employers with fewer than 50 employees are only exempt from the requirements of the PUMP Act if they can demonstrate that compliance with the provision would impose an undue hardship. The U.S. Department of Labor (DOL) recently released guidance on the PUMP Act, which is available here.

Covered employers must post a notice explaining employee’s rights under the PUMP Act.  The Wage and Hour Division has published an updated FLSA poster that reflects current pump at work requirements.

Employers should update their policies, procedures, and postings and advise management of these changes to ensure immediate compliance with these laws.

FFCRA REGULATIONS – INTERPRETATION

By Daniel Finerty, Sally Piefer & Oyvind Wistrom

On Wednesday, April 1st, the Department of Labor (DOL) released its regulations applicable to the Families First Coronavirus Response Act (FFCRA). This E-Alert provides an explanation and comments regarding the interpretations and how each may apply in practice.

Please note that these are interim regulations, not the final regulations, and are subject to change. In fact, a group of Congressional members have sent a letter to the DOL criticizing some of the regulations and interpretive guidance DOL has already provided. Some of the issues addressed in that letter include:

  • Whether an employer can require any sort of certification of the need for leave from an employee;
  • Whether an eligible employee has a right to emergency paid leave if the company furloughs the employee or has to close due to a “safer at home” order
  • Use of intermittent leave
  • Definition of a “health care provider” for purposes of who can advise an employee to self-quarantine
  • Definition of a “health care provider” for purposes of who may be exempted from the leave provisions

We will continue to monitor these important issues. Should you have any specific questions that are not addressed, please contact your Lindner & Marsack attorney or the Firm at (414) 273-3910 to seek counsel.

General Definitions

“Average Regular Rate” is calculated using the same method that is used under the Fair Labor Standards Act (FLSA) and includes commissions, tips and piece rates received by the Employee.

“Child Care Provider” is defined to include both a provider who receives compensation for providing child care services on a regular basis, as well as a friend, neighbor or family member who regularly cares for the Employee’s child, even if not licensed or compensated.

“Eligible Employee” for purposes of the Expanded Family and Medical Leave (EFMLA or EFML) means an Employee who has been employed for at least 30 calendars days with the Employer.  There is no prior work requirement for employees to qualify for Paid Sick Leave under the Emergency Paid Sick Leave Act (EPSLA or EPSL).

“Employer” is clarified to include any private employer or individual with fewer than 500 employees, as well as any Public Agency employing at least one employee.  A “Public Agency” is further defined to include the Government of the United States, the government of a State or political subdivision thereof; any agency of the United States (including Postal Service), a State, or a political subdivision of the State; or any interstate governmental agency.

“School” is defined to include both elementary school and secondary schools, which is further defined as a nonprofit institutional day or residential school, including charter schools that provides instruction as determined under State law.  For-profit private elementary and secondary schools are excluded from the definition of a school.

“Son or daughter” is given the same meaning as under the FMLA, and includes a biological, adopted, foster child, stepchild, a legal ward, or child of a person standing in loco parentis, who is under age 18; or 18 years of age or older who is incapable of self-care because of mental or physical disability.

“Telework” means work the Employer permits or allows an Employee to perform while the Employee is at home or at a location other than the Employee’s normal workplace.  An Employee is able to Telework if: (a) his or her Employer has work for the Employee; (b) the Employer permits the Employee to work from the Employee’s location; and (c) there are no extenuating circumstances (such as serious COVID-19 symptoms) that prevent the Employee from performing that work.

Definition of Employer

Generally, according to the DOL draft regulations, the definition of employer tracks the textual language of the FFCRA, the FFCRA Questions and Answers and other DOL summaries and guidance.

A private employer (“employer”), includes, but is not limited to, any private entity or individual who employs fewer than 500 employees. Such employers must provide Paid Sick Leave and Expanded Family and Medical Leave.

Employee Count

In order to determine the number of employees employed, an employer must count all full-time and part-time employees employed within the United States at the time the employee would take leave. All part-time employees should be counted as if a full-time employee; in addition, the employer should count “any [e]mployees on leave of any kind,” such as those on existing leave under the FMLA, worker’s compensation leave or other leave. Further, for counting purposes, the number of employees includes all employees currently employed, regardless of how long those Employees have worked for the Employer. The question of eligibility for leave is separately dependent upon whether or not the employee has worked for the employer for at least 30 days.

For purposes of counting employees of temporary placement agencies, employers must count employees who are jointly employed under the FLSA, see 29 CFR Part 791, by the Employer and another Employer (regardless of which Employer’s payroll the Employee appears on) and day laborers supplied by a temporary placement agency (regardless of whether the Employer is the temporary placement agency or the client firm).

However, employer can exclude from their count workers who are independent contractors, assuming properly classified as such under the FLSA, and employees who have been laid off or furloughed and have not subsequently been reemployed.

Joint Employers

To reach the correct number of employees, all common employees of joint employers or all employees of integrated employers must be counted together. A corporation is considered a single employer, including its separate establishments or divisions, and all of its employees must be counted together. Further, where one corporation has an ownership interest in another corporation, the two corporations are separate employers unless they are joint employers under the FLSA test. See 29 CFR Part 791. This test was recently rolled back by the Trump Administration and is unfavorable to aggregation of employees. The guidance tends to indicate that a large corporate entity cannot aggregate employees of all subsidiaries and divisions for counting purposes.

Integrated Employers

However, two or more entities should generally be considered to be separate employers unless they meet the integrated employer test under the FMLA. 29 CFR 825.104(c)(2). If two entities are an integrated employer under this test, then employees of all entities making up the integrated employer must be counted under the FMLA’s comparatively less strenuous integrated employer test. A determination of whether or not separate entities are an integrated employer is not determined by the application of any single criterion, but rather the entire relationship is to be reviewed in its totality. 29 C.F.R. § 825.104(c)(2). Factors considered in determining whether two or more entities are an integrated employer include common management; interrelation between operations; centralized control of labor relations; and, degree of common ownership/financial control. 29 C.F.R. § 825.104(c)(2).

Employers with questions regarding this analysis should work with counsel to ensure a proper counting under both the FLSA and the FMLA during the grace period while ensuring that adequate preparations are made to ensure compliance with the FFCRA mandates as may be necessary.

Eligible Employees

According to the FFCRA, an “eligible employee” means an employee who has been employed for at least 30 calendar days by the employer; however, employers should note this applies only with regard to employees who request EFMLA. Those employees who have not been employed for that duration do not become eligible for EFMLA until after employed for 30 days. By contrast, all employees are eligible for EPSL regardless of when hired or re-hired by the employer.

The regulations further refine “eligible employee” to include:

  1. Any employee on an employer’s payroll for the 30 calendar days immediately prior to the day that the employee’s leave would begin;
  2. Any employee laid off or otherwise terminated by the Employer on or after March 1, 2020, and rehired or otherwise reemployed by the Employer on or before December 31, 2020, provided that the Employee had been on the Employer’s payroll for 30 or more of the 60 calendar days prior to the date the Employee was laid off or otherwise terminated.

If an employee employed by a temporary placement agency is subsequently hired by the employer, the employer must count the days worked as a temporary employee for the employer toward the 30-day period. Finally, an employee who has been employed by an employer for at least 30 days is eligible for EFMLA regardless of whether or not the employee meets or does not meet the traditional FMLA eligibility criteria.

Exemption from Coverage

The exemptions from the obligation to provide EFMLA and EPSL includes employers with fewer than 50 employees (“small business” or “small employer”), health care providers and emergency responders who may be excluded by their employer from the definition of “eligible employee,” among other governmental entities.

Small Business

DOL’s prior guidance on this issue caused frustration among small business. Small business found themselves having to make adequate preparation in the event the exemption was narrowly defined while also hoping the exemption would be more clearly and broadly defined.

However, the regulations provide a comparatively more clearly delineated exemption for small businesses with fewer than 50 employees. These small employers do not have to provide employees with paid sick leave and expanded family and medical leave to care for children whose school or place of care is closed, or child care provider is unavailable, when such leave would jeopardize the viability of the business as a going concern. This FFCRA language is put into context by the regulations.

Using the definition “ongoing concern assumption” (“concern”) from the American Institute of Certified Public Accountants (AICPA), the regulations note that the definition permits companies to use the concern to defer prepaid expenses until a future accounting period to allow the entity to continue in business for the foreseeable future without the intention nor the necessity to liquidate, cease trading, or seek protection from creditors pursuant to laws or regulations and remain a viable business for the foreseeable future. The concern standard considers conditions or events in the aggregate. To utilize this exemption, an authorized officer of the small business must determine that:

  1. The leave requested under either the EFMLA or the EPSLA would result in the small business’s expenses and financial obligations exceeding available business revenues and cause the small business to cease operating at a minimal capacity;
  2. The absence of an employee or the employees requesting leave under either the EFMLA or the EPSLA would entail a substantial risk to the financial health or operational capabilities of the business because of their specialized skills, knowledge of the business, or responsibilities; or
  3. There are not sufficient employees who are able, willing, and qualified, and who will be available at the time and place needed, to perform the labor or services provided by the Employee or Employees requesting leave under either the EFMLA or the EPSLA and these labor or services are needed for the small business to operate at a minimal capacity.

As such, it is recommended that, the small business conduct an analysis of the impact of the EFMLA, the EPSLA or both under each of the criteria set forth above.

The explanation of regulation provides that a small business, for reasons 1., 2., and 3. above, may deny EPLS or EFMLA only to those otherwise eligible employees whose absence would cause the small business a hardship provided it examines whether its expenses and financial obligations to exceed available business revenue, whether use of either the EFMLA or the EPSL pose a substantial risk, or would prevent the small employer from operating at minimum capacity.

Notably, while the explanation of this regulation uses the conjunctive “and,” and seems to indicate that all three conditions must be met, as noted above, the actual text of the regulation uses the disjunctive “or,” and, as a result, permits a small business to deny requests for either the EFMLA or the EPSL if such leave may impact any one of the three conditions outlined above.

There appears to be some suggestion by DOL that this analysis must be conducted when a request for leave either the EFMLA or the EPSL is received from an employee. This conclusion is supported by later indication that, regardless of whether a small business chooses to exempt “one or more employees,” the small business is still obligated to post both the required the EFMLA notice and the EPSL notice.

Accordingly, it is reasonable to assume that a small employer can conduct an initial analysis with regard to the application of the exemption and conduct a partial analysis each time a request is made by any employee deemed ineligible to provide an updated analysis.

Regardless, the regulation provides that a small employer must document the facts and circumstances that meet these criteria to justify such denial and maintain all such documents within its own files. As noted, because a small employer is not normally covered by the FMLA, its records do not need to be the type of formal records required by that law. However, the records should be sufficient to defend the small business if an employee files a complaint with the DOL contesting the small business’s decision to exempt its employees. The documentation may be reviewed by a DOL investigator during an investigation, but rather should retain such records for its own files. As a result, while a small business may create a form to analyze this issue in each instance, such examination likely should be conducted in order to fend off any subsequent DOL claims.

Health Care Providers and Emergency Responders

The regulatory language initially notes that “an [e]mployer whose [e]mployee is a health care provider or an emergency responder may exclude such [e]mployee from the EPSLA… and/or the EFML[]A’s… requirements.” Following up on the prior guidance provided by Questions and Answer Nos. 56-57, the regulations further clarify the extent of this exemption, which permits these employers to remove employees from the definition of “eligible employees.”

Health Care Providers

A health care provider that may be exempted from the EFMLA and/or EPSL obligations by their employer under the FFCRA is broadly defined to include “anyone employed at any doctor’s office, hospital, health care center, clinic, post-secondary educational institution offering health care instruction, medical school, local health department or agency, nursing facility, retirement facility, nursing home, home health care provider, any facility that performs laboratory or medical testing, pharmacy, or any similar institution, Employer, or entity” including “any permanent or temporary institution, facility, location, or site where medical services are provided that are similar to such institutions.”

In a more detailed fashion, the regulations note, as did Question and Answer Nos. 56-57, that the broadly-worded definition includes:

  1. Any individual employed by an entity that contracts with any of these institutions described above to provide services or to maintain the operation of the facility where that individual’s services support the operation of the facility;
  2. Anyone employed by any entity that provides medical services, produces medical products, or is otherwise involved in the making of COVID-19 related medical equipment, tests, drugs, vaccines, diagnostic vehicles, or treatments; and
  3. Any individual that the highest official of a State or territory, including the District of Columbia, determines is a health care provider necessary for that State’s or territory’s or the District of Columbia’s response to COVID-19.

Because the term “health care provider” is used elsewhere in the regulations, this definition applies only for the purpose of determining whether an employer may elect to exclude an employee. The other definition of “health care provider” is the traditional definition used within the FMLA and the EFMLA as those providers that can provider medical certification of the need for leave.

Emergency Responders

An emergency responder is anyone necessary for the provision of transport, care, healthcare, comfort and nutrition of such patients, or others needed for the response to COVID-19 including, but not expressly limited to, the following:

  1. Military or national guard, law enforcement officers, correctional institution personnel, fire fighters, emergency medical services personnel, physicians, nurses, public health personnel, emergency medical technicians, paramedics, emergency management personnel, 911 operators, child welfare workers and service providers, public works personnel; and,
  2. Persons with skills or training in operating specialized equipment or other skills needed to provide aid in a declared emergency; and,
  3. Individuals who work for such facilities employing these individuals and whose work is necessary to maintain the operation of the facility; and,
  4. Any individual whom the highest official of a State or territory, including the District of Columbia, determines is an emergency responder necessary for that State’s or territory’s or the District of Columbia’s response to COVID-19.

One cautionary note is that the Background section of the regulations explain, at page 65, that “although the rule exempts certain health care providers and emergency responders from the definition of eligible employee for purposes of the FFCRA, their employers may have some employees who do not meet this definition, so these employers may still be impacted by the provisions of the FFCRA.” However, as a result of the fact that the regulations do not further clarify which employees may not meet the broadly-worded definitions, this may be an area rife for future disputes.

Paid Leave entitlements under Emergency Paid Sick Leave (EPSL)

Under the EPSL, a covered Employer must provide to each of its Employees Paid Sick Leave to the extent that an Employee is unable to work (including telework) due to any of the following reasons:

(i) The Employee is subject to a Federal, State, or local quarantine or isolation order related to COVID-19;

(ii) The Employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;

(iii) The Employee is experiencing symptoms of COVID-19 and seeking medical diagnosis from a health care provider;

(iv) The Employee is caring for an individual who is subject to an order as described in (i) or directed as described in (ii) of this subsection;

(v) The Employee is caring for his or her Son or Daughter whose School or Place of Care has been closed for a period of time, whether by order of a State or local official or authority or at the decision of the individual School or Place of Care, or the Child Care Provider of such Son or Daughter is unavailable, for reasons related to COVID-19; or

(vi) The Employee has a substantially similar condition as specified by the Secretary of Health and Human Services, in consultation with the Secretary of the Treasury and the Secretary of Labor. The substantially similar condition may be defined at any point during the Effective Period, April 1, 2020, to December 31, 2020.

Under subsection (i), an Employee is “subject to a Quarantine or Isolation Order” if he or she is subject to a quarantine, isolation, containment, shelter-in-place, or stay-at-home order issued by any Federal, State, or local government authority that caused the Employee to be unable to work even though his or her Employer has work that the Employee could perform, but for the order.  An employee may not take paid sick leave where the Employer does not have work for the Employee as a result of the order or other circumstances.

Under subsection (ii), an Employee is “advised by a health care provider to self-quarantine” where a health care provider (as defined under 29 CFR § 825.102 (1)) advises the Employee to self-quarantine (1) because (a) the Employee has COVID-19; (b) the Employee may have COVID-19; or (c) the Employee is particularly vulnerable to COVID-19; and (2) following the advice of the health care provider to self-quarantine prevents the Employee from being able to work or Telework.

Under subsection (iii), an Employee will be deemed to be “seeking medical diagnosis for COVID-19” where the Employee is experiencing symptoms of COVID-19 and he or she is seeking a medical diagnosis involving any of the following symptoms: (a) fever; (b) dry cough; (c) shortness of breath; or (d) any other COVID-19 symptoms identified by the U.S. Centers for Disease Control and Prevention.  Any Paid Sick Leave taken for this reason is limited to the time the Employee is unable to work because the Employee is taking affirmative steps to obtain a medical diagnosis, such as making, waiting for, or attending an appointment for a test for COVID-19.

Under subsection (iv), “caring for an individual” means caring for an Employee’s immediate family member, a person who regularly resides in the Employee’s home, or a similar person with whom the Employee has a relationship that creates an expectation that the Employee would care for the person if he or she were quarantined or self-quarantined.  This does not include persons with whom the Employee has no personal relationship.  In order for an Employee to qualify under this subsection, the “individual” for whom they are caring must be (1) subject to a quarantine or isolation order; or (2) has been self-quarantined by a health care provider because (a) the individual has COVID-19; (b) the individual may have COVID-19 due to known exposure or symptoms; or (c) the individual is particularly vulnerable to COVID-19.  An Employee caring for an individual may not take Paid Sick Leave where the Employer does not have work available for the Employee.

Under subsection (v), an Employee is entitled to paid sick leave to care for a son or daughter whose school or Place of Care has closed, or whose Child Care Provider is unavailable, for reasons related to COVID-19, only if no there is no other suitable person to care for the Son or Daughter during the period of the leave.  This provision would seem to indicate that two parents cannot simultaneously take paid sick leave to care for the same child.  An Employee caring for his Son or Daughter may not take Paid Sick Leave where the Employer does not have work for the Employee.

Emergency Family and Medical Leave (EFMLA)

Similarly, under the EFMLA, an eligible Employee may take emergency leave where the Employee is unable to work due to a need to care for his or her Son or Daughter whose School or Place of Care has been closed, or whose Child Care Provider is unavailable, for reasons related to COVID-19.  An Eligible Employee has the need to take EFMLA for this purpose only if no other suitable person is available to care for his or her Son or Daughter during the period of such leave.  An Employee caring for his Son or Daughter may not take Paid Sick Leave where the Employer does not have work available for the Employee.

Amount of Paid Sick Leave

A full-time Employee who is scheduled to work at least 40 hours per week is entitled to up to 80 hours of EPLS.  An Employee is still considered a full-time Employee if he or she does not have a normal weekly schedule, but the Employee averages at least 40 hours per week during the six-month period preceding the leave.

A part-time Employee is entitled to take EPSL equal to the number of hours that the Employee is typically scheduled to work over two workweeks.  If the Employee does not have a normal weekly schedule, and the Employee has worked for at least six months, he or she is entitled to EPSL equal to 14 times the average number of hours the Employee was scheduled to work each calendar day during that six-month period.  If the Employee has worked less than six months, then the leave amount is equal to 14 times the average number of hours that the Employer and Employee agreed the Employee would work, on average, each calendar day.  If there is no agreement, then leave entitlement is equal to 14 times the average number of hours that the Employee worked each calendar day, over the entire period of employment.  Hours that a part-time Employee took leave from the employer is also counted in these calculations.

Amount of Expanded Family and Medical Leave

An Eligible Employee is entitled to take up to 12 workweeks of EFMLA between April 1, 2020 and December 31, 2020.  Any leave taken under the EFMLA counts toward the total 12-week entitlement that the Employee would be entitled to take under the standard FMLA.  Additionally, an Eligible Employee may elect, and the Employee may require an Eligible Employee, to substitute any accrued paid vacation leave, personal leave, or paid time off to cover a portion of the Employee’s salary during the first two weeks of EFMLA.  If an Eligible Employee is also eligible to take EPSL leave during those two weeks. There appears to be a conflict between the regulations and the DOL’s Q&A’s on whether an Employer can force substitution of paid leave.

Employee Notice of Need for Leave

The DOL encourages employees to notify an employer of their need for EFMLA or EPSL as soon as practicable.  If an employee fails to give proper notice, an employer should notify the employee and allow the employee an opportunity to provide required documentation before denying the leave.  Employers may require employees to follow their reasonable notice procedures after the first workday the employee takes EPSL.  Whether an employer’s notice procedure is reasonable will be determined on a case-by-case basis.

Notice may not be required in advance – and may only be required after the first workday that an employee takes EPSL or EFMLA.  Notice may be given by an employee’s spokesperson (e.g. spouse) if the employee is unable to do so personally.

Documentation of Need for Leave 

An employer may only require documentation which includes: (i) the employee’s name; (ii) dates for which leave is requested; (iii) qualifying reason for the leave; and (iv) oral or written statement that the employee is unable to work because of the qualifying reason.

In addition, an employer can require certain additional information related to EPSL:

  • If the employee is taking leave because s/he has been issued a quarantine/isolation order, the employee must provide the name of the governmental entity that issued the order.
  • If the employee needs leave due to being advised to self-quarantine, the employee must provide the name of the health care provider who advised the employee to self-quarantine.
  • If the employee needs leave to care for another who has been issued a quarantine/isolation order or who has been advised to self-quarantine, the employee must provide the name of the person being cared for, their relationship to the employee and either (i) the name of the governmental entity that issued the order or (ii) the name of the health care provider who advised the employee to self-quarantine.
  • If the employee is taking leave because a school or place of care is closed or provider is unavailable, the employee must provide (i) the name of the child/ren being cared for; (ii) the name of the school/child care that has closed or the name of the provider who is unavailable and (iii) a representation that no other suitable person will be caring for the child/ren during the period the employee is taking EPSL or EFML.

Finally, an employer can request an employee to provide additional material needed for the employer to request the tax credits, and an employer need not provide leave if materials sufficient to support the tax credits are not provided. Additional information on this point is noted below.

Intermittent Leave

Employees are permitted to take intermittent leave for EFML and for some EPSL provisions in any increment of time acceptable to the employer.  Intermittent leave is not permitted, however, for leave taken where (i) the employee is subject to a quarantine or isolation order, (ii) the employee has been advised to self-quarantine by a health care provider, (iii) the employee is experiencing COVID-19 symptoms and is seeking a medical diagnosis or (iv) the employee is caring for an individual who is subject to a quarantine/isolation order or has been advised to self-quarantine by a health care provider.

An intermittent arrangement must clearly be understood by the parties.  We agree with the DOL’s recommendation that the intermittent arrangement should be reduced to writing.

If an employee is allowed or directed to Telework, the employee can use EFML or EPSL when the employee is unable to Telework because of a COVID-19-related reason.  The regulations clarify that if leave is permitted intermittently, only the amount of leave actually taken by the employee will count toward his/her leave entitlement.  For example, if an Employee needs only 4 hours of EFMLA each day because s/he can Telework 4 hours, then the Employee will only have taken 20 hours of EFMLA during that week. 

Interplay between EFMLA and EPSL

The regulations also clarify that if an Employee needs leave because a child’s school or place of care is closed, or where the provider is unavailable, the Employee is allowed to take both EPSL and EFMLA, and the benefits run concurrently.  For example, if Susan needs leave to care for her children because her daycare facility is closed, and if she has not already used her EPSL, she is allowed to use the 2 weeks of EPSL to cover the first 2 weeks of unpaid EFMLA, and then she is eligible for another 10 weeks of EFMLA.  If, however, Susan had already used her 2 weeks of EPSL to care for a family member suffering from COVID-19, then Susan’s first 2 weeks of EFMLA are unpaid, and she remains eligible for 10 weeks of EFMLA.  As noted earlier, there is a conflict in the regulations on whether paid time can be substituted for unpaid time. 

Interplay between EFMLA and Traditional FMLA

The regulations acknowledge that some employers already have to comply with the FMLA.  If, for example, an employee has already taken traditional FMLA for another qualifying reason during the applicable leave year, the employee can use the remaining portion of the 12 workweeks for EFMLA.  If an employee has already exhausted the full 12 workweeks of traditional FMLA, s/he is not eligible for EFMLA, but is allowed to use EPSL.  Similarly, if an employee has not used traditional FMLA and does not use all available EFMLA, the employee may still use the remaining 12 workweeks for traditional FMLA purposes.The regulations also clarify that an employee is allowed to take no more than 12 workweeks of EFMLA—even if the time period spans two of the employer’s leave years. For example, if the company’s 12-month period begins on July 1, and the employee took 7 weeks of EFMLA in May and June, 2020, the employee could take only up to 5 additional weeks of EFMLA between July 1 and December 31.

As we know, the pay for EFMLA is 2/3 of the employee’s regular rate of pay, up to $200/day.  However, the employer and employee may agree that an employee may use available paid time to supplement the unpaid 1/3 of EFMLA.  The employer may not require the employee to supplement the unpaid time with his/her available paid time. 

Health Care Coverage During Leave

When an employee is taking EPSL or EFMLA, the employer must maintain the employee’s group health coverage on the same conditions as if the employee continued to work during the leave period.  For example, if an employee has family coverage before taking leave, the employee must be allowed to continue family coverage while on leave.  Maintenance of individual health insurance policies purchased by an employee, however, are the responsibility of the employee.

Employees remain responsible for paying their portion of group health plan benefits while taking leave. Increases or decreases to the employee portion must be applied to employees on leave.  The employee’s share of the premium must be paid by the method normally used during any paid leave – e.g., by payroll deduction.  During any unpaid leave or if an employee’s pay during leave is insufficient to cover the employee’s share of the premiums, an employer can obtain payment from the employee as provided under traditional FMLA, including making payment due at the same time as it would be made if by payroll deduction.

An Employee may choose not to retain group health plan coverage while the employee is taking EPSL or EFMLA.  In such event, when an employee returns from leave, coverage has to be reinstated on the same terms as prior to taking leave, without a new qualifying period or other requirements.

If an employer offers a new health plan or changes its health plan while an employee is on covered leave, the employee is allowed to make changes to the same extent that would have been allowed had the employee not been on leave.  Changes in coverage, premiums and deductibles which apply to all employees also apply to employees taking leave.  Notice of changes must be given to an employee, and if an employee requests changed coverage, the employer must provide it.

An employer’s obligation to maintain health benefits while an employee is taking EPSL or EFMLA ends if the employment relationship would have terminated if the employee had not taken leave (e.g., the employee fails to return from leave or entitlement to leave stops because the employer closes its business). In such instance, COBRA rules apply. 

Return to Work

Generally, an employee is entitled to be restored to the same or equivalent position when returning from EPSL and EFMLA.  However, an employee is not protected from employment actions, such as layoffs, which would have affected the employee regardless of whether the employee took leave.

Key employees, as defined by the FMLA, who take EFMLA can be denied restoration if denial is necessary to prevent substantial and grievous economic injury to the employer’s operations.

Finally, employers with less than 25 employees may deny restoration to an employee who takes EFMLA if all of the following exist:

  • The employee took leave to care for a child whose school or place of care was closed or provider was unavailable for COVID-19 related reasons;
  • The position held when leave began does not exist due to economic conditions or other operating conditions caused by a public health emergency during the leave;
  • The employer makes reasonable efforts to restore the employee to an equivalent position, with equivalent benefits, pay and other terms/conditions; and
  • Where an employer’s reasonable efforts fail, the employer makes reasonable efforts to contact the employee during a 1-year period if an equivalent position becomes available. The 1-year period begins on the earlier of the date the leave ended or the date 12 weeks after the employee’s leave began. 

Employer Notice

Last week, we provided you with access to the DOL’s model notice. The EPSL notices can be found here and the EFMLA notice can be found here.

An employer can satisfy its obligation to post by posting in all of its facilities. However, if you have employees who are already working remotely, the regulations allow you to communicate the notice to those employees through email or by posting on your internal or external website.  Interestingly, you need only provide the notice in English; translation to another language is not required.

Employer Recordkeeping

Employers are required to retain all documents supporting the need for an employee’s leave for 4 years – regardless of whether the request was granted to denied. If an employee provided oral statements to support a request for leave, it is the employer’s responsibility to document the request and maintain the required information described above for 4 years.

If an employer denies EPSL or EFMLA, the determination must be documented and retained for 4 years.

In order to claim tax credits from the IRS, an employer should maintain the following for 4 years:

  • Documentation to show how the employer determined the amount of EPSL and EFMLA to employees eligible for the credit, including records of work, telework, EPLS and EFMLA;
  • Documentation to show how the employer determined the amount of qualified health plan expenses allocated to the wages;
  • Copies of completed IRS Forms 7200 submitted to the IRS;
  • Copies of completed IRS Forms 941 submitted to the IRS, or if you use a third-party payer to meet your tax obligations, records of information provided to that third-party payer substantiating entitlement to the credit claims on the IRS Form 941; and
  • The other documentation described in the tax credit section below.

Documentation Needed to Substantiate Eligibility for Tax Credits

The IRS has published FAQs relating to the tax credits.  At this time, the IRS says the following information should be obtained to substantiate eligibility for the EFMLA and EPSL tax credits:

A written request for the applicable leave from the employee in which the employee provides:

  1. The employee’s name;
  2. The date or dates for which leave is requested;
  3. A statement of the COVID-19 related reason the employee is requesting leave and written support for such reason; and
  4. A statement that the employee is unable to work, including by means of telework, for such reason.

In the case of a leave request based on a quarantine order or self-quarantine advice, the statement from the employee should include the name of the governmental entity ordering quarantine or the name of the health care professional advising self-quarantine, and, if the person subject to quarantine or advised to self-quarantine is not the employee, that person’s name and relation to the employee.

In the case of a leave request based on a school closing or child care provider unavailability, the statement from the employee should include the name and age of the child (or children) to be cared for, the name of the school that has closed or place of care that is unavailable, and a representation that no other person will be providing care for the child during the period for which the employee is receiving family medical leave and, with respect to the employee’s inability to work or telework because of a need to provide care for a child older than 14 during daylight hours, a statement that special circumstances exist requiring the employee to provide care.

Effect on Other Laws, Employer Practices and Collective Bargaining Agreements

An employee’s entitlement to EPSL and EFMLA is in addition to other rights or benefits employees have under any federal, state or local law (except FMLA), under a collective bargaining agreement (CBA) or under any employer policy that existed prior to April 1, 2020.  In addition, EPSL must be used before an employee can be forced to use any other pay to cover a leave provided under the EPSL.

In addition, an employer cannot deny, postpone or delay EPSL or EFMLA to any employee who may have taken leave prior to April 1, 2020 for any COVID-19-related reasons—with the exception of employees who may have already exhausted traditional FMLA.  Similarly, employees are not entitled to retroactive compensation through EPSL or EFMLA for leave taken prior to April 1, 2020.

Employees are not entitled to be paid out for unused EPSL or EFMLA upon employment separation or when the law sunsets on December 31, 2020.

Interestingly, EPSL is provided on a 1-time-use basis – meaning that if a full-time employee uses less than 80 hours of EPSL and then changes employers, the employee is only entitled to the remainder of the 80 hours from the new employer – provided the new employer is covered by the law.  Notably absent in the regulations is a process or procedure by which the new employer is able to ascertain how to obtain this information from the employee or the former employer.

Multi-Employer Plans

Employers who are signatory to multi-employer CBAs can satisfy their obligations under EPSL and EFMLA by making contributions to a multiemployer fund, plan or other program.  Contributions must be based on the hours of EPSL and EFMLA an employee is entitled to receive.  The fund, plan or program must allow employees to access payments.  Alternatively, an employer signatory to a multiemployer CBAs may satisfy its obligations by other means, provided the means are consistent with existing bargaining obligations and any applicable CBA.

Employer Prohibitions

As expected, employers may not discharge, discipline or discriminate against an employee who takes EPSL or EFMLA.  Similarly, you may not discharge, discipline or discriminate against an employee because the employee either files a complaint, institutes a proceeding relating to the leave or has testified or is about to testify in such a proceeding.

Employees who believe that they have been discharged, disciplined or discriminated against for taking or attempting to take EFMLA have a private cause of action against the employer only if the employer is otherwise subject to traditional FMLA.

Temporary Period of Non-Enforcement

As DOL previously noted in its Field Assistance Bulletin 2020-1, DOL not bring enforcement actions against any employer for alleged violations of the FFCRA until April 17, 2020, provided that the employer has made reasonable, good faith efforts to comply.  For purposes of this non-enforcement position, an employer who may be found to have violated the FFCRA acts “reasonably” and “in good faith” when all of the following facts are present:

  1. The employer remedies any violations, including by making all affected employees whole as soon as practicable. As explained in a Joint Statement by the Department, the Treasury Department and the Internal Revenue Service (IRS) issued on March 20, 2020, this program is designed to ensure that all covered employers have access to sufficient resources to pay required sick leave and family leave wages.
  1. The violations of the Act were not “willful” based on the criteria set forth in McLaughlin v. Richland Shoe, 486 U.S. 128, 133 (1988) (the employer “either knew or showed reckless disregard for the matter of whether its conduct was prohibited…”).
  1. The Department receives a written commitment from the employer to comply with the Act in the future.

With that said, provided employers are able to establish its reasons and thought process used when applying the regulations to a particular set of circumstance with good faith, such information will provide a defense to a DOL enforcement action provided remedies any violations when necessary and commits to further compliance.

PRESIDENT SIGNS FAMILIES FIRST CORONAVIRUS RESPONSE ACT

By Sally Piefer and Oyvind Wistrom

Last evening the President signed the Families First Coronavirus Response Act. The legislation had passed the Senate only hours before. The Response Act has a number of provisions which employers must be aware of—an expansion of the federal Family & Medical Leave Act (FMLA) and a paid sick time.

Expansion of the FMLA

The expanded provisions, which provide coverage for public health emergency leave, are in place through December 31, 2020, and this public health emergency leave covers all employers with fewer than 500 employees. This is a significant departure from the current provisions of the FMLA—which apply to employers with 50 or more employees who work within a 75-mile area. An eligible employee is one who has been employed with the employer for at least 30 calendar days.

The new leave provides coverage for employees who are unable to work (or telework) because they need leave to care for a child (under age 18) if the child’s elementary or secondary school or place of care has been closed or if the child care provider is unavailable because of a public health emergency. Of course, the term “public health emergency” means an emergency with respect to COVID-19 declared by a federal, state or local authority. This is the only qualifying need for emergency FMLA leave and is a departure from the earlier version of the bill.

The specific leave provisions allow an employee to take up to 12 weeks of job-protected leave. If the need for such leave is foreseeable, the employee must provide notice of leave as soon as practicable. The first 10 days of leave are unpaid, but the employee may substitute available paid leave. After the first 10 days, the employer must provide paid leave for each day the employee takes leave, up to a maximum of 12 total weeks of leave. Pay for the employee must be at no less than 2/3 of the employee’s regular rate of pay for each hour the employee would normally be scheduled to work. Special rules are in place for employees who have variable work schedules. The pay is also capped at $200 per day and $10,000 in total.

Employees are also generally entitled to reinstatement—but restoration is not required of an employer with less than 25 employees if (i) the position the employee held does not exist due economic conditions or other conditions caused by the public health emergency; (ii) the employer makes a reasonable effort to restore the employee to a position similar to the one held before the leave, with equivalent pay, benefits and other terms and conditions of employment; and (iii) if the employer’s reasonable efforts fail, the employer makes reasonable efforts to contact the employee if an equivalent position becomes available during the earlier of the 1-year period after the public health emergency concludes or the date which is 12 weeks after the date the employee’s leave began.

Employers who are subject to a multi-employer collective bargaining agreement (CBA) can fulfill their obligations under this FMLA expansion by making contributions to the fund, plan or program based on the paid leave provisions provided under the CBA.

Emergency Paid Sick Leave

The Emergency Paid Sick Leave Act provisions of the legislation mandate that employers who employ less than 500 employees provide limited paid sick leave to employees who are unable to work (or telework) because of leave needed for any of the following reasons:

  1. The employee is subject to a state, federal or local quarantine or isolation related to COVID-19;
  2. The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
  3. The employee is experiencing symptoms of COVID-19 and is seeking a medical diagnosis;
  4. The employee is caring for an individual subject to a state, federal or local quarantine or isolation related to COVID-19;
  5. The employee is caring for their child if the child’s school or place of care has been closed, or the child care provider is unavailable due to COVID-19 precautions; or
  6. The employee is experiencing any other substantially similar conditions specified by the Secretary of HHS in consultation with the Secretary of the Treasury and the Secretary of Labor.

All employees are eligible for the emergency paid sick leave—regardless of the length of their employment. After the first workday an employee needs leave, the company may require an employee to follow its normal call-in procedures to continue receiving paid sick time. However, employers may not require employees to first exhaust other available paid leave before providing emergency paid sick leave. This emergency leave is in addition to, other leave which an employer may already provide under existing policies or CBAs.

For full-time employees, the paid sick leave is limited to 80 hours; for part-time employees, the paid leave is equal to the number of average hours that an employee works during a 2-week period.

The sick leave is paid at the employee’s regular rate of pay for qualifying leave reasons 1-3 above, but only at 2/3 of the employee’s regular rate of pay for qualifying reasons 4-6. Paid sick leave is calculated at not less than the greater of the following: (i) the employee’s regular rate of pay, (ii) the federal minimum wage or (iii) the state minimum wage in the state in which the employee is employed. The pay is further limited and shall not exceed $511 per day (or $5,110 in the aggregate) for leave connected with reasons 1-3 above, and shall not exceed $200 per day (or $2,000 in the aggregate) for reasons 4-6 above. Different rules apply for employees with variable work schedules.

This paid sick leave does not carry over from one year to the next, and this part of the legislation also sunsets on December 31, 2020. Employers may not discriminate against, discipline or discharge an employee who takes emergency paid sick leave, files a complaint or initiates a lawsuit about the emergency leave, or otherwise participates in a proceeding. Employers who violate the Act are subject to the same penalties as are provided for violations of the Fair Labor Standards Act (FLSA).

Small employers employing fewer than 50 employees may be able to claim an exemption to the requirements of the paid sick leave portion of the Act if it can show that compliance would jeopardize the viability of the business as a going concern.

Tax Credits for Employers

The Act also provides a series of refundable tax credits for employers who are required to provide the Emergency Paid Sick Leave and Emergency Paid Family and Medical Leave described above. These tax credits are allowed against the employer portion of social security and Medicare taxes (collectively referred to as FICA). While this limits application of the tax credit, employers will be reimbursed if their costs for qualified sick leave or qualified family leave wages exceed the taxes they would owe.

Specifically, employers are entitled to a refundable tax credit equal to 100% of the qualified sick leave wages paid by the employer for each calendar quarter in adherence with this Act. The qualified sick leave wages are capped at $511 per day ($200 per day if the leave is for caring for a family member or child).

Similarly, employers are entitled to a refundable tax credit equal to 100% of the qualified family leave wages paid by the employers for each calendar quarter in accordance with this Act. The qualified family leave wages are capped at $200 per day for each individual up to $10,000 total per calendar quarter. Only those employers who are required to offer Emergency FMLA and Emergency Paid Sick Leave may receive these credits.

Next Steps

The Secretary of Labor will have the authority to (i) issue regulations, (ii) exclude certain health care providers and emergency responders from the definition of an eligible employee and (iii) exempt small businesses with less than 50 employees where compliance would jeopardize the viability of the business.

The effective date of the new mandate will be no later than 15 days after the Act was signed by President Trump, which means an effective date no later than April 2, 2020.  Also, a model notice that employers will need to post, should be available from the Secretary of Labor within the next week, and regulations for calculating the paid sick leave are supposed to be available within the next 15 days.

We will continue to monitor further COVID-19 developments. If you have questions or concerns, please contact your Lindner & Marsack attorney.

 

This Legal Alert provides an overview of a specific developing situation. It is not intended to be, and should not be construed as, legal advice for any particular fact situation.

 

GOVERNOR WALKER PROPOSES TO ELIMINATE THE LABOR AND INDUSTRY REVIEW COMMISSION

By:  Jonathan T. Swain

February 13, 2017

In his recently published proposed biennial budget for fiscal years 2018 and 2019, Governor Walker has proposed to eliminate the Wisconsin Labor and Industry Review Commission (LIRC).  LIRC is an independent three member commission appointed by the Governor that currently handles all appeals of Administrative Law Judge (ALJ) decisions for unemployment compensation cases, worker compensation claims, as well as state fair labor standards cases and fair employment cases in the Equal Rights Division and public accommodation cases.  LIRC would be phased out over the next three fiscal years.

Presently, LIRC has the authority to affirm, overturn and remand ALJ decision in these areas.  LIRC decisions are appealable to the State’s circuit courts.

Under Governor Walker’s proposal, Worker Compensation ALJ decisions will be reviewable by the State Department of Administration, while jobless claims and Equal Right Division decisions will be Agency administrators.  In his budget statement, Governor Walker stated that the proposed elimination of LIRC will eliminate “an unnecessary layer of government” and will make this second layer of review decisions occur much more quickly.

Of course, this is a proposed budget and, as such, is subject to negotiation with the legislature and subsequent amendment.  Further, stakeholders in the business, labor and legal community have yet to weigh-in on the Governor’s proposal.  As this issue advances, we will keep you up to date and informed.

Department of Labor Issues Final Rule on FLSA Exemptions

By Oyvind Wistrom

The U.S. Department of Labor issued its much-anticipated final overtime exemption rule on May 18, 2016, raising the minimum salary threshold required to qualify for the Fair Labor Standards Act’s (FLSA) “white collar” exemptions to $47,476 per year ($913 weekly).  The new salary test will apply to all administrative, professional, executive, outside sales and computer employees who are treated as exempt and salaried under the FLSA.  This new rule will affect approximately 4.2 million U.S. workers who are currently treated as exempt, but who would not satisfy the new salary test under the FLSA.

The rule has been a long time coming.  The first version of the new rule was proposed in June 2015 and drew approximately 300,000 public comments between June and September 2015.  That first version of the rule would have more than doubled the salary threshold from $23,660 per year ($455 weekly) to $50,440 per year ($970 weekly).  The final rule just issued still doubles the salary threshold, but reduced the proposed salary threshold by approximately $3,000.  The rule will take effect on December 1, 2016.

Under previous regulations, employees had to meet certain tests related to job duties and be paid at least $23,660 per year ($455 weekly) on a salary basis to be exempt from the minimum wage and overtime requirements under the FLSA.  While DOL’s final rule raises the salary level significantly, non-discretionary bonuses and incentive payments can now count for up to 10 percent of the new salary level, provided the payments are made at least quarterly.  This change has been viewed by some commentators as DOL “throwing employers a bone” in the final rule.  In addition, this new salary threshold will be automatically updated every three years to ensure it stays at the 40th percentile benchmark, according to the Obama administration.  The final rule also raises the overtime eligibility threshold for “highly compensated” workers from $100,000 annually to $134,004 annually.

Employers have a range of options in responding to the updated standard salary level.  For all employees who are currently treated as exempt under the FLSA’s “white collar” exemptions, but who are paid less than $47,476 per year ($913 weekly), the following options exist:

  • Increase the salary of the employee to at least the new salary level to maintain his or her exempt status;
  • Convert the salary to an hourly rate and pay the overtime premium (one and one-half times the employee’s regular rate of pay) for all hours worked in excess of 40 hours in a week;
  • Control, reduce or eliminate overtime hours;
  • Reduce the amount of pay allocated to base salary (provided that the employee still earns at least the applicable hourly minimum wage) in order to account for overtime hours worked in excess of 40 hours (paying employee time and one-half for all overtime hours), to hold total weekly pay constant; or
  • Use some combination of these responses.

In determining which course of action to utilize, employers should analyze their workforce and determine which solution best suits their particular needs.  For salaried, exempt employees who regularly work overtime and currently earn slightly below the new standard salary level, employers may be best suited to raise the employees’ salaries to the new salary level to retain the “white collar” exemption.  For employees who rarely or almost never work overtime hours, employers may be best suited to start treating those employees as non-exempt, pay the employees a standard hourly rate, and pay the overtime premium when necessary.

If you have questions about this material, please contact Oyvind Wistrom by email at owistrom@lindner-marsack.com or by phone at (414) 273-3910, or any other attorney you have been working with here at Lindner & Marsack, S.C.

Awaiting The Implementation Of The Overtime Regulations…

By: Laurie A. Petersen and Samantha J. Wood

Employers continue to question when the Department of Labor (“DOL”) will finalize the changes to the Fair Labor Standard Act’s overtime regulations. Because the comment period ended on September 4, 2015, it was previously expected that the DOL would issue a final rule in early 2016.

However, last month at a Labor and Employment Law Conference, the Solicitor of Labor, M. Patricia Smith, stated that the DOL likely will not issue its final rule until late 2016. This is because the DOL must sift through approximately 270,000 comments that it received during the proposed rule’s commentary period (three times the amount of comments received in 2004 when the overtime rules were last updated).

Because the estimated timing of the final rule may coincide with the 2016 election, political commentators have suggested that the election may have an effect on the rulemaking process. For instance, if the proposed rule is implemented just prior to the election, it may be used as a campaign platform. Because of the uncertainties of an election, the current administration may impose a very short window of time for the rule to take effect (30-60 days) to ensure the rule is not reversed by the next administration. If the rule is not finalized or effective prior to a new administration, it is possible that the rule could be delayed or substantially changed.

Irrespective of the possible effects the election may have on the final rule, employers should plan and develop a strategy in the event the proposed rule will takes effect in Q3 or 4 of 2016. In their 2016 planning strategies and budget considerations, employers should analyze which employees will and will not be affected by the proposed changes, and should determine the appropriate steps to ready compliance should the rule take effect. Employers may choose to increase employee salaries to meet the new salary level threshold (estimated to be $970/week) or may reclassify employees from exempt to non-exempt. If the employer chooses to reclassify its employees from exempt to non-exempt, it will also need to consider the impact of overtime pay, the impact on employee morale, options to avoid overtime pay (such as hire additional staff), and implementation and communication of time-keeping policies.

If you have questions about this material, please contact Laurie A. Petersen or Samantha J. Wood by email at lpetersen@lindner-marsack.com or swood@lindner-marsack.com, or any other attorney you have been working with here at Lindner & Marsack, S.C.

DOL ISSUES GUIDANCE EMPHASIZING ITS FOCUS ON MISCLASSIFICATION

By: Laurie A. Petersen and Samantha J. Wood

The U.S. Department of Labor (“DOL”) has issued new guidance reiterating its focus on misclassification of employees as independent contractors and warning employers that “most workers are employees.”

The DOL has asserted that the purpose of its guidance is to provide clear direction to employers regarding the classification of workers as independent contractors. It asserts that employers should apply the multi-factorial “economic realities,” test, which focuses on whether the worker is truly in business for him or herself. Under this test, employers should consider and weigh the following factors: (1) the extent to which the work performed is an integral part of the employer’s business; (2) the worker’s opportunity for profit or loss depending on his/her managerial skill; (3) the extent of the relative investments of the employer and the worker; (4) whether the work performed requires special skills and initiative; (5) the permanency of the relationship; and (6) the degree of control exercised or retained by the employer. The DOL asserts that all of the factors should be considered and weighed together in each case, and that no one factor, such as the control factor, is determinative.

While the guidance does not announce a new standard to be applied in analyzing whether a worker is an employee or independent contractor, it asserts that the application of the economic realities test should be guided by the Fair Labor Standard Act’s definition of the term “employ.” The FLSA provides an expansive scope of the employee-employer relationship by broadly defining the term “employ,” to mean “to suffer or permit to work.” Applying the economic realities test to the broad scope of the employee-employer relationship, the DOL concludes that most workers should be classified as employees under the FLSA.

In light of this guidance, employers should carefully examine their classification of workers to prepare themselves for DOL audits and protect themselves from costly misclassification litigation and liability. Indeed, if it is found that an employer misclassified employees as independent contractors, the financial consequences could include the following: liability for employment withholding taxes, failure to pay tax penalties, minimum wage, overtime compensation, unemployment insurance, workers’ compensation, and ACA penalties for failing to provide minimum essential health-care coverage.

If you have questions about this material, please contact Laurie A. Petersen or Samantha J. Wood by email at lpetersen@lindner-marsack.com or swood@lindner-marsack.com, or any other attorney you have been working with here at Lindner & Marsack, S.C.

DOL’S PROPOSED CHANGES TO THE OVERTIME REGULATIONS SEEK TO RAISE THE SALARY THRESHOLD FOR EXEMPT EMPLOYEES TO $970 A WEEK

By:  Laurie A. Petersen and Samantha J. Wood

As directed by President Obama in March 2014, the Department of Labor (DOL) has issued a proposed rule regarding the Fair Labor Standard Act’s overtime regulations.

The rule focuses primarily on updating salary and compensation levels.  It proposes increasing the standard salary threshold level for exempt employees from $455 a week to approximately $970 a week.  This increase would set the standard salary level at the 40th percentile of weekly earnings for full-time salaried workers (nationwide) in 2016.  While the standard salary level was set at the 20th percentile of weekly earnings for full-time salaried workers in 2004, the DOL states that an increase is necessary to fully account for the simplified duties test that was created in the DOL’s 2004 changes.

The rule also proposes salary increases to the “highly compensated employee” exemption.  Currently, the regulations provide an exemption for employees if they earn at least $100,000 in total annual compensation and customarily and regularly perform any one or more of the exempt duties or responsibilities of an executive, administrative or professional employee.  The DOL is proposing increasing this figure to $122,148, which would set the salary standard at the 90th percentile of all full-time salaried workers.

Furthermore, the DOL has proposed a mechanism for annually updating the salary and compensation levels going forward.  It is considering and is seeking commentary on two possible methodologies: (1) annually updating the thresholds based on a fixed percentile of earnings for full-time salaried workers, or (2) annually updating the thresholds based on changes in the Consumer Price Index for all Urban Consumers (CPI-U).

Despite these drastic changes, the DOL has included a silver lining for employers.  The DOL has proposed allowing non-discretionary bonuses and incentive payments, such as bonuses tied to productivity and profitability, to count toward 10% of the standard weekly salary level of $970, for the executive, administrative, and professional exemptions.  In order to include the bonuses within the salary, the bonuses would have to be non-discretionary and employees would need to receive the bonuses more frequently than annually (i.e., monthly or quarterly, rather than a yearly “catch-up” payment).

While the DOL is not proposing any specific changes to the standard duties tests, it is seeking commentary to determine whether, in light of the salary level proposal, changes to the duties tests are necessary.

Upon publication of the proposed rule, the public is encouraged to provide commentary through the online portal at www.regulations.gov under Rule Identification Number 1235-AA11.  After considering the comments, the DOL will make revisions to its rule and will issue a Final Rule sometime thereafter.

If you have questions about this material, please contact Laurie A. Petersen or Samantha J. Wood by email at lpetersen@lindner-marsack.com or swood@lindner-marsack.com, or any other attorney you have been working with here at Lindner & Marsack, S.C.