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U.S. Department of Labor Announces Proposed Revision to Rule on Overtime Exemptions; Exempt Salary Threshold to More than Double; No Immediate Action Needed

July 1, 2015

By Scott J. Wenner

The U.S. Department of Labor posted an announcement on its website this morning that its much anticipated proposed rule to curtail existing overtime exemptions had been approved for publication in the Federal Register as a Notice of Proposed Rulemaking (NPRM), and would be published soon. In the interim, the DOL website posted a link to the approved version of the rule, available here.

According to the DOL’s announcement, the centerpiece of the proposed rule, which is intended to increase the number of employees who are eligible for overtime compensation, will be an increase of the minimum salary required to qualify as exempt to around $50,440 per year. If the rule becomes final, the increase will more than double the present threshold of $23,660. Computed on a weekly basis, the minimum weekly salary for exemption will increase from $455 per week to about $970 per week.

The DOL maintains that this dramatic increase is necessary if the exempt classifications under the FLSA are to be defined as originally intended: to exempt “highly compensated executive, administrative, and professional employees” from eligibility for overtime compensation. According to the NPRM, the weekly salary threshold it proposes is at the 90th percentile of average weekly wages of full-time salaried employees according to the Bureau of Labor Statistics. Further, to keep the minimum salary from lagging behind in the future, the NPRM proposes to update the minimum annually, either by indexing it to the CPI-U or by maintaining it at the 90th percentile of average weekly wages of full time salaried employees.

The NPRM also announced that the DOL would like to receive comments during the comment period on whether nondiscretionary bonuses should count toward the minimum salary requirement – an issue that inevitably arises in view of the steep increase in the salary threshold.

To be exempt as an executive, administrative or professional employee, of course, the employee must satisfy both the “salary basis test” (which includes receipt of the specified minimum amount) and the “primary duty test” (which examines the character of the primary duties of the employee’s position).   After President Obama directed the Secretary of Labor in early 2014 to update the existing regulations governing the so-called “white collar exemptions,” a substantial increase to the minimum salary was widely expected, but many also anticipated a tightening of the duties test to further restrict qualification for exempt status.

The unofficial version of the NPRM posted today makes no change to the duties test. However, it announces that “the Department is considering whether revisions to the duties tests are necessary in order to ensure that these tests fully reflect the purpose of the exemption.” The DOL may envision proposing a separate rule to limit the availability of exempt status to a smaller group of higher paid employees and a revision to the primary duty test might be proposed after the doubling of the minimum salary threshold becomes final. The effective date of this increase remains uncertain. The NPRM to be published in the Federal Register will announce a comment period that must precede publication of a final rule by the agency. Further, the DOL must consider the comments it receives before publishing a final rule. The NPRM’s wording suggests that it is aiming to publish a final rule in 2016.

For more information regarding this or other labor and employment issues, please contact Scott J. Wenner, past chair of Schnader’s Labor and Employment Practices Group. 

The materials posted on Schnader.com and SchnaderWorks.com are prepared for informational purposes only and should not be considered as providing legal advice or creating an attorney-client relationship. Please see our disclaimer page for a full explanation.

Obamacare Survives Second Supreme Court Challenge

June 25, 2015

By Scott J. Wenner

The Affordable Care Act has survived another serious challenge – again through an opinion authored by Chief Justice Roberts. Today’s 6 to 3 Supreme Court decision in King v. Burwell held that the Administration’s interpretation, via an IRS rule, of an ambiguous, “ancillary” provision of the law was a permissible one, especially as “Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them.”

Specifically at issue was whether the Administration could continue to subsidize health insurance purchased by those with low incomes in states that had refused or failed to establish their own exchanges. The challengers had argued that the literal language of law made insurance subsidies available only where the coverage was purchased on an insurance exchange “established by the state.” In a nutshell, the majority disposed of this argument by (i) declaring the language of the quoted section ambiguous; (ii) observing that insurance subsidies were crucial and necessary nationwide, regardless of whether a state exchange is available in a particular state, in order for the law to work; and (iii) concluding that an interpretation that would prompt the destruction of healthcare markets would hardly fulfill the purpose of Congress in passing the Affordable Care Act.

Justice Scalia authored a scathing dissenting opinion. In it he accused the Chief Justice of failing to apply traditional rules of statutory construction in order to preserve the healthcare law.  In the peroration of his dissent, Justice Scalia, mindful that this was Justice Roberts’s second rescue of Obamacare, and having accused the Chief Justice of tortured reasoning in both instances, observed: “We should start calling this law SCOTUScare.”  Indeed.

For more information regarding this or other labor and employment issues, please contact Scott J. Wenner, past chair of Schnader’s Labor and Employment Practices Group. 

The materials posted on Schnader.com and SchnaderWorks.com are prepared for informational purposes only and should not be considered as providing legal advice or creating an attorney-client relationship. Please see our disclaimer page for a full explanation.

Countdown to July 3 for San Francisco Retailers to Modify Flexible Scheduling Practices

June 15, 2015

By Scott J. Wenner

We have written before of the growing movement to suppress the flexible scheduling practices commonly employed in the retail industry.  Retailers have long used factors such as projections of sales traffic, conversion rates, weather conditions and the like, to create and adjust staffing schedules.  Like all businesses, retailers seek to enhance profits by controlling costs, including labor costs. To control wage costs, they have used these projections to create work schedules that minimize overtime and unnecessary coverage, while ensuring the presence of adequate staff to maintain optimal levels of customer service, security, product availability and appearance.

As a result, many retailers have utilized a largely part-time workforce which, given the shopping patterns and preferences of modern Americans, must be able to work evenings, Saturdays, Sundays, and holidays. As our earlier post noted, software now exists to measure and analyze many of the same factors that retailers have long considered to schedule workers.  Proponents of measures to restrain flexible staffing have seized upon the use of software to analyze staffing needs as an example of bloodless corporate profit mongering at the expense of people and their families.

In keeping with its cutting edge reputation and penchant for social tinkering, especially on workplace matters, San Francisco was the first jurisdiction to impose controls on retail scheduling practices. Many retailers in San Francisco’s lucrative market should be in their last stages of preparing to comply with the Retail Workers Bill of Rights – that city’s first-in-the-nation law that controls the scheduling and hiring practices of what it calls “formula retail establishments” – or, what most people call chain stores.

The elements of the  “formula” are: (1) satisfaction of two of the following six characteristics: (i) a standardized array of merchandise, (ii) a standard façade, (iii) a standardized decor and color scheme, (iv) uniform apparel, (v) standardized signage, and  (vi) ownership of a trademark or service mark; (2) 20 or more employees in San Francisco; and (3) ownership of at least 20 such formula retail establishments anywhere in the world. An amendment is pending approval by the San Francisco Board of Supervisors to increase from 20 to 40 the number of establishments necessary for the retail store to be covered by the ordinance.

Retailers Nationwide are Paying Attention

Those San Francisco retail employers subject to the ordinance will find their ability to manage their labor costs significantly restrained beginning on the July 3 effective date – just in time for the Fourth of July holiday weekend. However, retail chains nationwide should have their eyes on how retail operations in San Francisco fare under the new staffing regime, as a version could be in store for them elsewhere if the Retail Action Project and its allies gain traction.  As our post linked above noted, New York’s pro-labor Attorney General launched an investigation in April of purported use of “on-call shifts” by a group of retailers that would fit the San Francisco formula, suggesting that he believed that flexible scheduling devices are unlawful.

Outline of Requirements of San Francisco Ordinance

The highlights of the San Francisco Retail Workers Bill of Rights ordinance are:

  • Equal treatment of part time and full time workers. Part-time workers must be treated the same as full timers in the same job classification with respect to (i) starting hourly wage, (ii) eligibility for paid time off and unpaid time off, and (iii) eligibility for promotions.
  • Scheduling
    • Before starting employment new employees must be given a written estimate of the minimum number of scheduled shifts per month he/she can anticipate, and the days and hours of those shifts (excluding on-call shifts).
    • Employee requests for modifications must be considered, but employer discretion prevails.
    • Employers must provide employees with work schedules two weeks in advance, at the workplace via posting or electronically.
    • Advance notice of schedule changes must be given by phone, text or other reasonable means.
    • Schedules must be retained for three years, and failure to do so will result in a presumption of non-compliance
  • Penalties for Schedule Changes – “predictability pay”
    • Schedule change between 7 days and 24 hours of the shift entitles employee to one (1) hour of additional pay.
    • Schedule change within 24 hours of start of the shift entitles employee to two (2) hours of additional pay, but four (4) hours pay must be given if the shift was four hours or more.
    • An On-Call employee notified not to come to work is entitled to same penalties as above: 2 or 4 hours depending on length of the shift.
    • Exceptions to the penalty exist for events outside employer’s control, including failure of other employee to report to work or need to send other employee home.
  • Limitations imposed on making new hires. If a covered retailer has any employees working fewer than 35 hours per week, before hiring any newpart- orfull time employees, temporary employees or contractors, it must offer the work in writing to the existing part-time employees if
    • one or more existing part-timers is qualified to perform the work, and
    • the work is the same or similar to the part-timer’s current work.

Written offers must be retained for three years.

  • Change in Ownership/Successor Obligations. If a retail establishment is sold, all employees having six months seniority or more must be retained for at least 90 days with the same terms and conditions of employment, with the following exceptions:
    • terminations for cause
    • reductions by seniority where the successor determines it needs fewer employees
  • Posting Requirement. A notice must be posted at each workplace informing employees of their rights under the ordinance (which is not available as of this writing).
  • The San Francisco Office of Labor Standards Enforcement has responsibility for enforcement and can order compliance, impose administrative fines, and require employers to pay lost wages and penalties to employees and reimburse the City’s enforcement costs, as well as bring civil actions against employers.

For more information regarding this or other labor and employment issues, please contact Scott J. Wenner, past chair of Schnader’s Labor and Employment Practices Group. 

The materials posted on Schnader.com and SchnaderWorks.com are prepared for informational purposes only and should not be considered as providing legal advice or creating an attorney-client relationship. Please see our disclaimer page for a full explanation

U.S. Supreme Court Unanimously Rules that Courts Have a Narrow Scope to Review Whether the EEOC Complied with Its Statutory Duty to Conciliate Before Filing Suit

April 29, 2015

By Scott J. Wenner

The United States Supreme Court has announced its decision in the closely watched Mach Mining LLC v. Equal Employment Opportunity Commission case – and it was unanimous. In an opinion authored by Justice Elena Kagen that resolved a circuit court split, the Court rejected the EEOC’s position that it had carte blanche to determine whether the agency satisfied its statutory duty to attempt conciliation of employment discrimination claims before launching a lawsuit.   The Court also rejected the position asserted by the employer, Mach Mining, which the Court described as requiring the district courts to “do a deep dive into the conciliation process.” Instead, Justice Kagan’s opinion recognized a limited right of judicial review of the EEOC’s pre-lawsuit conciliation efforts, stating:

We hold that a court may review whether the EEOC satisfied its statutory obligation to attempt conciliation before filing suit. But we find that the scope of that review is narrow, thus recognizing the EEOC’s extensive discretion to determine the kind and amount of communication with an employer appropriate in any given case.

The Court soundly rejected both (1) the EEOC’s position that the broad discretion Congress gave it to fulfill its conciliation obligation under Title VII allowed for no meaningful standards by which courts could measure compliance, and (2) Mach Mining’s position, which the Court found required far too much of the agency, created further procedural requirements, and “flout[ed] Title VII’s protection of the confidentiality of conciliation ef­forts” found in §2000e–5(b) of the statute. The Court adopted a compromise standard that requires the EEOC to submit an affidavit confirming that it performed the following obligations but that its efforts failed:

[T]he EEOC must inform the employer about the specific allegation, as the Commission typically does in a letter announcing its determination of “reasonable cause.”. . . Such notice properly describes both what the employer has done and which employees (or what class of employees) have suffered as a result. And the EEOC must try to engage the employer in some form of discussion (whether written or oral), so as to give the employer an opportunity to remedy the allegedly discriminatory practice. Judicial review of those requirements (and nothing else) ensures that the Commission complies with the statute. . . . [and] allows the EEOC to exercise all the expansive discretion Title VII gives it to decide how to conduct conciliation efforts and when to end them. And such review can occur consistent with the statute’s non-disclosure provision, because a court looks only to whether the EEOC attempted to confer about a charge, and not to what happened (i.e., statements made or positions taken during those discussions.)

While the Court’s decision will be disappointing to most employers given the manner in which the EEOC has been exercising its discretion, at least the agency cannot be the sole judge of whether it has ignored its statutory duty to conciliate.

For more information regarding this or other labor and employment issues, please contact Scott J. Wenner, past chair of Schnader’s Labor and Employment Practices Group. 

The materials posted on Schnader.com and SchnaderWorks.com are prepared for informational purposes only and should not be considered as providing legal advice or creating an attorney-client relationship. Please see our disclaimer page for a full explanation

New York City Council Votes to Limit Credit Checks by Employers

April 21, 2015

By Scott J. Wenner

On April 16, the New York City Council passed Intro 261A, which bans the use of credit checks to screen applicants for employment except in enumerated circumstances. The legislation, which was supported by Mayor Bill de Blasio and was sponsored by 40 of the 51 members of the Council, is expected to be signed and become law promptly.  It purports to prohibit “discrimination based on consumer credit history” – a practice that is said to adversely affect black and Hispanic workers disproportionately.

When the Mayor signs the credit check ban into law, New York City will join 10 states and several other municipalities that have curtailed this pre-employment practice.  While New York City is not the first jurisdiction to limit the use of consumer credit reports to screen applicants, its chief sponsor, Councilman Brad Lander of Brooklyn, claims that his bill is “the strongest of its type in the country”  – a characterization that might be correct.

Consumer Credit History Broadly Defined.  As passed by the City Council, the bill deems it an unlawful discriminatory practice for an employer to use individuals’ consumer credit histories in making employment decisions. In addition to consumer credit reports and credit scores, the bill defines “consumer credit history” to also include information obtained directly from the applicant or employee about prior bankruptcies, judgments, and liens, as well as “details about credit accounts.” This latter category of information includes “the individual’s number of credit accounts, late or missed payments, charged-off debts, items in collections, credit limit [and] prior credit report inquiries.” The bill also defines “consumer credit report” to include “any written or other communication of any information by a consumer reporting agency that bears on a consumer’s creditworthiness, credit standing, credit capacity, or credit history. “

Exceptions.  The bill reportedly contains more exceptions than Councilman Lander had proposed initially as a result of discussions that included the Partnership for New York City – a group representing business interests – as well as labor union representatives. However, it does not contain the kind of broad, top-to-bottom exemption for financial institutions that most existing credit check laws contain. The exceptions to the credit check ban in the forthcoming New York City law will include (i) hiring for police or peace officer jobs, (ii) positions subject to NYC Department of Investigation background checks, (iii) jobs that require the employee to be bonded or demand a government security clearance, (iv) positions  (other than clerical jobs) that require regular access to trade secrets or national security information, (v) workers who operate digital security systems, (vi) employees having signatory authority over third party funds or assets valued at $10,000 or more, or fiduciary responsibility and authority to enter into contracts valued at $10,000 or more for their employer, and (vii) where the employer is required by state or federal law or regulations or by a self-regulatory organization to use an individual’s consumer credit history for employment purposes.

The law will become effective 120 days after it is signed by Mayor de Blasio

For more information regarding this or other labor and employment issues, please contact Scott J. Wenner, past chair of Schnader’s Labor and Employment Practices Group. 

The materials posted on Schnader.com and SchnaderWorks.com are prepared for informational purposes only and should not be considered as providing legal advice or creating an attorney-client relationship. Please see our disclaimer page for a full explanation

NY Attorney General’s Office Begins Campaign Against Scheduling Practices of Large Retailers

April 16, 2015

By Scott J. Wenner

In letters sent to 13 large retail chains on April 10, available here, the New York State Attorney General’s Office has questioned the lawfulness of a scheduling practice known as “on-call shifts,” and has requested wide-ranging information and documents.  In so doing, New York’s attorney general has joined a growing movement seeking to make the work schedules of employees – especially part timers – in the retail industry more steady and predictable.  That movement received a boost when San Francisco enacted its “Retail Workers’ Bill of Rights” late last year. That ordinance became effective in January 2015, and specifically outlaws many of the practices the New York attorney general appears ready to attack without the benefit of legislation that makes the practices unlawful.  Among the requirements in San Francisco are (i) 2-4 hours of pay to workers who are required to be on call for a shift but are not called into work, and (ii) a requirement that schedules be posted two weeks in advance with penalties for subsequent changes.

After citing the toll that unpredictable work schedules take, particularly on low wage earners, the letter, which is signed by Labor Bureau Chief Terri Gerstein, voices the AG’s particular concern about on-call shifts. Gerstein defines this practice as requiring employees to call in just hours before a shift is scheduled to start to learn whether they should report to work, without receiving any compensation if they are not directed to report for that shift.   Gerstein notes that the employees were not paid even though the employer required them to remain available had they been needed, and could not accept work elsewhere for that on-call shift.  According to the Labor Bureau, the practice, which is said to be “growing,” not only gives short shrift to the needs of the part-timers, but also suggests that it may violate New York’s call-in pay regulation at 12 N.Y.C.R.R. § 142-2.3.  That regulation, which is directed primarily at ensuring a minimum shift length if an employee reports to work, provides “[a]n employee who by request or permission of the employer reports for work on any day shall be paid for at least four hours, or the number of hours in the regularly scheduled shift, whichever is less, at the basic minimum hourly wage.”

The letter sent to the 13 retailers outlines the practice, advises them that the Bureau has reason to believe that they are using on-call shifts as a scheduling methodology, that the Bureau is looking into the practice, and that the agency wishes to examine each recipient’s use of on-call shifts by reviewing their responses to the information and document requests in the letter, which they are directed to produce be early May.

The scheduling systems that utilize the kind of on-call practices criticized in the AG’s letter generally are reliant on software that analyzes a variety of factors, including sales traffic, conversion rates, and even weather conditions, to arrive at a daily scheduling model to maximize revenue and minimize expense. While groups such as the Retail Action Project that are vociferously opposed to the scheduling practices targeted by the attorney general are critical of the retailers’ use of scheduling technology, it appears that these retailers simply are continuing to use the same factors that always drove retail schedules, but that software now is available to analyze the input more quickly and more accurately than in the past.

In addition to technology, what has really changed is the political environment that led to San Francisco’s bill of rights for retail workers, the current pressure for minimum wage increases, the enactment of paid sick time legislation in New York and other cities, and, in all likelihood, the activity commenced in New York to attack retailer scheduling practices.  It will be interesting to see whether the attorney general’s Labor Bureau proceeds against the retailers based upon an elastic interpretation of the regulations cited in the recent letter, or if instead his office waits for legislation that more specifically curbs the practices that the letter cites.

It does appear clear that New York City and/or State legislation will be enacted regardless of the path the attorney general chooses.

For more information regarding this or other labor and employment issues, please contact Scott J. Wenner, past chair of Schnader’s Labor and Employment Practices Group. 

The materials posted on Schnader.com and SchnaderWorks.com are prepared for informational purposes only and should not be considered as providing legal advice or creating an attorney-client relationship. Please see our disclaimer page for a full explanation

En Banc 6th Circuit Returns to Practicality, Finding Regular and Predictable Attendance to be Essential Function of Position

April 13, 2015

By Scott J. Wenner

In May 2014, we reported on an opinion of a divided panel of the Court of Appeals for the Sixth Circuit embracing the position of the Equal Employment Opportunity Commission (EEOC) that virtual full-time telecommuting could be a reasonable accommodation under the Americans with Disabilities Act (ADA) for an employee whose irritable bowel syndrome rendered her unable to maintain regular attendance at work.  The EEOC’s argument and the panel’s opinion both relied on assumptions that advances in technology required the abandonment of precedents permitting employers to require regular physical attendance at the workplace, while giving short shrift to the substantial evidence supporting the business judgment of the employer, Ford Motor Company, that personal interaction was a necessary part of the plaintiff’s job.  The panel’s reasoning was encapsulated in the following quote from the opinion: “the law must respond to the advance of technology in the employment context as it has in other areas of modern life, and recognize that the ‘workplace’ is anywhere that an employee can perform her job duties.”

In late August 2014, the appellate court vacated the controversial panel decision and set it for review by the entire Sixth Circuit bench.  The en banc opinions – a majority opinion by the panel’s dissenter and a dissent by the author of the vacated panel opinion – were announced on April 10th.  The majority found that the EEOC was unable to prove that the employee in question, Jane Harris, was a “qualified individual” under the ADA because the evidence showed “that Harris cannot regularly and predictably attend the workplace – an essential function, and a prerequisite to other essential functions. . . .” In reaching this conclusion, the majority found that the EEOC’s evidence failed to create a genuine issue of fact over whether on-site attendance was essential to performance of her job duties. First, it discounted Harris’s own testimony that physical attendance was not essential based both on Circuit precedent that self-serving testimony of this nature is given little weight and because she failed to establish that she could perform all of her duties remotely without lowering production standards – a consequence that employers need not endure.  (29 C.F.R. § 1630, App. At 395-396).  Secondly, the court rejected the EEOC’s argument that by permitting others to work from home (on one fixed day per week at most) Ford admitted that in-person attendance was not essential. Observing that Harris’s telecommuting demand was for four days per week that were not scheduled in advance, and that every person allowed to work from home one day per week was required to come to work on their fixed telecommuting day upon request, the majority found that what Harris had demanded was too dissimilar to the telecommuting privileges given to others to be of value to her claim.

The final prong of the EEOC’s argument that attendance was nonessential to Harris’s job was its literally naked appeal to technology, contending (without citation to the record or case law) that it is “self-evident” that “technology has advanced” sufficiently for employees to perform “at least some essential functions” from home.  The majority observed that the EEOC no doubt is correct: as an abstract proposition technology has advanced.  However, it added, “[t]he proper case to credit advances in technology is one where the record evinces that advancement. There is no such evidence here.”   Indeed, “email, computers, telephone and limited video conferencing were equally available when courts around the country uniformly held that on-site attendance is essential for interactive jobs.”

Concluding Thoughts

Although the Sixth Circuit’s en banc decision no doubt comes as a relief to employers that are concerned about telecommuting imposed by fiat, Ford Motor Company represents only a preliminary skirmish is what is likely to be a more protracted battle with the EEOC and other employee advocates.  It is fair to read the majority opinion as more about evidentiary requirements than about the substance of the ADA – as confirming that the EEOC cannot rely on platitudinous and “self-evident” propositions, at least without producing evidence to validate and link them more specifically to the issues in dispute.  For the opinion certainly suggests that had the EEOC produced competent evidence that specific technologies that are available that would permit the duties of Ms. Harris’s interactive position to be performed as effectively at home as on-site, the majority would not have affirmed the district court’s entry of summary judgment in favor of Ford.  One can only anticipate that the next time the EEOC argues that telecommuting is a reasonable accommodation under the ADA, it will armed with evidence to support its generalized observations on the march of technology.

Finally, a focal point of the dissent – but mentioned only in passing by the majority – concerned the weight to be given to Ford’s judgment in identifying the essential functions of the position.  While the majority did not purport to give particular weight to Ford’s opinion, focusing instead on the deficiencies in the EEOC’s evidence, the dissent spent several pages arguing that the employer’s judgment is entitled only to consideration – not deference – and is but one of more than half a dozen factors the EEOC’s regulations suggest should be considered in deciding what functions are essential.  Responding to the dissent, the majority opinion agreed that merely because an employer deems a function to be essential does not make it so: blind deference is not the standard. However, summary judgment is required when “the employer’s judgment as to essential job functions – evidenced by the employer’s words, policies and practices and taking into account all relevant factors – is job-related, uniformly-enforced, and consistent with business necessity.”

Like the debate over telecommuting, the debate over an employer’s freedom to identify which job functions are essential will continue as the EEOC aggressively inserts itself into what employers consider management decisions, including how a job is to be performed.

For more information regarding this or other labor and employment issues, please contact Scott J. Wenner, past chair of Schnader’s Labor and Employment Practices Group. 

The materials posted on Schnader.com and SchnaderWorks.com are prepared for informational purposes only and should not be considered as providing legal advice or creating an attorney-client relationship. Please see our disclaimer page for a full explanation

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