Employment Law Update:

A Look Back and a Look Ahead

Peter Donati

Laura Friedel

Kenneth Kneubuhler

September 17, 2015

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Today’s Webinar Panel

Peter F. Donati Practice Group Leader

Tel 312.476.7590

pdonati@lplegal.com

.

2

Laura B. Friedel Partner

Tel 312.476.7510

lfriedel@lplegal.com

Kenneth Kneubuhler Of Counsel

Tel 312.476.7567

kkneubuhler@lplegal.com

Our Program for Today:

• Proposed Overtime Regulations

• Smartphones and Off the Clock Work

• Unpaid Internships

• NLRB Developments

• A Higher Bar for Independent Contractor Status?

• ACA Reporting

• New Requirements for Federal Contractors

• Gay Marriage, Sexual Orientation and Transgender Employees in the

Workplace

• Expanding Availability of Whistleblower/Retaliation Claims

• Accommodation Developments

• EEOC Guidance on Wellness Programs

• Agency Guidance on Policies and Handbooks

• State & Local Developments on Minimum Wage, Sick Leave, and

Ban the Box 3

Your Questions…

- Your questions can be submitted online

- Only we will be able to see them

- If we don’t have time to answer them today, we’ll follow

up with you

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Proposed FLSA Overtime Regulations

• Announced July 6, 2015

• 1st update to regulations since August 2004

• Public comment period closed on September 4th

• Expect final regulations in 2016

• Likely will take effect 30 days after published

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Proposed FLSA Overtime Regulations

Exempt status requirements reminder…..

Currently, to be exempt under the White Collar

(Administrative, Executive, Professional) Exemptions the

employee MUST:

1. Be paid on a salary basis;

2. Receive guaranteed salary (or other guaranteed pay) of

at least $455/week ($23,660/year); AND

3. Meet the job duties test.

The proposed regulations only change #2….

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Proposed FLSA Overtime Regulations

New proposed minimum guaranteed pay:

• NPRM says $921 per week ($47,892 per year)

• Final likely will be $970 per week ($50,440 per year)

- 40th Percentile of full time salaried employees, nationwide

- NPRM amount is based on 2013 data

- Prediction for final is based on anticipated Q2 2015 – Q1 2016 data

• Annual increases

Two possible methods for annual increases:

• Fixed percentile of salaried employees

- 40th percentile for given year

• CPI-U

The proposed regulations only change #2….

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Proposed FLSA Overtime Regulations

New proposed minimum for Highly Compensated

Employee Exemption:

• NPRM says $122,148 per year

- 90th Percentile of full time salaried employees, nationwide

- NPRM amount is based on 2013 data

- Predict higher in final rule – based on Q2 2015 – Q1 2016 data

• Annual increases

Remember: HCEE doesn’t apply in all states!

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Proposed FLSA Overtime Regulations

Expected Impact of Changes

4.6 Million employees nationwide (exempt making more

than $23,660 but less than $50,440)

Greatest concern:

- outside major metropolitan areas

- certain industries (fast food, retail, hospitality)

- certain departments (customer service, accounting)

- commissioned employees with low salary/guaranteed draw

- “intro level exempt” (account managers, analysts)

Increases will require annual review of exempt status

Annual increases may disproportionately impact traditional

(rather than “hot”) industries

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Proposed FLSA Overtime Regulations

Steps to take in anticipation of new regulations:

Identify exempt employees making salary <$52k/year

Identify commissioned exempt employees making

guaranteed pay <$52k/year

Weigh financial and cultural impact of pay increase vs

transition to non-exempt

Consider using change in regulations as opening to

change status of questionably-classified employees

Consider how you will annually assess whether minimum

salary is satisfied

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Smartphones and Off the Clock Work

Allen v. Chicago Police Department

• CPD officer brought suit claiming he wasn’t paid for time

spent on his blackberry after hours

• Told to put in overtime slips for time spent off the clock

monitoring and responding to emails/calls/texts

• Class claims that discouraged from doing so and

supervisors should have ensured they did

• Bench trial in late August

• Not a new issue but noteworthy because likely to get an

opinion (most settle)

• Decision could set new standards for how employers

handle afterhours smartphone use

DOL has said it will be weighing in…..

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Unpaid Internships & the FLSA

Glatt v. Fox Searchlight Pictures, et. al (2d Cir. 7/2/15)

Schumann v. Collier Ansethesia (11th Cir. 9/11/15)

Issue: What test do we apply to determine if an intern is

really an employee (and thus has a right to pay)

Answer: Primary Beneficiary Test… but how applied differs

Key takeaway: Unpaid internships remain very risky!

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NLRB Quickie Election Rules

• Rules intended to shorten election process and reduce

challenges, which gives union an advantage

• If pre-election hearing, 8 days from Notice of Hearing

• Comprehensive and binding position statement required

from employer before hearing

• Pre-election hearing limited to unit issues, other issues

deferred until after election

• Previous rules election could be month or more after

petition – now can be as soon as two weeks

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NLRB Quickie Election Rules

What you can do…

Keep communication channels open with employees

Consider unit determination issues beforehand

Provide periodic training for your managers and

supervisors

Consider keeping a “war plan” in your file that is ready to

go from Day 1

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NLRB’s New Joint Employer Standard

Browning-Ferris Industries (NLRB 8/27/15)

Issue: Can a company that has another employer’s

employees working on its premises be deemed to be a joint

employer even if it doesn’t exercise authority to control

aspects of their employment?

Old Rule: To be a “joint employer”, must exercise authority

over terms and conditions of employment in a direct and

immediate manner that was not “limited and routine”

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NLRB’s New Joint Employer Standard

NLRB ruling set forth a new standard:

Authority, even if indirect, reserved or unexercised, can

be sufficient to establish a joint employment

relationship

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NLRB’s New Joint Employer Standard

• Direct impact is primarily with specific structures

- Franchisees

- Labor agencies that directly supervise their employees working

on client work (limited control by client)

• Key Takeaways

- Franchisors and franchisees need to anticipate claims that they

are joint employers

- Pay attention to contracts with staffing firms and subcontractors

- Ensure that there is mutual obligation to comply with laws &

mutual cooperation obligation

- If concerned about joint employer status, consider letting go of

some control

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Other NLRB Developments

• Purple Communications – employers required to open corporate email

systems to union organizing by employees and group discussions of

terms and conditions of employment

• Babcock & Wilcox Construction -- Change in NLRB deferral standard

likely will lead to duplicative proceedings for employers

• Press Room Cleaners -- when a successor violates law by unilaterally

changing the predecessor’s terms and conditions of employment, the

make-whole remedy will include restoration of the predecessor’s terms

and conditions of employment

• Lincoln Lutheran – dues checkoff obligation continues even after

contract expiration

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Independent Contractor Developments

New DOL Guidance

• Issued July 15th

• Most workers classified as independent contractors are

misclassified

• No new test.

• Instead, applies the “Economic Realities” Test and reads it

together with a broad view of the FLSA’s definition of

“employ”

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Independent Contractor Developments

• Employ = “Suffer or Permit to Work”

- Designed to be VERY broad – broader than agency analysis

- Worker is economically dependent on the entity as opposed to truly

in business for him or herself

• “Economic Realities”

a) Is the work an integral part of the company’s business?

b) Does the worker’s managerial skill affect her opportunity for profit

or loss?

c) How does the worker’s relative investment compare to that of the

company?

d) Does the work performed require special skill and initiative?

e) Is the relationship permanent or indefinite?

f) What is the nature and degree of the company’s control?

Conclusion: DOL says that virtually all workers are

employees….

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Independent Contractor Developments

Affordable Care Act raises cost of misclassification

• Many employee benefit plans expressly cover only those the company

designates as employees to protect against retroactive coverage of

misclassified independent contractors.

• Tax-qualified retirement plans have long had to cover a minimum

percentage of non-highly compensated employees (generally 70%).

- Failure to cover enough employees can trigger adverse tax

consequences to both company and employees

- But disqualification is usually avoided through modest fines and

corrective action.

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Independent Contractor Developments

• ACA ‘s pay or play mandate requires “large” employers to offer of

qualifying health coverage to a minimum % of full-time employees.

- This year employers of 100 or more full-time equivalent employees

must offer coverage to at least 70% of full-time employees.

- In 2016 employers of 50 or more full-time equivalent employees

must offer coverage to at least 95% of full-time employees.

- Little room for error in 2016.

• ACA penalty of $2000 times all full-time employees (over 30

employees) for failure to offer coverage to 95% of full-time employees

(determined monthly with prorated penalty).

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ACA Reporting Required for 2015

Reporting required for calendar 2015, regardless of

plan/policy year:

• employees get individual reports due Jan 31, 2016

• aggregate reporting to IRS due Feb 28 (3/31 if filed

electronically)

Two kinds of reporting:

• Individual Mandate – verifies whether individual had minimum essential

coverage for a month (individual owes penalty for failure to have

required coverage)

• Employer Mandate - determines whether “large” employer offered

qualifying coverage to enough full-time employees for a month

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ACA Reporting Required for 2015

Individual Mandate Reporting

• Coverage under insured health plan is reported by insurer

• Minimum essential coverage provided on self-insured basis by ANY

employer is reported by that employer

• Form 1095-B to employee; Form 1094-B transmittal to IRS

Employer Mandate Reporting

• Employers of 50 or more must report for 2015 (<100 employee

exemption for 2015 doesn’t apply for reporting purposes)

• Form 1095-C to employee; Form 1094-C transmittal to Treasury

• Employer can use 1095-C report to report self-insured coverage so

employee gets single report

If you haven’t already started planning for this reporting, its

time to get started!

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New Requirements for Federal Contractors

So you want to do business with the U.S. government?

• Paid sick/family leave required for employers who receive contracts

in 2017 -- 1 hour of leave for every 30 hours of work up to max of 7

days – can be used for employee or family sick days, as well as

absences dues to domestic violence or sexual assault

• Minimum wage rises in January 2016 for employees on federal

contracts to $10.15 per hour and $5.85 per hour for tipped employees

• OFCCP's issues final rule concerning pay transparency - federal

contractors barred from discriminating against employees and

applicants who discuss, disclose or inquire about pay

• Proposed guidance issued on “blacklisting rule” which will require

prospective federal contractors to disclose a three-year history of

violations of federal labor and employment laws

• LGBT rule goes into effect barring contractors from discriminating

against lesbian, gay, bisexual and transgender employees

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Gay Marriage, Sexual Orientation Discrimination,

Transgender Discrimination

Benefit Plans after Obergefell v. Hodges

• In Windsor (2013) Supreme Court held a same-sex

marriage valid under any state law was valid under federal

law.

• In Obergefell (June 2015) the Court took the next step and

held that states could not ban same-sex marriages.

• Now employers do not need to impute state income tax for

health coverage to same-sex spouse.

- State tax laws that do not track federal tax law need to be amended

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Gay Marriage, Sexual Orientation Discrimination,

Transgender Discrimination

Benefit Plans after Obergefell v. Hodges (continued)

• Employers that offer coverage to domestic partners and civil

unions may decide to stop.

- Marriage is now available

- Simplifies plan & tax administration

• Must employers treat same-sex marriages the same as

opposite-sex marriages?

- Federal law does not require health & welfare plans to provide

spousal benefits

- If coverage is offered to opposite-sex spouses, many state

insurance/non-discrimination laws require offer to same-sex spouses

- Would different treatment violate federal law (Title VII)?

• Claims for retroactive benefits.

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Gay Marriage, Sexual Orientation Discrimination,

Transgender Discrimination

• DOL final rule on interpretation of “spouse” under FMLA –

recognizes all same sex marriages regardless of state law

• EEOC determines that Title VII covers sexual orientation

discrimination (previously determined that Title VII protects

against discrimination based on gender identity)

• EEOC sues two companies over transgender

discrimination

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Expanding Retaliation Claims

• Greathouse v. JHS Security Inc. (2d Cir. 4/20/15)

- Internal, oral complaint could be considered protected activity and

form basis for FLSA retaliation claim.

• Greengrass v. International Monetary Systems (7th Cir.

1/12/15)

- Company’s statement in SEC filing that EEOC complaint was

“meritless” and that it would vigorously defend itself can form the basis

of a Title VII retaliation claim.

• Berman v. Neo@Ogilvy (2nd Cir. 9/10/15)

- Employee could bring whistleblower claim under Dodd-Frank Act even

though he didn’t go to the SEC.

- Internal complaint was sufficient because it was protected under

Sarbanes-Oxley.

- Creates a split with 5th Circuit.

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Accommodations in the Workplace

• Illinois amends Human Rights Act to provide greater

protections for pregnancy – notices must be posted,

accommodations are required, scope of coverage

expanded

• Supreme Court rules in Young v. UPS that light duty

positions not necessarily off limit to pregnant employees -

EEOC issues revised enforcement guidance on pregnancy

discrimination and related issues

• Supreme Court addresses standard of proof for religious

discrimination in Abercrombie case – even if no

accommodation request, employer generally cannot use a

religious practice as a basis not to hire

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EEOC Wellness Program Guidance

• EEOC says that wellness programs must be voluntary to

avoid violation of ADA (non-job related medical exams &

questions be voluntary, confidential, and not used to

discriminate).

• Two more actions against employers since last year’s

Webinar:

- EEOC v. Flambeau (September 30, 2014)

- EEOC v. Honeywell International (October 27, 2014)

• EEOC issued proposed regulations this April under ADA

- Proposal not fully aligned with HIPAA reward limits

• EEOC says it will later address how Genetic Information

Nondiscrimination Act (GINA) affects employer wellness

programs.

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Agency Positions on Employer Policies

NLRB Report of General Counsel on Employee Handbook

Rule Cases

• A rule/policy is unlawful if

1. employees would reasonably construe the rule’s language to

prohibit protected, concerted activity;

2. the rule was promulgated in response to union or other protected ,

concerted activity; or

3. the rule was applied to restrict employee’s exercise of their right

to engage in protected concerted activity.

• Report deals with a number of different types of policies:

• Provides examples of lawful and unlawful policies

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• confidentiality

• professionalism rules

• anti-harassment rules

• conflict of interest rules

• trademark rules

• photography/recording rules

• media contact rules

• rules prohibiting walking off the job

Agency Positions on Employer Policies

Key Takeaways from NLRB Report…

Avoid general prohibitions on sharing/discussing employee

or personnel information or information regarding terms

and conditions of employment.

Avoid policies that prohibit employees from criticizing the

employer or from being disrespectful, negative,

inappropriate or rude toward the employer, coworkers or

management.

Avoid prohibitions on negative or inappropriate discussions

among employees, or on discussions of workplace,

compensation, or other terms and conditions of

employment.

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Agency Positions on Employer Policies

Ensure that media policies only apply to statements on

behalf of the company

Don’t prohibit non-commercial “fair use” of company’s

name and logo.

Tie prohibitions on recording, photos or video to specific

privacy interests.

Avoid phrases such as “walking off the job” and “work

stoppage” in policies requiring employees to be at work.

Don’t prohibit employees from engaging in conduct that is

not in the company’s best interests.

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Agency Positions on Employer Policies

Suggestions in light of NLRB Report:

• Consider NLRB’s position when developing policies

• Weigh consequences of violation against benefits of policy

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Agency Positions on Employer Policies

Securities & Exchange Commission

• Considered statement that the company required

employees to sign in connection with internal investigation

I understand that in order to protect the integrity of this review, I am

prohibited from discussing any particulars regarding this interview and

the subject matter discussed during the interview, without prior

authorization of the Law Department. I understand that the

unauthorized disclosure of information may be grounds for disciplinary

action up to and including termination of employment.

• Determined that this statement violated Dodd-Frank

whistleblower protections because an employee could read

it to prohibit him from contacting the SEC.

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State/Local Law Updates

Significant changes in Paid Sick Leave and Minimum Wage

Laws:

• California mandatory sick leave law went into effect July 1,

2015

• Massachusetts sick leave law effective July 1, 2015

• Oregon sick leave law signed on June 22 goes into effect

on January 1, 2016

• Chicago raises minimum wage from $8.25 to $10 in July, to

$11 in 2017, and to $13 in 2019

• Seattle, San Francisco and L.A. have approved increases

over time to $15/hr., NY has raised for fast food workers,

and D.C. is heading toward ballot initiative

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State/Local Law Updates

Ban the Box

• Prohibits questions about criminal history on applications

• Prohibits asking about criminal history until later in process

(exactly when depends on state).

Currently law for private employers in: Hawaii, Illinois,

Massachusetts, Minnesota, New Jersey, Oregon, Rhode

Island, and many municipalities.

Note: Each law is different, so it’s important to check the

specific provisions.

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plug for our blog….

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