In May 2016, the federal Department of Labor issued its final rules amending the overtime regulations applicable to white collar exemptions. In principal part, these new regulations increase the minimum salary threshold amount necessary for the exemptions to apply from $455 per week ($23,660 annually) to $913 per week ($47,476 annually). The DOL also increased the minimum salary threshold amount applicable to the highly compensated employee exemption from $100,000 per year to $134,004 per year. These minimum salary amounts are subject to automatic updates every three years. The new overtime rules become effective December 1, 2016.
The DOL estimates that these new regulations will affect at least 4.5 million workers and employers are scrambling to determine whether to significantly increase the base salary paid to those white collar workers or to forfeit the applicable overtime exemption.
In an effort to block enforcement of the new DOL rules, two lawsuits were filed in Texas federal court on September 20, 2016. In Nevada v. United States Department of Labor, 21 states have sought a declaratory judgment that the new regulations were improperly implemented and an injunction preventing their enforcement. In Plano Chamber of Commerce v. Perez, several Chambers of Commerce and other business organizations filed a similar lawsuit seeking the same type of relief.
Congress is also seeking to block enforcement of these new overtime regulations. On September 28, 2016, the House of Representatives voted 246 to 177 in favor of the “Regulatory Relief for Small Businesses, Schools, and Nonprofits Act” to delay enforcement of the new DOL rules until June 1, 2017.
Takeaway: While efforts are fast and furious to block – or at least delay – enforcement of the new DOL overtime rules, the current December 1, 2016, effective date is fast approaching. Employers should reach out to their legal counsel with any questions they have regarding how to comply with these new rules and any updates on the above-noted actions.
On August 31, 2016, the Minnesota Supreme Court issued an order agreeing with the Minneapolis City Attorney that a ballot initiative could not be used to enact a new minimum wage in the City of Minneapolis.
In late July of this year, the Minneapolis City Attorney issued a legal opinion that concluded that a petition with 20,000 signatures in support of a ballot initiative to amend the City Charter to include a $15 minimum wage was not a proper subject for a ballot initiative. Following the City Attorney’s advice, the City Council agreed not to include the ballot initiative on the ballot for the upcoming election in November. Labor activists then challenged the City’s position in Hennepin County District Court. Last week, the district court disagreed with the City and ruled that the $15 minimum wage should be included on the ballot in this November’s election. The City appealed the district court’s decision.
On appeal, the Minnesota Supreme Court reversed the district court and sided with the City. The Court reasoned that city charters may or may not provide for the enactment of an ordinance through the ballot initiative and that the Minneapolis City Charter does “not authorize the proposed charter amendment.” Vasseur et al. v. City of Minneapolis, et al., No. A16-1367 (Minn. Aug. 31, 2016).
Takeaway: The $15 minimum wage ballot initiative for the City of Minneapolis will not appear on the ballot this November.
An applicant’s wage history is often a factor employers consider in making hiring decisions. In fact, it is not uncommon for an employment application to ask how much a candidate made at their previous positions. Various good faith reasons may support this question. For example, how much an applicant was paid may indicate, beyond job title, how significant his or her job duties and experience have been.
Past wage history may also determine how much the new employer is willing to offer the candidate to entice their employment. The Massachusetts legislature recently considered this issue and determined that setting compensation based on wage history can unfortunately perpetuate market wage disparities based on gender or race. In response, Massachusetts enacted a new pay equity law that prohibits employers from seeking wage history information from applicants. A copy of the new law can be found here.
Pursuant to this new law, it will considered an unlawful act for an employer to:
- Screen job applicants based on their wage, including benefits or other compensation or salary histories, including by requiring that an applicant’s prior wages, including benefits or other compensation or salary history satisfy minimum or maximum criteria; or request or require as a condition of being interviewed, or as a condition of continuing to be considered for an offer of employment, that an applicant disclose prior wages or salary history.
- Seek the salary history of any prospective employee from any current or former employer; provided, however, that a prospective employee may provide written authorization to a prospective employer to confirm prior wages, including benefits or other compensation or salary history only after any offer of employment with compensation has been made to the prospective employee.
This new law will not be effective until January 1, 2018.
Takeaway: Employers hiring applicants in Massachusetts should be aware of this new law and take steps to edit their employment application forms and processes as necessary prior to January 2018. Employers should continue to monitor this issue as similar laws might well be enacted in other states.
Do Employees Need to Have Final Hiring and Firing Authority to Qualify for the FLSA’s Executive Exemption?
Not necessarily – a recent decision from the Eighth Circuit Court of Appeals illustrates that employees may qualify for the executive exemption under the Fair Labor Standards Act (FLSA) even if they do not have final authority over hiring and firing decisions.
In Garrison v. ConAgra Foods Packaged Foods, LLC, the issue before the court was whether the plaintiffs’ recommendations relating to hiring and firing decisions were given sufficient weight to qualify for the executive exemption. Nos. 15-1177, 15-1428 (8th Cir. Aug. 15, 2016). It was undisputed that the other requirements of the executive exemption were satisfied.
The parties agreed that the plaintiffs did not have final authority over hiring and firing decisions, but disputed whether they nevertheless qualified as exempt because their “recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees are given particular weight.” 29 C.F.R. § 541.100(a)(4). The court held that the evidence established that the plaintiffs’ recommendations concerning hiring and firing decisions were given “particular weight” because:
- The plaintiffs were responsible for appraising performance and reporting good or poor performance for probationary employees;
- Two of the plaintiffs recommended the discharge of one probationary employee and that recommendation was followed;
- Some employees were demoted based on evaluations and feedback from the plaintiffs;
- The plaintiffs were able to fill temporary vacancies by moving employees from one classification to another; and
- The plaintiffs recommended discipline for employees and management followed those recommendations most, if not all, of the time.
Because the Eighth Circuit agreed that the plaintiffs’ recommendations concerning hiring and firing decisions were given particular weight, the court affirmed summary judgment in favor of the employer on the grounds that the employees were exempt from the FLSA.
Takeaway: Employees may qualify for the FLSA’s executive exemption even if they do not have final authority over hiring and firing decisions, provided that their recommendations concerning hiring and firing are given particular weight.
The Department of Labor’s new salary basis rules, which are set to go into effect in December of 2016, permit employers to use bonuses, incentives, and commissions to satisfy part of the salary requirements for exempt employees under the Fair Labor Standards Act (FLSA). Here’s what employers need to know about this aspect of the DOL’s new rules:
- Employers can use nondiscretionary bonuses, incentives, and commissions to satisfy up to 10% (or $91.30 per week) of the new $913 per week salary requirement for exempt employees.
- To qualify, the nondiscretionary bonuses, incentives, or commissions must be paid quarterly or more frequently.
- Because the employer can only take credit for up to 10% of the $913 per week salary requirement, the employer still must pay affected employees a minimum of $821.70 per week to ensure the salary basis requirements are satisfied.
- If by the last pay period of the quarter, the employee’s salary plus his or her nondiscretionary bonuses, incentives, or commissions do not equal at least 13 times the weekly salary requirement (or $11,869), the employer may make one final “catch-up” payment sufficient to achieve the required amount.
- Any catch-up payment made by an employer must be paid no later than the next pay period after the end of the quarter and must count only toward the prior quarter’s salary amount (not toward the salary amount for the quarter in which it was paid).
Takeaway: Employers may use nondiscretionary bonuses, incentives, and commissions to satisfy up to 10% of the FLSA’s salary basis requirements for exempt employees, provided that they follow the above-listed rules.
The NFL’s 2014 punishment of Adrian Peterson has been a rollercoaster ride. After a district court vacated the punishment, the Eighth Circuit Court of Appeals has now reinstated it.
The NFL suspended Peterson and fined him the equivalent of six games worth of pay after he entered a plea of no contest in November 2014 to a misdemeanor charge of reckless assault against one of his children. Peterson challenged the punishment under the NFL Players Association’s collective bargaining agreement, but an arbitrator initially upheld the punishment as valid.
Next, Peterson challenged the decision in federal court. Because federal courts are generally very deferential to arbitration decisions, Peterson had a difficult legal standard to meet to vacate the decision. However, in February of 2015, the district court agreed with Peterson and vacated the punishment on the grounds that: (i) the punishment violated the collective bargaining agreement because it applied a new NFL personal conduct policy retroactively in violation of a previous decision regarding Ray Rice; and (ii) the arbitrator exceeded his authority by considering whether the punishment could be sustained under the NFL’s previous personal conduct policy. The NFL then appealed the district court’s order to the Eight Circuit Court of Appeals.
In National Football League Players Association v. National Football League, the Eighth Circuit Court of Appeals reversed the district court and reinstated the NFL’s punishment of Peterson as valid. No. 15-1438 (8th Cir. August 4, 2016). In reaching this decision, the court first reasoned that the district court’s disagreement with the arbitrator’s conclusion regarding retroactive application of the new NFL policy was not a valid basis to vacate the arbitrator’s decision. Rather, the arbitrator’s decision needed to be upheld so long as the arbitrator was “at least arguably construing or applying the contract, including the law of the shop.” Because the arbitrator “undoubtedly construed” the previous Ray Rice decision, the Eighth Circuit held that this requirement was satisfied and that the arbitrator’s decision on the issue should not be second-guessed by the courts.
The Eighth Circuit also disagreed that the arbitrator exceeded his authority by considering whether the discipline could be upheld under the NFL’s old personal conduct policy. With respect to this issue, the NFL Players Association argued that the only question presented to the arbitrator was whether the NFL could retroactively apply its new policy to Peterson. The Eighth Circuit pointed out, however, that the NFL characterized the issue more broadly as “Is the discipline appropriate?” The NFL Players Association also raised arguments during the arbitration concerning whether the discipline was permitted under the NFL’s old policy. As a result, the Eighth Circuit concluded that the arbitrator was at least arguably acting within the scope of his authority when he considered the previous policy, so that his decision must be upheld.
Takeaway: The Eighth Circuit’s decision concerning Adrian Peterson is a reminder that courts are very deferential to arbitration decisions and that it is generally difficult to vacate an arbitration decision in federal court.
No – the Minneapolis City Attorney recently published a legal opinion stating that a ballot initiative cannot be used to enact a new minimum wage in the City of Minneapolis.
In June of 2016, a group called 15 Now Minnesota submitted a petition with 20,000 signatures to the City of Minneapolis. The petition sought to include a ballot initiative in the upcoming November election, which would amend the Minneapolis City Charter to increase the minimum wage. The proposed amendment would have gradually raised the minimum wage in Minneapolis over time so that it would reach $15.00 per hour by August of 2022.
On July 28, 2016, the Minneapolis City Attorney issued a legal opinion that concluded that the proposed amendment to the city charter was not a proper subject for a ballot initiative. The City Attorney reasoned that, under Minnesota law, city charters may only be used for the “establishment, administration or regulation of city government.” See Minn. Stat. § 410.07. In contrast to a charter amendment governing the administration of city government, a legislative ordinance may only be implemented through ballot initiative if specifically authorized by the city charter. See Minn. Stat. § 410.20.
The City Attorney concluded that the proposed minimum-wage amendment was “legislative in nature” and did not relate to the establishment, administration or regulation of city government. Because the Minneapolis City Charter does not specifically authorize the implementation of legislative ordinances through the ballot initiative process, the City Attorney further concluded that “the proposed amendment is not a proper subject for a charter amendment and the Council should decline to place the provision on the ballot.”
Takeaway: The 20,000 signature petition seeking to amend the Minneapolis City Charter to increase the minimum wage is likely not a valid means of enacting a higher minimum wage within the City of Minneapolis.
When an employer purchases another company or facility with a workforce covered by a collective bargaining agreement, it should pay careful attention to whether it is either a “successor employer” or a “perfectly clear successor employer” under the National Labor Relations Act (NLRA). Here’s what employers need to know about these two different statuses:
Successor Employers: A “successor employer” is a new employer that continues its predecessor’s business in substantially unchanged form and hires employees of the predecessor as a majority of its workforce. An employer who qualifies as a successor employer has an obligation to bargain with the union that represented the employees while they were employed by the predecessor. Because it is not usually evident whether the union will retain majority status in the new workforce, however, the duty to bargain with the union does not normally arise until after the successor establishes the initial terms and conditions of employment. This means that a new employer who is merely a “successor employer” typically has an opportunity to change the terms and conditions of employment before the duty to bargain with the union arises.
Perfectly Clear Successor Employers: If it is “perfectly clear” that a new employer will retain all of the employees of the bargaining unit, the obligation to bargain with the union may arise before the new employer sets the initial terms and conditions of employment. A new employer is deemed to be a “perfectly clear successor employer” if it has either: (i) actively or, by tacit inference, misled employees into believing they would all be retained without change in their wages, hours, or conditions of employment; or (ii) failed to clearly announce its intent to establish a new set of conditions of employment prior to inviting former employees to accept employment. Thus, to avoid becoming a perfectly clear successor employer, the new employer must clearly announce its intent to establish a new set of conditions prior to, or simultaneously with, its expression of intent to retain the predecessor’s employees.
The National Labor Relations Board (NLRB) discussed these two concepts in detail in its recent decision in Nexeo Solutions, LLC, 364 NLRB No. 44 (July 18, 2016). In Nexeo Solutions, LLC, the NLRB held that the new employer was a “perfectly clear successor employer” because it informed the predecessor’s bargaining unit employees that they would be transferred to the new business, and then, a day later, advised them that they would be retained with equivalent salaries and benefits comparable to those provided by the predecessor. The new employer did not announce an intent to change the terms and conditions of employment until three months after these initial communications were made. Because of the initial communications, the NLRB reasoned that the union’s majority status in the new work force was “essentially guaranteed,” and the new employer was a perfectly clear successor who had a duty to bargain before imposing new conditions of employment.
Takeaway: To avoid becoming a “perfectly clear successor employer,” an employer involved in an acquisition should clearly announce its intent to establish a new set of terms and conditions of employment for the acquired workforce prior to, or simultaneously with, its expression of intent to retain the predecessor’s employees.
There are four problematic behaviors, which employers should avoid to stay in compliance with the National Labor Relations Act (NLRA). These behaviors are commonly abbreviated as T.I.P.S. and consist of the following:
- Threats: Employers may violate the NLRA if they make threats against employees who support unions or unionization efforts. Impermissible threats may take a variety of forms, such as threatening to close a facility, to cut employees’ pay, or to fire employees.
- Interrogation: Employers may violate the NLRA if they interrogate employees about union activities or unionization efforts. For example, employers should not ask employees which of their co-workers are union sympathizers or whether they are voting in support of the union.
- Promises: Employers may violate the NLRA if they promise benefits to employees who oppose a union. For example, an employer should not offer a one-time bonus to any employee who votes against a union.
- Surveillance/Spying: Employers may violate the NLRA if they spy on employees or conduct surveillance regarding the employees’ union activities. For example, employers should not attempt to record employee meetings about forming a union or photograph employees who are engaging in union activity.
Takeaway: Employers can reduce the risk of unfair labor practice charges by following these T.I.P.S.
Does an Employer Need to Obtain a Judgment on the Merits to Recover Attorneys’ Fees Under Title VII?
No – the U.S. Supreme Court recently held that a defendant need not obtain a favorable ruling on the merits to recover attorneys’ fees under Title VII.
Title VII provides that district court has discretion to award a “prevailing party” reasonable attorneys’ fees and costs in litigation arising under the statute. 42 U.S.C. § 2000e-5(k). In CRST Van Expedited, Inc. v. EEOC, the Supreme Court addressed the question of whether a “prevailing party” must obtain a favorable ruling on the merits to recover attorneys’ fees or whether a non-merits-based favorable ruling may suffice. No. 14–1375 (May 19, 2016).
In CRST, a single employee filed a charge of discrimination against her employer alleging sexual harassment. After investigating, the EEOC determined there was probable cause to support the charge. The EEOC further found that there was probable cause to show that the employer subjected a class of current and prospective employees to sexual harassment. The EEOC later filed a lawsuit against the employer on behalf of over 250 allegedly aggrieved female employees. The district court, however, dismissed the lawsuit on the basis that the EEOC failed to adequately investigate or attempt to conciliate its claims. Following the dismissal, the EEOC awarded the employer over $4 million in fees. The Eighth Circuit Court of Appeals eventually reversed the fee award, holding that a Title VII defendant can only be a “prevailing party” by obtaining a “ruling on the merits.”
The U.S. Supreme Court disagreed with the Eighth Circuit’s requirement that a ruling on the merits was a prerequisite to an award of attorneys’ fees under Title VII. The Court explained that:
The defendant, of course, might prefer a judgment vindicating its position regarding the substantive merits of the plaintiff ’s allegations. The defendant has, however, fulfilled its primary objective whenever the plaintiff ’s challenge is rebuffed, irrespective of the precise reason for the court’s decision. The defendant may prevail even if the court’s final judgment rejects the plaintiff ’s claim for a nonmerits reason.
The Court noted that one purpose of the fee-shifting provision was to deter litigation that was “frivolous, unreasonable, or groundless” and requiring a merits-based determination could undermine this objective. For example, litigation might be frivolous if it was barred by non-merits-based determinations, such as state sovereign immunity or mootness.
Takeaway: A defendant need not obtain a favorable ruling on the merits to recover attorneys’ fees as the prevailing party under Title VII.
Yesterday, former Fox News TV host, Gretchen Carlson, filed a sexual harassment lawsuit against Roger Ailes, the CEO of Fox News. The allegations in the lawsuit serve as a roadmap of the kinds of behavior to avoid in the workplace. Here are five lessons about what not to do in the workplace that can be learned from the case:
- Don’t tell subordinate employees that “I think you and I should have had a sexual relationship a long time ago” and that “sometimes problems are easier to solve” that way.
- When an employee reports sexual harassment, don’t call her a “man hater” and say that she needs to learn to “get along with the boys.”
- Don’t ask a female (or male) employee to turn around so that you can ogle her posterior.
- Don’t comment that certain outfits enhance an employee’s figure and urge her to wear those outfits every day.
- Don’t boast to others that you always stay seated when a woman walks over so that she has to “bend over” to say hello.
Takeaway: Whether these allegations are true are not, they are good examples of the kinds of behavior that employers, managers, and employees should avoid in the workplace to reduce the risk of liability.
Last week, the President of the St. Paul Area Chamber of Commerce, Matt Kramer, published a public letter in opposition to the proposed “earned sick and safe time ordinance” under consideration by the St. Paul City Council. The ordinance currently under consideration in St. Paul is similar in many respects to the ordinance recently passed in Minneapolis.
The letter asserts that the proposed ordinance is based on “little data,” “driven by emotion,” and will likely be implemented “with little calculation as to the multi-million dollar impact this will have on the business community.” The letter strongly questions the asserted public health benefits of the proposed ordinance. It notes that there is no available data that shows a correlation between paid sick leave and public health. The letter also discusses the negative impact that the ordinance will likely have on small employers and raises various other concerns with the proposed ordinance. A copy of the letter is available here.
Takeaway: Despite opposition from the business community, the St. Paul City Council is expected to pass a paid sick leave ordinance similar to the one recently adopted in Minneapolis in the near future.