Category Archives: Colorado

April 28, 2015

Retirement Plans: Proposed Changes to the Fiduciary Rules Offer An Opportunity For Introspection

The Department of Labor (DOL) recently published long-promised revisions to the rules regulating investment advisers to retirement plans and their fiduciaries, participants and beneficiaries, as well as IRAs and their owners and beneficiaries (Advice Recipients). The new proposed fiduciary regulations (2015 Proposed Rule) are the DOL’s most recent attempt to modernize long-standing labor rules that predate the creation of the 401(k) plan and the widespread use of IRAs. In 2010, the DOL attempted to revise these same regulations, but withdrew the proposed changes after receiving significant pushback from stakeholders. We’ll have to see if its second effort is more successful.

Role of Investment Advisors Are At Issue

The crux of the issue is that plan fiduciaries must act in the best interest of their Advice Recipients. Under ERISA and the Internal Revenue Code, if a fiduciary uses plan or IRA assets for their own advantage, it is a prohibited transaction. For example, a fiduciary adviser who receives compensation from a third party (i.e., the plan recordkeeper or platform provider) to recommend a particular investment to an Advice Recipient may be engaging in a prohibited transaction. Fiduciaries who are a party to a prohibited transaction may be subject to penalties and lawsuits from plan participants.

In the past, investment advisers have navigated around this issue by serving in a non-fiduciary consulting capacity with respect to their Advice Recipients. The current long-standing regulations generally treat an adviser as a fiduciary only if the adviser enters into an agreement with an Advice Recipient to regularly provide individualized investment advice that will serve as the primary basis upon which the Advice Recipient will make investment decisions. (This is generally referred to as the “five-part test.”) Each element of the five-part test must be satisfied in order for an adviser to be considered a fiduciary.

Investment consultants take the position that they are not fiduciaries under the five-part test because they either do not provide regular advice to the Advice Recipient or the advice they provide is not the primary basis of the Advice Recipient’s investment decision. Plans that use investment consultants who do not assume fiduciary responsibility should be aware that the 2015 Proposed Rule may ultimately characterize these consultants as fiduciaries.

Expanded Fiduciary Activity

Under the 2015 Proposed Rule, an adviser will be a fiduciary to an Advice Recipient even if the adviser does not regularly provide investment advice to the Advice Recipient and even if the advice is not the primary basis for the Advice Recipient’s investment decision. Instead, under the 2015 Proposed Rule, an adviser may become a fiduciary if the adviser receives a fee for the advice and the adviser either (i) represents or acknowledges that he or she is acting as a fiduciary with respect to the Advice Recipient or (ii) agrees in writing or verbally to provide the Advice Recipient with advice that is individualized or specifically directed to the Advice Recipient.

Under the 2015 Proposed Rule, investment advice generally includes:

a recommendation to acquire, hold, dispose or exchange an investment, including in connection with a participant’s distribution or rollover from a plan or IRA;
a recommendation with respect to the management of an investment, including in connection with a participant’s distribution or rollover from a plan or IRA;
an appraisal, fairness opinion, or similar oral or written statement concerning the value of an investment in connection with a transaction involving a plan or IRA; or
a recommendation to hire another service provider who will provide investment advice.

Under the 2015 Proposed Rule, a “recommendation” includes an adviser’s suggestion for the Advice Recipient to take a particular course of action with respect to an investment under the Advice Recipient’s control.

Common Plan Administration Carve-Outs

Notwithstanding the apparent breadth of the 2015 Proposed Rule, the rule contains a number of helpful carve-outs that identify common situations in which an adviser will not be considered a plan fiduciary, as summarized below.

Providing a plan or IRA with an investment platform, provided that the recordkeeper or platform provider notifies the Advice Recipient that it is not providing investment advice or serving as a fiduciary.
Identifying investment options that satisfy the pre-established investment criteria of an independent plan fiduciary (e.g., expense ratios, size of fund, type of asset, etc.) and/or providing benchmarking information to the independent plan fiduciary.
Providing basic investment information that assists a plan in complying with reporting and disclosure requirements.
Providing investment education that is limited to investment concepts (e.g., risk and return, diversification and dollar-cost averaging) and objective questionnaires, worksheets and interactive software.
Selling investments to an Advice Recipient who has the requisite investment background and who is properly informed that the broker is not undertaking to impartially advise the plan. This carve-out generally only applies to larger retirement plans.

The 2015 Proposed Rule also provides a means by which an adviser who falls within the definition of a fiduciary may continue to receive conflict-of-interest compensation by satisfying certain safeguards and disclosure requirements.

Take Aways

The definition of a fiduciary under the 2015 Proposed Rule is quite broad and, if adopted, will certainly expand the number of advisers who are treated as adviser fiduciaries to retirement plans and IRAs. However, even if the 2015 Proposed Rule is not adopted, Advice Recipients should take this opportunity to review their relationship with their current investment adviser. If an adviser is not currently a fiduciary, but provides recommendations with respect to investments, consider asking the adviser whether he or she is able to be a fiduciary and whether changes will be required to the relationship if the rule is finalized. These questions may spark a helpful conversation that clarifies the adviser’s role and informs the Advice Recipient of whether changes to the relationship may be required (even if the rule is not finalized).

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April 14, 2015

EEOC Fails to Show Telecommuting Would Be A Reasonable Accommodation

By Mark Wiletsky

The Americans With Disabilities Act (ADA) “does not endow all disabled persons with a job—or job schedule—of their choosing,” according to the majority of judges on the full Sixth Circuit Court of Appeals. In an 8 to 5 decision, the Sixth Circuit Court ruled en banc that Ford Motor Company did not violate the ADA when it denied an employee’s request to telecommute up to four days per week in order to accommodate her irritable bowel syndrome. EEOC v. Ford Motor Co., No. 12-2484 (6th Cir. Apr. 10, 2015).

“Good, Old-Fashioned Interpersonal Skills” Made In-Person Attendance Essential

The Equal Employment Opportunity Commission (EEOC) argued that a resale buyer for Ford, Jane Harris, who had irritable bowel syndrome that made it difficult for her to be far from a restroom, should be allowed to work from home up to four days per week. The agency cited Ford’s telecommuting policy that allowed other workers, including some resale buyers, to telecommute as evidence that Harris’ telecommuting request was a reasonable accommodation under the ADA.

The Court disagreed. It ruled that regular and predictable on-site attendance was an essential function of the resale-buyer position at Ford. Resale buyers needed to purchase raw steel from steel suppliers and then resell it to parts manufacturers to make parts used in Ford vehicles. Although some interactions could be done by email and telephone, the Court found that many required “good, old-fashioned interpersonal skills,” and resale buyers needed to be able to meet face to face with suppliers, parts manufacturers and Ford employees during core business hours.

Importantly, the Court reiterated the general rule is that regular attendance at work is essential to most jobs, especially interactive ones. It pointed to past court opinions as well as to EEOC regulations that support the premise that regular and predictable on-site attendance is an essential job function. The Court even relied on that “sometimes-forgotten guide” – common sense, stating that non-lawyers (as well as judges in other appellate circuits) recognize that regular in-person attendance is an essential function, and a prerequisite to other essential functions, of most jobs.

Other Buyers Telecommuted on a Predictable, Limited Basis

But what about the fact that Ford had a telecommuting policy that allowed other employees, including resale buyers like Harris, to work from home? Wouldn’t that make telecommuting a reasonable accommodation for Harris?

The Court said no, because she proposed to telecommute four days per week on a schedule of her choosing. The other resale buyers who telecommuted did so only one established day per week and they agreed in advance that they would come into work that day, if needed. They were also able to perform well and maintain productivity. Harris, on the other hand, wanted to be able to pick and choose which days she would telecommute, up to four days per week, without agreeing to come in those days, if necessary. The Court found that none of these other employees’ more predictable and more limited telecommuting schedules removed regular on-site attendance from the resale buyer’s job.

As a result, the Court ruled that Harris’ proposed telecommuting accommodation unreasonable.

In addition, Ford had allowed Harris to telecommute on an as-needed basis on three separate occasions and her performance suffered. Other attempts to improve Harris’ attendance also failed. The Court found that Harris could not perform the essential functions of her job and was unable to establish regular and consistent work hours. Therefore, it ruled that she was not a “qualified individual” under the ADA.

Technology Did Not Carry the Day

The EEOC argued that advances in technology make on-site attendance less essential. The Court disagreed in this case, stating that there was no evidence presented that specific technology made personal interactions unnecessary for resale buyers.

No Blind Deference to Employer’s Judgment

The Court made a point of stating that its opinion did not open the door for courts to blindly accept as essential whatever an employer says is essential for a particular job. It emphasized that an employer’s words, policies and practices were all important in deciding whether a particular task or requirement is an essential job function.

In Ford’s case, the evidence supported Ford’s judgment that regular and predictable in-person attendance was essential for resale buyers. The Court affirmed the district court’s grant of summary judgment in favor of Ford.

No Retaliation For Termination

The Court also ruled that Ford did not retaliate against Harris when it fired her for poor performance just four months after she had filed a charge of discrimination with the EEOC. Key was Ford’s good documentation of Harris’ performance and interpersonal issues. She had been ranked in the bottom 10% of her peer group before she filed her charge. Documentation showed that she failed to update spreadsheets, complete her paperwork, schedule training sessions, price items correctly and finish her work on time. Despite the closeness in time of the firing to her charge filing, the Court ruled that the EEOC failed to present evidence from which a reasonable jury could find that the real reason that Ford terminated Harris was unlawful retaliation instead of poor performance.

Dissent: Either Physical Presence is Not Essential or Telecommuting is A Reasonable Accommodation

Five judges on the Sixth Circuit dissented, believing that the EEOC had presented enough evidence to send the EEOC’s claims to a jury. Specifically, the dissent stated that the evidence was sufficient to show that there remained genuine disputes over whether Harris was a qualified individual, either because in-person attendance was not an essential function of her job, or because telecommuting would be a reasonable accommodation for her. It pointed to Ford’s telecommuting policy which allowed for “one to four days” of telework each week. It noted that Harris proposed that she be able to work from home up to four days each week, as was arguably allowed under the policy, not that she be permitted to telecommute four days each and every week.

The dissent also asserted that Harris’ past attendance issues that were a result of her disability should not be used against her in deciding whether a telecommuting arrangement during core business hours would be a reasonable accommodation under the ADA. Moreover, the dissent found that Ford should have engaged in a more interactive process to clarify Harris’ telecommuting accommodation request. Finally, the dissent believed that there was a genuine dispute over whether Ford retaliated against Harris for filing her discrimination charge.

Lessons for Employers Facing ADA Telecommuting Accommodation Requests

The majority’s decision finding that regular and predictable in-person attendance is an essential function of most jobs, especially interactive ones, is favorable for employers. But it does not mean that telecommuting can never be a reasonable accommodation. In fact, the dissent in this case demonstrates that telecommuting requests for disabled employees is likely to continue to be an issue with which employers will grapple in coming years.

If face-to-face interactions and in-person attendance at meetings or other work-related functions is essential for certain jobs at your workplace, be certain to include those tasks in your job descriptions. If you generally allow telecommuting, be sure to have a written policy and apply it consistently. If presented with a request to telecommute in order to accommodate a disability, engage in an interactive process to discuss whether telecommuting would be appropriate for that particular position and employee, whether it would constitute an undue hardship for your organization and if alternative accommodations would allow the employee to perform his or her essential functions. And by all means, make sure you have concrete documentation of an employee’s poor performance or policy infractions before taking adverse action against anyone who has filed a discrimination charge.

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April 3, 2015

Presidential Veto Quashes Congressional Attempt to Overturn NLRB “Quickie” Election Rules

By John Husband and Brad Williams

On March 31, 2015, President Obama vetoed a joint resolution passed by both houses of Congress that sought to overturn the National Labor Relations Board’s (NLRB’s) rules designed to speed up the union election process. Scheduled to go into effect on April 14, 2015, these so-called “quickie” or “ambush” election rules significantly shorten the period of time between a petition for a union election and a vote.

History of “Quickie” Election Rules

The “quickie” election rules have a tortured history. First proposed in June 2011, the rules faced immediate and severe criticism that led to a watered-down version of the rules being adopted in December 2011. These watered-down rules went briefly into effect in April 2012, but were quickly invalidated by a federal court just two weeks later. The court ruled that the Board had lacked a statutorily mandated quorum when it voted to adopt the rules.

Notably, the federal court also stated that nothing prevented a properly constituted quorum of the Board from voting to re-adopt the rules in the future. That is exactly what the Board did in February 2014. It re-proposed its original rules, and subsequently adopted the rules in December 2014. The new rules are slated to become effective on April 14th.

Legal Challenges Continue

Despite Congress’s ill-fated attempt to block the rules under the Congressional Review Act, the rules still face potential hurdles. For instance, the U.S. Chamber of Commerce filed a lawsuit in the District of Columbia in January 2015 seeking to vacate the rules and enjoin their enforcement. Business groups in Texas filed a similar lawsuit in January 2015. These lawsuits allege numerous reasons why the rules should be invalidated, including alleged violations of the National Labor Relations Act and Congressional intent, alleged violations of the First Amendment and due process protections, and arbitrary and capricious rulemaking under the Administrative Procedure Act. However, the lawsuits will take time to wind through the courts, and their chances of success are uncertain.

Anticipated Effects of Rules

Barring any unexpected injunction before April 14th, employers should anticipate big changes from the new rules. The rules will shorten the period of time between a petition for a union election and a vote to perhaps fifteen or fewer days (as opposed to the five or more weeks under current practice). The rules are expected to boost organizing activity as unions attempt to increase their membership – and dues-generated revenue – through “ambush” elections. The compressed timeline between a petition and vote will limit employers’ ability to fully explain the pros and cons of union representation before an election, and limit employees’ ability to cast an informed vote. To retain flexibility in dealing directly with their employees, employers should be ready at the first hint of union organizing to educate their employees about the desirability of union representation. Advance preparation, and a properly orchestrated counter-organizational campaign, will be key.

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March 30, 2015

Drafting Employee Handbook Policies That Pass NLRB Muster

By Brian Mumaugh

All employers, union and non-union alike, should think about making a thorough review of their employee handbook and policies in light of a recent report on employer workplace rules by the National Labor Relations Board’s (NLRB’s) General Counsel, Richard Griffin. In his report, Griffin describes a variety of employment policies that the Board has found unlawful and offers the Board’s reasoning as to why. He also points out acceptable policies and explains what wording or context made that policy lawful. The bottom line: a single word or phrase can, in this Board’s view, make the difference between an acceptable policy or one that violates the National Labor Relations Act (NLRA).

Overly Broad Handbook Policies Can Chill Employees’ Rights

The Board has long taken the position that even neutrally worded employment policies can violate the NLRA if they have a chilling effect on the right of employees to engage in protected concerted activities. These activities, referred to as Section 7 activities, include discussing wages, benefits, and other terms and conditions of employment with other employees and with outside parties, such as government agencies, union representatives and the news media.

In his March 18th Report, GC Griffin explains that the majority of policies found by the Board to violate the NLRA, were unlawful because employees could reasonably construe the language of the rule as prohibiting or infringing on Section 7 activities. Consequently, many well-intentioned, seemingly common-sense policies prove problematic for employers due to their possible interpretation as limiting an employee’s right to discuss their pay or working conditions with others.

Handbook Policies That Result in Violations

The report sets out eight categories of work rules that frequently violate the NLRA and then distinguishes between unacceptable and acceptable language for such rules. The categories and the unlawful aspects of each may be summarized as follows:

Confidentiality Policies: may not prohibit employees from discussing their wages, hours, workplace complaints or other personal information; prohibiting the disclosure of the company’s confidential information may be acceptable;
Employee Conduct Toward the Company and Supervisors: may not prohibit employees from engaging in negative, disrespectful or rude behavior or other conduct that may harm the company’s business or reputation; prohibiting employees from disparaging the company’s products, or requiring employees to be respectful to customers, vendors and competitors will typically be acceptable;
Conduct Toward Fellow Employees: may not prohibit “all” negative, derogatory, insulting or inappropriate comments between employees as that may interfere with the employees’ right to argue and debate with each other about management, unions and the terms and conditions of their employment; requiring employees to treat each other professionally and with respect as well as banning harassing and discriminatory conduct will typically be lawful;
Interactions with Third Parties: may not completely ban employees from talking to the media or government agencies; a policy noting that employees are not authorized to speak on behalf of the company without authorization may be considered lawful;
Restricting the Use of Company Logos, Copyrights and Trademarks: may not prohibit all use of company logos and intellectual property because the NLRB upholds employees’ right to use company names, logos and trademarks on picket signs, leaflets and other protest materials; policies that require employees to respect all copyright and intellectual property laws is acceptable;
Restricting Photos and Recordings: may not ban employees from taking pictures or making recordings on company property; a policy may limit the scope of such a prohibition depending on a competing protective right (such as a healthcare facility protecting patient privacy by limiting photos of patients);
Restrictions on Leaving Work: because employees have the right to go on strike, a policy that prohibits employees from “walking off the job” will be unlawful; policies stating that failure to report for a scheduled shift or leaving early without permission as grounds for discipline may be acceptable; and
Conflict-of-Interest Policies: policy may not ban any activity “that is not in the company’s best interest;” policies that give examples of what constitutes a conflict-of-interest, such as having a financial or ownership interest in a customer, supplier or competitor, or exploiting one’s position for personal gain will likely be lawful.

Few Bright Lines for Lawful Policies

The report goes on to offer analysis of additional policies dealing with topics such as handbook disclosure, social media and employee conduct related to a particular employer who agreed to revise their policies as part of a settlement agreement with the NLRB. You may have similar policies in your handbook, making it worthwhile to read what policy language the Board considers problematic and what may pass muster. The takeaway, however, is that the lawfulness of many policies may turn on a single word or phrase. At the present time, it is unclear whether GC Griffin’s report will withstand legal challenge. The best advice is that given the report and its contents, it is important to take time to review your handbook and compare your wording to the examples provided in the report. Although the report is not a legally binding interpretation of the NLRA, it can help you make an informed decision about the risks involved in including certain provisions in your employee handbook.

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March 26, 2015

Supreme Court: Pregnant Worker With Lifting Restrictions May Continue Lawsuit

By Jude Biggs

In a divided decision, on March 25, 2015, the U.S. Supreme Court released a long-awaited ruling involving a pregnant worker’s claim under the Pregnancy Discrimination Act (PDA). In its ruling, the Court held that the worker could proceed with her lawsuit, because disputes remain as to whether her employer treated more favorably at least some non-pregnant employees whose situation could not reasonably be distinguished from hers.

The majority of the Court forcefully rejected the 2014 guidance of the Equal Employment Opportunity Commission (EEOC) concerning the application of Title VII and the Americans with Disabilities Act (ADA) to the PDA, as it fell short on a number of fronts needed to “give it power to persuade.” Without ruling for either party, the Court adopted a new standard for courts to use when deciding PDA cases brought under a disparate treatment theory. Young v. UPS, 575 U.S. ___ (2015).

Despite the Court’s guidance, employers still will face many questions on what accommodations will be required in the future. The standards for “disparate treatment” and “disparate impact” cases may be more confusing in the future for employers who need to make decisions regarding whether and how to accommodate pregnant employees. As a result, employers are wise to respond carefully to accommodation requests by pregnant workers. Employers should review any policies that might have a disproportionate effect on pregnant workers, such as rules limiting job accommodations. In addition, employers should be careful to review restrictions on use of sick pay/sick time, leave eligibility outside of FMLA, lifting restrictions, and light duty assignments to determine: (1) if they disparately affect pregnant employees while accommodating others; and (2) what “strong” business rationale you can offer to defend the distinction.

For additional analysis of the Court's opinion and what it means for employers, please see our full article here.

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March 23, 2015

FMLA and FLSA Lawsuits Are Increasing

By Mark Wiletsky

The U.S. federal courts saw a whopping 26.3 percent increase in the number of Family and Medical Leave Act (FMLA) lawsuits filed last year over the prior fiscal year, according to statistics recently released by the Administrative Office of the U.S. Courts. Wage and hour lawsuits alleging a violation of the Fair Labor Standards Act (FLSA) were up a significant 8.8 percent. These filings are the highest they’ve been in the past 20 years of annual statistics reported by the courts.

The increasing numbers of lawsuits brought under those two employment laws may reflect how difficult it is to understand and administer wage and hour and leave laws. The increase also may be due to the heightened awareness by workers of their rights and benefits under these laws. Regardless of the cause of the increase, the numbers suggest that it is worthwhile for employers to focus their compliance efforts in these two areas.

Self-Audit Your Pay and Leave Practices

Before you find yourself defending a lawsuit, take the time to review your payroll and FMLA policies and practices, including these often tricky issues:

Classifying workers as exempt versus non-exempt from minimum wage and overtime pay requirements
Calculating each non-exempt employee’s regular rate of pay and overtime rate
Rounding time at the beginning and end of shifts
Automatic deductions for meal periods
Treating workers as independent contractors rather than employees
Tracking time worked remotely or “off-the-clock”
Providing FMLA notices within required time period
Calculating FMLA leave for workers with irregular schedules
Administering intermittent FMLA leave
Not penalizing employees who have taken FMLA leave

If your self-audit reveals any irregularities, take steps to revise your policies and practices to bring them into compliance with the applicable laws. Don’t forget state and local laws that may impose additional requirements related to pay and leave administration. If in doubt, don’t hesitate to consult with your legal counsel so that you don’t become one of next year’s statistics.

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March 12, 2015

EEOC Strategic Enforcement Priorities: More Insight from Denver’s Director (Part Two)

By Jude Biggs

As we wrote last week, John Lowrie, the new director of the EEOC’s Denver Field Office, recently offered insight into the agency’s national Strategic Enforcement Plan (SEP) and how his office will approach those enforcement goals. Here is the second article in the series exploring the third and fourth priorities in the EEOC’s SEP.

Priority #3 – Developing Issues

Field Director Lowrie explained the EEOC and its individual field offices are working to advance a number of developing issues. These include:

Reasonable ADA accommodations – one example is telecommuting, where an employee’s physical presence at the company is not an essential job function. The EEOC has successfully pursued this in a case against the Ford Motor Company but the case is being reexamined by the full Sixth Circuit Court of Appeals so may not stand.
Pregnancy discrimination – Mr. Lowrie discussed the lengthy Pregnancy Discrimination Act (PDA) enforcement guidance issued last July. The guidance document contains many hypothetical situations that the agency deems would violate the PDA as well as a section on employer best practices.
Title VII accommodations – Mr. Lowrie pointed to the Abercrombie & Fitch religious accommodation case which is currently before the U.S. Supreme Court as an example of how the agency looks to ensure employers make reasonable accommodations for characteristics protected by Title VII. At issue in the Abercrombie case is whether a Muslim job applicant who wore a headscarf to her job interview and was denied employment was required to request a reasonable accommodation on religious grounds in light of the company’s “look policy” which would not have permitted wearing the headscarf at work.

Priority #4 – Equal Pay Act

The fourth priority in the EEOC’s SEP is enforcement of the Equal Pay Act (EPA). Mr. Lowrie noted that Jenny Yang, who was appointed as the EEOC’s new chairperson last September, had made a recent visit to the Denver field office during which she specifically mentioned EPA issues to the Denver investigators and staff. Because equal pay issues are high on the Chair’s agenda, charges involving allegations of unequal pay based on gender will receive additional attention by EEOC investigators and attorneys.

Mr. Lowrie also noted that Wyoming is the worst state in the nation for pay disparity issues. Because the Denver field office has jurisdiction over Wyoming (as well as Colorado), the Denver field office may look to change Wyoming’s poor ranking through vigilant enforcement of equal pay charges that come into its office.

Steps to Avoid Additional Scrutiny

Because the EEOC is giving priority status to these types of charges, you need to take time to review your compliance efforts related to these issues. First, take a look at your reasonable accommodation process. Have you trained your managers and supervisors to recognize when an accommodation is being requested? Do you engage in an interactive process with the applicants and employees who make accommodation requests? Be certain to document your interactive process and all accommodations decisions you make. Second, review your policies as they relate to pregnant employees. Make sure that you do not treat pregnancy less favorably than other medical conditions and consider possible ADA accommodations if circumstances so warrant. Third, audit your pay grades and compensation structure to make sure that you are paying workers doing the same work equally, regardless of gender.

Next Installment Will Focus on Final Two EEOC Priorities

In the next and final article in this series, we will offer insight into the last two of the EEOC’s strategic priorities. Both are areas in which the EEOC has vigorously sued employers whose policies and practices it deems are discriminatory, so stay tuned.

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March 9, 2015

DOL May Issue Interpretations of FLSA Exemptions Without Notice-and-Comment Process

By Mark Wiletsky

Today the Supreme Court sided with the U.S. Department of Labor (DOL), holding that a federal agency’s interpretive rules are exempt from notice-and-comment rulemaking procedures. Perez v. Mortgage Bankers Ass’n, 575 U.S. ___ (2015). The Court’s decision means that the DOL (and other federal agencies) may issue initial and amended interpretive rules without advance notice and without considering input from interested parties.

DOL “Flip-Flopped” on Interpretive FLSA Rule

In this case, the Mortgage Bankers Association (MBA) challenged the DOL’s most recent interpretation on whether loan officers fell within the Fair Labor Standards Act (FLSA) administrative exemption following a series of “flip-flops” in the DOL’s interpretation. In 1999 and 2001, the DOL issued opinion letters stating that mortgage-loan officers do not qualify for the administrative exemption to overtime pay requirements. After new regulations regarding the exemption were issued in 2004, the MBA requested a new interpretation under the revised regulations. In 2006, the DOL issued an opinion letter in which it changed its position, deciding that mortgage-loan officers do qualify for the administrative exemption. In 2010, however, the DOL changed its interpretation again when it withdrew the 2006 opinion letter and issued an Administrator’s Interpretation without notice or comment stating that loan officers once again do not fall within the administrative exemption.

The MBA sued the DOL, claiming that the DOL needed to use the notice-and-comment process established by the Administrative Procedure Act (APA) when it planned to issue a new interpretation of a regulation that differs significantly from its prior interpretation.

Distinction Between Legislative Rules and Interpretive Rules

In a unanimous decision, the U.S. Supreme Court ruled that the text of the APA specifically excludes interpretive rules from the notice-and-comment process, so the DOL was free to change its interpretation on loan officers qualifying for the administrative exemption without providing advance notice or seeking public comment first. The Court pointed to the difference between “legislative rules” that have the force and effect of law, which must go through the notice-and-comment period, and “interpretive rules” that do not have the force and effect of law and, therefore, are not subject to the notice-and-comment obligation.

Finding that the clear text of the APA exempted interpretive rules from the notice-and-comment process, the Court overruled prior precedent in a line of cases that has come to be known as the Paralyzed Veterans doctrine. Under that doctrine, if an agency had given its regulation a definitive interpretation, the agency needed to use the APA’s notice-and-comment process before issuing a significantly revised interpretation. The Court’s ruling today specifies that no notice or comment process is needed for interpretive rules, whether it is an initial interpretation or a subsequently revised one.

Implications of Court’s Decision

Today’s ruling means that the DOL’s interpretation excluding mortgage-loan officers from the administrative exemption stands. More broadly, it means that federal agencies, such as the DOL, are permitted to issue and amend interpretations of their regulations that will take effect immediately without any advance notice to the regulated parties. Accordingly, employers should stay on top of new developments so as not to miss any new regulatory interpretations that may impact their employment practices.

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March 2, 2015

EEOC Strategic Enforcement Priorities: Insight from Denver’s Director (Part One)

By Jude Biggs

Knowing the Equal Employment Opportunity Commission’s (EEOC’s) top priorities can help you direct your risk management efforts and avoid enhanced scrutiny. John Lowrie, the new director of the EEOC’s Denver Field Office, recently spoke to the Labor and Employment Section of the Colorado Bar Association about the agency’s national Strategic Enforcement Plan (SEP) and how his office will approach those enforcement goals. This article is the first in a series that will share Mr. Lowrie’s insight into how EEOC investigators and attorneys in the Denver Field Office work toward fulfilling the national enforcement priorities.

Certain EEOC Charges Get Immediate Attention

The Denver field office currently has 12.5 investigators, 7 attorneys, 3 mediators and 1 administrative law judge. With the volume of charges received by the Denver office remaining steady at between 1,800 to 2,000 charges each year, charges alleging certain types of claims get enhanced attention which can include immediate review by the legal staff, up to and including the director himself.

Which charges receive this immediate attention? Any charge that touches on one of the EEOC’s six national strategic enforcement priorities. Here we discuss the first two priorities in the national SEP, including Mr. Lowrie’s perspective from the Denver Field Office.

Priority #1 – Remove Barriers to Employment

According to Field Director Lowrie, there are two main components to the EEOC’s first enforcement priority of removing barriers to employment: (1) arrest and conviction records, and (2) medical screening questions and procedures. If a charge alleges discriminatory use of criminal background checks in hiring or the inappropriate timing or use of medical questions or exams, the EEOC will escalate that charge for immediate review.

The EEOC has brought several high-profile lawsuits in the past few years alleging that blanket “no hire” policies that prohibit hiring an applicant with a criminal record have a discriminatory impact on African Americans and other protected classes in violation of Title VII. In the Peoplemark case, however, the EEOC was ordered to pay the prevailing employer over $750,000 in attorneys’ and expert witness fees when the court ruled that no company-wide criminal background check policy existed, an allegation that was essential to the EEOC’s case. Similarly, in the Freeman case, a federal appeals court recently upheld the dismissal of the EEOC’s case, calling its expert’s analysis “utterly unreliable.” Despite its losses, the EEOC is pursuing claims based on criminal background checks, with lawsuits against BMW, Dollar General and other companies still ongoing.

Priority #2 – Vulnerable Workers

The second strategic enforcement priority is the protection of vulnerable workers. Field Director Lowrie explained that this includes agricultural workers, immigrant and migrant workers and mentally disabled workers.

When discussing immigrant and migrant workers, Mr. Lowrie noted the EEOC does not look at whether the workers are authorized to work in the U.S. or if they are in the country illegally, commenting that the EEOC is not ICE or Homeland Security. Instead, the EEOC looks to enforce the anti-discrimination laws under its jurisdiction so that employers do not escape enforcement just because they use unauthorized workers.

As for protecting mentally disabled workers, Mr. Lowrie specifically mentioned the EEOC’s win in a case against a turkey farm in the Midwest in which over thirty men with intellectual disabilities were housed in substandard facilities, denied medical care and harassed both verbally and physically for years.

Stay Tuned for Insight into Other Top EEOC Priorities

In the next few weeks, we will explore the EEOC’s remaining strategic priorities. In the meantime, review your background check policy to ensure you do not have a blanket “no hire” criminal record exclusion. Check that your employment application does not state that applicants will be automatically excluded if they have a criminal record. Make sure that you do not ask for medical information, such as family medical history, or send applicants for a medical exam until after a conditional job offer has been made. Be careful with wellness programs, ensuring they are voluntary. And if you employ vulnerable workers, make certain that your policies and practices do not single them out for disparate treatment in pay, job assignments or other conditions of employment.

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February 23, 2015

Exempt Employee Salary Deductions for a Reduced Schedule

By Brad Cave

Classifying an employee as exempt under the Fair Labor Standards Act (FLSA) comes with a trade-off. Most employers know that exempt employees are not entitled to overtime. But, in exchange for that benefit, the FLSA limits employers’ ability to reduce the exempt employee’s salary, even when they are not coming to work. However, exempt employees are not immune from needing time off of work to recover from a medical condition, to settle an aging parent into an assisting living arrangement or to handle a long-term behavioral issue with a child. If an employee seeks some time off each week to take care of such matters, you may agree to allow the employee to work a reduced work schedule for a period of time. But when payday rolls around, must you pay the employee his or her full weekly salary or can you deduct pay to reflect the reduced work schedule? Missing this answer can have significant ramifications for the employee’s exempt status.

FLSA Salary Basis

Under the Fair Labor Standards Act, exempt employees’ pay must meet the salary basis test, which means that the employee must receive a predetermined amount of salary for each workweek, without reductions because of variations in the quality or quantity of work during the week. Thus, deductions from salary for reduced working hours is generally not permitted under the salary basis test. Deducting pay for the missed time could result in the loss of the employee’s exempt status. However, two exceptions may apply to your employee.

FMLA Leave Can Result in Pay Deduction

If the employee’s reduced schedule constitutes unpaid leave under the Family and Medical Leave Act (FMLA), the FLSA regulations permit employers to “pay a proportionate part of the full salary for time actually worked” without risk to the exempt status. This means that if your employee is missing work for an FMLA-qualifying reason, you may deduct pay from their weekly salary to reflect the unpaid FMLA leave time.

PTO, Sick Leave or Other Paid Leaves

If the employee has accrued PTO, sick leave or another type of company-provided paid leave, you can require that the employee use such paid leave to cover the partial day absences, as long as the employee continues to receive the full amount of their weekly salary. And, once the employee uses up all of their accrued paid leave, you can make salary deductions for full-day, but not partial-day, absences.

Saved Wages Vs. Loss of Exempt Status

Deductions from an exempt employee’s salary should be made only after careful consideration of the potential consequences. After all, the salary you save now for missed time may seem trivial if you lose the exempt status of this and all similarly-situated employees and owe them overtime for the past two years.