November 20, 2017

Draw Against Commissions: Keeping FLSA Minimum Wage and Overtime Violations At Bay

Paying sales employees on a commission basis can achieve multiple goals. Salespersons have an incentive to increase sales to earn more money while the company sees higher revenues without being locked into a guaranteed pay structure for underperforming employees.

Although various types of commission structures may be used, a common one is a draw against commission. Typically, this type of pay structure means that a sales employee is paid solely on the basis of commissions, but may be advanced a certain amount of money known as a “draw” for weeks in which the employee fails to earn a certain level of commissions. Then, the draw is deducted from future commissions when the employee’s commissions exceed the expected level. It sounds easy, but such arrangements can be fraught with FLSA traps.

Illustrative Case

The Sixth Circuit Court of Appeals (whose decisions apply to Michigan, Ohio, Kentucky, and Tennessee) recently examined an employer’s draw-against-commissions policy to determine whether the policy violated the minimum wage and overtime requirements of the FLSA. In that case, current and former retail and sales employees of hhgregg, Inc. and Gregg Appliances filed a lawsuit claiming that hhgregg’s commission policy violated the FLSA and state law in numerous ways. Here is a summary of the policy at issue:

In pay periods when an employee’s earned commissions fell below the minimum wage, the employee would be paid a draw to meet the minimum-wage requirement
In a non-overtime week (i.e., the employee worked 40 or fewer hours), the draw equaled the difference between the minimum wage for each hour worked and the amount of commissions actually earned
In an overtime week (i.e., the employee worked more than 40 hours), the draw equaled the difference between one and one-half times the minimum wage for each hour worked and the amount of commissions actually earned
Draw payments were calculated on a weekly basis
The amount of the draw would be deducted from commissions earned in future weeks
An employee could be subject to discipline, including termination, if he or she received frequent draws or accumulated a high draw balance
Upon termination of employment, an employee with a draw balance was required to immediately pay the company any deficit.

Retail and Service Establishment Exemption

The FLSA exempts retail or service employees from the overtime pay requirement but only if (1) “the regular rate of pay of such employee is in excess of one and one-half times the minimum hourly rate applicable” under the FLSA, and (2) “more than half his compensation . . . represents commissions on goods or services.” This exemption does not relieve employers from meeting minimum wage obligations.

In the hhgregg case, the employer argued that the exemption applied. The Sixth Circuit disagreed, pointing to the allegation that the commission policy paid exactly the minimum hourly rate in a normal, nonovertime week, thereby failing to meet the exemption requirement that it be “in excess of one and one-half times the minimum hourly rate.” Because the exemption didn’t apply, hhgregg could not escape overtime pay obligations.

Deductions of Draws From Future Earnings Was Not An Illegal “Kick Back”

Under the FLSA, when an employee earns less in commissions than was advanced through a draw, the employer may deduct the excess amount from later commissions, if otherwise lawful. In the hhgregg case, the plaintiffs argued that the deductions were not “otherwise lawful” because the draws to meet the minimum wage were not delivered “free and clear,” as is required by DOL regulation. Plaintiffs argued that the draws were loans that the sales persons were expected to repay, functioning as an unlawful “kick back.”

The Sixth Circuit rejected the plaintiffs’ argument, finding that because the employees could keep the full amount of the draw at the time it was “delivered,” it was not an unlawful “kick back.” Thus, deducting the draw payments from future commissions did not violate the “free and clear” regulation.

Immediate Repayment Upon Termination

Plaintiffs alleged that making employees immediately pay the company any deficit in draws upon termination of employment violated the FLSA. On that claim, the Sixth Circuit agreed, at least to the extent of allowing the lawsuit to proceed. The Court looked to hhgregg’s written commission policy to find that the sales employees could reasonably believe that they would be liable to hhgregg for any unearned draw payments at the time of termination. Because that provision could violate the DOL regulation that minimum wage be provided “free and clear,” the Court held that plaintiffs alleged sufficient facts in their complaint to support their claim that the policy violated the FLSA.

Off-The-Clock Work

Plaintiffs further alleged that the company encouraged sales employees to attend required training and store meetings “off the clock” in violation of minimum wage and overtime requirements. Specifically, plaintiffs alleged that hhgregg managers approved of and sometimes encouraged sales persons to work “off the clock” to avoid incurring a higher draw.

hhgregg argued that any practice of off-the-clock work would not violate the FLSA because “by allegedly under-reporting working time in draw weeks and thereby lessening their draw payments, [plaintiffs] increased the amount of commission pay they subsequently received by the same amount.” Therefore, “the ‘off-the-clock’ work allegedly performed did not deprive them of pay; it simply shifted it to a different week.”

The Court rejected the company’s argument. Because the FLSA requires employers to pay the minimum wage for all hours worked on a week-by-week basis, an employer may not “shift” pay for hours worked to a future week. Therefore, the Court ruled that plaintiffs’ claim could continue.

Review Your Commission Policy

This recent draw-against-commission case highlights the FLSA issues that employers may face when implementing commission policies. If you use commission payments for any segment of your workforce, we recommend that you review your policy to confirm that it pays employees for all hours worked (e.g., no “off-the-clock” time). In addition, if you offer a draw against commissions, make certain that it meets your minimum wage and overtime pay obligations. Finally, if you rely on an FLSA exemption, such as the exemption for retail and service establishments, compare your commission policy to the exemption to ensure you meet the exemption test. Because this is a tricky area, consult with experienced counsel to resolve any questions or compliance concerns.

November 6, 2017

Take Note: Benefit Plan Deadlines Approaching

By Molly Hobbs

At this time of year, important deadlines are quickly approaching for 401(k) plans and health and welfare plans. Here is a non-exhaustive list of significant employee benefit plan deadlines for the remainder of 2017 and early 2018. These deadlines are generally for calendar year plans, unless otherwise specified.

Retirement Plan Deadlines:

December 2

Distribute the following notices, as applicable, by December 2, 2017:
- Traditional 401(k) Safe Harbor Notice
- Qualified Automatic Contribution Arrangement (QACA) Notice
- Eligible Automatic Contribution Arrangement (EACA) Notice
- Non Safe-Harbor Automatic Contribution Arrangement Notice
- Qualified Default Investment Alternatives (QDIA) Notice
Determine when the annual participant fee disclosure was last provided and timely provide the disclosure. The annual participant fee disclosure is required every 14 months. Many employers provide this disclosure on or before the end of the year along with other year end notices.

December 16

Provide summary annual report (SAR) to participants if the 2016 Form 5500 was filed by extension on or before October 16, 2017. For non-calendar year plans, the SAR must be provided two months after the Form 5500 was filed, including by approved extension.

December 31

Adopt any discretionary amendments implemented during the plan year.
Ensure all required minimum distributions have been paid to applicable participants.

January 2018

Provide non-discrimination testing census data to the record keeper or Third Party Administrator (TPA).

March 15, 2018

Make sure TPA has completed non-discrimination testing, and distribute any excess contributions, in order to avoid excise taxes.

April 16, 2018

Distribute any excess contributions and related earnings from prior year.
Make any employer contributions to retirement plan(s) in order to receive tax deduction (plus extensions).

Health and Welfare Plan Deadlines:

November 1

If the plan’s open enrollment is approaching, fix the starting and ending dates for open enrollment and prepare and distribute enrollment materials such as the Summary of Benefits and Coverage.
Marketplace/Exchange open enrollment begins.

November 15

If the plan is a self-funded health plan, submit the Transitional Reinsurance Program (TRP) Annual Enrollment and Contributions Submission Form, reporting the annual enrollment count and selecting a payment schedule. If the Plan elected in 2016 to pay the TRP fee in two installments, the second payment is also due by November 15, 2017.

December 15

Open enrollment for the Marketplace/Exchange coverage ends.

December 16

Provide summary annual report (SAR) to participants if the 2016 Form 5500 was filed by extension on or before October 16, 2017. For non-calendar year plans the SAR must be provided two months after the Form 5500 was filed, including by approved extension.

December 31

Provide the following annual notices, as applicable, by December 31, 2017:
- Children’s Health Insurance Program (CHIP)
- Women’s Health and Cancer Rights Act (WHCRA)
- HIPAA Notice of Privacy Practices (at least every three years)
Many plan sponsors provide these notices with the annual open enrollment materials.

January 31, 2018

If the employer is subject to the ACA employer mandate, provide full-time employees with an IRS Form 1095-C documenting 2017 health coverage.

February 28 (March 31, if filing electronically)

If the employer is subject to the ACA employer mandate, file Form 1094-C and Forms 1095-C with the IRS.

Keep this deadline checklist handy to ensure that your plans remain compliant and as always, consult with your employee benefits counsel for additional information.

October 12, 2017

Top Five Ongoing Challenges For Collective Bargaining and Organizing

By Steve Gutierrez

Most expect that the White House and federal agencies will take a more business-friendly approach than in recent years. Employers hope that will mean they can now look forward to a potential rollback of regulations and enforcement efforts that have stymied their business objectives. Yet when it comes to responding to union organizing campaigns and negotiating collective bargaining agreements, employers still face wide-ranging challenges. Here is my list of the top five ongoing challenges.

1. Affordable Care Act (ACA) Cadillac Tax

Many unions, such as the Teamsters, prioritize and bargain extensively over top quality, employer-paid health insurance. They often use it as a selling point to their members. Yet, the ACA’s 40 percent excise tax on workers with comprehensive insurance plans (the so-called “Cadillac tax”), set to be implemented in 2020, is seen by the unions as an affront to their hard-fought bargaining to obtain high quality health care for their membership.

In fact, reports show that unions, including the Teamsters, have actively lobbied members of Congress for a repeal of the Cadillac tax. Because health care reform has not yet passed, it may be unlikely that relief from the Cadillac tax is forthcoming anytime soon.

This opens the door for alternate bargaining tactics over health care plans and benefits. Economics can be based on the ultimate cost to the employees/members, when factoring in the tax. This issue remains a challenge for both employers and the union and can change the overall approach to structuring the economic package during contract negotiations.

2. Micro-units

In 2011, the NLRB issued its Specialty Healthcare decision permitting unions to establish bargaining units that include only a small fraction of a workforce. For example, in 2014, the Board certified a micro-unit of cosmetic and fragrance salespersons working at a Macy’s department store rather than requiring all employees at the store (or even all salespersons at the store) to make up the bargaining unit. The Board authorized the micro-unit by finding that the cosmetics and fragrances salespersons were a readily identifiable group and shared a community of interest. The Board also found that other Macy’s employees did not share an overwhelming community of interest with the cosmetics and fragrances employees, and prior NLRB cases involving the retail industry did not require a wall-to-wall unit.

These micro-units can make union organizing easier as they do not require a majority of the historical “wall-to-wall” bargaining units to vote in favor of the union. For example, a unit of only nine employees needs just five to vote “yes” and the union has its foot in the door with that employer. And organizing on that micro level can more easily go unnoticed by employers. Micro-units can also result in an employer having to negotiate with multiple unions affecting small segments of its workforce, and the headaches involved with administering varying contracts.

Numerous efforts are underway in the current administration to do away with micro-units. Current NLRB Chairman Phillip Miscimarra disagrees with the Specialty Healthcare standard for determining an appropriate bargaining unit, raising chances that the Board will abandon the approval of micro-bargaining units. However, Miscimarra has announced that he will leave the Board when his term expires in December 2017. Despite his impending departure, it is possible that a majority-Republican Board will reverse course on micro-units.

In addition, this past Spring, Senate Republicans introduced (again) the Representation Fairness Restoration Act (S. 801) which would do away with micro-units. That bill has been assigned to the Senate Health, Education, Labor, and Pensions committee where it is one of 250 bills currently being considered by the committee.

Until the law or Board precedent is changed, micro-units remain a challenge for employers. But because a more employer-friendly Board might rule against a micro-unit, it becomes vastly important to challenge proposed bargaining units and any potential outlier unit members. Increased pressure on the Board on this issue should be a continued focus.

3. Transparency with Employees/Members

Unions are becoming quite savvy in communicating with their members and potential members. Union leaders are increasingly focusing on being more transparent with their members during the bargaining process. They continue to build strong communications networks centered on social media and other online platforms, with development of mobile apps and company-specific websites, Facebook pages, and Twitter accounts.

To stay ahead of and counter union communications, employers facing a union organizing campaign or in the midst of negotiating a contract should institute and invest in more robust communication strategies with their employees as well. Social media and other online communications boards are essential in getting the company’s message out, especially to millennials and other employee demographics who will seek their information from such sources. But, be aware that in late 2014, the NLRB ruled that employees may presumptively use a company’s email system for statutorily protected communications as long as it takes place during nonworking time and does not interfere with productivity. That Board decision, Purple Communications, is on appeal in the Ninth Circuit Court of Appeals but remains a challenge for employers until such time it is reversed or overturned.

4. New Technology in the Workplace

As more technology comes into the workplace and robots threaten to replace workers, collective bargaining will likely face these issues head on. Just as outsourcing used to be (and in many cases, still is) a sore spot for unions, workplace automation is a similar threat to jobs and future expansion.

One example involves the Teamsters who recognize that autonomous driving vehicles are becoming a reality. The Teamsters are urging lawmakers to prioritize workers and safety when crafting legislation and rules regarding autonomous vehicles. Their concerns likely spill over into their contract negotiations as well.

As workplace technology accelerates, discussions of the use of such technology will likely become key in any bargaining where robots and automation are a possibility. Anticipating that topic, and the potential impact on workers, opens the door for employers to bargain for potential gains and/or trade-offs in their favor when the union opposes or seeks to limit autonomous technology.

5. Favorability of Unions on the Rise

According to a January 2017 Union Favorability Survey by the Pew Research Center (PRC), 60 percent of respondents viewed labor unions favorably while only 35 percent viewed unions unfavorably. This is the highest union favorability rating compiled by the PRC since March of 2001 and only the second rating at or above 60 percent since 1985.

Employers should be aware of this rising trend, especially when communicating with employees during an organizing or bargaining campaign. Opposing and criticizing unions too strongly could backfire so communications and strategies should be formulated to focus on issues, rather than the institution of unions and union membership itself.

Responding to organizing campaigns and preparing for collective bargaining is always a challenge but thinking ahead about these top five issues, and investing in some preventative training and education for managers, can help you manage the process and achieve a favorable outcome.

October 5, 2017

ADA Does Not Mandate Multi-month Leave of Absence As Accommodation, Says Seventh Circuit Court

By Mark Wiletsky

Rarely do we receive definitive guidance on reasonable accommodations. But the Seventh Circuit Court of Appeals came very close to providing that when it recently ruled that a multi-month leave of absence is beyond the scope of a reasonable accommodation under the Americans with Disabilities Act (ADA).

Back Condition Leads to FMLA Leave

In the recent Seventh Circuit case, Raymond Severson had long suffered from back myelopathy, a condition that caused degenerative changes in his back, neck, and spinal cord and impaired his functioning. Although he usually was able to perform his duties at Heartland Woodcraft, Inc., a fabricator of retail display fixtures, at times Severson experienced flare-ups that made it difficult for him to walk, bend, lift, sit, stand, or work.

Over the course of seven years of employment with Heartland Woodcraft, Severson rose from supervisor to shop superintendent and then to operations manager. The company, however, found that he performed poorly in the operations manager position and on June 5, 2013, notified Severson that it had demoted him to a second-shift lead position, which included performing manual labor in the production area.

That same morning, Severson had wrenched his back at home and he was visibly uncomfortable. He left work early and requested leave under the Family and Medical Leave Act (FMLA). He was granted FMLA leave, and his doctor provided certificates indicated that he had multiple herniated and bulging discs in his back which would make him unable to work until further notice.

Unable To Return To Work Following FMLA Leave

While out on FMLA leave, Severson’s doctor treated him with steroid injections, but they did not improve his condition. Severson scheduled disc decompression surgery for August 27, 2013, the same day that his 12 weeks of FMLA leave would expire.

About two weeks before his surgery, Severson requested an extension of his medical leave, explaining that typical recovery time for his surgery would be at least two months. The company contacted him on August 26, the day before his scheduled surgery, and informed him that his employment with Heartland would terminate on August 27 when his FMLA leave expired. He was told he could reapply for employment after he was medically cleared to work.

On August 27, Severson had his scheduled surgery, and on October 17, his doctor gave him a partial clearance to return to work with a 20-pound lifting restriction. On December 5, Severson’s doctor released him to work without restriction.

Leave As A Reasonable Accommodation

Severson sued the company for an ADA violation alleging that it failed to accommodate his physical disability by refusing to provide a three-month leave of absence following expiration of his FMLA leave. The federal court in Wisconsin rejected the claim as a matter of law, entering summary judgment in favor of Heartland Woodcraft, and Severson appealed.

The Seventh Circuit (whose decisions are binding on federal courts in Illinois, Wisconsin, and Indiana) affirmed judgment in favor of the employer. The Court was very clear in ruling that a long-term medical leave is not a reasonable accommodation under the ADA. Judge Sykes, writing for the three-judge panel, stated, “The ADA is an antidiscrimination statute, not a medical-leave entitlement.” The Court stated that a reasonable accommodation is intended to make it possible for the employee to perform his or her job. But a medical leave that lasts multiple months does not allow the employee to work and that inability to work removes the person from the class of “qualified individuals” protected by the ADA.

The Court stated that brief periods of time off may be an appropriate accommodation in some circumstances. For example, the Court noted that intermittent time off or a short leave of absence may be appropriate for someone with arthritis or lupus when brief periods of inflammation make it too painful for the individual to work. But the Court ruled that a multi-month leave of absence “is beyond the scope of a reasonable accommodation under the ADA.” Read more >>

September 12, 2017

Employer May Keep Tips As Long As Employees Are Paid Minimum Wage, According To 10th Circuit

By Brad Cave

By invalidating a U.S. Department of Labor (DOL) regulation that states that tips are the property of employees, the 10th Circuit Court of Appeals (whose opinions apply to Wyoming, Colorado, Utah, Kansas, Oklahoma, and New Mexico) rejected an employee’s wage claim based on her employer’s practice of keeping all tips. But employers in states with an analogous state law governing ownership of tips, such as Wyoming, need to be aware that the 10th Circuit’s ruling may not change how they handle tips.

Caterer Kept Tips But Paid More Than Minimum Wage

Relish Catering regularly receives tips from its customers in the form of a gratuity added to their final catering bill at the end of an event. Relish retains those tips for itself rather than passing them along to its employees who work at the events. However, it pays its employees at or above the federal minimum wage of $7.25 per hour as well as time and a half for overtime and does not rely on any sort of tip credit to meet the minimum wage.

Bridgette Marlow believed Relish was required to turn over her share of the catering tips under the Fair Labor Standards Act (FLSA). Despite making $12 per hour (and $18 per hour for overtime), she sued Relish and Brett Tucker, a manager and part owner of the company, alleging they violated the minimum wage provisions of the FLSA by retaining the tips.

FLSA Restrictions Apply Only When Tip Credit Taken

Marlow argued that by retaining all of the tips, Relish was essentially paying employees below minimum wage. For example, she suggested that if she received her $12 hourly wage but Relish retained $11 in tips for each hour she worked, the result was the same as if Relish turned over all of the tips to her and paid her a $1 hourly wage. In essence, she argued that the company could be paying less than the required amount for tipped employees.

The 10th Circuit didn’t bite on Marlow’s rationale. The Court stated that it doesn’t matter where the money to pay wages comes from so long as the company paid at least the minimum wage required under the FLSA. The Court rejected Marlow’s argument that the FLSA’s tip-credit provision applied to her case because Relish doesn’t take a tip credit.

The FLSA tip-credit provision allows employers of “tipped employees” to pay a reduced hourly wage of $2.13 per hour so long as employees receive sufficient tips to raise their earnings to the $7.25 hourly minimum. But this provision applies only if the employer counts tips toward the minimum wage, said the Court. The tip-credit provision does not apply if the employer doesn’t count tips toward the minimum and instead pays the full hourly minimum wage.

The Court stated that the FLSA tip-credit provision does not require that employers turn over all tips to employee in all circumstances, as Marlow urged. Instead, when an employer doesn’t take the tip credit, the tip-credit provision imposes no restrictions on what it may do with tips as long as it pays an hourly wage above the $7.25.

DOL’s Tip-Ownership Regulation Invalid

Marlow relied extensively on a 2011 DOL regulation that provides:

Tips are the property of the employee whether or not the employer has

taken a tip credit under section 3(m) of the FLSA. The employer is

prohibited from using an employee’s tips, whether or not it has taken a tip

credit, for any reason other than that which is statutorily permitted in

section 3(m): As a credit against its minimum wage obligations to the

employee, or in furtherance of a valid tip pool.

From the language of that regulation, it would seem that Marlow had a valid claim. But the 10th Circuit said not so fast and looked at whether the DOL had the authority to implement the regulation in the first place.

Relying on U.S. Supreme Court precedent, the 10th Circuit pointed out that federal agencies may create rules only to fill “ambiguities” or “gaps” in statutes. In a “friend-of-the-court” brief, the federal government argued that the FLSA is silent on the issue of who “owns” tips when an employer does not take the tip credit, and therefore, the DOL had the authority to create a tip ownership rule to fill in that gap.

Despite the Ninth Circuit’s acceptance of that argument, the 10th Circuit disagreed with it, finding that nothing in the FLSA directs the DOL to regulate the ownership of tips when the employer doesn’t take the tip credit. Because the FLSA limits the tip restrictions to employers who take the tip credit, the DOL lacked the authority to regulate otherwise.

The Court invalidated the DOL’s tip-ownership regulation, finding it was beyond the DOL’s authority, and affirmed the lower court’s judgment in favor of the employer. Marlow v. The New Food Guy, Inc., No. 16-1134 (10th Cir. June 30, 2017). Read more >>

August 31, 2017

Court Invalidates Overtime Rule That Increased Exempt Salary Levels

By Mark Wiletsky

The Department of Labor (DOL) exceeded its authority when it doubled the minimum salary levels for exempt executive, professional, and administrative employees under the Fair Labor Standards Act (FLSA), ruled federal judge Amos Mazzant of the U.S. District Court for the Eastern District of Texas today. Granting summary judgment in favor of the states and business plaintiffs who challenged the new overtime rule last November, Judge Mazzant determined that the DOL’s new overtime rule “effectively eliminates a consideration of whether an employee performs ‘bona fide executive, administrative, or professional capacity’ duties.”

Exempt Duties Are Part Of The Analysis

Judge Mazzant wrote that although Congress delegated authority to the DOL to define and delimit the white-collar exemptions, Congress was clear when enacting the FLSA that the exemption determination needs to involve a consideration of an employee’s duties, rather than relying on salary alone. He stated that the Obama-era overtime rule that significantly increased the minimum salary levels would result in entire categories of previously exempt employees who perform “bona fide executive, administrative, or professional capacity” duties being denied exempt status simply because they didn’t meet the salary threshold. Consequently, the elimination of an analysis of duties for those who failed to meet the new high salary level was inconsistent with Congressional intent.

A Minimum Salary Level Still Acceptable

When issuing a preliminary injunction last November, Judge Mazzant’s ruling raised the question as to whether any salary threshold could be used as part of the white-collar exemption tests. In his summary judgment order, Judge Mazzant appears to leave the salary-level part of the test stand, writing “[t]he use of a minimum salary level in this manner is consistent with Congress’s intent because salary serves as a defining characteristic when determining who, in good faith, performs actual executive, administrative, or professional capacity duties.” He notes that even though the plain meaning of Section 213(a)(1) does not provide for a salary requirement, the DOL has used a permissible minimum salary level as a test for identifying categories of employees Congress intended to exempt. Citing to a report on the proposed regulations, Judge Mazzant seems to approve of setting that salary level at “somewhere near the lower end of the range of prevailing salaries for these employees.”

No Automatic Increase Mechanism

The ruling also strikes down the mechanism in the DOL’s overtime rule that provided for automatic updates to the exemption’s salary levels every three years. In a cursory paragraph, Judge Mazzant wrote that having found the rule unlawful, the automatic updating mechanism was similarly unlawful.

Back To Square One

Now that the existing, never-implemented rule has been invalidated, the DOL is starting over with revising and updating the overtime exemption rule. The DOL recently published a request for information seeking public input on what the new salary levels should be, how updates should be made, whether duties tests should be changed, and other issues affecting the white-collar exemptions. We will have to see what new proposals the DOL puts out in the months to come. But in the meantime, employers can abandon plans to address the doubled salary thresholds under the Final Rule.

On Another Note, No Pay Data To Be Collected With EEO-1 Reports

In another development, on August 29, 2017, the Office of Management and Budget (OMB) directed the Equal Employment Opportunity Commission (EEOC) to immediately stay the requirement that certain employers provide pay data as part of a new EEO-1 report. The controversial pay-data rule would have required companies with 100 or more employees (and federal contractors with 50 or more employees), to submit the wage and hour information for employees according to race, gender, and ethnicity, with the information being used by the EEOC to analyze pay discrepancies and identify possible Equal Pay Act violations. Because of the stay, covered employers should use the previous EEO-1 form, which still collects data on employee race, ethnicity, and gender by occupational categories. Despite the reprieve for employers on the pay-data rule, EEOC Acting Chair Victoria Lipnic states that her agency remains committed to strongly enforcing federal equal pay laws.

If you have any questions about these new developments, be sure to reach out to the employment counsel with whom you typically work.

August 14, 2017

Only Certain Types of Speech Are Protected In The Workplace

By Steve Gutierrez

This past week, talk abounds over Google’s firing of a software engineer after he posted a lengthy memo criticizing the company’s diversity policy and culture on the company’s internal website. Google says he crossed a line and violated its Code of Conduct. The engineer says he engaged in protected speech and filed an unfair labor practice charge against Google with the National Labor Relations Board (NLRB). The case will be interesting to follow, especially to the extent that it resolves the dispute between Google’s conduct policy and this employee’s criticisms of his former employer.

No Free Speech Guarantee

Some discussions about the Google memo have centered around the belief that employees should have free speech protections to say whatever they like, even about their employer. U.S. workers employed by private entities, however, do not have so-called free speech rights. The First Amendment to the U.S. Constitution prohibits Congress from making any laws that abridge the freedom of speech. But it applies only to government actions and does not prohibit private employers from limiting or taking employment actions based on what an employee says or does.

NLRA Concerted Activities Are Protected

The National Labor Relations Act (NLRA) guarantees employees the right to form and join unions. But it also gives employees the right to engage in other “concerted activities for the purpose of collective bargaining or other mutual aid or protection.” These rights under Section 7 of the NLRA extend to protecting non-union employees who discuss and/or act together to try to improve the terms and conditions of their employment, such as their pay, benefits, policies, and workplace safety issues. Employers may not threaten, discipline, or fire employees who engage in such protected activities.

When it comes to employee memos and social media posts, content generally will be protected if it relates to or grows out of group action, such as when an individual employee solicits other employees to take action to fix work-related problems or seek improvements in the workplace. But mere griping by an individual employee will not be protected as a protected concerted activity. Additionally, even communications that would be deemed concerted activities can lose NLRA protection if they express egregiously offensive, abusive, or knowingly and malicious false statements.

When Company Policies Clash With Concerted Activities

When a company policy prohibits employees from engaging in certain conduct, such as prohibiting disparagement of the company or its managers, or restricting discussion among co-workers of confidential information, the NLRB may consider whether it restricts or “chills” employees’ Section 7 rights to engage in protected concerted activities. If the NLRB finds that a policy is overly broad and potentially restricts concerted activities, the company can be found to have violated the NLRA.

Before Discipline and Discharge

Anytime your organization seeks to discipline or terminate an employee for writing emails, posting on social media, or otherwise communicating about the company, consider the following:

Does the communication discuss with or seek to engage co-workers in relation to the terms and conditions of their employment?
Could the communication be seen as an effort to form a union or another form of group action related to the workplace?
Is the employee reaching out to a third party, such as the media or union organizers, on behalf of multiple employees?
If the basis for the discipline or discharge is a company policy, is the policy narrowly defined or is it too broad so that it interferes with employees’ Section 7 rights?

Employers have a great deal of authority to discipline or get rid of at-will employees based on inappropriate or undesired communications or actions. Just make sure to evaluate whether employees are engaging in protected concerted activities prior to imposing a detrimental employment decision so as not to violate the NLRA.

August 10, 2017

New Nevada Employment Laws – Part 2: Non-competes and Domestic Violence Leave

by Dora Lane

In addition to the pregnancy accommodation law and nursing mothers law we reported on here, the Nevada legislature recently enacted changes to Nevada’s non-compete law and created a new obligation for employers to provide domestic violence leave. Here are the specifics of these new laws that Nevada employers need to know.

Non-Compete Agreements – Changes To Enforceability (AB 276) – effective June 3, 2017

Governor Sandoval recently signed into law AB 276 which enacts some important changes to existing Nevada non-compete law, requiring careful review.

To begin, AB 276 amends NRS Chapter 613 to require that a non-compete covenant: (a) be supported by valuable consideration; (b) not impose any restraint that is greater than necessary for the protection of the employer for whose benefit the restraint is imposed; (c) not impose any undue hardship on the employee; and (d) impose restrictions that are appropriate in relation to the valuable consideration supporting the non-compete covenant.

Many questions are raised by the new requirement that the restrictions be in relation to the consideration offered to the employee to support the non-compete agreement. One key question is whether continued employment of an at-will employee will be sufficient consideration to support a non-compete. We will have to see how that language plays out in future enforcement actions.

Restructuring or Reductions In Force. The new amendments state that, if an employee’s termination is the result of a reduction in force, reorganization, or “similar restructuring,” a non-compete covenant is only enforceable during the period in which the employer is paying the employee’s “salary, benefits or equivalent compensation,” such as severance pay. This restriction may vastly reduce the ability of Nevada employers to use non-compete agreements when executives, managers, or other employees are let go due to downsizing or other restructuring.

Restrictions Related to Customers. These new amendments further provide that a non-compete covenant may not restrict a former employee from providing service to a former client or customer of the employer if: (a) the former employee did not solicit the former client or customer; (b) the client or customer voluntarily chose to leave and seek services from the former employee; and (c) the former employee is otherwise complying with the limitations in the covenant as to time, geographical area, and scope of activity to be restricted, other than any limitation on providing services to a former customer or client who seeks the services of the former employee without any contact instigated by the former employee.

Confidentiality and Non-Disclosure Agreements. AB 276 additionally states that it does not prohibit agreements to protect an employer’s confidential and trade secret information if the agreement is supported by valuable consideration and is otherwise reasonable in scope and duration.

Judicial Revision Required. Notably, the new provisions state that if, during a non-compete enforcement action, a court determines that the non-compete covenant is supported by valuable consideration, but otherwise contains limitations that are unreasonable, or impose greater restraint than necessary and create undue hardship on the employee, the court “shall revise the covenant to the extent necessary and enforce the covenant as revised.” Any judicial revisions must be made to cause the limitations contained in the non-compete agreement as to time, geographical area and scope of activity to be restrained to be reasonable and to impose a restraint that is not greater than is necessary for the protection of the employer for whose benefit the restraint is imposed.

Domestic Violence Leave (SB 361) – effective January 1, 2018

Beginning in 2018, Nevada employers must provide an employee who has been employed for least 90 days and who is a victim of domestic violence, or whose family or household member is a victim of domestic violence, up to 160 hours of leave in one 12-month period, assuming the employee is not the alleged perpetrator. A “family or household member” means a spouse, domestic partner, minor child, or parent or another adult who is related within the first degree of consanguinity or affinity to the employee, or other adult person who is or was actually residing with the employee at the time the act of domestic violence was committed.

The leave allowed under this new law may be paid or unpaid, and may be used intermittently or in a single block of time. The leave must be used within 12 months after the date when the act of domestic violence occurred. If used for FMLA-qualifying purposes, the domestic violence leave will run concurrently with FMLA leave and both leave balances will be reduced accordingly.

Reasons For Leave. Eligible employees may take domestic violence leave for the following reasons:

For the diagnosis, care, or treatment of a health condition related to an act of domestic violence committed against the employee or the employee’s family or household member;
To obtain counseling or assistance related to an act of domestic violence committed against the employee or the employee’s family or household member;
To participate in court proceedings related to an act of domestic violence committed against the employee or the employee’s family or household member; or
To establish a safety plan, including any action to increase the safety of the employee or the employee’s family or household member from a future act of domestic violence.

Notice Requirements. This new leave law requires an employee who has used any leave allowed under the bill to give his or her employer at least 48 hours notice if the employee needs to use additional leave for any of the purposes outlined above.

Reasonable Accommodations. Employers are obligated to make reasonable accommodations that will not create undue hardship for an employee who is a victim of domestic violence (or whose family or household member is such a victim). These accommodations may include: (a) a transfer or reassignment; (b) a modified schedule; (c) a new telephone number for work; or (d) any other reasonable accommodation which will not create an undue hardship deemed necessary to ensure the safety of the employee, the workplace, the employer, and other employees.

Documentation. Employers may require employees to present documentation substantiating the need for leave, such as a police report, a copy of an application for a protective order, an affidavit from an organization that provides assistance to victims of domestic violence, or documentation from a physician. Any substantiating documentation provided to the employer must be treated confidentially and must be retained in a manner consistent with the FMLA requirements. In addition, employers may require an employee to provide documentation that confirms or supports the need for a reasonable accommodation under this new law.

Recordkeeping. Employers are required to keep a record of the hours taken for domestic violence leave for a 2-year period following the entry of the information in the record and make these records available to inspection by the Nevada Labor Commissioner upon request. When producing records pursuant to an inspection request, employee names must be redacted, unless a request for a record is made for investigation purposes.

Notice. Pursuant to SB 361, the Nevada Labor Commissioner has provided a bulletin setting forth the rights conferred to employees under the domestic violence leave law, available on its website. Employers must post the bulletin in a conspicuous location in the employer’s workplace. The bulletin may be included in the posting already required by NRS 608.013.

Additional Protections. The domestic violence leave law states that an otherwise eligible employee may not be denied unemployment benefits if the employee left employment to protect himself or herself (or a family or household member) from an act of domestic violence, and the person actively engaged in an effort to preserve employment.

The new law also prohibits employers from denying an employee’s right to use domestic violence leave, requiring an employee to find a replacement as a condition to using this leave, or retaliating against an employee for using such leave. It is also unlawful for employers to discharge, discipline, discriminate in any manner or deny employment or promotion to, or threaten to take any such action against an employee because:

The employee sought leave under SB 361;
The employee participated as a witness or interested party in court proceedings related to domestic violence, which triggered the use of leave under SB 361;
The employee requested an accommodation pursuant to SB 361; or
The employee was subjected to an act of domestic violence at the workplace.

Update Your Policies and Practices

Take time now to review and update your employee handbook, supervisor manuals, and other personnel policies to reflect these new Nevada laws. If you use non-compete agreements, be sure to review future agreements for compliance with the amended statute. Also, be sure to train your managers, supervisors, team leads, and human resources personnel on the requirements and restrictions imposed on employers by these laws. As always, if you have questions or need assistance, contact your Nevada employment attorney.

July 25, 2017

DOL Signals A “Do Over” For Overtime Rule

By Mark Wiletsky

The U.S. Department of Labor (DOL) announced today that it was publishing a Request for Information (RFI) asking employers and other interested parties to provide information and ideas about the overtime exemptions. The DOL’s RFI signals an interesting development in the saga of revising the overtime rule. In short, revisions to the overtime rule are not dead, but we may be back at square one.

As you likely know, the new overtime rule that was set to take effect on December 1, 2016, would have raised the minimum salary level for the executive, administrative, and professional exemptions from $455 per week ($23,660 per year) to $913 per week ($47,476 per year). Before the rule could go into effect, however, a federal district judge in Texas issued an order stopping implementation of the rule nationwide. The judge’s order suggested that the DOL lacks the authority to set any minimum salary level for the so-called white-collar exemptions under the Fair Labor Standards Act (FLSA). Last December, the DOL under the Obama Administration appealed that order to the Fifth Circuit Court of Appeals, seeking to overturn the injunction.

After the Trump Administration took over in January, it became unclear whether the DOL would continue with its appeal of the nationwide injunction on the overtime rule before the Fifth Circuit, or if it would instead withdraw the appeal, essentially allowing the injunction to stand. However, on June 30, 2017, the DOL, under new Secretary of Labor Alexander Acosta, filed a reply brief in support of the appeal.

As explained in its June 30th reply brief, the DOL argued that it has the authority to set a minimum salary threshold for the exemptions, an issue that the federal district judge questioned in his November 22, 2016 injunction order. The DOL, however, wrote that it has “decided not to advocate for the specific salary level ($913 per week) set in the final rule at this time and intends to undertake further rulemaking to determine what the salary level should be.”

By publishing the RFI, the DOL again seeks public comment to essentially begin anew the whole process of revising the overtime rule. Secretary Acosta has indicated in other forums that the DOL was not opposed to raising the minimum salary levels for the white-collar exemptions, just not to the high level set in the 2016 rule. With the publication of the RFI, it is clear that the DOL wants to rework the exemption tests and seeks input from businesses, employees, and interested associations and groups on what those tests should be.

This is an excellent chance for employers to be heard. This DOL will likely be more receptive to resolving the burdens and hardships expressed by businesses in implementing changes to the overtime exemptions so I would expect that the agency will seek to simplify the exemption tests and offer sufficient time for employers to implement them. That said, the DOL may need to fast track the new rulemaking process so that it is ready to implement a replacement rule when litigation over the existing rule is resolved.

July 5, 2017

New Nevada Employment Laws – Part 1: Pregnancy Accommodations and Nursing Mothers

By Dora Lane

The Nevada Legislature was very busy this year, passing several significant employment-related bills that will affect Nevada employers. Here is my first summary of new Nevada employment laws you’ll need to know about, addressing protections and accommodations for pregnant applicants and employees, and break times and suitable facilities for expressing breast milk.

Nevada Pregnant Workers’ Fairness Act

Senate Bill 253 created the Nevada Pregnant Workers’ Fairness Act, which applies to employers with 15 or more employees (for at least 20 weeks in the current or preceding year). This new law makes it unlawful for an employer to do any of the following (except when the action taken is based upon a bona fide occupational qualification):

Refuse to provide a reasonable accommodation to a female employee or applicant, if requested, for a condition of the employee or applicant relating to pregnancy, childbirth or a related medical condition, unless the accommodation would impose an undue hardship on the business (as discussed below);
Take an adverse employment action against a female employee because the employee requests or uses a reasonable accommodation for a condition of the employee related to pregnancy, childbirth or a related medical condition, such as failing to promote the employee, requiring the employee to transfer to another position, declining to reinstate the employee to the same or equivalent position after the employee comes back to work, or taking “any other action which affects the terms or conditions of employment in a manner which is not desired by the employee.”
Deny an employment opportunity to a qualified female applicant or employee based on their need for a reasonable accommodation for a condition related to pregnancy, childbirth, or a related medical condition;
Require a female applicant or employee who is affected by a condition related to pregnancy, childbirth, or a related medical condition to accept an accommodation that the employee or applicant did not request or chooses not to accept; and
Require a female employee who is affected by a condition related to pregnancy, childbirth, or a related medical condition to take leave from employment if a reasonable accommodation for any such condition of the employee is available that would allow the employee to continue to work.

The law defines a condition related to pregnancy, childbirth, or a related medical condition as a physical or mental condition intrinsic to pregnancy or childbirth that includes, without limitation, lactation or the need to express breast milk for a nursing child. “Related medical condition” is further defined as any medically recognized physical or mental condition related to pregnancy, childbirth, or recovery from pregnancy or childbirth, such as mastitis or other lactation-related medical condition, gestational diabetes, pregnancy-induced hypertension, preeclampsia, post-partum depression, loss or end of pregnancy and recovery from loss or end of pregnancy.

Pregnancy Accommodations

In the event an applicant or employee seeks a reasonable accommodation for a pregnancy-related condition, the new law requires the employer and employee to engage in a timely, good-faith interactive process to arrive at an effective, reasonable accommodation for the applicant or employee. Examples of reasonable accommodations include: (1) modifying equipment or providing different seating; (2) revising break schedules (as to frequency or duration); (3) providing a space in an area other than a bathroom that might be used for expressing breast milk; (4) providing assistance with manual labor if the manual labor is incidental to the primary work duties of the employee; (5) authorizing light duty; (6) temporarily transferring the employee to a less strenuous or hazardous position; or (7) restructuring a position or providing a modified work schedule.

An employer is not, however, required to create a new position as an accommodation (unless the employer has created or would create such a position to accommodate other classes of employees). An employer is also not required to fire another employee, transfer any employee with more seniority, or promote any employee who is not qualified to perform the job (unless the employer has taken or would take such an action to accommodate other classes of employees).

An employer seeking to show that a requested accommodation is an undue burden has to demonstrate that the accommodation is significantly difficult to provide or expensive, considering, without limitation: (1) the nature and cost of the accommodation; (2) the overall financial resources of the employer; (3) the overall size of the employer’s business with respect to the number of its employees, and the number, type, and location of available facilities; and (4) the effect the accommodation would have on the employer’s expenses and resources or on the employer’s operations. Evidence that the employer provides or would be required to provide a similar accommodation to a similarly situated applicant or employee creates a rebuttable presumption that the accommodation does not impose an undue hardship on the employer.

Notice Requirements

SB 253 also requires employers to provide a written or electronic notice of the rights conferred by the Nevada Pregnant Workers’ Fairness Act to employees, including the right that a female employee is entitled to a reasonable accommodation for a condition related to pregnancy, childbirth, or a related medical condition. The notice must be provided upon commencement of employment and within 10 days after the employee notifies her supervisor that she is pregnant. The notice must also be posted in a conspicuous place at the employer’s business location, in an area accessible to employees.

No Retaliation

SB 253 provides anti-retaliation protections for employees or applicants who oppose any practice made unlawful by the Nevada Pregnant Workers’ Act, or who have made a charge, testified, assisted, or participated in any manner in an investigation, proceeding, or hearing related to the Act.

Licensed Contractors Exempt From Certain Provisions

Employers who are licensed contractors under NRS Chapter 624 are not subject to the requirement to provide suitable breast milk expression facilities (other than a bathroom) if the employee is performing work on a construction site located more than 3 miles from the employer’s regular place of business. Such employers are, instead, encouraged to provide suitable breast milk expression facilities to the extent practicable. In addition, these employers are exempt from the requirements of Sections 4 and 5 above (requiring undesired accommodations or requiring leave) if the employee’s work duties include manual labor.

Considerations For Nursing Mothers

Under AB 113, public and private employers in Nevada are required to provide an employee who is a mother of a child under one year of age with (1) reasonable break time, with or without pay, to express breast milk as needed; and (2) a place (other than a bathroom), which is reasonably free from dirt and pollution, protected from the view of others and free from intrusion by others, where the employee may express breast milk. If break time must be compensated because of an existing collective bargaining agreement, then any break time taken to express milk must also be compensated.

This new law does not apply to private employers who employ fewer than 50 employees if the requirements it imposes would constitute an undue hardship on the employer, considering the size, financial resources, nature, and structure of the employer’s business. If a private employer determines that providing reasonable break time and suitable breast milk expression facilities will cause an undue burden on the employer, the employee and the employer may meet to agree on a reasonable alternative. If the parties cannot reach an agreement, the employer can require the employee to accept the reasonable alternative selected by the employer.

Both public and private employers are prohibited from retaliating or encouraging another to retaliate against an employee for (i) taking the time to express breast milk or using the facilities designated for such expression; or (ii) taking any action to require the employer to comply with the AB 113 requirements, including filing a complaint, testifying, assisting, or participating in any manner in an investigation, proceeding, or hearing to enforce the provisions of AB 113.

Contractors licensed under NRS Chapter 624 are not required to comply with AB 113 with regard to employees who perform work at a construction jobsite located at least 3 miles from the employer’s regular place of business.

For purposes of AB 113, “public body” means:

The State of Nevada or any of its agencies, instrumentalities, or corporations;
The Nevada System of Higher Education; or
Any political subdivision of the State of Nevada or any public or quasi-public corporation organized under the laws of the State of Nevada, including counties, cities, unincorporated towns, school districts, charter schools, hospital districts, irrigation districts, and other special districts.

AB 113 does not, however, apply to the Department of Corrections, which is encouraged to comply with the provisions of AB 113 to the extent practicable.

More To Come

Stay tuned for more information about additional significant employment-related laws passed in this year’s legislative session in Nevada. If you have questions about these new laws, please be sure to reach out to your Nevada employment counsel.