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February 14, 2019

U.S. DOL Eases Restriction on Tipped Employees

Katarina Harris

By Katarina Harris

Employers in the hospitality industry have long struggled to follow U.S. DOL guidance limiting circumstances under which they may take a “tip credit” toward their employees’ federal minimum wage. New U.S. DOL guidance eases that restriction.

DOL Opinion Letter Retracts “80/20 Rule”

In a new opinion letter released November 8, 2018, the U.S. Department of Labor (DOL) decided to eliminate the “80/20 Rule” which had previously limited employers’ ability to take a “tip credit” toward their employees’ federal minimum wage. This retraction comes as a relief to many employers in the hospitality industry, as the previous rule effectively required employers to track and account for the time their employees spent on non-tipped tasks, such as rolling silverware, filling salt-shakers, and other types of daily “side work.” Under the 80/20 Rule, an employer could not take a tip credit for non-tip-generating duties performed by a tipped employee if the amount of time spent on such duties exceeded twenty percent of the employee’s overall work. Tracking and monitoring this time was a tedious and difficult task for employers, resulting in higher risk from wage and hour lawsuits.

“Dual Job” and “Dual Task” Rules Sowed Confusion

Under the federal Fair Labor Standards Act (FLSA), employers must currently pay employees a minimum wage of $7.25 per hour. State wage and hour laws may impose different and higher minimum wage requirements. However, if an employee qualifies as a “tipped” employee under federal regulations, his or her employer may pay the employee just $2.13 per hour in cash wages and take a “tip credit” arising from the employee’s actual tips to cover the remainder of the federal minimum wage. This credit may total $5.12 per hour.

However, the FLSA distinguishes between tipped employees who perform non-tip-generating duties and those considered to have “dual jobs.” For employers, this distinction is critical to avoiding wage and hour lawsuits. If an employee is employed in both a tipped occupation (e.g., as a server), and in a non-tipped occupation (e.g., as a janitor), for the same employer, the employer may only take the tip credit for that employee’s work in the tipped occupation. For all work performed in the non-tipped occupation, the employer must pay the employee his or her federal minimum wage in cash wages.

The old 80/20 Rule took this functional distinction even further. It effectively distinguished between “dual jobs” and those involving “dual tasks.” Even if a tipped employee was not engaged in a “dual job”—for instance, if he or she worked solely as a server—the employer could still not take a tip credit for any work the employee performed which was related to, but not directed toward, producing tips—at least if the employee spent more than 20% of his or her time on such duties. This was the old 80/20 Rule.

Employers Found “80/20 Rule” Unworkable

Many employers found the old 80/20 Rule burdensome, if not completely unworkable. It effectively required employers to track tipped employees’ time spent on non-tip-generating duties. It also opened the door to wage lawsuits requiring detailed fact-finding in order to reconstruct exactly how much time, minute-by-minute, a tipped employee spent on particular tasks. Even worse, the rule did not specify which tasks were considered “related” to tip-generating occupations, as opposed to constituting distinct, non-tipped work. If a customer dropped silverware on the floor and asked a server for a new set, was the time spent rolling a new set of silverware related to tip-generating work? Would the answer be different if the server rolled extra sets of silverware at the beginning of his or her shift before the first customers arrived? Issues like these created a fertile field for litigation.

New DOL Opinion Letter Revives Old Guidance

In January 2009, the DOL issued an opinion letter which briefly rescinded the 80/20 Rule. However, the DOL retracted this rescission just two months later after a new administration came into office. The 80/20 Rule remained in force at all times thereafter.

In its November 2018 opinion letter, the DOL has now reissued its previous January 2009 guidance rescinding the 80/20 Rule. In this new letter, the DOL acknowledges that its previous guidance created some “confusion and inconsistent application” of the tip credit. The letter also quotes a federal circuit court’s observation that, under the old 80/20 Rule, “nearly every person employed in a tipped occupation could claim a cause of action against his employer if the employer did not keep perpetual surveillance or require them to maintain precise time logs accounting for every minute of their shifts.”

Given the practical difficulties caused by the 80/20 Rule, the DOL announced in its new opinion letter that the agency no longer “intend[s] to place a limitation on the amount of duties related to a tip-producing occupation that may be performed” by a tipped employee, at least if such non-tipped duties are performed “contemporaneously with the duties involving direct service to customers.” The related, but non-tip-producing, duties may also be performed “for a reasonable time immediately before or after” a tipped employee performs his or her direct-service duties without imperiling the credit. For employers, this means no more logging, tracking, and monitoring tipped employees’ daily activities.

The DOL’s new letter also acknowledges the need to provide front-end guidance to employers on which duties are entirely unrelated to tip-producing occupations, and thus not subject to the tip credit. To this end, the letter references a list of “core” and “supplemental” duties for certain tip-producing occupations provided by the Occupational Information Network (O*NET). Employers may consult this list to determinine whether certain tasks are related to tip-producing occupations, in which case they are subject to the tip credit. Conversely, employers may not take the tip credit in relation to any duties which do not appear on this list, unless they are very minimal in duration (i.e., “de minimis”)

Greater Clarity for Hospitality Employers

Although additional uncertainties regarding the tip credit may persist into future—e.g., what is a “reasonable time” immediately before or after a tip-producing activity for purposes of related duties?—the DOL’s new opinion letter provides much-needed guidance to employers in the hospitality industry. Employers need no longer track time spent on tip-producing versus “related” tasks in order to claim the tip credit. Nonetheless, hospitality employers should remain vigilant in distinguishing between “dual jobs,” and those with “dual tasks,” because any time spent in non-tipped occupations remains ineligible for the tip credit. When in doubt, employers should consult experienced employment law counsel for additional guidance.

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.

June 7, 2017

DOL Withdraws Obama-Era Interpretations On Independent Contractors and Joint Employment

By Brad Cave

On June 7, 2017, the U.S. Department of Labor (DOL) announced that it was withdrawing two informal guidances, namely a 2015 administrator interpretation on independent contractors and a 2016 administrator interpretation on joint employment, effective immediately. The DOL’s short announcement states that the removal of the administrator interpretations does not change the legal responsibilities of employers under the Fair Labor Standards Act (FLSA) and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA), and that the DOL “will continue to fully and fairly enforce all laws within its jurisdiction.” Here’s an attempt to read between the lines and determine the DOL’s position on these two issues.

Withdrawal of Independent Contractor Interpretation

When we wrote about the July 15, 2015 independent contractor interpretation here, we noted that then-Wage and Hour Division Administrator David Weil stressed that most workers meet the criteria to be deemed employees under the FLSA, and therefore, should not be treated as independent contractors. Although noting that multiple factors are used to determine independent contractor status, former administrator Weil stated that the DOL would focus primarily on whether the worker runs his or her own independent business or if instead, the worker is economically dependent on the employer.

Withdrawal of the 2015 interpretation guidance does not change the fact that to “employ” is broadly defined in the FLSA as “to suffer or permit to work” and consequently, most individuals hired to perform work fall within that definition as an employee. In addition, the long-standing multi-factor “economic realities” test used by courts to determine whether a worker is an employee or an independent contractor will continue to apply.

That said, the withdrawal of the 2015 administrator interpretation may be a signal that the DOL will no longer focus on misclassifications of independent contractors with the same fervor as it previously did. A more business-friendly DOL may choose to rely on certain factors, such as an independent contractor agreement setting forth the business relationship and the comparative degree of control over the work exerted by the two parties, over those factors that were highlighted in former administrator Weil’s interpretation, such as whether the worker runs his or her own independent business. The distinction between employees and independent contractors remains, but query whether this DOL, under the direction of new Secretary of Labor Alexander Acosta, will change the balance in determining independent contractor status.

Joint Employment Interpretation Withdrawn

When the DOL issued its administrator interpretation on joint employer status in February 2016, we wrote here that the DOL made it clear that the agency planned to examine dual employer relationships very closely, with an apparent intent to find joint employer status in more circumstances under both the FLSA and the MSPA. By withdrawing that interpretation, the DOL may be suggesting a contraction of its efforts to find joint employer status. If that is the case, employers who utilize workers employed by a staffing agency or other workers provided by a third-party may face less scrutiny (and potentially, less liability) for wage and hour violations as a potential joint employer. In addition, companies that use the same workers across different subsidiaries or among other legally distinct entities may see a relaxation of the DOL’s emphasis on joint employer status.

The Tea Leaves Say . . .

Employers should stay vigilant about ensuring that workers they treat as independent contractors meet the multi-factor tests for independent contractor status. Similarly, organizations that could be subject to the joint employer analysis should examine their status under the applicable tests and are urged to review their third-party staffing arrangements to ensure compliance with wage and hour (and other DOL-enforced) laws. But, with the withdrawal of some of the more proactive enforcement approaches of the past administration, the DOL may be signaling its more business-friendly stance. Perhaps the National Labor Relations Board (NLRB) will be next to announce a less aggressive view towards finding joint employer status and a retraction of other arguably expansive positions taken in past years. We’ll keep you informed as new developments arise.

September 20, 2016

Overtime Rule Lawsuit Seeks To Stop December 1st Changes

By Mark Wiletsky

Twenty-one states have sued the federal Department of Labor (DOL) seeking to prevent the new overtime exemption salary boost from going into effect on December 1, 2016. In a lawsuit filed in the Eastern District of Texas, the states argue that the DOL exceeded its authority when it issued its final rule increasing the salary level for exempt employees to $47,476 per year, with automatic updates to the salary threshold every three years.

Legal Challenge To The Overtime Rule

In the states’ complaint against the DOL, the states argue that the new rule is unlawful. One of their primary arguments is that enforcing the Fair Labor Standards Act (FLSA) and the new overtime rule against the states infringes upon state sovereignty in violation of the Tenth Amendment. The complaint cites the increased payroll costs to the states that would result from having to comply with the new exempt salary levels.

The states argue numerous other reasons why the new overtime rule should be stopped, including that the DOL exceeded the authority granted to it by Congress when it focused on the salary level as the litmus test for exempt status rather than on the duties of white collar workers. The states argue that exempt status should apply to any “bona fide executive, administrative, or professional” employee, even if their salary falls below the new threshold.

The states also take issue with the automatic increases in the new rule through which the DOL will index the salary thresholds every three years. The states assert that the DOL should have to go through the normal notice and comment period in order to make future changes to the salary levels. Read more >>

February 2, 2016

DOL’s New Joint Employer Interpretation Seeks To Hold More Employers Accountable

By Brian Nugent

The U.S. Department of Labor (DOL) issued a new Administrator’s Interpretation (AI) that emphasizes the agency’s intent to apply joint employer status more broadly under the Fair Labor Standards Act (FLSA) and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA). Even though the definition of joint employment under these acts has not changed, the DOL made it clear that it will examine dual employer relationships closely with what appears to be an intent to find joint employer status in more circumstances.

Of course, companies engaged as a “dual employer” generally seek to avoid joint employer status. Being a joint employer in the eyes of the DOL can result in liability for the acts of a client that has the primary responsibility to direct and control employees. This is not a favorable place to be. Temporary staffing agencies and PEOs do not have enough control over workers assigned to a client location to assume such liability. As a result, such companies have worked for years to maintain dual or co-employment relationships that do not constitute joint employment. It appears, however, that the DOL, through the AI, is trying to chip away at such relationships and include more dual employers within the definition of joint employer.

All companies engaged in the business of providing employees to clients or co-employing workers are affected by this AI. As explained in more detail below, it is clear that the DOL intends to scrutinize all “dual employer” relationships more closely and focus on the degree of control over workers as a guide to determine whether a joint employer relationship exists..

The DOL identified the two most likely scenarios where joint employment typically exists. One type of joint employment, referred to as vertical joint employment, is where there is an “intermediary employer”, such as a staffing agency, PEO, or other provider of workers to a client. Where such a relationship exists, the DOL will focus on the economic realities of the relationship to determine whether a worker is economically dependent on two or more employers, and if so, will be inclined to find joint employer status. The second type of joint employment under scrutiny by the DOL is where the employee has two or more separate, but related employers, each benefitting from a person’s work during the same period of time. These scenarios are explained in more detail below.

Vertical Joint Employment

In a vertical employment relationship, it is common for the “intermediary employer” to be the W-2 employer that actually pay the wages and payroll taxes, but does not direct and control the day-to-day activities of the worker. The issue for the DOL as expressed in the AI is whether, based on the economic realities of the employment relationship shared by the intermediary and the client company, joint employment exists between the employee, the intermediary employer and the client at which the employee is assigned to work.

The economic realities test is not new to the FLSA or MSPA. What is new is that in reviewing a relationship for joint employer status, the DOL announced in the AI that it will abandon its prior practice to look only to its joint employer regulations, and focus exclusively on the economic realities factors in vertical employment scenarios. This is not necessarily bad news, but it is significant.

Under the economic realities test, the degree of control exerted by a person or entity over the workers is only one of the primary factors in a joint employer analysis, and is not definitive. Other economic realities factors the DOL will consider “in the mix” include:

Does the other employer direct, control, or supervise (even indirectly) the work?
Does the other employer have the power (even indirectly) to hire or fire the employee, change employment conditions, or determine the rate and method of pay?
Is the relationship between the employee and the other employer permanent or long-standing?
Is the employee’s work integral to the other employer’s business?
Is the work performed on the other employer’s premises?
Does the employer perform functions typically performed by employers, such as handling payroll, providing workers’ compensation insurance, tools, or equipment, or in agriculture, providing housing or transportation?
Does the employee perform repetitive work or work requiring little skill?

The DOL also identified industries where it believes vertical joint employment relationships are common, and as a result, under increased scrutiny. These industries include “agriculture, construction, hotels, warehouse and logistics” as well as other industries that regularly use staffing agencies or subcontracting intermediaries.

Horizontal Joint Employment

According to the DOL, the so-called horizontal joint employment relationship exists where multiple employers who are sufficiently associated with each other both benefit from the individual’s work, such as where two separate restaurants have the same ownership and jointly schedule an employee to work at both establishments. The factors to consider when analyzing this type of joint employment include:

Who owns or operates the possible joint employers?
Do they have any agreements between the employers?
Do the two employers share control over operations?
Do the employers share or have overlapping officers, directors, executives, or managers?
Does one employer supervise the work of the other?
Do the employers share supervisory authority over the employee?
Are their operations co-mingled?
Do they share clients or customers?

The DOL stresses that it is not necessary for all, or even most, of these factors to exist in order to find joint employment status between two or more related employers.

NLRB Focus On Joint Employers

The National Labor Relations Board (NLRB) has also been expanding its use of joint employment status to hold companies liable for violations of the National Labor Relations Act. Although the DOL stated in a recently issued Questions and Answers document that its joint employment analysis is different than that used by the NLRB, reports suggest that the office of the Solicitor of Labor reached out to the NLRB’s General Counsel on the issue of joint employment in advance of issuing the new Administrator’s Interpretation. It is clear that both agencies are focused on a broad application of the joint employer doctrine.

What Does This Mean For Employers

If joint employment is found, both entities may be held responsible for compliance with all applicable laws, including wage and hour and other employment protection laws. This includes making sure non-exempt employees are paid minimum wage for all hours worked and overtime pay for hours worked over 40 in a workweek. For employers covered by MSPA, both employers are liable for ensuring necessary disclosures of the terms and conditions of employment, and payment of wages are made, as well as maintaining required written payroll records. A joint employer could also find itself named as a co-defendant in a tort liability suit brought against the “primary actor” employer.

Joint employment also applies for determining eligibility and coverage under the Family and Medical Leave Act (FMLA). This is critical as smaller employers with less than 50 employees may think they are free of any FMLA obligations, only to find that they meet the coverage threshold if they are deemed to be a joint employer with another entity, such as a staffing agency that provides them with additional workers. Similarly, joint employer status could affect compliance under the Affordable Care Act.

In light of this new guidance and the emphasis by the federal government on broad application of joint employment, staffing agencies, PEOs, and their clients should examine their relationships, including but not limited to, the degree of control, supervision, termination rights, setting of pay rates, and provision of tools, training, and policies exerted by the client company. The higher the degree of control and reservation of rights over the workers, the higher the chance that a joint employment relationship will be found. This also means that clients may ask staffing agencies to provide additional information about their compliance with applicable laws so as to gauge their level of risk. In fact, compliant staffing companies that are violation-free may see that as a marketing point in the future.

In the end, if employers comply with applicable laws, joint employment need not come into play. It is only when compliance takes a back seat and government investigators arrive at the door, that companies need to worry about whether they are a joint employer.

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January 12, 2016

Anticipating Revisions To The “Persuader Rules” – What You Need To Know

By Brian Mumaugh

As early as March, the U.S. Department of Labor (DOL) plans to issue its final rules that will significantly narrow the type of union-avoidance activities that employers and their labor attorneys and relations consultants may engage in without having to report those activities to the government. The tightening of the so-call “persuader rules” will mean that employers who utilize labor relations consultants, including lawyers, to help with union-avoidance or collective bargaining activities will need to disclose many more of those activities, and the fees paid for them.

Evolution of the “Persuader Rules”

In the late 1950’s, because of perceived questionable conduct by both unions and employers involved in union organizing and collective bargaining campaigns, Congress enacted the Labor-Management Reporting and Disclosure Act of 1959 (LMRDA). The LMRDA seeks to make labor-management relations more transparent by imposing reporting and disclosure requirements on labor organizations and their officials, employers, and labor relations consultants.

Under the LMRDA, the reporting requirements for employers and their labor consultants are triggered when they undertake activities intended to directly or indirectly persuade employees to exercise (or not to exercise) the employees’ right to organize and bargain collectively through representatives of their own choosing. Employers must file a Form LM-10 (Employer Report) that discloses all payments made to unions and union officials, persuader payments made to employees and employee committees, persuader agreements/arrangements made with labor relations consultants, including lawyers, which includes the amount and dates of payments made to such consultants, and any expenditures made to interfere with, restrain or coerce employees, or otherwise obtain information concerning employees or a labor organization. Labor relations consultants must file a Form LM-20 specifying, among other things, information about the consultant and the nature of the “persuader activities” to be performed. Under the LMRDA, the DOL must make all such forms available for public inspection.

The “Advice” Exemption

The LMRDA contains an exemption from the reporting requirements for persuader activities for services that give “advice” to the employer. Except for brief periods when the LMRDA was first enacted and again in 2001, the DOL has interpreted this “advice” exemption to apply to activities where a consultant or lawyer prepares a speech or documents for use by the employer, or revises materials initially drafted by the employer. In other words, as long as the consultant or lawyer did not directly deliver or disseminate speeches or materials to employees for the purpose of persuading them with respect to their organizational or bargaining rights, behind-the-scenes activities where the consultant/lawyer drafts materials for use by the employer would not trigger a reporting obligation. Under the proposed rules, that is about to change.

Expanded Proposed Interpretation of “Advice” Exemption

Believing its long-standing interpretation of the “advice” exemption to be overly broad, the DOL proposed a narrower interpretation that would require reporting in any case in which the agreement or arrangement with a labor consultant/lawyer in any way calls for the consultant to engage in persuader activities, regardless of whether or not advice is also given. The revised interpretation would define reportable “persuader activity” to include activities where a lawyer or consultant provides material or communications to, or engages in other actions, conduct, or communications on behalf of an employer that at least in part, has the objective of persuading employees concerning their rights to organize or bargain collectively. Exempt “advice” would be limited to recommendations, verbal or written, regarding an employer’s decision or course of conduct.

Stated examples of covered persuader activities that would require disclosure include:

drafting, revising, or providing written materials for presentation, dissemination, or distribution to employees
drafting, revising, or providing a speech, video, or multi-media presentation to be presented, shown or distributed to employees
drafting, revising, or providing website content for employees
planning or conducting individual or group employee meetings, and training supervisors or employer representatives to do the same
coordinating or directing the activities of supervisors or employer representatives
establishing or facilitating employee committees
developing personnel policies or practices
deciding which employees to target for persuader activity or disciplinary action
conducting a seminar for supervisors or employer representatives

The DOL justifies this expansion of the reporting circumstances, in part, because the role of outside consultants and law firms in managing employers’ anti-union efforts has grown substantially over the years, citing reports that somewhere between 71% and 87% of employers facing organizing drives hire third-party consultants to assist in their counter-organizing efforts. The DOL also states that underreporting of persuader activities is a problem as “employees are not receiving the information that Congress intended they receive.” Regardless of its reasoning, the DOL’s proposed change of its 50-year old interpretation will result in significant burdens on both employers and their consultants.

March 2016 Is New Target Date for Final Rule

Almost five years has passed since the DOL published its proposed rule changing the “persuader rules.” After numerous delays in publishing its final rules, the DOL’s regulatory agenda indicates that it expects to issue the final “persuader rules” this March. We will let you know when the final rules are published, or if the timeline changes. In the meantime, you might want to take advantage of the next few months before the new rules kick in to obtain union-avoidance materials and training from your consultants now. At a minimum, talk to your labor relations consultant/labor lawyer about the upcoming changes so that you are aware of how they may impact your labor strategies in the future.

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December 28, 2015

Workplace Safety Violations Could Lead to Felony Convictions and Stiffer Penalties Under New Initiative

Looking to send a strong message to employers who fail to provide a safe workplace, the Departments of Labor and Justice (DOL and DOJ respectively) are teaming up to investigate and prosecute worker endangerment violations, namely, violations of the Occupational Safety and Health Act (OSH Act), the Migrant and Seasonal Agricultural Worker Protection Act (MSPA), and the Mine Safety and Health Act (MINE Act). Under a new Worker Endangerment Initiative announced on December 17, 2015, federal investigators and prosecutors will look to possible environmental crimes committed by companies in conjunction with workplace safety violations in order to seek felony convictions and enhanced penalties available under federal environmental laws. With the DOJ’s additional focus on holding individual corporate wrongdoers accountable, corporate executives could find themselves criminally and civilly liable for their role in such crimes.

It’s All About Imposing Bigger Penalties

The three federal worker safety statutes emphasized in the Endangerment Initiative generally only provide for misdemeanor penalties and monetary penalties that are significantly lower than various environmental statutes. By looking for environmental offenses to add to workplace safety violations, prosecutors will be able to seek felony convictions and enhanced penalties under Title 18 of the U.S. Code and the federal environmental laws. The stated intent is to “remove the profit from these crimes by vigorously prosecuting employers who break safety and environmental laws at the expense of American workers.”

In addition to prosecuting environmental crimes, the Environment and Natural Resources Division looks to strengthen its pursuit of civil cases that involve worker safety violations. The division believes that violations of the Clean Air Act, Resource Conservation and Recovery Act and the Toxic Substances Control Act can have a direct impact on workers who must handle dangerous chemicals and other materials as part of their work duties.

Linking Safety Violations With Environmental Crimes

If an organization skimps on safety protections for its workers, will it also ignore environmental protections? The DOJ and DOL think so. The government points to statistics of workplace deaths and injuries, including 13 worker deaths on average in the U.S. each day, due in part to exposure to toxic and hazardous substances at work. According to John C. Cruden, Assistant Attorney General for the Justice Department’s Environment and Natural Resources Division, “employers who are willing to cut corners on worker safety laws to maximize production and profit, will also turn a blind eye to environmental laws.”

In essence, this initiative provides the government with a mechanism to turn a workplace safety investigation into an examination of a company’s environmental compliance. The plan is for the DOJ’s Environment and Natural Resources Division and the U.S. Attorneys’ Offices to work in conjunction with the DOL’s Occupational Safety and Health Administration, Mine Safety and Health Administration, and Wage and Hour Division to increase the frequency and effectiveness of criminal prosecutions of worker endangerment violations.

Individual Accountability For Corporate Wrongdoers

The new Worker Endangerment Initiative will target companies who have committed workplace safety and environmental violations. However, due to a recent push by the DOJ to focus on holding individuals accountable for corporate wrongdoing, company executives and decision-makers could be the target of increased scrutiny during the government’s investigation.

In September 2015, Deputy Attorney General Sally Quillian Yates issued a memorandum outlining the steps that DOJ attorneys should take in investigating corporate misconduct in order to hold more executives and managers accountable for corporate wrongdoing. The steps, some of which represent policy shifts, are:

Corporations must provide to the government all relevant facts relating to the individuals responsible for the misconduct in order to qualify for any cooperation credit;
Criminal and civil corporate investigations should focus on individuals from the inception of the investigation;
Criminal and civil attorneys handling corporate investigations should be in routine communication with one another;
Absent extraordinary circumstances or approved departmental policy, the DOJ will not release culpable individuals from civil or criminal liability when resolving a matter with a corporation;
DOJ attorneys should not resolve matters with a corporation without a clear plan to resolve related individual cases, and should memorialize any declinations as to individuals in such cases; and
Civil attorneys should consistently focus on individuals as well as the company and evaluate whether to bring suit against an individual based on considerations beyond that individual’s ability to pay.

The DOJ believes holding individuals accountable for corporate wrongdoing will be effective in reducing corporate misconduct because it will deter future illegal activity, incentivize changes in corporate behavior, hold the proper parties responsible for their actions, and promote the public’s confidence in our justice system.

What This Means For Employers

Companies subject to a workplace safety investigation can expect that their environmental compliance will also be investigated. If federal prosecutors find that a company violated environmental laws, they will pursue the stiffer criminal and civil penalties provided by those environmental statutes. In addition, because the DOJ’s renewed focus on individual accountability, employers should expect that future safety and environmental investigations will focus on individual corporate actors who engaged in or authorized the wrongdoing in order to hold such individuals criminally and civilly liable.

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August 24, 2015

Home Care Workers Entitled to Minimum Wage and Overtime

By Mark Wiletsky

Agencies that provide companionship or live-in care services for the elderly, ill or disabled will now have to pay their home care workers minimum wage and overtime pay under the Fair Labor Standards Act (FLSA). Reversing a lower court decision, the Court of Appeals for the District of Columbia upheld the Department of Labor’s (DOL’s) new regulations that removed those employees from the “domestic service” exemption. The Court also struck down the challenge to the DOL’s revised definition of companionship services that now places a duty restriction on workers who may be considered exempt.

Extension of FLSA Protections Is Reasonable

For years, individuals who provide companionship or live-in care services were exempt from the minimum wage and overtime rules under the FLSA, even if those individuals were employed by a third party. In 2013, however, the DOL reversed its prior interpretation of the domestic service exemption, adopting new regulations stating that third-party employers of companionship-services and live-in employees could no longer use the exemption to avoid paying minimum wage and overtime pay to their home care workers. The new regulations also narrowed the definition of companionship services: a worker providing exempt services can spend no more than 20 percent of his or her total hours worked on the provision of care, including meal preparation, driving, light housework, managing finances, assistance with the physical taking of medications, and arranging medical care.

Before the new rules went into effect, trade associations representing third-party agencies that employ home care workers challenged the DOL’s new regulations in court and the district judge declared them invalid. The lower court ruled that the DOL’s decision to exclude a class of employees from the exemption because they were employed by a third-party agency contravened the plain terms of the FLSA. The court also threw out the DOL’s revised definition of companionship services, with its 20 percent limit on care-related tasks, as contrary to both the text and intent of the statutory exemption.

On August 21, 2015, the Circuit Court of Appeals for the District of Columbia disagreed and upheld the new regulations. The appellate court found that the FLSA exemption did not specifically address the third-party employment question and therefore, the DOL had the authority to create rules and regulations to fill in the gap.

The court also determined that the DOL’s new interpretation was “entirely reasonable.” The DOL explained that its change in policy was due to the change in the market for home health care. In the 1970’s, professional care for the elderly and disabled was primarily provided in hospitals and nursing homes so that services in the home were largely that of an “elder sitter” or companion. More recently, however, individuals needing a significant amount of care were now receiving that care in their own homes, provided by professionals employed by third-party agencies rather than by workers hired directly by care recipients or their families. These changes, as well as Congress’s intent to bring more workers within the FLSA’s protections, convinced the court that the DOL’s changed interpretation was reasonable.

Potential Adverse Effects of FLSA Coverage Unfounded

The third-party agencies challenging the DOL’s regulations argued that requiring minimum wage and overtime pay for home care workers would raise the cost of their services, making home care less affordable and creating a “perverse incentive for re-institutionalization of the elderly and disabled.” The DOL countered by pointing to fifteen states where minimum wage and overtime protections already extend to most third-party-employed home care workers and noted that there was no reliable data that these pay protections led either to increased institutionalization or a decline in the continuity of care. The DOL also cited the industry’s own survey that indicated that home care agencies operating in those fifteen states had a similar percentage of consumers receiving 24-hour care as those agencies in non-overtime states.

The DOL further argued that the new rules would improve the quality of home care services, thus benefitting consumers, because the revised regulations would result in better qualified employees and lower turnover. It would also reflect the reality that home care workers employed by third-party agencies are professional caregivers, many of whom have training or certifications, who work for agencies that profit from their employees’ services. The appellate court found the DOL’s position reasonable, upholding its regulations.

No Standing to Challenge Narrowed Definition of Companionship Services

By ruling that the third-party agencies could not use the domestic services exemption, the court removed the ability of those agencies to use the companionship services definition to exempt home care workers from minimum wage and overtime protections. As a result, the trade associations’ members challenging the new, narrowed definition of companionship services would not be directly harmed by the revised definition. Because they would not suffer any injury from the narrowed definition, the challengers lacked standing to oppose the revision, denying the court of jurisdiction to resolve that issue. Consequently, the court ordered that judgment be entered in favor of the DOL.

Practical Effect for Home Care Employers

Pending any appeals, the DOL’s new regulations removing the ability of third-party home care agencies to exempt their home care workers from FLSA minimum wage and overtime pay will go into effect. Employers of home care workers should take steps now to ensure that they comply with the FLSA minimum wage requirement for all hours worked as well as paying an overtime premium for all hours worked over 40 per week. In addition to updating your pay practices, be sure to revise any affected policies and statements in your employee handbook, operational manual, timekeeping procedures, job advertisements and recruiting materials.

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August 14, 2013

DOL Updating FMLA Guidance to Reflect DOMA Decision

By Brad Cave

New Labor Secretary, Tom Perez, indicated that the Department of Labor (DOL) has updated departmental guidance regarding spousal leave provisions of the Family and Medical Leave Act (FMLA) to reflect the Supreme Court’s recent decision that struck down certain provisions of the Defense of Marriage Act (DOMA). As the DOL updates its policies, employers too need to examine and update their FMLA policies. Here is what you need to know.

Unconstitutionality of DOMA Means FMLA Spousal Leave Applies to Legally Married Same-Sex Couples

The Supreme Court’s decision in United States v. Windsor focused on Section 3 of DOMA which defined “spouse” as a husband or wife of the opposite sex for purposes of federal laws or regulations. Because of that definition, legally married same-sex couples were not entitled to federal benefits or rights. As a result, FMLA leave benefits did not extend to employees needing time off to care for a same-sex spouse with a serious health condition.

In finding Section 3 of DOMA unconstitutional, the Court stated that the regulation of marriage traditionally rests exclusively with the states and the federal government violates equal protection principles by denying rights and benefits to same-sex couples who are legally married under state law. The result is that federal rights and benefits, including FMLA spousal leave benefits, now apply equally to state-sanctioned same-sex couples and heterosexual couples.

DOL Implementing Court’s Decision

Secretary Perez affirmed the availability of spousal leave under the FMLA based on same-sex marriages. He indicated that the DOL has removed references to DOMA from some of its guidance documents and will continue to take steps to implement the Court’s Windsor decision.

When Do Employers Need to Recognize Same-Sex Marriages for FMLA Purposes?

With some states legally recognizing same-sex marriages and others not, a key question for employers is which state’s law applies for FMLA spousal leave purposes? According to the DOL’s 2009 FMLA regulations, “spouse” means a husband or wife as recognized by the state where the employee resides. This means that the employer must determine if same-sex marriages are lawful in the state where the employee requesting FMLA leave lives, not where the employer is located or where the employee actually works. At present, 13 states plus the District of Columbia recognize same-sex marriages as lawful: California, Connecticut, Delaware, Iowa, Massachusetts, New Hampshire, Maine, Maryland, Minnesota, New York, Rhode Island, Vermont and Washington.

Some groups are urging the DOL to adopt a rule that would recognize FMLA rights based on the state where the marriage was celebrated, not the state of residency. Although the DOL has not yet proposed any rule changes on this issue, we will keep an eye on it and will let you know if any changes to the marriage recognition rules are proposed.

Update Your FMLA Policy for Same-Sex Spousal Leave

If you have employees living in one or more states that recognize same-sex marriages (or in the District of Columbia), update your FMLA policy, forms and practices to incorporate spousal leave benefits for recognized same-sex marriages. This includes FMLA leave for an employee who needs to care for a same-sex spouse with a serious health condition, leave because of a qualifying exigency due to the employee’s same-sex spouse being on “covered active duty” and FMLA military caregiver leave for an employee who needs to care for a same-sex spouse who is a “covered servicemember” or “covered veteran.” Be sure to look at the state where the employee resides when determining whether same-sex marriage is deemed lawful and recognized for FMLA purposes. If you use an FMLA tracking mechanism, make sure the system properly tracks for same-sex spousal leave. As always, train your managers, supervisors and human resource professionals on this change in FMLA benefit coverage.

Disclaimer: This article is designed to provide general information on pertinent legal topics. The statements made are provided for educational purposes only. They do not constitute legal advice and are not intended to create an attorney-client relationship between you and Holland & Hart LLP. If you have specific questions as to the application of the law to your activities, you should seek the advice of your legal counsel.