For regular readers of this blog, you know that my colleague, Tracey Truesdale, gave you some tips for properly paying employees in the event of a pandemic. That was on February 26, 2020. Since then, we’ve heard of employers sending entire offices of employees home to telecommute, restricting travel, and cancelling social events in reaction to the spread of COVID-19. We’ve also heard about Italy’s decision to lock down the country by closing schools and restricting all forms of travel for 16 million people, and how mortgage payments have been suspended to help employees who are faced with sudden unemployment.  

How to treat missed work time during the COVID-19 crisis is something that American employers are grappling with. Walmart, the U.S.’s largest private employer, issued a memo to its employees just three days ago substantially revising its attendance and leave policies in response to COVID-19. Walmart advised employees that:   

  • If employees are unable to work or are uncomfortable at work, they may choose to stay home, and Walmart will waive its attendance occurrence policy through the end of April.   
  • If an employee or their work location is required to quarantine by a government agency or by Walmart, the employee will receive up to two weeks of paid leave to cover the absence.   
  • Employees who are diagnosed with COVID-19 will receive up to two weeks of paid time off. If an employee cannot return to work after that period, her or she may be eligible for up to 26 weeks of pay replacement.  

Over the last couple of weeks, we’ve also seen several tech giants, including Google, Apple, and Microsoft, direct their employees to telecommute or recommend that they avoid working in shared office spaces. While this approach may not work for every employer, it provides examples of how some employers are responding to the anticipated spread of COVID-19.   

For recommendations on how you can prepare for and respond to COVID-19, see our FAQ guidance. 

 

The anticipated spread of coronavirus in the U.S. has many employers revisiting their emergency response plans. Depending on guidance from public health officials, some employees may be directed to work from home, temporarily furloughed, or work a reduced schedule. Some managers and executives may be pressed into service to perform more manual or routine tasks.

To paraphrase a favorite sign in my office, this is not the Department of Labor’s first rodeo, and there is existing guidance under the Fair Labor Standards Act’s (FLSA) implementing regulations on how employees must be compensated in these situations. Let’s look at some of the wage/hour issues presented when a business must alter its operations due to a public health emergency.

Continue Reading Coronavirus: How to Properly Pay Employees in the Event of a Pandemic

Screen clip from Notice of Proposed Rulemaking
U.S. DOL Issues Notice of Proposed Rulemaking

On November 5, 2019, the U.S. Department of Labor published a proposed rule that would make it easier for some employers to apply the “Fluctuating Workweek” method of calculating overtime pay for certain non-exempt employees.

Background

For those not familiar with the concept, the fluctuating workweek method is one way of calculating overtime pay for non-exempt employees who are paid a fixed salary but whose hours fluctuate from week to week. The fluctuating workweek method can be extremely advantageous for employers because it allows an employer to pay a non-exempt employee a fixed salary covering all of the employee’s straight-time work, regardless of the number of hours worked. If an employee works overtime, they still receive premium pay for each hour worked, but the rate is one-half of the employee’s regular rate instead of 1.5 times the regular rate. For a full explanation of this method and the conditions under which it can be used, check out our earlier explanation here.

Under the current rules, several conditions must be met before an employer can use the fluctuating workweek method. These include:

Continue Reading DOL Proposes Rule to Make Bonus and Incentive Pay Compatible With Fluctuating Workweek

On Tuesday, the U.S. Department of Labor issued its final rule concerning overtime exemptions. The rule increases the salary threshold for employees exempt under the executive, administrative, and professional exemptions (the “white collar exemptions”) from $455 per week (or $23,660 annually) to $684 per week (or $35,568 annually). Additional changes include:

  • Increasing the total annual compensation threshold for highly compensated employees (“HCEs”) from $100,000 per year to $107,432 per year;
  • Permitting employers to use nondiscretionary bonuses and incentive payments to satisfy up to 10% of the increase salary threshold; and
  • Committing to updating the salary threshold more regularly.

The new rule is set to take effect on January 1, 2020 and increase the number of overtime-eligible employees by 1.3 million. No changes to the duties test have been made.

This isn’t the first time in recent years that we’ve had a final rule issued increasing the salary threshold for the white-collar exemptions. In 2016, the DOL, under President Obama’s administration, issued a final rule increasing the salary threshold to $913 per week (or $47,476 annually). The 2016 rule also increased the minimum salary for HCEs (to $134,004), allowed employers to use nondiscretionary bonuses and incentive pay to satisfy up to 10% of the salary threshold, and provided for automatic annual updates to keep the minimum salary level adjusted to the 40th percentile of full-time salaried workers in the lowest-wage Census region. Business groups and several states filed a lawsuit seeking to block the 2016 rules, arguing that the DOL exceeded its authority in adopting the rules. A federal district court in Texas agreed and blocked the rules from taking effect.

The new minimum salary threshold falls between the current salary threshold and the rule proposed under the Obama administration. While the 2016 rule was criticized by many business and employer groups, the new final rule is drawing fire from advocates for workers, who wish to force the administration to adopt something closer to the blocked 2016 rules. Legal challenges to the new rules are highly likely to follow.

We will keep you updated on any new developments as the effective date of the new rule approaches.

On June 11, 2019, Alabama Governor Kay Ivey signed a new law that prohibits wage discrimination based upon sex and protects workers who decline to share their salary history with a prospective employer. The new law takes effect August 1, 2019. Unlike laws in some other states, the Alabama law does not bar employers from asking for salary history information, but prohibits employers from refusing to interview or hire applicants who decline to provide such information.

Alabama joins a growing list of jurisdictions to ban or limit the use of salary history inquiries in the hiring process, including:

  • California (statewide and in San Francisco)
  • Colorado
  • Connecticut
  • Delaware
  • Hawaii
  • Illinois (awaiting Gov. Pritzker’s signature)
  • Maine
  • Massachusetts
  • Missouri
  • New York (Albany, Suffolk, and Westchester Counties, and NYC)
  • Ohio
  • Oregon
  • Philadelphia (subject to legal challenge)
  • Vermont
  • Washington

Among the bills awaiting signature by Illinois Governor J.B. Pritzker is an amendment to the Illinois Equal Pay Act of 2003 that would ban employers from asking job applicants for information about their wage, salary or benefits history. Governor Pritzker is expected to sign the bill, HB834. With this new law, Illinois joins at least 12 other states and multiple counties and municipalities in restricting employers’ ability to obtain or use applicants’ compensation history in the process of hiring and setting compensation.

New Restrictions on Requesting and Using Salary History
HB834 specifically prohibits employers from screening job applicants based on their current or prior wages or salary histories, including benefits or other compensation, by requiring that the wage or salary history of an applicant satisfy minimum or maximum criteria. The bill also bans employers from requesting or requiring applicants to disclose wage or salary history as a condition of employment, or from requesting such information from any current or former employer. The bill provides exceptions where wage or salary history is a matter of public record under FOIA or other laws, or the applicant is a current employee.

The bill expressly provides that employers do not violate the new restrictions by merely sharing information with applicants about the compensation and benefits associated with a position or discussing applicants’ expectations regarding compensation and benefits. The bill also provides that an employer does not violate the new law if an applicant voluntarily discloses compensation and benefits history information in the course of such discussions. However, if that happens, the employer is barred from relying upon that information as a factor in determining whether to make an offer of employment or compensation, or in determining future wages, salary, benefits, or other compensation.

Expanded Claims Under the Equal Pay Act

In addition to restricting use of salary history information, HB834 also makes it easier for employees to bring and win claims under the Equal Pay Act. Currently, the Act prohibits employers from paying an employee at a lower rate of pay as compared to another employee of the opposite sex who performs work requiring “equal skill, effort, and responsibility, and which are performed under similar working conditions.” The Act provides the same protection for African-American employees as compared to non-African-American employees. The law allows employers to justify pay differentials when they are due to a seniority system, a merit system, a system that measures earnings by quantity or quality of production, or “a differential based on any factor other than” race, sex, or other unlawful discrimination.

HB834 amends the Act’s protections in two ways. First, instead of having to demonstrate that another employee performs work requiring “equal” skill, effort, and responsibility, plaintiffs will now only have to show that the levels of skill, effort, and responsibility are “substantially similar.” Second, the law limits employers’ ability to justify pay disparities based upon “any factor other than” unlawful discrimination by requiring employers to show that the factor relied upon “is not based on or derived from a differential in compensation based on sex or another protected characteristic,” that it is “job-related with respect to the position and consistent with business necessity,” and that the factor “accounts for the differential.”

Ban on Agreements Restricting Employees From Disclosing Compensation

Under the existing law, employers are barred from taking action against any employee for “inquiring about, disclosing, comparing or otherwise discussing the employee’s wages or the wages of any other employee …” HB834 expands upon these protections by specifically prohibiting employers from requiring an employee to “sign an contract or waiver that would prohibit the employee from disclosing or discussing information about the employee’s wages, salary, benefits, or other compensation.” However, the amendment now expressly allows employers to prohibit HR employees, supervisors, and other employees whose job responsibilities afford them access to other employees’ compensation information from disclosing that information “without prior written consent from the employee whose information is sought or requested.”

Increased Liability for Violations

HB834 also significantly expands employers’ potential liability for Equal Pay Act violations. Under current law, employees who prevail on a claim under the Act can recover the amount of any pay differential, plus interest and attorneys’ fees and costs. Employers are also subject to civil penalties of up to $5,000 per affected employee. HB834 amends the Act to allow employees to recover compensatory damages if the plaintiff demonstrates that the employer acted “with malice or reckless indifference,” and punitive damages. Employers who violate the new restrictions on salary history inquiries can also be held liable for “special damages” of up to $10,000 and any additional compensatory damages needed to make the plaintiff whole. The amendment also allows courts to award injunctive relief. The statute of limitations under the amended law will remain 5 years from the date of each underpayment.

What Employers Should Do

The new provisions of HB834 will take effect 60 days after the Governor signs the bill. The Equal Pay Act applies to all Illinois employers, regardless of size, including governmental bodies. Employers should prepare to comply with the new law as soon as possible. Steps to consider include the following:

  • Employers must change their recruiting and hiring practices to eliminate inquiries regarding compensation and benefit history, and should not rely on candidates’ compensation or benefit history when selecting candidates or determining compensation or benefits.
  • When recruiting, employers should shift compensation discussions with candidates away from the candidates’ salary history to focus on candidates’ expectations and the salary range that the employer has identified for the position.
  • Employers should train all personnel involved in the recruiting and hiring process on these new requirements.
  • Employers should review their existing compensation structures to identify pay differentials between employees who perform similar work and assess whether those differentials can be justified under the amended law. Differentials based solely upon prior compensation history may now be difficult for employers to defend. Consider engaging legal counsel to conduct this review, as the legal issues can be complex and an assessment done without the assistance of counsel will not be privileged.
  • While employers should consider addressing any pay disparities that may be problematic under the new law, they should be cautious in how they do so. The Act prohibits employers from reducing the pay of any employee to comply with the Act. While increasing compensation is less problematic, that too can create employee relations and legal issues if not handled with care. Proceed with caution, and consult with legal counsel.
  • Employers should review their confidentiality policies and agreements to ensure that they do not run afoul of the Act’s new restrictions on provisions limiting disclosure of compensation information.

City of Chicago FlagThe City of Chicago has flirted with enacting a “Fair Workweek” ordinance, aimed at ensuring predictable work schedules for workers, for several years. While the ordinance failed to gain traction in its prior iterations, this time it has a powerful proponent in Mayor Lori Lightfoot, who has made passing the ordinance one of her priorities for her first 100 days in office.

If it passes, the ordinance will impose significant new regulatory obligations on day and temporary labor service agencies, hotels, restaurants, building services, healthcare facilities and programs, manufacturers, airports, warehouses, retail employers, and childcare providers. The Chicago City Council may vote on the measure as early as June 12, 2019.

The full text of the ordinance is available here: O2019-3928 (1)

Visit this link for a detailed summary of the ordinances’s requirements.

Mayor Lightfoot’s first 100-day agenda also includes a proposal to increase the minimum wage in Chicago to $15 per hour by 2021. Illinois recently adopted legislation to increase the state minimum wage to $15 per hour, but that increase will not take full effect until 2025.

 

Earlier today (March 7, 2019), the U.S. Department of Labor announced new proposed regulations (.pdf) that would increase the minimum salary for employees to qualify for the Executive, Administrative, and Professional exemptions under the Fair Labor Standards Act to $679 per week, equivalent to $35,308 per year. This is an increase from the current minimum of $455 per week ($23,660 per year), set in 2004. However, it is significantly less than the $913 per week ($47,476 per year) minimum established in final regulations issued in 2016 and later blocked by a federal court.

Unlike the ill-fated 2016 regulations, the new proposed rules do not provide for automatic increases of the minimum salary. Instead, the Department proposes to review the minimum salary threshold every 4 years.

One new wrinkle included in the proposed rules is a provision that would allow employers to use non-discretionary bonuses and commissions paid annually or more frequently to satisfy up to 10% of the minimum salary obligation.

The Department will accept public comments on the new rules for a period of 60 days after the Notice of Proposed Rulemaking is formally published in the Federal Register. The timing of a final rules remains uncertain, but it is likely that the Department will aim to have final rules in place before the 2020 election.

For now, no need to panic even if you have exempt employees whose salaries fall below the proposed new minimum. It will be months before we know exactly what the final rules will look like, let alone whether they will survive the inevitable legal challenges.

Stay tuned for updates and further analysis.

On February 15, 2019, the U.S. Department of Labor issued Field Assistance Bulletin No. 2019-2, providing additional guidance for Wage and Hour Division staff regarding how to apply tip credit rules for employees who perform both tip-generating work (like taking orders and serving) and other duties. We provided an overview of the DOL’s position on the issue in an earlier post (“What Duties Can a Server Perform Under the Tip Credit Rules?“).

This latest bulletin doesn’t break new ground, but does provide a useful summary of the DOL’s current take on how the tip credit under FLSA Section 3(m) applies to employees who perform differing tasks for an employer. It’s worth a read for any employers in the hospitality industry. Keep in mind – the DOL’s revised position may not carry the day in litigation, and state laws may vary.