In April, the Illinois Department of Labor published new regulations regarding the expense reimbursement requirements in Section 9.5 of the Illinois Wage Payment and Collection Act. The Act requires an employer to reimburse an employee for “all necessary expenditures or losses incurred by the employee within the employee’s scope of employment and directly related to services performed by the employer.” It defines “necessary expenditures” as “all reasonable expenditures or losses required of the employee in the discharge of employment duties that inure to the primary benefit of the employer.”Continue Reading New Reimbursement Rules for Illinois Employers
In 2018, Congress added a provision to the Fair Labor Standards Act prohibiting employers from retaining employee tips or allowing managers or supervisors to participate in a tip pooling arrangement. Today, the U.S. Department of Labor announced a new final regulation in which the DOL asserts authority to penalize employers up to $1,100 per violation of this provision, on top of any back wages owed. Prior rules published by the Trump administration also provided for civil penalties, but only in cases of “repeated and willful” violations. The new rule allows the DOL to pursue penalties even for a first offense and regardless of whether the violation was willful. The rule defines “managers and supervisors” as those employees who meet the duties requirement for the executive exemption, whether or not the employees are paid on a salary basis or actually treated as exempt.
The rule is scheduled to be published in the Federal Register on September 24, 2021, and will take effect 60 days later on November 23, 2021.
The DOL is still working an additional rule that will govern how employers pay tipped workers who spend time on tasks that don’t generate gratuities, such as washing dishes or other “back of the house” functions. In June 2021, the DOL proposed dropping regulations issued by the Trump administration and returning to the longstanding rule that would require businesses to pay tipped workers at least the federal minimum wage for non-tipped activities when those activities take up at least 20% of a worker’s time in a workweek. The DOL is currently reviewing public comments on that proposal and is expected to issue a final rule in the coming months.
Wage and hour law is full of traps for the unwary. Even compensation practices that are well-accepted across an entire industry can sometimes create huge headaches for employers in the face of a legal challenge. Case in point: A recent decision by the Fifth Circuit Court of Appeals in Hewitt v. Helix Energy Solutions Group, Case No. 19-20023, in is causing upheaval in the energy sector by suggesting that even highly paid supervisory employees may be entitled to overtime pay on top of their six-figure compensation because they are paid a day rate rather than a weekly salary.
Wage and hour violations in Illinois just got a lot more expensive. On Friday, July 9, 2021, Governor Pritzker signed an amendment to the Illinois Wage Payment and Collection Act that increases the penalty for underpaying wages from 2% of the amount of the underpayment per month to 5%. That may not sound like a lot, but it adds up fast.
Suppose a former employee claims that their employer failed to pay them $5,000 in vacation pay upon separation from employment. Employees have up to 10 years to file a lawsuit under the Act, so it may be several years before the claim is even filed, let alone before it works its way through the legal system. Assume optimistically that the claim is filed immediately and is resolved in the employee’s favor two years after the employee’s termination. Previously, the employee would be entitled to recover the original $5,000 plus an additional $2,400 (2% of $5,000 per month x 24 months) in statutory penalties. Under the amended law, the penalties would be $6,000, more than double the original amount due. The employer would also be on the hook for the employee’s attorneys’ fees, in addition to its own defense costs and other penalties.
This change brings the penalty provisions of the Wage Payment and Collection Act in line with earlier amendments to the Illinois Minimum Wage Law. However, the Minimum Wage Law provides for employees to recover triple the amount of any wages due, in addition to the 5% penalty. The amendment to the Wage Payment and Collection Act does not include a treble damages provision.
The message for Illinois employers is clear: wage and hour claims can cost you dearly. Make sure you pay your employees correctly and keep the records to prove that you did so.
The Department of Labor (“DOL”) released an opinion letter addressing whether certain overtime payments based on an expected number of hours may be credited towards the amount of overtime pay owed under the Fair Labor Standards Act (“FLSA”) and whether such overtime payments are excludable from the regular rate. The answer to both questions is yes.
The inquiry came from a business that provides in-home care services on a live-in basis or for shifts of 24 hours or more. The employer pays an hourly rate plus overtime based on anticipated overtime hours. The caregivers typically work five days a week for 120 or more hours. Given the nature of the caregivers’ work, the employer found it difficult to track which hours the caregivers were actually working. The employer therefore treats the employees as performing compensable work for the entire extended shift, minus 8 hours allotted for sleeping and meal breaks. If a caregiver has any work-related interruptions to meal or sleep periods, the caregiver is to track those hours and they are counted as compensable time. If a caregiver works more than anticipated, then the employer supplements the prepaid compensation at a rate of 1.5 times the caregiver’s hourly rate for each unanticipated hour of work over 40 hours.
On September 8, 2020, the United States District Court for the Southern District of New York struck down portions of a January 2020 Final Rule issued by the Department of Labor. The Final Rule provided a new test for determining whether an entity is a joint employer with another entity under the Fair Labor Standards Act (FLSA). The Final Rule, which became effective in March of 2020, severely limited the situations in which an entity can be considered a joint employer and held liable for violations of the FLSA in a “vertical” joint employment relationship. A vertical joint employment relationship is the variety of joint employment that exists when there is some sort of intermediary, like a staffing firm, PLA, or temp agency between the employee and the employer that ultimately benefits from the employee’s work. We discussed “horizontal” joint employment in a prior post.
Several states, including Illinois, filed suit challenging the Final Rule’s legality with respect to the Final Rule’s changes to the vertical joint employment determination. Historically, courts and the DOL have made clear that control over an individual’s employment is not the dispositive factor in determining whether an entity is a joint employer with another entity. Instead, whether a joint employment relationship exists depends upon whether the employee in question is economically dependent upon the potential joint employer.
In Field Assistance Bulletin No. 2020-4, issued June 26, 2020, the United States Department of Labor, Wage and Hour Division, recognized a number of ways an employee can establish eligibility for Family First Coronavirus Response Act (FFCRA) leave based on the closure of a summer camp or program that the employee claims would have been the place of care for the employee’s child over the summer. In addition to proof of actual enrollment or application to a camp or program, if an employee’s child attended a camp or program in the summer of 2018 or 2019 and the child remains eligible for the camp or program for Summer 2020, that may be sufficient. Likewise, if an employee’s child is accepted to a waitlist pending the reopening of a camp or program or the reopening of the camp or program’s registration process, that, too, may be sufficient. Although the DOL states that mere interest in a summer camp or program is not enough, this broad interpretation opens the door to many new requests for FFCRA leave for employees. Employers should continue to obtain as much information as possible from an employee regarding the reasons the employee considers a summer camp or program to be the provider for the employee’s child. Consider consulting with legal counsel if you receive a request where there is a question as to whether the provider is in fact the child’s provider, including requests related to a summer camp for which no application, acceptance, attendance, or enrollment has occurred.
I believe most would agree, the Department of Labor’s (DOL) interpretative guidance typically provides useful insight to employers navigating often tricky wage and hour laws. This was not the case with the DOL’s decades-old guidance regarding whether an employer was a “retail or service establishment” and could claim an overtime exemption for certain employees paid on commission under Section 7(i) of the Fair Labor Standards Act (FLSA). In its interpretative guidance, the DOL created lists of industries that were either not recognized as retail establishments, or could possibly be recognized as retail establishments. In an action that should be mostly applauded by employers, the DOL recently issued a final rule withdrawing these particularly unhelpful “industry lists” and will instead evaluate every industry according to its regulations.
The U.S. Department of Labor (DOL) has issued a final rule under the Fair Labor Standards Act (FLSA) expressly authorizing employers to offer bonuses, hazard pay, and other premiums to employees whose hours, and regular rate of pay, vary from week to week.
The final rule revises 29 CFR §778.114, which is the DOL regulation that specifies how overtime is to be computed for salaried, non-exempt employees who work a fluctuating workweek. The new rule clarifies that bonuses, premium payments, commissions, and hazard pay on top of fixed salaries are compatible with the fluctuating workweek method of compensation and that employers must include such variable compensation when calculating an employee’s regular rate for overtime purposes. The final rule includes example calculations to illustrate how to factor in such payments.
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.