Alabama Becomes Latest State To Restrict Salary History Inquiries

Posted in Pay Equity

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

Illinois Poised to Ban Salary History Inquiries

Posted in Pay Equity

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.

Fair Workweek Ordinance May Be Coming Soon in Chicago

Posted in Chicago

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.

 

DOL Proposes $35,308 Minimum Salary For Exempt Employees

Posted in *New Exemption Rules, DOL News

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.

DOL Releases Additional Guidance on Dual Jobs for Tipped Employees

Posted in Tip Credit

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.

Stiff New Employer Penalties Included In Illinois $15 Minimum Wage Law (Updated)

Posted in Minimum Wage, State Regulation

On February 19, 2019, Illinois Governor J.B. Pritzker signed Senate Bill 1, which increases the minimum wage in Illinois to $15 per hour by 2025. Under the new law, the minimum wage will increase from $8.25 to $9.25 on January 1, 2020, to $10.00 on July 1, 2020. Thereafter, the minimum wage will increase by $1.00 per hour each January 1, until it reaches $15.00 per hour on January 1, 2025. To mitigate the sting for small employers, the law allows employers with 50 or fewer employees to claim a tax credit for 25% of the cost of the increase in 2020. The credit gradually phases out over the next several years.

While most of the headlines about the new law focus on the minimum wage increase, the law also dramatically increases employers’ potential liability for minimum wage and overtime violations. Previously, employees who sued to recover wages and overtime pay under the Minimum Wage Law were entitled to recover the amount of any underpayment plus a statutory penalty of 2% of the amount of the underpayment per month that amount goes unpaid. The new law more than doubles the statutory penalty to 5% per month. Even more significantly, the law creates a new provision allowing employees to recover not just the amount of wages owed, but treble that amount.

To put this in dollar terms, before this new law, an employee who was underpaid by $100 per month over three years could recover $4,932 ($3,600 in wages plus $1,332 in penalties). Under the new law, the same employee could recover $14,130 ($10,800, or three times the amount of wages owed, plus $3,330 in penalties). These changes are likely to encourage employees and plaintiffs’ lawyers to pursue claims for even modest underpayments. Employers may also find it far more difficult and expensive to settle minimum wage and overtime claims under the new law.

The law also adds other new penalties payable to the Illinois Department of Labor. The Minimum Wage Law already provided that if an underpayment is found to be willful, repeated, or reckless, the employer is liable to the Department of Labor for a penalty of 20% of the amount of the underpayment. The new law adds an additional penalty of $1,500, payable to the Department of Labor’s “Wage Theft Enforcement Fund.”

The law also adds new teeth to the Minimum Wage Law’s record keeping provisions. Until now, the Minimum Wage Law did not provide for any monetary penalties for failure to keep required records. Under the new law, an employer that fails to maintain records required by the Minimum Wage Law is subject to a penalty of $100 for each impacted employee, also payable to the Department of Labor’s Wage Theft Enforcement Fund. Among other things, the Minimum Wage Law requires employers to keep a record of “the hours worked in each day and in each work week by each employee.” The law does not create any exception to this timekeeping requirement for exempt employees, and the Department of Labor’s regulations under the Wage Payment and Collection Act expressly state that employers are required to keep daily time records for all employees “regardless of an employee’s status as either an exempt administrative employee, executive or professional.”

The penalty provisions of the law are effective immediately.

In light of the new law, Illinois employers should consider the following steps:

  • Review all wage rates and begin planning for how to address the increased minimum wage taking effect on January 1, 2020.
  • Plan for how the increased minimum wage may affect bargaining with unions and existing wage schedules under union contracts.
  • With the assistance of legal counsel, conduct a comprehensive wage and hour compliance review.
  • If your organization does not currently keep a daily record of hours worked by exempt employees in Illinois, start doing so.
  • If you have fifty or fewer employees, be sure to talk with your tax advisers about the new tax credit.
  • Don’t hesitate to seek professional advice about wage and hour questions. The cost of a fifteen minute phone call with an experienced wage and hour lawyer is a drop in the bucket compared to the severe new penalties for even innocent mistakes under the new law.

Pay Freeze? Winter Weather and the FLSA

Posted in Exemptions, Salary Basis

Oh the weather outside is frightful …

No, seriously, it’s actually dangerous here in Chicago. Since much of the city seems to be on lock-down today as we all try not to freeze to death, this seems like a good time to review the rules relating to employee pay during weather-related shut-downs.

For non-exempt employees, the rule is pretty simple: Unless you have promised to do otherwise, you only have to pay non-exempt employees for the hours that they actually work. If you are shut down due to weather, you are not typically obligated to pay non-exempt employees. If you choose to pay for time that the employees do not actually work, you do not have to count the hours of non-work for overtime purposes, or include the pay in the “regular rate” calculation for computing overtime.

Exempt employees are another story. Most employees who are exempt under the executive, administrative, and professional exemptions have to be paid on a salary basis, meaning that they receive the same pay each workweek, regardless of their work hours. You can deduct from pay if an employee does not show up to work for a full day for personal reasons, but that exception does not apply if the employer elects to shut down for weather, lack of work, or other reasons. As long as the employee is ready, willing, and able to work, they are entitled to their full pay for the week.

You can require exempt or non-exempt employees to draw down any available vacation, PTO or personal time to cover the hours missed due to your shut down. However, once exempt employees are out of paid time, you still have to pay them their full salary for the week.

If you are open for business but your exempt employees decide on their own that they prefer not to brave the cold, you might be able to take deductions for any full days missed. Just beware – most exempt employees these days have at least some ability to work from home. Even if they are just taking a few calls or replying to e-mail, that counts as work, and if they work part of the day, they are entitled to pay for the full day.

As always, mileage may vary depending on your jurisdiction, and be sure to check and follow your policies, handbooks, agreements, etc.

Stay warm!

 

 

It's BAAA-aaack - Illinois Supreme Court Revives Biometric Data Claims

Posted in Recordkeeping, State Regulation

Back in 2008, Illinois enacted what at the time must have seemed like a relatively obscure law to address privacy concerns associated with biometric information – the Biometric Information Privacy Act or “BIPA”. At the time, biometric devices existed, but they weren’t terribly common. Today, many of us carry a sophisticated fingerprint reader or face scanner in our pockets, and many businesses have adopted biometric security for everything from company phones and computers to timekeeping systems to door access. Unfortunately, many of those same businesses had never heard of BIPA. Cue the lawyers.

Back in July 2017, we reported on several class action lawsuits filed against employers who allegedly failed to comply with BIPA. These lawsuits were potentially a big deal for organizations of any size, because BIPA provides for liquidated damages of $1,000 for each negligent violation, and $5,000 per willful violation, plus attorneys’ fees. In December 2017, the Illinois Appellate Court for the Second District threw potential defendants a break, holding in Rosenbach v. Six Flags Entertainment Corp. that plaintiffs could recover liquidated damages under BIPA only if they could show that they were actually harmed in some way by a violation. Many organizations breathed a sigh of relief after this decision. If the rule had held, it would have greatly diminished the pool of potential plaintiffs who could bring BIPA lawsuits. However, in September 2018, the Appellate Court for the First District reached the opposite conclusion in Sekura v. Krishna Schaumburg Tan, Inc. The Illinois Supreme Court resolved this brief split in authority last week, when it reversed the Second District’s ruling in Rosenbach, allowing Six Flags Great America patrons whose fingerprints were used to verify their identities when reentering the park to pursue claims for liquidated damages under BIPA. (See our write-up on that decision here.)

If you manage payroll for a “private entity” operating in Illinois that uses biometric time clocks to track employee hours, now would be a really good time to make sure that you have BIPA-compliant policies and procedures in place. Ditto if your organization uses biometric technology for anything else – company phones, laptops, door locks, etc.

Unlimited Vacation - Wave of the Future or Potential Liability?

Posted in Vacation and PTO

The idea seems so simple: Instead of carefully tracking how much time each employee takes off during the year, we all agree to treat one another as professional, responsible adults, and take off whatever time we need consistent with getting our work done. That’s the idea behind unlimited vacation or PTO policies, and it does seem great in theory. Employees get flexibility. Employers don’t have to book accrued vacation or PTO or worry themselves about complicated recordkeeping. Everyone is happy.

Until, that is, the government and the lawyers get involved.

Lawmakers and regulators often are not “out of the box” thinkers. To the contrary, their whole job is to define the legal boxes that we all live in. Often this is for the general good, but it does make things complicated when someone tries to implement a new approach to an issue like vacation pay.

Here in Illinois, like a number of states, employers are required to keep track of employees’ work hours as well as their vacation or PTO accruals and usage. The Illinois Wage Payment and Collection Act requires employers to pay employees for any accrued, unused vacation or PTO remaining to them at the time of termination. But how does that work with an “unlimited” PTO policy?

Employers with such policies might argue that the payout requirement does not apply because employees do not accrue any guaranteed vacation time. Employees simply take time off when needed without having their salaries docked.

Unfortunately, that is not how the Illinois Department of Labor sees things. According to the Department’s FAQs on vacation pay, employers with such policies “must pay an employee who separates from employment a monetary equivalent equal to the amount of vacation pay to which the employee would otherwise have been allowed to take during that year but had not taken.” That obviously creates a problem – how do you know how much leave a given employee “otherwise would have been allowed to take,” if you don’t limit or even track vacation or PTO usage? Do you take an average of the number of days used by all employees, or by each specific employee? Do you look at what if any scheduled time off the employee may have had coming up later in the year? Do you look at the calendar year? Anniversary year? What sort of evidence is required? Is an employee’s testimony about how much vacation he would have used sufficient to sustain a claim? On top of the practical problems, it is not clear whether the IL DOL’s interpretation of this issue in its FAQ would govern any actual claims, since the FAQ page is not a binding regulation and the courts have yet to weigh in on this issue. Indeed, the impracticality of measuring how much vacation an employee “otherwise would have been allowed to take” is a strong argument against the IL DOL’s interpretation. However, until the issue is addressed by binding legal authority, Illinois employers are left to wonder.

Unlimited vacation and PTO policies can also create issues when accounting for other forms of leave. For example, the FMLA requires employers to allow available paid leave to run concurrently with an employee’s FMLA leave. When employees have a set number of days or weeks of PTO available, the employer’s obligation to provide paid leave is limited to the number of days allowed by policy. But if an employer’s policy simply provides for unlimited PTO with no cap, arguably that would mean that an employee’s entire 12-week FMLA leave entitlement must be paid.

Finally, employers should be mindful of the criticism that because unlimited leave policies do not provide concrete guidance on how much time off the organization regards as reasonable, unlimited PTO policies can actually result in employees taking less time away from work than they would if they might if they had a fixed amount of PTO or vacation. For some employers perhaps that is part of the point, but most employers recognize that taking appropriate time away from work is important for employee productivity and retention.

While unlimited PTO policies are not as simple as they seem on their face, the complications and risks associated with such policies can generally be managed or minimized through careful planning and implementation. Here are a few tips for employers that are considering (or that already have) such a policy:

  • If you are transitioning away from a system in which employees accrued a fixed amount of vacation or PTO, talk with your legal counsel about how to manage the transition without violating your state and local wage laws.
  • Don’t make your policy truly “unlimited.” Establish reasonable parameters around when and how employees are able to use PTO, such as a requirement that employees obtain management approval for time off and an upper limit on the number of consecutive work days an employee can take off with pay.
  • Make sure that your policy is coordinated with other benefits that your organization offers, such as paid parental leave or short-term disability.
  • Be aware of the laws in your jurisdiction, and try to craft your policy in a way that ensures compliance. For example, if you are in a jurisdiction that requires employers to provide a certain number of days of paid sick leave, consider adding language to your policy to make clear that employees will be provided at least the number of paid sick days required by the law, and for all of the purposes provided by the law.
  • Even if you do not restrict the time that employees take off, keep track of the days your employees take and the reasons for their absences. Yes, having to keep these records does reduce one potential advantage of an unlimited PTO policy, but in many cases it is required by law. Even if it were not required, having a record of when people were and were not at work can be very important for defending against certain kinds of claims.
  • Ensure that your managers understand that they still need to manage employees’ time off, not just to prevent employees from taking too much time, but also to ensure that employees take enough time off to remain satisfied and productive.
  • In states like Illinois that require employers to pay employees for accrued, unused PTO and vacation upon termination of employment, make sure you understand how the law might apply to employees covered by your policy.
  • This is a rapidly evolving area of the law. Regularly review and update your policy to comply with changes in the law.

 

 

 

 

Are your bonuses really discretionary?

Posted in Bonus, Overtime

As the holiday lights start to fade, we come to one of the most anticipated times of the year – bonus season!

Such a happy time. Who doesn’t love getting a bonus, and what employer doesn’t like rewarding good performance with some extra monetary recognition? Bonuses are great, but keep in mind that they also carry some legal obligations. In the case of non-exempt employees, that might include paying additional overtime based on your bonus payment. The FLSA requires employers to pay overtime based upon an employee’s “regular rate” of pay. The regular rate is not simply the employee’s base hourly pay rate. Rather, it is the rate calculated by adding up all of an employee’s non-overtime compensation for each workweek, then dividing by the total hours worked during the workweek. Non-discretionary bonuses are part of an employee’s total compensation, so must be included in this calculation even if the bonus is not calculated or paid out until after the employee’s regular pay.

“Ha!”, you might be thinking to yourself as you read this, “we don’t have to do that because our bonus policy says right in the title that bonuses are discretionary.” You might be right, but it’s not quite that simple. The FLSA regulations (specifically 29 C.F.R. § 778.211), discuss which bonuses can be considered “discretionary”:

 In order for a bonus to qualify for exclusion as a discretionary bonus under section 7(e)(3)(a) the employer must retain discretion both as to the fact of payment and as to the amount until a time quite close to the end of the period for which the bonus is paid. The sum, if any, to be paid as a bonus is determined by the employer without prior promise or agreement. The employee has no contract right, express or implied, to any amount. If the employer promises in advance to pay a bonus, he has abandoned his discretion with regard to it. Thus, if an employer announces to his employees in January that he intends to pay them a bonus in June, he has thereby abandoned his discretion regarding the fact of payment by promising a bonus to his employees. Such a bonus would not be excluded from the regular rate under section 7(e)(3)(a). Similarly, an employer who promises to sales employees that they will receive a monthly bonus computed on the basis of allocating 1 cent for each item sold whenever, is his discretion, the financial condition of the firm warrants such payments, has abandoned discretion with regard to the amount of the bonus though not with regard to the fact of payment. Such a bonus would not be excluded from the regular rate. On the other hand, if a bonus such as the one just described were paid without prior contract, promise or announcement and the decision as to the fact and amount of payment lay in the employer’s sole discretion, the bonus would be properly excluded from the regular rate. (Underlining added.)

In sum, a bonus is not “discretionary” under this rule if an employer either commits in advance to paying a bonus or states the amount of the bonus or method of calculation in advance. Merely sticking a disclaimer at the end of your bonus policy or calling your bonuses “discretionary” doesn’t necessarily make it so.

So what if your bonus plan is non-discretionary – how do you calculate any overtime due? Look for a later post with the answer to that question, including a method of calculating bonuses that might allow you to skip the extra math altogether.

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