Tough Time To Be An Employer

Transcription

1 Lumsden & McCormick 2015 Exempt Organizations Conference Surviving the DOL Vice Grip: Practical Insight for Managing the Flood of New Employer Regulations Tough Time To Be An Employer 1

2 Not To Be Outdone The DOL Vice Grip: Topics to Cover USDOL Proposed Fair Labor Standards Act (FLSA) White-Collar Regulations Independent Contractor Misclassification Guidance NYSDOL Proposed Wage Payment Regulations Industry-specific Minimum Wage Increases 2

3 Caught in a Political Movement President Obama A dangerous and growing inequality and lack of upward mobility that has jeopardized middle-class America s basic bargain that if you work hard, you have a chance to get ahead... is the defining challenge of our time. December 4, 2013 Caught in a Political Movement Governor Cuomo Op-Ed Page, New York Times May 16, 2015 Income inequality is a national problem that leaders at all levels of government are grappling with. While American capitalism never guaranteed success, it did once guarantee opportunity. 3

4 USDOL Proposed FLSA White-Collar Regulations FLSA: The Basics FLSA has two fundamental requirements: Minimum Wage; and Overtime for Hours > 40/week 4

5 FLSA Overtime Exemptions Overtime need not be paid if the employee meets one of several statutory exemptions Most common are the white-collar exemptions: oexecutive oadministrative oprofessional Qualifying For The White-Collar Exemptions Three Tests: o Salary Basis o Salary Level o Duties Test A short-cut test also applies to highly compensated executive, administrative or professional employees 5

6 Proposed FLSA Regulations 3/13/14 Obama directs USDOL to modernize and streamline white-collar exemptions 7/6/15 USDOL publishes proposed rule 9/4/15 Public comment period closes (nearly 250,000 comments) 9/4/15 to??? USDOL reviews comments and prepares final rule??? Final rule to be published??? Final rule to take effect Reasons for Changing the Exemption Regulations Overtime is a pretty simple idea. If you have to work more, you should get paid more. President Obama (March 13, 2014) 6

7 Reasons for Changing the Exemption Regulations USDOL shall simplify the regulations to make them easier for both workers and businesses to understand and apply. President Obama (March 13, 2014) 7

8 Simplify? Really? 2004: USDOL last revised white-collar exemptions to make compliance easier oduties test for administrative employees required that individuals exercise independent judgment and discretion over matters of significance oresulted in substantial litigation over meaning of the phrase matters of significance Since 2004: Explosion of FLSA Actions More FLSA actions filed than in any prior year FLSA actions have become the most common type of employment claim brought under federal law Frequency of FLSA class and collective actions continues to trend upward Overwhelming number of FLSA claims concern whether employee(s) satisfy the duties test 8

9 USDOL s Response Proposed Changes to Salary Level Current Salary Level: o $455 per week ($23,660 per year) o $100,00 per year (highly compensated) Note: NY s current salary level is $656.25/week and is scheduled to increase to $675/week on 12/31/15 Proposed Salary Level: o $970 per week ($50,440 per year) o $122,148 per year (highly compensated) 9

10 Proposed Annual Indexing or Automatic Increases Current salary level is fixed USDOL proposes either: o Automatic annual updating based on 40 th percentile of weekly earnings for full-time salaried workers), or o Pegging to consumer price index Proposed regulation would require annual adjustments by employer to ensure exempt status of workers Non-Discretionary Bonuses Currently, non-discretionary bonuses (e.g., production, attendance, referral, etc.) cannot be counted towards salary level USDOL s proposal sought comments on whether to allow non-discretionary bonuses to satisfy a portion of the salary level test 10

11 So What About the Duties Test??? USDOL states that it views salary level test as the initial bright line test for the white-collar exemptions However, it also recognizes that salary level works in tandem with the duties test No change to duties test proposed But Duties Test USDOL requested comments so it could asses whether changes to the duties test might be appropriate For instance: o Possible adoption of a California-style duties test o Possible modification of the concurrent duties standard for executive employees 11

12 Proactive Risk Management Step 1: Self Audit Review salary levels and duties o Examine job descriptions, evaluations, etc. Identify and evaluate part-time exempt employees Document reclassification decisions Consider benefits of attorney-client privilege Proactive Risk Management Step 2: Roll-Out Changes Determine timing of re-classification decision Develop action plan and employee communications Educate supervisors Be prepared to answer questions and address complaints 12

13 Proactive Risk Management Step 3: Training & Compliance Recordkeeping o Requirements of exempt vs. non-exempt o WTPA Meal periods (NYLL) Restrictions on working outside of normal work hours Overtime restrictions Making The Classification Decision If keeping exempt: Must satisfy new salary level o Budget issues (revisit on annual basis) o Pay compression o Morale problems Must satisfy whatever duties test exists o Significant misclassification problems will be caused by a California-style test or change to the concurrent duties standard 13

14 Making The Classification Decision If exempt non-exempt: Must set the new pay rate (including overtime) Must enforce record-keeping policies Must take steps to avoid unauthorized overtime and off-the-clock work Must be prepared for morale problems USDOL: New Independent Contractor Misclassification Guidance 14

15 FLSA & Independent Contractors 7/15/15 USDOL recently issued new Administrator s Interpretation addressing problematic trend of independent contactor misclassification Problems with misclassification: oemployees denied workplace protections (minimum wage/ot, UI, WC, nondiscrimination, etc.) oloss of tax revenue ounfair competition FLSA & Independent Contractors USDOL Position Most workers are employees under the FLSA Scope of employment under FLSA is very broad Must use multi-factor economic realities test to determine if worker is employee or IC: o No one factor determinative o Should not be mechanically applied o Liberally construed to provide expansive coverage of FLSA 15

16 USDOL Economic Realities Test Is work an integral part of employer s business? Does worker s opportunity for profit or loss depend on his or her managerial skill? What is worker s investment compared to employer s? Does work performed require special business skills, judgment, and initiative? Is relationship permanent or indefinite? How much control is exercised by putative employer over the worker? USDOL Economic Realities Test Fundamental Question per the USDOL: Is the worker economically dependent on the business? Or is the worker in business for herself/himself? 16

17 Some Actual Realities About the USDOL s Interpretation USDOL will be predisposed to find an employment relationship Application of the multi-factor economic realities tests leaves USDOL with extreme discretion Any facts tending to show an independent contractor relationship will likely be marginalized and discounted Recommendations To protect against worker misclassification claims: o Require contingent workers to have, or be part of, a bona fide separate business Contract with the business, not the individual Verify status through available means o Identify and retain any advertisements of the worker or business o Assess level of worker s own investment (the more the better) o Determine if the worker s profitability is connected to his or her own managerial judgment 17

18 Recommendations (cont.) To protect against worker misclassification claims, consider: o Documenting the worker s performance for other entities o Confirming that the worker can refuse to perform available work from your business (and document all such refusals) o Requiring the worker to have his/her own workers compensation, unemployment, and liability insurance coverages Some Recommendations To protect against worker misclassification claims, consider the following (Cont.): o Do not reimburse worker for expenses or travel o And have a written independent contractor agreement in place (but remember that agreement, alone, is not enough) Note: Special rules apply to the use of independent contractors by New York businesses in many industries (including the construction and transportation industries). 18

19 NYSDOL: New Proposed Wage Payment Regulations Proposed NYSDOL Regulations 5/27/15 NYSDOL published new regulations concerning the manner in which employers may pay employees 7/31/14 Public comment period closed (following earlier extension) 10/28/15 NYSDOL published revised proposed regulations 11/27/15 New 30-day comment period closes 19

20 Proposed Wage Payment Regulations: The Basics Employer may pay wages to employees by: o Cash o Check o Direct Deposit o Payroll Debit Card Majority of changes in the proposed regulations (both originally and as revised) concern payment by payroll debit card Payment By Payroll Debit Card & Direct Deposit Permissible if employer provides written notice: o Describing all options for receipt of wages o Stating that employer will not require employees to accept wages by direct deposit or payroll debit card o Stating that employees will not be charged fees for services to access wages o Listing locations within a reasonable proximity of the place of work were employees can access wages at no charge 20

21 Payment By Payroll Debit Card & Direct Deposit Other Requirements Employee must give written informed consent Consent cannot be a condition of hire or continued employment Consent can be withdrawn at any time (employer has two weeks to comply) Direct deposit must be to financial institution of employee s choosing For payroll debit card: o employee must have local access to ATM that offers withdrawals at no fee o Employee must have at least one method of withdrawing total amount of wages each pay period or remaining balance on card without fee. (Similar new requirement for payment by check) NYSDOL: Industry-specific Minimum Wage Increases 21

22 Fast Food Industry Remember that political movement??? NYSDOL Commissioner recently approved huge increase in minimum wage for fast food workers (9/10/15) $15/hour by 2018 in NYC and by 2021 elsewhere o Phased-in over coming years Fast Food Industry But it only affects the fast food industry, right? o Wrong! Market pressure to raise wages of higher skilled workers earning less than $15/hour Your industry could be next! (This movement is not going away soon.) 22

23 State-Wide Minimum Wage Wait, your industry IS next! Governor Cuomo is now pushing for a state-wide minimum wage of $15/hour Will reportedly work to enact legislation in the coming term Questions? 23

24 Fall 2015 Labor and Employment Law Breakfast Briefing Surviving the DOL Vice Grip: Practical Insight for Effectively Managing the Flood of New Employer Regulations 24