2011 Winston & Strawn LLP

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2 A Hostile Regulatory Environment: DOL Regulations and Interpretive Guidance, Brought to you by Winston & Strawn s Labor and Employment Relations Practice Group. 2

3 Today s elunch Presenters Gregory Jacob Labor and Employment Relations Washington, D.C. gjacob@winston.comcom 3

4 Department t of Labor s New Policy Orientation 4

5 Key DOL Leadership Secretary of Labor Hilda Solis Deputy Secretary Seth Harris Solicitor of Labor Patricia Smith Wage and Hour Administrator Lorelei Boylan (withdrawn) Assistant Secretary for OSHA David Michaels Assistant Secretary for Employee Benefits Security Administration Phyllis Borzi Deputy Assistant Secretary for OFCCP Patricia Shiu 5

6 DOL s DOLs Policy Orientation [T]here [] is a new sheriff in town. Sec. Solis Stepped up enforcement Less emphasis on compliance assistance Very aggressive from the top down in pushing legal interpretation and authority Withdrawal ofand overruling ofmany wage & hour opinion letters Regulatory attempts that have been struck down or have had to be withdrawn Tilted toward meeting the demands d of organized dlb labor 6

7 Key Wage & Hour Enforcement Areas 7

8 Overtime Exemptions: The Power of DOL Guidance DOL efforts account for less than 10% of total wage & hour enforcement, but DOL has tremendous power to influence federal courts on exemption issues Courts will defer to DOL positions even when newly announced in amicus briefs (See Auer v. Robbins, 519 U.S. 452 (1997)) DOL has even succeeded in reversing the decision of a federal Court of Appeals based on a guidance memorandum it issued after the court s decision (See Long Island Care at Home, Ltd. v. Coke, 551 US U.S. 158 (2007)) Where the fact pattern is within the four corners of an opinion letter, good faith reliance protection may apply Otherwise, DOL can retroactively change the rules simply by issuing new interpretive guidance But in a mortgage loan officer case, DOL recently disclaimed retroactive application where they explicitly overrule a previous position 8

9 Overtime Exemptions DOL has been taking much narrower positions on: Administrative exemption Outside sales exemption DOL s recent Second Circuit amicus brief in Novartis opined that pharmaceutical sales reps are non exempt: Not outside sales because no good or service is actually sold Not administratively exempt because specific instructions were provided for each aspect of the job, and the nature and level of decisions was too low to qualify as matters of significance But note that deference to DOL on this particular issue was rejected by the Ninth Circuit in Christopher v. Smithkline: History of non enforcement by DOL on pharma sales reps DOL s regulation merely parroted the statutory language, such that a lower level lof df deference applied to the interpretation 9

10 Overtime Exemptions (continued) Administrator s s Interpretations have replaced opinion letters as the primary vehicle for guidance Administrator s Interpretation : Mortgage gg loan officers typically not administratively exempt Primary duty (looking at description, qualifications, training, and payment method) is sales. Any work analyzing and recommending options in light of customer needs is merely incidental to the sale. Resurrects production vs. administrative dichotomy. States that perform work that aids the general business operations of a customer can still qualify for the administrative exemption, but only if the customer is a company. Work performed to aid the personal interests ofindividual customers cannotqualify asadministrative. 10

11 FMLA Leave & Nursing Breaks Administrator s Interpretation : FMLA Leave is available for non biological children of domestic partners DOL notes that the current regulations allow in loco parentis FMLA coverage To squeeze in domestic partners in, DOL sweepingly interprets in loco parentis to include anyone who provides day to day care or financial support withthethe intention ofassuming parental responsibilities Nursing mother breaks under PPACA Fact sheet requires provision of breaks of a reasonable time, as frequently as needed, in a place other than a bathroom Departing from the normal rule, nursing breaks are expressly made non compensable even if shorter than 20 minutes 11

12 Technology & Off the Clock Issues DOL and plaintiffs attorneys are beginning gto focus on compensation issues created by advancing technology: Computer log in Blackberries and home e mail Associated commuting and travel issues The core set of issues to be considered: Has the employer suffered or permitted the employee to work beyond scheduled work hours? How does the concept of the continuous workday apply? Does the de minimis doctrine apply? Did the employer have no means of knowing that the employee was performing uncompensated work? 12

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14 Technology Checklist Are any of your non exempt employees required to wait at the beginning of their shifts for a computer or other similar device to boot up so that they can perform their job duties? If so, this is almost certainly compensable time! The clock generally starts the moment the employee turns the computer or other similar device on. However, once the employee is on the clock, the employer is entitled to control what the employee does with his or her time. Generally, it is a good practice for employers to minimize waiting time as much as possible, and to attempt to fill the waiting time with other productive work. To minimize i i unproductive waiting time, some employers have found dit efficient to assign one employee to turn on many computers each day. 14

15 Technology Checklist (continued) Do any of your non exempt employees have access to: BlackBerries or Personal Data Assistants? Take home laptops? Remote e mail? Cell phones? If you answered yes to any of the above, giving the nonexempt employees access to such technology outside their normal working hours implies they are expected to use that technology at some point for the employer s benefit. Proceed to the next step. 15

16 Technology Checklist (continued) Are either of the following remedial measures feasible? Stop providing access to such technology to non exempt employees. Require non exempt employees to pick up the remote work devices at the beginning ofeach shift, and turn them inat the end of each shift. If not, proceed to the next step. 16

17 Technology Checklist (continued) Establish a clear, written remote work policy! Have employees record all work related time spent using remote work devices, and compensate them for all of that time. There are a few options: Establish a daily or weekly de minimis threshold for remote work, and require employees to record their time whenever it is exceeded. (See ERLJarticle for therisk associatedwith various thresholds.) Require employees to secure advance supervisory approval for all remote work. Make it clear that all such work will be paid for, with or without pre approval, but that failure to secure pre approval will be treated as a disciplinary issue. 17

18 Independent Contractors There are no federal wage and hour regulations in this area (yet), but DOL has initiated a major enforcement initiative in conjunction with the IRS Misclassification of employees as independent contractors is not itself an FLSA violation, but DOL is looking for ancillary opportunities to weigh in Consequences can be significant: Overtime and recordkeeping violations, liability for failure to include in benefit plans, tax liability, unemployment Every agency and every state uses a different multi factor test, but FLSA economic realities test is broadest Some key factors: Right to control manner and means or performance, personal investment in equipment, other clients?, is work part of employer s core business?, previous employee?, length of employment, right to terminate at will, basis of py payment (per job?) 18

19 Unpaid Interns According to DOL, unpaid interns are not employees (and thus don't have to be paid) if all six apply: Internship provides training similar to vocational school; The training is for the benefit of the student; The interns do not displace regular employees, but rather work under the supervision of employees; The employer derives no immediate advantage from intern work; The interns are not guaranteed a job; and There is a mutual understanding that no wages will be paid. Courts typically apply a more lenient economic reality test that balances intern and employer benefits. Key: Set up hallmarks of a real educational program! 19

20 Proposed Plan/Prevent/Protect Regs Employers and others must find and fix violations that is, assure compliance before a Labor Department investigator arrives at the workplace. Employers and others in the Department s regulated communities must understand that the burden is on them to obey the law, not on the Labor Department to catch them violating the law. This is the heart of the Labor Department's new strategy. We are going to replace catch me if you can with Plan/Prevent/Protect. DOL, Spring

21 Proposed Plan/Prevent/Protect Regs NPRM is currently planned for spring 2011, but will likely slip The proposed rule is expected to require employers to document and justify in writing the classification of: All employees considered to be exempt from overtime All workers considered to be independent contractors The proposed p rule is further expected to require employers to furnish these documents to employees: A roadmap for the plaintiffs bar! Comments by individual id employers on the tremendous burdens that would be imposed by this rule will be essential to efforts to challenge the rule in court 21

22 OFCCP Issues 22

23 OFCCP s New Focus on Compensation Discrimination Approximately one third of OFCCP s enforcement personnel will now be devoted dto compensation cases Compensation cases are much more subjective than hiring cases, because similarly situated employee groupings require judgment calls OFCCP will be revoking the 2007 Compensation Standards in order to limit employer defenses, with no plans to replace them Subjectivity is worst in the early stages of investigations, when OFCCP may apply pay grade or cohort analyses to determine potential liability Individual OFCCP auditors thus have a tremendous amount of discretion in seeking conciliation! 23

24 OFCCP s New Focus on Compensation Discrimination (continued) OFCCP has hired significant numbers of additional investigators: audits are coming! The keys to limiting exposure: Do a self audit, document it, and document the steps you took in response to it Put your own similarly situated employee groupings together, collect data according to your SSEGs, and then submit the data to OFCCP in your format Establish record keeping practices that clearly document all legitimate factors that explain pay disparities, such as work experience 24

25 Veteran Hiring Goals OFCCP published an NPRM on April 26, Comments are due by June 25, The rule would: Require contractors for the first time to establish hiring benchmarks to measure their progress in hiring veterans Contractors would be required to consult BLS data on veterans, state employment service data on veterans, and other information sources in establishing benchmarks Require e contractors to engage in at least three eespecified ed types of veteran outreach and recruitment efforts each year Require that all applicants be invited to self identify as a protected veteran before they are offered a job 25

26 Disability Hiring Goals OFCCP issued an advance notice of proposed p rulemaking on establishing additional Affirmative Action Plan requirements for employees with disabilities 127 comments received, mostly from concerned employers Unclear as yet what the substance of an NPRM will look like but most likely: Additional recruiting requirements will be imposed Additional information collection requirements will be imposed Employers will be required to establish h goals for hiring i of persons with disabilities 26

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28 Questions? 28

29 Thank You. 29

30 Contact Information Gregory Jacob Labor and Employment Relations Washington, D.C. (202)