As previously discussed on this blog in a post dated November 23, 2016, the United States Department of Labor (“DOL”), in May of 2016, issued a final rule (“Final Rule”) revising its regulations construing the so-called white-collar overtime exemptions of the Fair Labor Standards Act (“FLSA”).  In essence, the Final Rule increased the minimum salary that employers must pay their employees in order to invoke the white-collar exemption, from $23,600 to $47,476 annually, and provided for automatic updates to the minimum salary every three years.

The Final Rule was scheduled to take effect on December 1, 2016, but on November 22, 2016, a federal judge in the Eastern District of Texas issued a nationwide preliminary injunction, preventing the DOL from implementing the rule ( Nevada v. U.S. Dep’t of Labor ).  That litigation continues, and the preliminary injunction ruling is on appeal to the Court of Appeals for the Fifth Circuit.  It is unknown whether the Fifth Circuit will uphold the injunction or reverse, and whether the District Court will ultimately vacate the Final Rule or lift the injunction.   Resolution of these uncertainties appears to be months away.  The Fifth Circuit recently granted the DOL’s request for an extension of time to file its reply brief “to allow incoming leadership personnel adequate time to consider the issues,” and the reply brief is not due until May 1, 2017.

If the District Court lifts the injunction, or the Fifth Circuit reverses, the Final Rule will presumably go into effect, and a troubling question for employers arises: Will courts hold employers liable under the FLSA’s overtime rules based on their failure to comply with the Final Rule since December 1, 2016?

District courts across the country have been wrestling with a similar issue relating to a different set of DOL regulations – those construing the FLSA’s companionship-services exemption.  The new DOL companionship-services regulations, set to take effect on January 1, 2015, removed home health care employees of third-party agencies from the ambit of the FLSA’s exemption.  However, before the new regulations took effect, a federal judge in the District of Columbia vacated the regulations.  Over eight (8) months later, in August of 2015, the Court of Appeals for the District of Columbia reversed the vacatur and upheld the regulations ( Home Care Ass’n of Am. v. Weil ).

Since that time, a distinct split of authority has developed regarding whether employers are liable for overtime for those previously-exempt companionship-services employees during the time that the vacatur of the new DOL regulations was in effect.  On the one hand, some federal judges have concluded that the regulations did not require compliance during the period that the vacatur was in effect.  In contrast, other federal judges have ruled that, because of the D.C. Circuit’s reversal, the District Court’s vacatur, in essence, never occurred, and employers were required to follow the new regulations as of January 1, 2015.  Of course, the latter interpretation puts employers in a distinct quandary to the extent they justifiably relied upon the pronouncements of a district court.

The uncertainty surrounding the effective date (for employer-compliance purposes) of the DOL’s companionship-services regulations may have implications for the obligations imposed by the Final Rule.  In the event that the Texas judge’s injunction against the enforcement of the Final Rule is lifted or reversed, it is entirely unclear whether courts will determine that employers were obligated to comply with the Final Rule’s new minimum salary requirement as of December 1, 2016.  This lack of clarity is further compounded by the uncertainty surrounding the new administration’s position with respect to the Final Rule and its motivation to pursue the appeal.

Employers who would be affected by the obligations imposed by the Final Rule should carefully evaluate the relevant legal and business risks in determining whether to meet the Final Rule’s minimum salary requirements while the injunction remains in place.

We will keep our readers updated with respect to the state of the law surrounding the Final Rule.

Whether you are starting a new business in 2017 or gearing up for another year with an existing company, the New Year brings the excitement of fresh opportunities.  That enthusiasm, however, should not overshadow employment related legal pitfalls that commonly befall companies and can impact the bottom line through unnecessary litigation.  Outlined below are five areas where employers can take proactive measures in 2017 to protect their business.  Entrepreneurs and business owners would be wise to take advantage of the energy of a new year to evaluate these areas, reduce the potential for future disputes, and place themselves in a good defensive position should an issue arise.

  • Proper Worker Classification and Compensation

Business owners both large and small routinely confront issues relating to the accurate classification of workers as “employees” or “independent contractors”, as well as setting the correct compensation for employees’ hourly and overtime work.  These determinations are particularly important for employers in 2017, with the anticipated updates to the Fair Labor Standards Act set to take effect, as discussed in more detail previously here.  While the enforcement of these new rules remains in limbo due to pending litigation, employers should be prepared to address the impact of the updated wage requirements, both from a financial and practical perspective, in 2017.

  • Workplace Policies and Procedures

A formal handbook or collection of written corporate policies helps protect a company when disputes arise and ensures uniform application of the company’s expectations for all workers, even in at-will employment situations.  Some common policies that employers should strongly consider adopting (or revising) in 2017 include paid vacation and sick leave policies, anti-discrimination rules, equal opportunity employment policies, medical and family leave procedures, social media and/or internet usage guidelines, “bring your own device” parameters, and a company code of conduct, just to name a few.

  • Adequate Documentation of Business Relationships

Although the “handshake” agreement may be easy to enter and inexpensive, it can create uncertainty and result in arguments down the road.  To ensure clarity of expectations for both parties’ duties and obligations in 2017, owners should document relationships among the company’s founders or investors, as well as with customers, executives, vendors, employees, and other service providers.  Not every situation calls for an onerous, formal written agreement; sometimes a confirming letter may do the trick.  But, executives should avoid the temptation to close any business deal based only on a verbal discussion.

  • Protecting Valuable Intellectual Property and Confidential Information

One of the largest assets in many modern businesses is intellectual property, “know-how”, technological advances, or other “secret” information that the company exploits for profit.  Protecting such valuable information can be done effectively and efficiently through mechanisms such as Confidentiality Agreements, Non-Competition or Non-Solicitation Agreements, and by registering trademarks and other intellectual property.  Formally safe-guarding these assets will not only maintain their value for the company, but it will provide the business with means to prohibit others from utilizing those assets without permission and block former employees from taking those resources with them should they chose 2017 as the year to make a career move.

  • Insurance Coverage

While some insurance coverage may be required, such as workers’ compensation or disability insurance, other types of insurance may be beneficial to protect a business in the event a dispute arises in 2017.  For example, Employment Practices Liability Insurance (EPLI) can cover the costs of defending losses incurred in discrimination, wrongful termination, harassment, and/or retaliation lawsuits.  Likewise, Directors and Officers Insurance indemnifies corporate executives for claims brought against them in their corporate capacity.  In addition, Key Employee Insurance may lessen the burden of the loss of a high performing or important individual employee in a small business.  Employers should consider implementing or expanding the scope of insurance coverage in these categories for 2017.

By starting the New Year on the right foot through adopting or revising these and other areas of habitual discord, business owners may avoid costly and unnecessary litigation.  Where a dispute does arise from a venture gone wrong, employers will be happy they invested in these defensive measures as they will be equipped with ammunition to protect the company’s interests.

Employers are well advised to ensure that they start the New Year on the correct foot as many laws have effective dates in a few short days and weeks.  Among the most notable changes are the following:

Minimum Wage

New Jersey’s minimum wage will be $8.44/hr. effective January 1, 2017.  Similarly, in New York City, the minimum wage will be $11.00/hr. for workers employed by “large employers”  with 11 or more employees.  For those “small employers” with less than 11 employees, the minimum wage is $10.50/hr. effective January 1, 2017. Other minimum wage rates will apply depending on the location within the State.

“White Collar Exemption” Salary Threshold Level – New York

Although the federal overtime Final Rule, which was set to be enacted on December 1, 2016, has been delayed for the time being, New York employers must pay attention to State law in this area.  Effective December 31, 2016, New York City “large employers” invoking a “white collar exemption” must meet the salary threshold of $825/wk.  Accordingly, assuming an employee meets the duties test, in order for an employer to treat the worker as exempt from overtime, the worker must earn at least $825/week on a salary or fee basis.  For “small employers” the salary threshold is $787.50/week, also effective December 31, 2016.  These levels are set to increase over the next few years and, like the minimum wage, the amounts will differ in other parts of the State.

Bathroom Law – New York

Effective January 1, 2017, New York City employers, including bars and restaurants, must remove any signs designating single-occupancy bathrooms as being for a certain gender.  The law does not require physical alteration of a single-occupant bathroom, but instead only requires the posting and maintenance of appropriate gender-neutral signs.

OSHA’s Injury Reporting Requirements

The Occupational Safety and Health Administration (“OSHA”) has new injury reporting requirements that go into effect January 1, 2017 and will phase in over 2 years.  One of the primary changes is that employers will be required to electronically submit the summary of injuries and illnesses to OSHA.  OSHA’s new rule is based on the premise that employers will be more likely to focus on safety if their injury information is publicly available.  The new OSHA rule also prohibits retaliation against employees who report work-related injuries, and requires employers to inform employees of their right to be from retaliation.

Revised I-9 Form

U.S. Citizenship and Immigration Services (USCSA) has issued a new Form I-9, which employers must begin using on January 22, 2017.  The new form can be found here and will be valid until August 31, 2019.  Employers can be fined for using an expired version of the I-9 form.

Employers may complete the new form in either a “smart” PDF version (if completed on a computer using Adobe reader) or by hand using paper.  Either way the employee or employer’s representative must sign the completed form.

There are a few significant changes to the new Form I-9.  First, the form requests “other last names used”, rather than “other names used.”  In addition, employees who identify as “alien authorized to work” must list only one number from among the employee’s alien number, I-9 for admission number and foreign passport number.  Previously employees had to list multiple numbers.

Of course, given the incoming administration’s public comments on immigration  changes, all employers are well advised to keep abreast of these changes and ensure compliance with all immigration obligations.

Thinking about tying one on this year to get into the holiday spirit, or about finally asking out that cute girl or guy from the office at the holiday party after the spirit moves you?  Think again!  With the holiday season upon us, employers and employees would be well-served to review their Employee Manuals’ harassment, discrimination and social media policies to avoid the embarrassment, and pricey lawsuits that pop up at this time of year following otherwise festive celebrations.

Remember, just because an event takes place off premises, or in the office after hours, does not mean that the employment relationship and policies that attach do not follow everyone to the party.  Employers are urged to be proactive to avoid claims of harassment and discrimination, reminding managers and employees to be on their best behavior.  The old adage, “If you would not say it to your mother, don’t say it,” is still a fair yardstick to apply to nearly anything employees and managers might say to one another, in the office or at the holiday party.  Remind all to be courteous and mindful of the company’s policies, including social media policies, at all times.  Videos or pictures of drunken or inappropriate behavior from the holiday party posted on social media can only lead to trouble and discomfiture.

The chief source of mischief at any holiday party – free flowing libations – should be monitored closely to ensure the party does not devolve into a bacchanal.  Company sponsored events place ultimate responsibility for employee behavior on the company.

Hiring an outside vendor to tend bar – with its own liability insurance and procedure to monitor guests’ alcohol intake – is an excellent suggestion.  Avoid at all costs the serve it yourself bar, or employees pouring drinks for each other – both recipes for excess.  If the party takes place at an outside venue, consider providing drink vouchers for a maximum of number of drinks to employees, closing the bar an hour before the party ends and providing coffee and dessert to stay or to go.  Offering taxis, buses or designated drivers to get people home safely are also excellent recommendations.

Importantly, do not discriminate.  Make the party secular, nondenominational and welcoming to all, but not mandatory.

Holiday celebrations can be great opportunities for employees and employers to connect on a social level, talk about things other than work and boost morale.  Don’t let the opportunity slip away.  Happy Holidays!

As we previously posted on this blog, on May 18, 2016, the United States Department of Labor (“DOL”), issued a final rule (the “Final Rule”) revising the overtime exemption rules of the Fair Labor Standards Act (“FLSA”).  The Final Rule significantly increased the “salary level test” of the FLSA white collar exemptions from $23,660 to $47,476 ($913 per week) annually and included an automatic updating mechanism for the salary level.  The Final Rule was set to go into effect on December 1, 2016.  The future of the Final Rule, however, is now very much in doubt.

On November 22, 2016, a Texas district court issued a nationwide injunction blocking the implementation of the Final Rule, agreeing with 21 states who filed a lawsuit challenging the DOL’s Final Rule.  That lawsuit, which had been consolidated with a similar lawsuit filed by the U.S. Chamber of Commerce and other business groups, challenged the Final Rule as an overreach of the DOL’s rulemaking authority.

In granting the injunction, the district court found that the states established a prima facie case that the increased salary level and automatic updating in the Final Rule were without statutory authority.  The district court also found that the states would suffer irreparable harm through the increased costs the states would incur in complying with the Final Rule.

It is important to keep in mind that the injunction is not a final determination as to the legality of the Final Rule although it does mean that as a practical matter the Final Rule will not go into effect on December 1st.  A final determination concerning the future of the Final Rule must await the conclusion of the lawsuit.

Adding further doubt to the future of the Final Rule is the fact that a new administration is coming into the White House.  As the Final Rule is a creation of the DOL, and not Congress, the new administration can revoke it through agency action, if it so chooses.

We will keep our readers updated as to the status and ultimate outcome of the Final Rule.  For now, there will be no changes to the FLSA regulations come December 1st.