January 2, 2018

Sexual Harassment – Employers Should Act Now

Roger Ailes, Bill O’Reilly, Harvey Weinstein, Kevin Spacey, Charlie Rose, Matt Lauer, politicians from both sides of the aisle – the list of prominent individuals accused of sexual harassment and assault continues to grow. And as sexual harassment dominates the headlines, workers are coming forward in increasing numbers to describe inappropriate sexual conduct in the workplace.

This heightened awareness by both the public and employees should make every employer pause to consider if it is doing enough to keep employees safe and free from harassment. Here are our recommendations for steps you should take right now to help prevent your organization from appearing in the headlines.

Have a Strong Anti-Harassment Policy

Every employer should have a written policy that prohibits sexual harassment in the workplace. If you do not have one, you should strongly consider implementing one to ensure your employees know that sexual harassment is absolutely prohibited. If you already have one, review it to ensure that it includes the following provisions:

zero tolerance for unlawful harassment and inappropriate sexual conduct in the workplace
examples of unacceptable physical conduct, such as unwelcome touching, hugging, kissing, groping, and gestures, as well as inappropriate verbal or visual conduct, such as sexual jokes, emails, cartoons, pictures, and propositions
requests for sexual favors or demands to engage in intimate relationships will not tolerated
policy applies to inappropriate conduct by managers, co-workers, vendors, customers, and others who come into contact with your employees
every employee is expected to report any harassment that he or she experiences or witnesses
reporting mechanism that offers two or more reporting channels (such as a supervisor and the human resources manager)
commitment to take complaints seriously through timely and thorough investigation
no retaliation or adverse consequences will occur to those who report sexual harassment or cooperate in any investigation or proceeding
employees found to have engaged in sexual harassment or other inappropriate conduct will be subject to discipline, up to and including termination.

Train Both Managers and Employees

A policy does little good if your employees are not aware of it. Take this opportunity to conduct sexual harassment training for your entire workforce. Live in-person presentations may be the best way to train your employees, allowing you to take questions and emphasize your organization’s commitment to preventing and resolving any harassment issues. If live training sessions are impossible, offer video or recorded training. Provide specialized training to your executives, managers, and supervisors so that you can stress their input in creating a culture that is free of harassment, and to help them recognize and learn how to handle harassment scenarios.

Encourage Reporting of Inappropriate Conduct

Employees won’t report harassment to you if they feel their complaint will fall on deaf ears.
They may, instead, talk to the media or an attorney. Consequently, management and human resources professionals need to encourage reporting of workplace improprieties, no matter who it involves or how sensitive the accusation. If you do not welcome complaints, you will not have an opportunity to nip inappropriate conduct in the bud or resolve situations that could prove highly detrimental to your company.

Investigate Every Complaint

You must treat every report of sexual misconduct or harassment seriously and conduct a timely, thorough investigation to determine whether the alleged conduct occurred. If the complaint is against your company president or another high-ranking individual, you still must investigate it in the same vigorous manner you would for any other employee accused of the misconduct. Consider whether you need to hire outside counsel or a third-party investigator to preserve privilege and to avoid allegations that the investigator was biased because he or she reports to the person accused of misconduct. Take time now to make sure you have an investigation process in place so that when a report of harassment comes in, you don’t waste time determining who does what.

Take Prompt, Appropriate Action

As you receive a sexual harassment complaint and begin an investigation, you need to determine what action, if any, should be taken pending the investigation’s outcome. You may need to place the alleged harasser on leave, or you may need to separate workers so that they work on separate shifts or in different locations. Your duty is to stop any harassment from occurring, so take whatever steps may be necessary to do that. Then, when you have sufficient facts about the alleged harassment, determine what action is warranted to resolve it. If you conclude that harassment likely occurred, you need to impose consequences. Depending on the severity, that could mean immediate termination of employment. Remember, zero tolerance means no unlawful harassment goes unpunished.

Preventing and Resolving Sexual Harassment Should Help Keep You Out of the News

Because the topic of sexual harassment is so hot right now, take the time to recommit your organization to preventing and resolving workplace harassment by following the steps above. Your efforts now will go a long way in avoiding surprise allegations in the future.

December 28, 2017

Colorado Minimum Wage Goes Up To $10.20 Per Hour On January 1

By Emily Hobbs-Wright

Minimum wage employees in Colorado will get a raise in the new year. The state minimum wage goes up by ninety cents per hour, from the current $9.30 to $10.20, beginning January 1, 2018.

Annual Increases Approved By Voters In 2016

The upcoming minimum wage increase is the result of a ballot effort last year to increase Colorado’s minimum wage to $12 per hour by 2020. In the November 2016 election, Colorado voters approved Amendment 70 which raises the state’s hourly minimum wage by 90 cents per hour each year, as follows:

$10.20 effective 1/1/18
$11.10 effective 1/1/19
$12.00 effective 1/1/20

After 2020, annual cost-of-living increases will be made to the mandatory minimum wage.

Tipped Employees

Under Colorado law, employers may take a tip credit of $3.02 off the full minimum wage for employees who regularly receive tips. Consequently, the minimum wage that must be paid to tipped workers will go up by 90 cents on January 1, 2018 as well. The applicable minimum wage for tipped workers for upcoming years is as follows:

$7.18 effective 1/1/18
$8.08 effective 1/1/19
$8.98 effective 1/1/20

Remember that if tips combined with wages does not equal the state minimum wage, the employer must make up the difference in cash wages.

Take steps now to ensure that your payroll system is ready to comply with the increased minimum wage beginning January 1.

December 26, 2017

The New Tax Bill & Employee Benefits: What is Changing? What is Not?

By Molly Hobbs and Brenda Berg

On December 22, 2017, the President signed into law the Republican tax bill that was passed by Congress just days earlier. Beyond cutting individual tax rates temporarily and slashing corporate taxes to 21 percent permanently, the tax bill includes some important changes to the taxation of certain employee benefits.

Listed below are the major changes to employer-provided benefits under the final tax bill:

Revised: Time to repay “offset” employer-sponsored retirement plan loans.
- Currently, retirement plan loans are generally accelerated (i.e., immediately due and payable) when the plan terminates or the participant terminates employment. If the loan is not repaid, the plan will “offset” the loan against the participant’s account. This loan offset may be rolled over by making an equivalent contribution to an IRA or another qualified plan, but this must be done within 60 days of the date of the offset.
- Beginning in 2018, the period to roll over a loan offset is extended to the individual’s due date for the tax return for the year in which the offset occurred (including extensions).
Repealed: Employer deduction for qualified transportation fringe benefits, including commuting expenses.
- Currently, an employer can deduct the cost of certain transportation fringe benefit provided to employees (i.e., parking, transit passes, and vanpool benefits), even though such benefits are excluded from the employee’s income.
- Beginning in 2018, the employer deduction for qualified transportation fringe benefits is fully disallowed. In addition, except as necessary for ensuring the safety of an employee, the employer deduction for providing transportation or any payment or reimbursement for commuting to work is disallowed.
- These changes do not appear to prevent employers from sponsoring a qualified transportation plan to allow employees to elect to have certain transportation costs paid on a pre-tax basis.
Repealed: Employee exclusion of bicycle commuting reimbursements.
- Currently, an employee can exclude from income qualified bicycle commuting reimbursements of up to $20 per qualifying bicycle commuting month. These amounts are also excluded from wages for employment tax purposes.
- Beginning in 2018, the qualified bicycle commuting reimbursement exclusion is fully disallowed.
- Going forward, employers can still maintain a program for bicycle commuting, however, reimbursements under such program will be taxable to the employee.
Repealed: Employer deduction for entertainment, amusement and recreation provided to employees.
- Currently, an employer can fully deduct expenses for recreational, social, or similar activities primarily for the benefit of non-highly compensated employees, provided such activities directly relate to the active conduct of the employer’s business.
- Beginning in 2018, this deduction is fully disallowed. The employee exclusion remains unchanged.
Partially Repealed: Employer deduction for meals, food and beverages provided to employees.
- Currently, an employer can fully deduct any food and beverage expense that can be excluded from an employee’s income as a de minimis fringe benefit.
- Beginning in 2018, there will be a 50% limitation on the deduction for food and beverages that can be excluded from an employee’s income as a de minimis fringe benefit, including expenses for the operation of an employee cafeteria located on or near the employer’s premises. The employee exclusion remains unchanged.
Partially Repealed: Employee exclusion of value of certain types of employee achievement awards and the employer’s related deduction.
- Currently, an employer can deduct up to $400 (or up to $1,600 in the case of certain written nondiscriminatory achievement plans) of the value of certain employee achievement awards for length of service or safety. The employee receiving such award can exclude the award from income to the extent that the value of the award does not exceed the employer’s deduction.
- Beginning in 2018, the employee’s exclusion and employer’s deduction for employee achievement awards will not apply to cash, gift coupons/certificates, vacations, meals, lodging, tickets to sporting or theater events, securities, and “other similar items.” However, an employee can still exclude (and an employer can still deduct) the value of other tangible property and gift certificates that allow the recipient to select tangible property from a limited range of items pre-selected by the employer.
Repealed: Employee exclusion from income of employer-provided qualified moving expense reimbursements.
- Currently, an employee can exclude qualified moving expense reimbursements paid by his or her employer for the reasonable expenses of moving. These amounts are also excluded from wages for employment tax purposes.
- Beginning in 2018, the qualifying moving expense reimbursement is fully taxable to the employee, except for members of the Armed Forces on active duty who move pursuant to a military order.
Enacted: Employer tax credit for employers providing paid family and medical leave.
- Beginning in 2018, an employer that offers at least two weeks of annual paid family and medical leave, as described by the Family and Medical Leave Act (FMLA), to all “qualifying” full-time employees (and a proportionate amount of leave for non-full-time employees) will be entitled to a tax credit. The paid leave must provide for at least 50% of the wages normally paid to the employee. “Family and medical leave” does not include leave provided as vacation, personal leave, or other medical or sick leave.
- A “qualifying employee” is an employee who has been employed by the employer for at least one year, and whose compensation for the preceding year did not exceed 60% of the compensation threshold for highly compensated employees (i.e., compensation did not exceed $72,000).
- The credit will be equal to 12.5% of the amount of wages paid to a qualifying employee during such employee’s leave, increased by .25% for each percentage point the employee’s rate of pay on leave exceeds 50% of the wages normally paid to the employee (but not to exceed 25% of the wages paid).

In addition, employers should be aware that the tax bill eliminates the Affordable Care Act’s (“ACA”) individual mandate penalty starting in 2019. The individual mandate requires most individuals (other than those who qualify for a hardship exemption) to carry a minimum level of health coverage. Currently, individuals who do not enroll in health coverage can incur a tax penalty. Beginning in 2019, individuals will still technically be required to carry health coverage, but will no longer be penalized for failing to do so. This change to the ACA’s individual mandate could indirectly impact employers. For example, if fewer employees avail themselves of Exchange coverage and the related subsidies, an employer’s penalty risk under the ACA’s employer mandate will decrease. The lack of individual penalty could also destabilize the Exchange, resulting in more individuals looking to their employers for coverage.

Although earlier drafts of the tax bill called for repeal or modification, the following benefit provisions remain unchanged by the final tax bill:

The hardship distribution safe harbor rules incorporated into many retirement plans (proposals would have eased hardship rules);
The employer-provided child care credit;
Dependent Care Assistance Programs (DCAPs);
Adoption assistance programs;
Employer-provided housing; and
Educational assistance programs.

Takeaways for Employers:

In light of changes to employer-provided benefits under the final tax bill, employers should take the following actions:

Determine whether any changes are needed to retirement plan loan distribution paperwork regarding tax and rollover consequences.
Review qualified transportation plan(s) in light of the changes to qualified transportation fringe benefits and bicycle commuting reimbursements.
Review any company policies that involve recreational, social, or similar activities for employees, employee meals, employee achievement awards, and/or employee moving expenses.
Adjust payroll reporting as necessary and determine whether any taxable amounts are now eligible compensation for retirement plan deferrals and employer contributions.
Consider utilizing the new tax credit for paid family and medical leave.

December 14, 2017

NLRB Overturns Controversial Standards on Joint-Employer Status and Neutral Employment Policies; Questions Quickie Election Rule

By Steve Gutierrez

In a series of decisions that affect both union and non-union employers, the National Labor Relations Board (NLRB or Board) has overruled numerous controversial standards that had broadened the coverage of employee rights in recent years. On December 14, 2017, the Board returned the standard for determining joint-employer status to the pre-Browning-Ferris standard as well as walking back the standard for determining whether facially neutral employment policies infringe on employees’ section 7 right to engage in protected concerted activities. The return to more employer-friendly standards will help ease the risk of engaging in unfair labor practices under the National Labor Relations Act (NLRA). Here are the highlights of the new developments.

Joint-Employer Status Depends on Control

In its 2015 controversial decision in Browning-Ferris Industries, the NLRB significantly broadened the circumstances under which two entities could be deemed joint employers for NLRA purposes. In that case, the Board ruled 3-to-2 that Browning-Ferris Industries was a joint employer with a staffing company that provided workers to its facility for purposes of a union election because Browning-Ferris had indirect control and had reserved contractual authority over some essential terms and conditions of employment for the workers supplied by the staffing company.

Today, in a 3-2 decision, the now Republican-majority Board overruled Browning-Ferris, now requiring that two or more entities actually exercise control over essential employment terms of another entity’s employees and do so directly and immediately in a manner that is not limited and routine, in order to be deemed joint employers under the NLRA. This returns the joint-employer standard to the pre–Browning Ferris standard. Consequently, proof of indirect control, contractually-reserved control that has never been exercised, or control that is limited and routine, will no longer be sufficient to establish a joint-employer relationship.

This doesn’t mean that the Board will no longer find two or more entities to be joint employers under the NLRA. In fact, in the current case in which it overturned Browning-Ferris, it applied the tougher standard and still ruled that two construction companies were joint employers and therefore jointly and severally liable for the unlawful discharges of seven striking employees. Still, the requirement that entities have direct control that is exercised over the workers in question is a more workable and beneficial rule for employers.

New Standard For Facially Neutral Policies

In recent years, the NLRB has ruled that many types of standard employee policies unlawfully interfered with employees’ section 7 rights. That scrutiny went back to the 2004 decision in Lutheran Heritage Village-Livonia which ruled that employer policies that could be “reasonably construed” by an employee to prohibit or chill the employees’ exercise of section 7 rights violated the NLRA, even if such policies did not explicitly prohibit protected activities or were not applied by the employer to restrict such activities. Consequently, a series of Board rulings deemed certain language in employer policies unlawful even when facially neutral on their face, including policies on confidentiality, non-disparagement, recording and video at work, use of social media and company logos, and other typical employment rules.

In its recent decision, the Board ruled 3-to-2 to overturn Lutheran Heritage Village-Livonia and its standard governing facially neutral workplace rules. The new standard for evaluating employer policies will consider: (1) the nature and extent of the potential impact on NLRA rights, and (2) legitimate justifications associated with the rule. To provide greater clarity for employers, employees, and unions, the Board announced that prospectively, it will categorize workplace rules into three categories depending on whether the rule is deemed lawful, unlawful, or warrants individualized scrutiny. This change should significantly relieve the uncertainty that has existed under the “reasonably construed” standard.

Quickie Elections Being Reconsidered

In another move to reverse recent Board rules, the Board published a Request for Information (RFI) asking for public input on the 2014 representation election rule that changed the process and timing of union elections. In particular, the Board seeks public input on whether the 2014 quickie election rules should be retained, changed, or rescinded. The deadline for submitting responses is February 12, 2018. This RFI signals that the quickie election rule could be on its way out.

Conclusion

We will continue to monitor these and other Board developments. If you have any questions or concerns about these changes and how they may affect your workplace, you should reach out to your labor counsel.

November 20, 2017

Draw Against Commissions: Keeping FLSA Minimum Wage and Overtime Violations At Bay

By Mark Wiletsky

Paying sales employees on a commission basis can achieve multiple goals. Salespersons have an incentive to increase sales to earn more money while the company sees higher revenues without being locked into a guaranteed pay structure for underperforming employees.

Although various types of commission structures may be used, a common one is a draw against commission. Typically, this type of pay structure means that a sales employee is paid solely on the basis of commissions, but may be advanced a certain amount of money known as a “draw” for weeks in which the employee fails to earn a certain level of commissions. Then, the draw is deducted from future commissions when the employee’s commissions exceed the expected level. It sounds easy, but such arrangements can be fraught with FLSA traps.

Illustrative Case

The Sixth Circuit Court of Appeals (whose decisions apply to Michigan, Ohio, Kentucky, and Tennessee) recently examined an employer’s draw-against-commissions policy to determine whether the policy violated the minimum wage and overtime requirements of the FLSA. In that case, current and former retail and sales employees of hhgregg, Inc. and Gregg Appliances filed a lawsuit claiming that hhgregg’s commission policy violated the FLSA and state law in numerous ways. Here is a summary of the policy at issue:

In pay periods when an employee’s earned commissions fell below the minimum wage, the employee would be paid a draw to meet the minimum-wage requirement
In a non-overtime week (i.e., the employee worked 40 or fewer hours), the draw equaled the difference between the minimum wage for each hour worked and the amount of commissions actually earned
In an overtime week (i.e., the employee worked more than 40 hours), the draw equaled the difference between one and one-half times the minimum wage for each hour worked and the amount of commissions actually earned
Draw payments were calculated on a weekly basis
The amount of the draw would be deducted from commissions earned in future weeks
An employee could be subject to discipline, including termination, if he or she received frequent draws or accumulated a high draw balance
Upon termination of employment, an employee with a draw balance was required to immediately pay the company any deficit.

Retail and Service Establishment Exemption

The FLSA exempts retail or service employees from the overtime pay requirement but only if (1) “the regular rate of pay of such employee is in excess of one and one-half times the minimum hourly rate applicable” under the FLSA, and (2) “more than half his compensation . . . represents commissions on goods or services.” This exemption does not relieve employers from meeting minimum wage obligations.

In the hhgregg case, the employer argued that the exemption applied. The Sixth Circuit disagreed, pointing to the allegation that the commission policy paid exactly the minimum hourly rate in a normal, nonovertime week, thereby failing to meet the exemption requirement that it be “in excess of one and one-half times the minimum hourly rate.” Because the exemption didn’t apply, hhgregg could not escape overtime pay obligations.

Deductions of Draws From Future Earnings Was Not An Illegal “Kick Back”

Under the FLSA, when an employee earns less in commissions than was advanced through a draw, the employer may deduct the excess amount from later commissions, if otherwise lawful. In the hhgregg case, the plaintiffs argued that the deductions were not “otherwise lawful” because the draws to meet the minimum wage were not delivered “free and clear,” as is required by DOL regulation. Plaintiffs argued that the draws were loans that the sales persons were expected to repay, functioning as an unlawful “kick back.”

The Sixth Circuit rejected the plaintiffs’ argument, finding that because the employees could keep the full amount of the draw at the time it was “delivered,” it was not an unlawful “kick back.” Thus, deducting the draw payments from future commissions did not violate the “free and clear” regulation.

Immediate Repayment Upon Termination

Plaintiffs alleged that making employees immediately pay the company any deficit in draws upon termination of employment violated the FLSA. On that claim, the Sixth Circuit agreed, at least to the extent of allowing the lawsuit to proceed. The Court looked to hhgregg’s written commission policy to find that the sales employees could reasonably believe that they would be liable to hhgregg for any unearned draw payments at the time of termination. Because that provision could violate the DOL regulation that minimum wage be provided “free and clear,” the Court held that plaintiffs alleged sufficient facts in their complaint to support their claim that the policy violated the FLSA.

Off-The-Clock Work

Plaintiffs further alleged that the company encouraged sales employees to attend required training and store meetings “off the clock” in violation of minimum wage and overtime requirements. Specifically, plaintiffs alleged that hhgregg managers approved of and sometimes encouraged sales persons to work “off the clock” to avoid incurring a higher draw.

hhgregg argued that any practice of off-the-clock work would not violate the FLSA because “by allegedly under-reporting working time in draw weeks and thereby lessening their draw payments, [plaintiffs] increased the amount of commission pay they subsequently received by the same amount.” Therefore, “the ‘off-the-clock’ work allegedly performed did not deprive them of pay; it simply shifted it to a different week.”

The Court rejected the company’s argument. Because the FLSA requires employers to pay the minimum wage for all hours worked on a week-by-week basis, an employer may not “shift” pay for hours worked to a future week. Therefore, the Court ruled that plaintiffs’ claim could continue.

Review Your Commission Policy

This recent draw-against-commission case highlights the FLSA issues that employers may face when implementing commission policies. If you use commission payments for any segment of your workforce, we recommend that you review your policy to confirm that it pays employees for all hours worked (e.g., no “off-the-clock” time). In addition, if you offer a draw against commissions, make certain that it meets your minimum wage and overtime pay obligations. Finally, if you rely on an FLSA exemption, such as the exemption for retail and service establishments, compare your commission policy to the exemption to ensure you meet the exemption test. Because this is a tricky area, consult with experienced counsel to resolve any questions or compliance concerns.

November 6, 2017

Take Note: Benefit Plan Deadlines Approaching

By Molly Hobbs

At this time of year, important deadlines are quickly approaching for 401(k) plans and health and welfare plans. Here is a non-exhaustive list of significant employee benefit plan deadlines for the remainder of 2017 and early 2018. These deadlines are generally for calendar year plans, unless otherwise specified.

Retirement Plan Deadlines:

December 2

Distribute the following notices, as applicable, by December 2, 2017:
- Traditional 401(k) Safe Harbor Notice
- Qualified Automatic Contribution Arrangement (QACA) Notice
- Eligible Automatic Contribution Arrangement (EACA) Notice
- Non Safe-Harbor Automatic Contribution Arrangement Notice
- Qualified Default Investment Alternatives (QDIA) Notice
Determine when the annual participant fee disclosure was last provided and timely provide the disclosure. The annual participant fee disclosure is required every 14 months. Many employers provide this disclosure on or before the end of the year along with other year end notices.

December 16

Provide summary annual report (SAR) to participants if the 2016 Form 5500 was filed by extension on or before October 16, 2017. For non-calendar year plans, the SAR must be provided two months after the Form 5500 was filed, including by approved extension.

December 31

Adopt any discretionary amendments implemented during the plan year.
Ensure all required minimum distributions have been paid to applicable participants.

January 2018

Provide non-discrimination testing census data to the record keeper or Third Party Administrator (TPA).

March 15, 2018

Make sure TPA has completed non-discrimination testing, and distribute any excess contributions, in order to avoid excise taxes.

April 16, 2018

Distribute any excess contributions and related earnings from prior year.
Make any employer contributions to retirement plan(s) in order to receive tax deduction (plus extensions).

Health and Welfare Plan Deadlines:

November 1

If the plan’s open enrollment is approaching, fix the starting and ending dates for open enrollment and prepare and distribute enrollment materials such as the Summary of Benefits and Coverage.
Marketplace/Exchange open enrollment begins.

November 15

If the plan is a self-funded health plan, submit the Transitional Reinsurance Program (TRP) Annual Enrollment and Contributions Submission Form, reporting the annual enrollment count and selecting a payment schedule. If the Plan elected in 2016 to pay the TRP fee in two installments, the second payment is also due by November 15, 2017.

December 15

Open enrollment for the Marketplace/Exchange coverage ends.

December 16

Provide summary annual report (SAR) to participants if the 2016 Form 5500 was filed by extension on or before October 16, 2017. For non-calendar year plans the SAR must be provided two months after the Form 5500 was filed, including by approved extension.

December 31

Provide the following annual notices, as applicable, by December 31, 2017:
- Children’s Health Insurance Program (CHIP)
- Women’s Health and Cancer Rights Act (WHCRA)
- HIPAA Notice of Privacy Practices (at least every three years)
Many plan sponsors provide these notices with the annual open enrollment materials.

January 31, 2018

If the employer is subject to the ACA employer mandate, provide full-time employees with an IRS Form 1095-C documenting 2017 health coverage.

February 28 (March 31, if filing electronically)

If the employer is subject to the ACA employer mandate, file Form 1094-C and Forms 1095-C with the IRS.

Keep this deadline checklist handy to ensure that your plans remain compliant and as always, consult with your employee benefits counsel for additional information.

October 12, 2017

Top Five Ongoing Challenges For Collective Bargaining and Organizing

By Steve Gutierrez

Most expect that the White House and federal agencies will take a more business-friendly approach than in recent years. Employers hope that will mean they can now look forward to a potential rollback of regulations and enforcement efforts that have stymied their business objectives. Yet when it comes to responding to union organizing campaigns and negotiating collective bargaining agreements, employers still face wide-ranging challenges. Here is my list of the top five ongoing challenges.

1. Affordable Care Act (ACA) Cadillac Tax

Many unions, such as the Teamsters, prioritize and bargain extensively over top quality, employer-paid health insurance. They often use it as a selling point to their members. Yet, the ACA’s 40 percent excise tax on workers with comprehensive insurance plans (the so-called “Cadillac tax”), set to be implemented in 2020, is seen by the unions as an affront to their hard-fought bargaining to obtain high quality health care for their membership.

In fact, reports show that unions, including the Teamsters, have actively lobbied members of Congress for a repeal of the Cadillac tax. Because health care reform has not yet passed, it may be unlikely that relief from the Cadillac tax is forthcoming anytime soon.

This opens the door for alternate bargaining tactics over health care plans and benefits. Economics can be based on the ultimate cost to the employees/members, when factoring in the tax. This issue remains a challenge for both employers and the union and can change the overall approach to structuring the economic package during contract negotiations.

2. Micro-units

In 2011, the NLRB issued its Specialty Healthcare decision permitting unions to establish bargaining units that include only a small fraction of a workforce. For example, in 2014, the Board certified a micro-unit of cosmetic and fragrance salespersons working at a Macy’s department store rather than requiring all employees at the store (or even all salespersons at the store) to make up the bargaining unit. The Board authorized the micro-unit by finding that the cosmetics and fragrances salespersons were a readily identifiable group and shared a community of interest. The Board also found that other Macy’s employees did not share an overwhelming community of interest with the cosmetics and fragrances employees, and prior NLRB cases involving the retail industry did not require a wall-to-wall unit.

These micro-units can make union organizing easier as they do not require a majority of the historical “wall-to-wall” bargaining units to vote in favor of the union. For example, a unit of only nine employees needs just five to vote “yes” and the union has its foot in the door with that employer. And organizing on that micro level can more easily go unnoticed by employers. Micro-units can also result in an employer having to negotiate with multiple unions affecting small segments of its workforce, and the headaches involved with administering varying contracts.

Numerous efforts are underway in the current administration to do away with micro-units. Current NLRB Chairman Phillip Miscimarra disagrees with the Specialty Healthcare standard for determining an appropriate bargaining unit, raising chances that the Board will abandon the approval of micro-bargaining units. However, Miscimarra has announced that he will leave the Board when his term expires in December 2017. Despite his impending departure, it is possible that a majority-Republican Board will reverse course on micro-units.

In addition, this past Spring, Senate Republicans introduced (again) the Representation Fairness Restoration Act (S. 801) which would do away with micro-units. That bill has been assigned to the Senate Health, Education, Labor, and Pensions committee where it is one of 250 bills currently being considered by the committee.

Until the law or Board precedent is changed, micro-units remain a challenge for employers. But because a more employer-friendly Board might rule against a micro-unit, it becomes vastly important to challenge proposed bargaining units and any potential outlier unit members. Increased pressure on the Board on this issue should be a continued focus.

3. Transparency with Employees/Members

Unions are becoming quite savvy in communicating with their members and potential members. Union leaders are increasingly focusing on being more transparent with their members during the bargaining process. They continue to build strong communications networks centered on social media and other online platforms, with development of mobile apps and company-specific websites, Facebook pages, and Twitter accounts.

To stay ahead of and counter union communications, employers facing a union organizing campaign or in the midst of negotiating a contract should institute and invest in more robust communication strategies with their employees as well. Social media and other online communications boards are essential in getting the company’s message out, especially to millennials and other employee demographics who will seek their information from such sources. But, be aware that in late 2014, the NLRB ruled that employees may presumptively use a company’s email system for statutorily protected communications as long as it takes place during nonworking time and does not interfere with productivity. That Board decision, Purple Communications, is on appeal in the Ninth Circuit Court of Appeals but remains a challenge for employers until such time it is reversed or overturned.

4. New Technology in the Workplace

As more technology comes into the workplace and robots threaten to replace workers, collective bargaining will likely face these issues head on. Just as outsourcing used to be (and in many cases, still is) a sore spot for unions, workplace automation is a similar threat to jobs and future expansion.

One example involves the Teamsters who recognize that autonomous driving vehicles are becoming a reality. The Teamsters are urging lawmakers to prioritize workers and safety when crafting legislation and rules regarding autonomous vehicles. Their concerns likely spill over into their contract negotiations as well.

As workplace technology accelerates, discussions of the use of such technology will likely become key in any bargaining where robots and automation are a possibility. Anticipating that topic, and the potential impact on workers, opens the door for employers to bargain for potential gains and/or trade-offs in their favor when the union opposes or seeks to limit autonomous technology.

5. Favorability of Unions on the Rise

According to a January 2017 Union Favorability Survey by the Pew Research Center (PRC), 60 percent of respondents viewed labor unions favorably while only 35 percent viewed unions unfavorably. This is the highest union favorability rating compiled by the PRC since March of 2001 and only the second rating at or above 60 percent since 1985.

Employers should be aware of this rising trend, especially when communicating with employees during an organizing or bargaining campaign. Opposing and criticizing unions too strongly could backfire so communications and strategies should be formulated to focus on issues, rather than the institution of unions and union membership itself.

Responding to organizing campaigns and preparing for collective bargaining is always a challenge but thinking ahead about these top five issues, and investing in some preventative training and education for managers, can help you manage the process and achieve a favorable outcome.

October 5, 2017

ADA Does Not Mandate Multi-month Leave of Absence As Accommodation, Says Seventh Circuit Court

By Mark Wiletsky

Rarely do we receive definitive guidance on reasonable accommodations. But the Seventh Circuit Court of Appeals came very close to providing that when it recently ruled that a multi-month leave of absence is beyond the scope of a reasonable accommodation under the Americans with Disabilities Act (ADA).

Back Condition Leads to FMLA Leave

In the recent Seventh Circuit case, Raymond Severson had long suffered from back myelopathy, a condition that caused degenerative changes in his back, neck, and spinal cord and impaired his functioning. Although he usually was able to perform his duties at Heartland Woodcraft, Inc., a fabricator of retail display fixtures, at times Severson experienced flare-ups that made it difficult for him to walk, bend, lift, sit, stand, or work.

Over the course of seven years of employment with Heartland Woodcraft, Severson rose from supervisor to shop superintendent and then to operations manager. The company, however, found that he performed poorly in the operations manager position and on June 5, 2013, notified Severson that it had demoted him to a second-shift lead position, which included performing manual labor in the production area.

That same morning, Severson had wrenched his back at home and he was visibly uncomfortable. He left work early and requested leave under the Family and Medical Leave Act (FMLA). He was granted FMLA leave, and his doctor provided certificates indicated that he had multiple herniated and bulging discs in his back which would make him unable to work until further notice.

Unable To Return To Work Following FMLA Leave

While out on FMLA leave, Severson’s doctor treated him with steroid injections, but they did not improve his condition. Severson scheduled disc decompression surgery for August 27, 2013, the same day that his 12 weeks of FMLA leave would expire.

About two weeks before his surgery, Severson requested an extension of his medical leave, explaining that typical recovery time for his surgery would be at least two months. The company contacted him on August 26, the day before his scheduled surgery, and informed him that his employment with Heartland would terminate on August 27 when his FMLA leave expired. He was told he could reapply for employment after he was medically cleared to work.

On August 27, Severson had his scheduled surgery, and on October 17, his doctor gave him a partial clearance to return to work with a 20-pound lifting restriction. On December 5, Severson’s doctor released him to work without restriction.

Leave As A Reasonable Accommodation

Severson sued the company for an ADA violation alleging that it failed to accommodate his physical disability by refusing to provide a three-month leave of absence following expiration of his FMLA leave. The federal court in Wisconsin rejected the claim as a matter of law, entering summary judgment in favor of Heartland Woodcraft, and Severson appealed.

The Seventh Circuit (whose decisions are binding on federal courts in Illinois, Wisconsin, and Indiana) affirmed judgment in favor of the employer. The Court was very clear in ruling that a long-term medical leave is not a reasonable accommodation under the ADA. Judge Sykes, writing for the three-judge panel, stated, “The ADA is an antidiscrimination statute, not a medical-leave entitlement.” The Court stated that a reasonable accommodation is intended to make it possible for the employee to perform his or her job. But a medical leave that lasts multiple months does not allow the employee to work and that inability to work removes the person from the class of “qualified individuals” protected by the ADA.

The Court stated that brief periods of time off may be an appropriate accommodation in some circumstances. For example, the Court noted that intermittent time off or a short leave of absence may be appropriate for someone with arthritis or lupus when brief periods of inflammation make it too painful for the individual to work. But the Court ruled that a multi-month leave of absence “is beyond the scope of a reasonable accommodation under the ADA.” Read more >>

September 12, 2017

Employer May Keep Tips As Long As Employees Are Paid Minimum Wage, According To 10th Circuit

By Brad Cave

By invalidating a U.S. Department of Labor (DOL) regulation that states that tips are the property of employees, the 10th Circuit Court of Appeals (whose opinions apply to Wyoming, Colorado, Utah, Kansas, Oklahoma, and New Mexico) rejected an employee’s wage claim based on her employer’s practice of keeping all tips. But employers in states with an analogous state law governing ownership of tips, such as Wyoming, need to be aware that the 10th Circuit’s ruling may not change how they handle tips.

Caterer Kept Tips But Paid More Than Minimum Wage

Relish Catering regularly receives tips from its customers in the form of a gratuity added to their final catering bill at the end of an event. Relish retains those tips for itself rather than passing them along to its employees who work at the events. However, it pays its employees at or above the federal minimum wage of $7.25 per hour as well as time and a half for overtime and does not rely on any sort of tip credit to meet the minimum wage.

Bridgette Marlow believed Relish was required to turn over her share of the catering tips under the Fair Labor Standards Act (FLSA). Despite making $12 per hour (and $18 per hour for overtime), she sued Relish and Brett Tucker, a manager and part owner of the company, alleging they violated the minimum wage provisions of the FLSA by retaining the tips.

FLSA Restrictions Apply Only When Tip Credit Taken

Marlow argued that by retaining all of the tips, Relish was essentially paying employees below minimum wage. For example, she suggested that if she received her $12 hourly wage but Relish retained $11 in tips for each hour she worked, the result was the same as if Relish turned over all of the tips to her and paid her a $1 hourly wage. In essence, she argued that the company could be paying less than the required amount for tipped employees.

The 10th Circuit didn’t bite on Marlow’s rationale. The Court stated that it doesn’t matter where the money to pay wages comes from so long as the company paid at least the minimum wage required under the FLSA. The Court rejected Marlow’s argument that the FLSA’s tip-credit provision applied to her case because Relish doesn’t take a tip credit.

The FLSA tip-credit provision allows employers of “tipped employees” to pay a reduced hourly wage of $2.13 per hour so long as employees receive sufficient tips to raise their earnings to the $7.25 hourly minimum. But this provision applies only if the employer counts tips toward the minimum wage, said the Court. The tip-credit provision does not apply if the employer doesn’t count tips toward the minimum and instead pays the full hourly minimum wage.

The Court stated that the FLSA tip-credit provision does not require that employers turn over all tips to employee in all circumstances, as Marlow urged. Instead, when an employer doesn’t take the tip credit, the tip-credit provision imposes no restrictions on what it may do with tips as long as it pays an hourly wage above the $7.25.

DOL’s Tip-Ownership Regulation Invalid

Marlow relied extensively on a 2011 DOL regulation that provides:

Tips are the property of the employee whether or not the employer has

taken a tip credit under section 3(m) of the FLSA. The employer is

prohibited from using an employee’s tips, whether or not it has taken a tip

credit, for any reason other than that which is statutorily permitted in

section 3(m): As a credit against its minimum wage obligations to the

employee, or in furtherance of a valid tip pool.

From the language of that regulation, it would seem that Marlow had a valid claim. But the 10th Circuit said not so fast and looked at whether the DOL had the authority to implement the regulation in the first place.

Relying on U.S. Supreme Court precedent, the 10th Circuit pointed out that federal agencies may create rules only to fill “ambiguities” or “gaps” in statutes. In a “friend-of-the-court” brief, the federal government argued that the FLSA is silent on the issue of who “owns” tips when an employer does not take the tip credit, and therefore, the DOL had the authority to create a tip ownership rule to fill in that gap.

Despite the Ninth Circuit’s acceptance of that argument, the 10th Circuit disagreed with it, finding that nothing in the FLSA directs the DOL to regulate the ownership of tips when the employer doesn’t take the tip credit. Because the FLSA limits the tip restrictions to employers who take the tip credit, the DOL lacked the authority to regulate otherwise.

The Court invalidated the DOL’s tip-ownership regulation, finding it was beyond the DOL’s authority, and affirmed the lower court’s judgment in favor of the employer. Marlow v. The New Food Guy, Inc., No. 16-1134 (10th Cir. June 30, 2017). Read more >>

August 31, 2017

Court Invalidates Overtime Rule That Increased Exempt Salary Levels

By Mark Wiletsky

The Department of Labor (DOL) exceeded its authority when it doubled the minimum salary levels for exempt executive, professional, and administrative employees under the Fair Labor Standards Act (FLSA), ruled federal judge Amos Mazzant of the U.S. District Court for the Eastern District of Texas today. Granting summary judgment in favor of the states and business plaintiffs who challenged the new overtime rule last November, Judge Mazzant determined that the DOL’s new overtime rule “effectively eliminates a consideration of whether an employee performs ‘bona fide executive, administrative, or professional capacity’ duties.”

Exempt Duties Are Part Of The Analysis

Judge Mazzant wrote that although Congress delegated authority to the DOL to define and delimit the white-collar exemptions, Congress was clear when enacting the FLSA that the exemption determination needs to involve a consideration of an employee’s duties, rather than relying on salary alone. He stated that the Obama-era overtime rule that significantly increased the minimum salary levels would result in entire categories of previously exempt employees who perform “bona fide executive, administrative, or professional capacity” duties being denied exempt status simply because they didn’t meet the salary threshold. Consequently, the elimination of an analysis of duties for those who failed to meet the new high salary level was inconsistent with Congressional intent.

A Minimum Salary Level Still Acceptable

When issuing a preliminary injunction last November, Judge Mazzant’s ruling raised the question as to whether any salary threshold could be used as part of the white-collar exemption tests. In his summary judgment order, Judge Mazzant appears to leave the salary-level part of the test stand, writing “[t]he use of a minimum salary level in this manner is consistent with Congress’s intent because salary serves as a defining characteristic when determining who, in good faith, performs actual executive, administrative, or professional capacity duties.” He notes that even though the plain meaning of Section 213(a)(1) does not provide for a salary requirement, the DOL has used a permissible minimum salary level as a test for identifying categories of employees Congress intended to exempt. Citing to a report on the proposed regulations, Judge Mazzant seems to approve of setting that salary level at “somewhere near the lower end of the range of prevailing salaries for these employees.”

No Automatic Increase Mechanism

The ruling also strikes down the mechanism in the DOL’s overtime rule that provided for automatic updates to the exemption’s salary levels every three years. In a cursory paragraph, Judge Mazzant wrote that having found the rule unlawful, the automatic updating mechanism was similarly unlawful.

Back To Square One

Now that the existing, never-implemented rule has been invalidated, the DOL is starting over with revising and updating the overtime exemption rule. The DOL recently published a request for information seeking public input on what the new salary levels should be, how updates should be made, whether duties tests should be changed, and other issues affecting the white-collar exemptions. We will have to see what new proposals the DOL puts out in the months to come. But in the meantime, employers can abandon plans to address the doubled salary thresholds under the Final Rule.

On Another Note, No Pay Data To Be Collected With EEO-1 Reports

In another development, on August 29, 2017, the Office of Management and Budget (OMB) directed the Equal Employment Opportunity Commission (EEOC) to immediately stay the requirement that certain employers provide pay data as part of a new EEO-1 report. The controversial pay-data rule would have required companies with 100 or more employees (and federal contractors with 50 or more employees), to submit the wage and hour information for employees according to race, gender, and ethnicity, with the information being used by the EEOC to analyze pay discrepancies and identify possible Equal Pay Act violations. Because of the stay, covered employers should use the previous EEO-1 form, which still collects data on employee race, ethnicity, and gender by occupational categories. Despite the reprieve for employers on the pay-data rule, EEOC Acting Chair Victoria Lipnic states that her agency remains committed to strongly enforcing federal equal pay laws.

If you have any questions about these new developments, be sure to reach out to the employment counsel with whom you typically work.