For employers, several important rulings and decisions were announced in 2019 that are likely to affect your relationship with your employees going forward. Not all of these will apply to every business, but be sure to note those that are relevant to you. You may choose to take action, such as reviewing your compensation structure, reevaluating your relationship with other companies, and updating your employee handbooks and policies.
New Overtime Rules
It’s common knowledge that workers who are paid hourly are eligible for overtime pay, under the Fair Labor Standards Act, if they work in excess of 40 hours in any given week. Less well known is that salaried workers also may qualify for overtime pay, based on their total annual compensation. Since 2004, any salaried worker earning less than $23,660 per year, or $455 per week, should have been paid overtime. Now, effective January 1, 2020, any worker earning less than $35,568 per year, or $684 per week, is eligible for overtime.
This change is in recognition of the increasing cost of living over time and the increases in wages and salaries since 2004. For businesses, this means that any salaried employee earning less than $35,568 must keep track of their time worked (as the employer, the burden is truly on you to track employees’ work hours) and their payroll stub must show overtime pay. Of course, you may establish a policy that any overtime work must be approved in advance, or that overtime work is prohibited entirely. Or you can increase any individual worker’s annual salary to above the threshold, and they will continue to be exempt from overtime.
Rate of Pay for Overtime Calculation
The Department of Labor issued another decision related to overtime pay in December 2019. The rule was issued to address the uncertainly about the role benefits and perks play when calculating an employee’s regular rate of pay, which is then multiplied by one and one-half to determine the pay rate for overtime hours. This rule became effective January 15, 2020.
Employers compensate their employees in numerous ways. In addition to an hourly or salaried wage, workers may receive compensation through payment of benefits premiums, paid time off, tuition for education, gym memberships, parking or commuting discounts, coffee and snacks, and bonuses, to name a few. Under the new rule, these categories of compensation may be EXCLUDED when calculating the employee’s regular rate of pay.
Joint Employer Test
The Department of Labor recently updated its criteria for determining Joint Employer status. In the past, “joint employment” might have arisen when an individual had employment relationships with two or more employers that shared control of the employee. The criteria was very broad and placed the responsibilities of serving as an employer on entities that had only indirect control of the employee.
Workers falling under this scenario might be an employee that worked at multiple retail storefronts owned by the same parent company, a temporary worker placed in an administrative role by a staffing agency, a restaurant worker in a franchise location that follows the operational direction of the parent franchise company, or an electrician hired by a general contractor who worked for the owner of the building project.
The final rule, effective March 16, 2020, provides updated guidance for determining joint employer status if an employee performs work that simultaneously benefits the employer and another individual or entity. The rule adopts a four-factor balancing test. Does the potential joint employer:
- hire or fire the employee;
- supervise and control the employee’s work schedule or conditions of employment to a substantial degree;
- determine the employee’s rate and method of payment; and
- maintain the employee’s employment records.
If your company benefits from the work of a worker but you do not meet the above criteria, you will no longer be considered that worker’s joint employer.
Employee Use of Company Property for Personal Communication
The National Labor Relations Board recently overturned a 2014 ruling that an employer’s policy prohibiting an employee from using the company’s email system for non-work purposes was invalid. The 2014 decision held that barring an employee from using the company email was a violation of the National Labor Relations Act, which protects a worker’s right to engage in “concerted activities for the purpose of collective bargaining or other mutual aid and protection.” Employees had the right to use company email to communicate with others about their work conditions and concerns, which was construed very broadly under the 2014 ruling, such that an argument could be made that many personal emails fell under this protection.
The new ruling reestablishes an employer’s right to control the use of its own property by restricting the use of the email system, and other company owned communication tools, like smartphones and internet connections, to only work-related communication (unless truly for purposes of forming a union or collective bargaining). The Board recognized that rarely, today, is company-owned equipment the only reasonable communication means available to employees.
Confidentiality of Workplace Investigations
The National Labor Relations Board also overturned a prior decision that prohibited employers from requiring confidentiality during all workplace investigations. The prior ruling was intended to support an employee’s right under the National Labor Relations Act to discuss the terms and conditions of their employment. However, employers found that, without required confidentiality, they experienced less candor and cooperation during the investigations.
With the new rule, employers may now require confidentiality of an employee’s conversations with investigators while an investigation is open. Once the investigation ends, non-management employees may discuss the investigation unless there is a significant reason for the employer to continue to require confidentiality.
Arbitration Agreements between Employers and Employees
In 2018, the US Supreme Court ruled, in Epic Systems Corp. v Lewis, that mandatory arbitration agreements between employers and employees were generally enforceable under the Federal Arbitration Act. While that case focused on class action lawsuits by employees, the decision had implications for all discrimination claims (race, color, religion, sex, national origin) protected by Title VII of the Civil Rights Act.
Back in 1997, the Equal Employment Opportunity Commission (EEOC) issued a policy statement, disfavoring mandatory arbitration agreements between employers and employees. Mandatory arbitration was seen as (a) unfairly limiting an employee’s right to a jury trial, (b) biased against employees, and (c) undermining public policy. Recognizing the holdings in Epic and numerous other cases decided since 1997, the EEOC rescinded its policy in December 2019, stating that it did not reflect current law. However, the ruling indicates that the EEOC maintains its authority to challenge the enforceability of any particular arbitration agreement, so employees still may file a claim against an employer with the EEOC.
While EEOC policy statements do not have the force of law, they are relied on as guidance by both EEOC investigators and courts. Several states have enacted laws banning mandatory arbitration agreements for certain discrimination claims, particularly in light of the #MeToo movement, but there has been no resolution yet in federal courts whether these laws are preempted by the Federal Arbitration Act.
Your Next Steps
These recent decisions may shed light on some employment situations that you have not encountered or had reason to even think about. In order to protect your company, it’s wise to think about how you could be affected and what changes need to be made now, or what policies should be put into place for potential future situations.
I can help determine how your company could be affected and together we can devise a plan to make sure that your company is not vulnerable. Remember, state and federal law is very fluid in the area of employer-employee relations, and it’s critical to stay on top of the issues that are getting attention. Call me to set up a time to meet so we can review your current situation and devise your plan.
NOTE: THIS ARTICLE IS FOR GENERAL INFORMATIONAL PURPOSES. IT DOES NOT CONSTITUTE LEGAL ADVICE, NOR DOES IT CREATE AN ATTORNEY-CLIENT RELATIONSHIP. EACH SITUATION IS DIFFERENT. YOU SHOULD CONSULT WITH AN ATTORNEY TO DETERMINE YOUR LEGAL RIGHTS, REMEDIES, AND DUTIES.
By Wendy M. Anderson, Esq.
Law Office of Wendy Anderson, PLLC
Contact Me Today