On March 26, 2009, the U.S. Department of Labor’s Employment and Training Administration (ETA) published notice in the Federal Register announcing that it has withdrawn for further consideration an interpretation of the Fair Labor Standards Act (FLSA) published in the final regulations revising H-2A and H-2B visa requirements. The H-2A and H-2B visa programs allow U.S. agricultural businesses to employ foreign workers in temporary or seasonal agricultural jobs. The final rules revising the procedures for issuance of H-2A and H-2B nonimmigrant visas were published in the Federal Register on December 18 and December 19, 2008, respectively. The preambles to both final rules included a discussion on the treatment of reimbursable expenses incurred under the H-2A and H-2B visa programs and rejected an Eleventh Circuit decision regarding such reimbursements.

In Arriaga v. Florida Pacific Farms, L.L.C., the U.S. Court of Appeals for the Eleventh Circuit held that the transportation and visa costs of temporary nonimmigrant workers coming to the U.S. under the H-2A visa program were primarily for the employer’s benefit and therefore reimbursable under the FLSA. 305 F.3d 1228 (11th Cir. 2002). A number of district courts, following the Arriaga decision, reached the same holding. The discussion in the H-2A and H-2B final rules concluded that the Arriaga decision and the related district court decisions were wrongly decided and that inbound travel expenses of H-2A and H-2B workers were not primarily for the benefit of the employer. Accordingly, DOL concluded that the inbound travel expenses were not reimbursable under FLSA, regardless of whether such costs result in workers being paid less than minimum wage. DOL did not seek public comment on this discussion and characterized it as an interpretation of the FLSA.

Because of the reach of FLSA coverage, this interpretation may have ramifications beyond the H-2A and H-2B programs and result in various pre-employment expenses lawfully reducing workers’ weekly wages below minimum wage. For this reason, ETA has withdrawn this interpretation for further consideration and announced that it may not be relied upon as a statement of DOL policy, until further interpretive guidance is disseminated by the agency.

Core Provisions: This legislation would amend the executive compensation provisions of the Emergency Economic Stabilization Act of 2008 to prohibit unreasonable and excessive compensation and compensation not based on performance standards. The bill would prohibit financial institutions that have received TARP funds or capital investment under the Housing and Economic Recovery Act from making any unreasonable or excessive compensation payment to any executive or employee whether under a pre-existing compensation arrangement or a new compensation arrangement. It would also prohibit bonuses or other payments not based on performance standards. The standard for “unreasonable or excessive” payments and for “performance-based” would be established by the Secretary of the Treasury within 30 days of enactment of the legislation.

Status: Rep. Grayson (D-FL) introduced H.R. 1664 on March 23, 2009 and it passed the House on April 1, 2009.

Core Provisions: This legislation would create a federal insurance fund to provide employees with twelve weeks of paid family and medical leave. The fund, established and administered by the Secretary of Labor, would provide benefits for employees taking leave (1) because of a serious health condition; (2) upon the birth or adoption of a child; (3) to care for a family member with a serious health condition; (4) for any qualifying emergency arising from the fact that a spouse, child, or parent of the employee is on active military duty; or (5) to care for a family member who is a covered service member. Under the benefits proposal, most employees would contribute 0.2 percent of their annual earnings, and employers would match employee payments. Benefit amounts would be tiered progressively according to income level and indexed for inflation under the Social Security wage index. The bill would allow employers with an equivalent or better paid-leave plan to opt out of participating in the insurance fund.

The legislation also prohibits employers from interference, discrimination, or retaliation concerning an employee’s exercise of rights under the act, and would give employees a corresponding private right of action. The Secretary of Labor would have investigative authority and would be authorized to bring an administrative or civil action. The bill also provides criminal penalties for knowingly submitting or helping another to submit a false certification in order to fraudulently collect benefits.    

Status: H.R. 1723 was introduced by Rep. Stark (D-CA) on March 25, 2009 and referred to the House Committees on Education and Labor; Oversight and Government Reform; and Ways and Means. Rep. Stark introduced similar legislation in the 110th Congress, but that legislation failed to make it out of committee.

On March 25, 2009, President Obama nominated Washington D.C. attorney Phyllis C. Borzi to serve as assistant secretary of labor for employee benefits security in the Employee Benefit Security Administration, a subdivision of the Department of Labor.

Borzi’s practice focuses on ERISA and employee benefits and is currently of counsel with the law firm of O’Donoghue & O’Donoghue LLP in Washington, D.C. She is also on the faculty of the Department of Health Policy in the George Washington University Medical Center’s School of Public Health and Health Services, conducting legal research and policy analysis in the area of employee benefits.

A graduate of Syracuse University and Catholic University Law School, Borzi worked as Pension and Employee Benefits Counsel from 1979 to 1995 for the Subcommittee on Labor-Management Relations of the Committee on Education and Labor in the U.S. House of Representatives. She has served on a number of health care and employee benefit-related advisory boards, including then-First Lady Hillary Rodham Clinton’s Presidential Task Force on Health Care Reform in 1993, and, in recent years, the Advisory Committee of the Pension Benefit Guaranty Corporation.

On March 24, 2009, Senator Arlen Specter (R-PA) delivered remarks on the Senate floor concerning his position on the controversial Employee Free Choice Act of 2009 (H.R. 1409; S. 560). In his remarks, Senator Specter announced his intent to vote against cloture on the bill.

Cloture is the procedure by which the Senate can vote to place a time limit on consideration of a bill, thereby avoiding a filibuster and permitting the legislation to advance towards a vote. A vote to invoke cloture requires the support of three-fifths of the full Senate or 60 votes. Given the current composition of the Senate (57 Democrats; 2 Independents; 41 Republicans), every vote is critical.    

Senator Specter’s position on this issue is important, because he was the only Republican Senator to vote for cloture on identical legislation that was proposed in 2007. At the time, Senator Specter noted that his vote was not in support of the merits of the proposed legislation but, instead, was calculated to force the Senate to take up the issue of labor law reform.

In his statement, Senator Specter also expressed his reservation to both the card check and interest arbitration provisions of the proposed legislation, particularly in light of the current economic climate. He further suggested several comprehensive amendments to the National Labor Relations Act, including measures restricting visits to employees’ homes, employer speeches, and campaign-related activities within twenty-hour hours of an election. His suggestions also include mediation, rather than arbitration, if a first contract is not reached. The full text of Senator Specter’s statement and suggested revisions are available on his website.  

On March 20, 2009, U.S. Citizenship and Immigration Services (USCIS) announced additional requirements for employers planning to hire foreign nationals to work in the H-1B specialty occupation category. U.S. businesses use the H-1B program to employ foreign workers in specialty occupations in technical or theoretical fields, such as science, engineering, and computer programming. The changes apply to companies receiving funds through the Troubled Asset Relief Program (TARP) or section 13 of the Federal Reserve Act (FRA).

As part of the American Recovery and Reinvestment Act (i.e., the stimulus package), on February 17, 2009, President Obama signed into law the “Employ American Workers Act” (EAWA).  The purpose of EAWA is to ensure that companies receiving funds under TARP or FRA do not displace U.S. workers. Companies who seek to hire new H-1B employees but have received funds under these programs are considered an “H-1B dependant employer.” 

H-1B dependent employers must make additional attestations to the U.S. Department of Labor (DOL) when filing the Labor Condition Application (LCA) and to USCIS when filing the H-1B petition.  These additional attestations include statements that: (1) the employer has made good faith efforts to recruit U.S. workers using industry-wide standards and offers compensation that is at least as great as that offered to H-1B workers; (2) the employer has offered the job to any U.S. worker who applies and is equally or better qualified for the job; (3) the employer has not “displaced” any U.S. worker through layoffs conducted within 90 days before or after the filing of the H-1B petition; and (4) the employer has not placed an H-1B worker with another employer without first inquiring whether that secondary employer has displaced or will displace any U.S. workers within a 90-day before or after the placement of the H-1B workers. 

These new requirements will apply to any petition filed after February 17, 2009 involving a new employer regardless of whether the worker is already in H-1B status. They also apply to petitions approved before February 17, 2009, where the worker did not commence employment before that date.  The requirements do not apply to current H-1B workers who seek to change their status with the same employer or extend current employment.

In addition, USCIS announced that it is revising Form I-129 (Petition for Nonimmigrant Worker) to ask if the petitioner has received any funding under TARP or the FRA.  It also announced that, beginning on April 1, 2009 it will accept H-1B petitions subject to the fiscal year 2010 cap (65,000 limit not including the first 20,000 petitions filed on behalf of aliens with a U.S. masters degree or higher). The necessary filing documents and other resources, including question and answer sections, are available on the USCIS website.

On March 13, 2009, the U.S. Department of Labor’s Employment and Training Administration (ETA) announced a proposed nine-month suspension of the final rule implementing changes to the H-2A program, which allows U.S. agricultural businesses to employ foreign workers in temporary or seasonal agricultural jobs. Notice of the proposed suspension was published in the Federal Register on March 17, 2009, and DOL has invited the public to submit comments by March 27, 2009.       

The H-2A program allows agricultural employers experiencing a shortage of available domestic workers to file a petition with the Department of Homeland Security, U.S. Citizenship and Immigration Services for permission to hire foreign workers to fill temporary or seasonal agricultural jobs. If the petition is approved, the workers may enter the United States on an H-2A nonimmigrant visa.

Previously, prospective employers of H-2A workers would first have to obtain DOL certification regarding the shortage of U.S. workers available to perform the work and the employer’s competitive wage rates and working conditions before the H-2A petition could be approved. The final rule, which was published in the Federal Register on December 18, 2008 and became effective on January 17, 2009, purports to streamline this process by only requiring an employer to attest that it has fully complied with the H-2A requirements. The new rule also sets forth certain penalties for falsification and requires employers to take certain positive recruitment steps. For a more detailed description of the final rule, click here.

According to DOL, the proposed suspension of the final rule is necessary to provide it with an opportunity to review the rule ”in light of issues that have arisen” since its publication, including the filing of a lawsuit challenging the validity of the regulations and concerns over the lack of available resources necessary to implement the rule. To avoid disruption to DOL, state workforce agencies, employers, and workers during the suspension period, DOL has proposed that the regulations previously in effect be reinstated on an interim basis. Any H-2A petitions that have already been filed according to the new regulations will proceed and be processed under those regulations.

On March 6, 2009, the Department of Labor’s Wage and Hour Division (WHD) posted forty new opinion letters discussing a variety of wage and hour issues. The WHD immediately withdrew 20 of the letters for further consideration. The WHD, charged with administering the Fair Labor Standards Act (FLSA), periodically issues opinion letters in response to questions submitted by employers. This article discusses opinion letters on (1) retroactive payment of overtime, (2) compressed two-week work schedules, (3) deductions for voluntary and mandatory time off, and (4) deductions from paid time-off plans.

In this opinion letter, the employer asked about the proper method to calculate retroactive payment of overtime wages for employees previously considered exempt from overtime wages. The employer paid the employees through the fluctuating workweek method, which allows employers to pay a fixed salary “for the hours worked each workweek, whatever their number, rather than for working 40 hours or some other fixed weekly work period.” 29 C.F.R. § 778.114(a). The WHD allows this method of payment if the salary compensates the employee for all straight time hours worked at a rate not less than the minimum wage and for all overtime hours worked at an additional one-half of the regular rate. Id. For example, the employer expected the employees to work at least 50 hours per week and paid a bi-weekly salary of $1,825.50. The employer converted this compensation to an hourly rate of $18.25 by dividing the bi-weekly salary, $1,825.50, by the expected hours worked in the pay period, 100.

The employer realized that it had misclassified its employees as exempt. Thus, the employer needed pay back wages to the employees for overtime hours worked during the period of misclassification. The employer took the following steps: (1) divided the weekly equivalent of the employee’s bi-weekly salary by the number of hours the employee worked that week to determine the regular rate; (2) multiplied the regular rate by one-half to determine the overtime rate; and (3) multiplied the overtime rate by the number of overtime hours worked in that workweek. The WHD concluded that the employer performed the correct method to calculate any back wages it may owe to the employees.

Compressed Two-Week Work Schedules

In this opinion letter, the employer asked whether a proposed workweek arrangement complied with the FLSA. Currently, the employer allows employees to work nine days during the pay period. The employees work nine hours per day Monday through Thursday and eight hours on every other Friday. The employer plans to change its time-keeping system to require employees to choose their workweek schedule. One schedule starts at 11:31 a.m. Friday and ends at 11:30 a.m. the following Friday, with the scheduled workday starting at 7:30 a.m. The other schedule begins at 12:31 p.m. Friday and ends at 12:30 p.m. the following Friday, with the scheduled workday starting at 8:30 a.m. The employer will pay time and one-half for all hours worked over forty in any workweek.

The WHD stated that a workweek does not need to correspond to a calendar week. Instead, “[a]n employee’s workweek is a fixed and regularly recurring period of 168 hours - seven consecutive 24-hour periods.” 29 C.F.R. § 778.105. The WHD concluded that the employer’s proposed schedules complied with the FLSA because they are fixed 168-hour periods and pay employees for any hours worked over forty in a workweek.

Deductions for Voluntary and Mandatory Time Off

In this opinion letter, the employer proposed to reduce the hours worked by exempt employees due to short-term business needs. The employer would offer voluntary time off (VTO), which allows the employees to continue accruing employment benefits, on a first-come, first served basis. If the employer does not receive a sufficient number of volunteers, it will require mandatory time off (MTO) under a seniority-based method. An employee will be entitled to use accrued paid leave or take unpaid MTO. If, however, the employee chooses not to use any accrued paid leave or does not have enough accrued paid leave, the employer plans to deduct the amount equal to the VTO or MTO from the employee’s salary. If the unpaid VTO or MTO lasts an entire workweek, the employer does not pay the salary for the workweek.

The WHD concluded that the salary deductions proposed by the employer do not comply the salary basis requirement in 29 C.F.R. § 541.602(a). That provision states that “[i]f the employee is ready, willing and able to work, deductions may not be made for time when work is not available.” 29 C.F.R. § 541.602(a). While the WHD allows salary reductions that reflect a reduction in the normal scheduled workweek if the reductions are not designed to circumvent the salary basis requirement, the WHD determined that the employer’s deductions in this situation are the type that the salary basis requirement intends to preclude. For an employer to deduct an employer’s salary for taking VTO, the employee’s decision to take VTO must be completely voluntary and not “occasioned by the employer or by the operating requirements of the business.” 29 C.F.R. § 541.602(a).

In this opinion letter, the employer proposed to require exempt employees to stay home or leave work early during periods of insufficient work. The employer would deduct the non-work time from the employees’ accrued paid time-off (PTO) accounts. If an employee’s accrued PTO account is exhausted, the employee’s salary will be reduced in full-day increments until it reaches the minimum salary required for the section 13(a)(1) exemption status, $455 per week.

The WHD stated that an employee is not paid “on a salary basis” if any deductions from the employee’s salary is made for full or partial day absences because of a lack of work. 29 C.F.R. § 541.602(a). Even if the absence is directed by the employer or results from a lack of work, an employer can substitute or reduce the employee’s accrued leave if the employee still received an amount equal to the employee’s guaranteed salary.

If an employer requires an exempt employee to work less than a full workweek, the employer must pay the employee’s full salary even if: (1) the employer does not have a bona-fide benefits plan; (2) the employee has no accrued benefits in the leave bank; (3) the employee has limited accrued leave benefits, and reducing that accrued leave will result in a negative balance; and (4) the employee already has a negative balance in the accrued leave bank. The WHD referred the employer to previous opinion letters dated October 24, 2005; May 27, 1999; February 18, 1999; May 23, 1996; and April 6, 1995.

The employer also asked whether it could schedule the exempt employee for less than forty hours and reduce the employee’s pay if the employee’s accrued PTO is exhausted. The employer would require the employee to be away from work one day a week and only pay the employee for four days.

The WHD concluded that this practice would violate the salary basis requirement in 29 C.F.R. § 541.602(a) because the employee would not be paid on a fixed and guaranteed weekly salary basis without regard to the quantity of work performed. The WHD also concluded that a WHD opinion letter dated November 13, 1970, which the employer relied upon for support, is distinguishable from the employer’s proposal. In the 1970 letter, the employer proposed a permanent change from 52 five-day workweeks to 47 five-day workweeks and 5 four-day workweeks. The WHD found that the 1970 proposal did not circumvent the salary basis requirement because that employer paid the employees a bona fide reduction of one-fifth their salaries for a fixed schedule of five annually recurring four-day workweeks. In contrast, the WHD found that the plan proposed here was not part of a fixed schedule; instead, it made salary deductions based on day-to-day or week-to-week determinations of the operating requirements of the business. Because such determinations are inconsistent with the salary basis requirement, the WHD concluded that the employer’s proposed plan violated 29 C.F.R. § 541.602(a).

Core Provisions: This legislation would require employers to provide labor organizations with equal access to employees prior to a representation election.  This bill also resembles the controversial Employee Free Choice Act of 2009 (EFCA), which was introduced by Congressional Democrats on March 10, 2009, in several respects. Like the EFCA, the bill contains provisions designed to increase employer penalties for unfair labor practices during organizing campaigns and to expedite the bargaining process surrounding a first collective bargaining agreement. Unlike the EFCA, however, the bill lacks the card check provision that allows a union to become the certified bargaining representative simply by obtaining signed authorization cards from a majority of employees in a proposed bargaining unit. 

Under the proposed legislation, within 30 days of the National Labor Relations Board directing an election, the employer must notify the designated union of “any activities the employer intends to engage in to campaign in opposition to recognition of the [union],” including any announcements, meetings, signs, or literature. The employer would be required to provide the union with equal access to the place of employment to campaign in favor of the union. This would mean providing the union with the opportunity to hold an equal number of meetings with individual employees or groups of employees, make announcements, display signs, and distribute literature, under the same terms and conditions that the employer engages in such activities.

The legislation includes provisions similar to those in the EFCA to facilitate an initial collective bargaining agreement, although this bill would apply only to employers with at least 20 employees and allow employers and unions additional time to reach an agreement before a party could initiate interest arbitration. Under this bill and the EFCA, the parties must begin bargaining within 10 days of a written request by a newly-certified union. But under the proposed legislation: (1) the parties would have 120 days to negotiate the terms of a collective bargaining agreement before either party can request mediation before the Federal Mediation and Conciliation Service (FMCS); (2) an additional 120 days to mediate before the parties were forced into mandatory interest arbitration before a panel appointed by the FMCS; and (3) the arbitration panel’s ruling would be effective for 18 months. In contrast, EFCA proposes a 90-day period to negotiate before a party can request mediation; an additional 30 days to mediate before going to mandatory interest arbitration; and an arbitration ruling that is effective for 2 years.

The legislation also includes an anti-retaliation provision and remedies identical to those included in EFCA. The remedies include liquidated damages in the amount of twice the awarded back pay and civil penalties of $20,000 for each time an employer willfully or repeatedly violates its employees’ right to organize.

Status: Rep. Sestak (D-PA) introduced this legislation on March 5, 2009, and it was referred to the House Committee on Education and Labor.

Core Provisions: This legislation would give employees a statutory right to request flexible work terms and conditions. Modeled after similar laws in Europe, the legislation provides for an interactive process by which an employee can request changes to his or her schedule, location of work, or the number of hours worked. Employers would be required to meet with the employee and a designated representative of his or her choosing to discuss the request, give a written decision to the employee, and must justify any denial in writing. If the employee is dissatisfied with the employer’s explanation, he or she may request reconsideration of the decision, in which case the employer would have to go through the interactive process again. The legislation also contains an anti-retaliation provision.  

The bill, which contains an exemption for small businesses with less than 15 employees, gives employees the right to make a complaint to the Department of Labor and provides for enforcement through Department of Labor investigations, administrative hearings, and federal court proceedings.

Status: H.R. 1274 was introduced by Reps. Maloney (D-NY), Miller (D-CA), Lewis (D-GA), and Cummings (D-MD) on March 3, 2009 and referred to the Committees on Education and Labor, Oversight and Government Reform, Administration, and the Judiciary. Identical legislation was introduced in the 110th Congress (H.R. 4301, S. 2419), with the Senate bill being co-sponsored by Sen. Kennedy and then-Sens. Obama and Clinton. Neither bill made it out of committee.