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Washington Labor & Employment Wire » Department of Labor, Wage and Hour Division

DOL Wage and Hour Division Posts Opinion Letter Clarifying Employee Notification Procedures for Taking FMLA Leave


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On May 5, 2009, the Department of Labor’s Wage and Hour Division (WHD) posted a new opinion letter on the scope of permissible employer policies requiring employees to provide notice of FMLA leave, which the WHD designated as FMLA2009-1-A.

Signed by Acting Administrator Alexander Passantino, the new letter expressly supersedes a January 15, 1999 opinion letter (designated as FMLA-101). The prior opinion letter had been interpreted to prohibit employers from applying internal call-in policies, disciplining employees under no call/no show policies, or disciplining employees who call in late, as long as the employees provided notice within two business days that the leave was FMLA-qualifying, regardless of whether they could have practicably provided notice sooner.

When the DOL published on February 11, 2008, a Notice of Proposed Rulemaking (NPRM) on proposed changes to the 1995 FMLA regulations, it clarified that regulatory language requiring employees who cannot provide the required 30 days advance notice to provide notice of the need for FMLA leave “as soon as practicable . . . ordinarily . . . within one or two business days of when the need for leave becomes known to the employee” was intended as an illustrative outer limit only. The DOL asserted that FMLA-101’s so-called “two day rule” for FMLA notice “in effect, mistakenly read the regulation as allowing employees two business days from learning of their need for leave to provide notice to their employers, regardless of whether it would have been practicable to provide notice more quickly” (emphasis added). The revised regulation, which became effective on January 16, 2009, clarifies that where an employee cannot provide 30 days advance notice of FMLA leave, “it should be practicable for the employee to provide notice of the need for leave either the same day or the next business day” after becoming aware of the need for leave, but that “the determination of when an employee could practicably provide notice must take into account the individual facts and circumstances.” 29 C.F.R. § 825.302(b).

The new WHD opinion letter notes that “where an employer’s usual and customary notice and procedural requirements for requesting leave are consistent with what is practicable given the particular circumstances of the employee’s need for leave, the employer’s notice requirements can be enforced.” Thus, the determination of the adequacy of an employee’s notice is driven by the individual facts and circumstances, rather than an arbitrary two-day timeframe. The regulation itself also recognizes employers’ ability to enforce reasonable call-in policies. “Where an employee does not comply with the employer’s usual notice and procedural requirements, and no unusual circumstances justify the failure to comply, FMLA-protected leave may be delayed or denied” so long as the employer does not delay or deny leave where the employee provides timely notice as set by the regulation.  29 C.F.R. § 825.302(d).

Therefore, to the degree that WHD Opinion Letter FMLA-101 had been interpreted to create a flat “two day rule,” the Department’s new letter officially rescinds it.


Obama Announces Intended Nomination of Lorelei Boylan as Wage and Hour Division Administrator

On April 14, 2009, President Barack Obama announced he intends to nominate Lorelei Boylan as the Administrator for the Department of Labor’s Wage and Hour Division. The Wage and Hour Administrator is responsible for enforcing the agency’s wage and hour laws as well as issuing interpretative guidance and opinion letters to assist employers in their compliance efforts with these laws.

Boylan currently serves as the Director of Strategic Enforcement at the New York State Department of Labor, Labor Standards Division, where she supervised a statewide task force responsible for investigating low-wage industries. Prior to this role, Boylan was the head of the Bureau of Immigrant Workers’ Rights and served as an Assistant Attorney General in the New York State Attorney General’s Office.

The White House has not yet indicated when President Obama’s final nomination will be announced.


DOL Withdraws Interpretation of FLSA Relocation Expenses in H-2A and H-2B Final Rules


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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.


DOL Wage and Hour Division Releases New Opinion Letters


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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.

Retroactive Payment of Overtime

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).

Deductions for Paid Time Off

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).


DOL Releases Two Opinion Letters Regarding Tipped Employees

On January 8, 2008, the Department of Labor’s Wage and Hour Division (WHD) posted eleven new opinion letters discussing a variety of wage and hour issues. 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) eligibility to participate in tipping pools, and (2) an employer’s duty to provide uniforms to a tipped employee who repeatedly damages the uniform while off-duty.

Tip Pools

In the first opinion letter, the WHD found that sushi chefs who cook and serve food to customers can participate in a tipping pool. The employer asked about two kinds of chefs: itamae-sushi chefs and teppanyaki chefs. Itamae-sushi chefs prepare and serve sushi to customers in the bar area. Teppanyaki chefs, on the other hand, prepare meals at a table located at customer tables and serve meals to customers. Servers assist both kinds of chefs by taking orders for meals and drinks, and bussers remove plates and serve water. The sushi chefs participated in a tip pool with servers, bussers, bartenders, and counter persons. All members of the tip pool made at least $30 per month in tips.

A tipped employee is “any employee engaged in an occupation in which he customarily and regularly receives more than $30 a month in tips.” 29 U.S.C. § 203(t).  Employees who “customarily and regularly receive tips” are eligible to participate in a tip pool. See 29 U.S.C. § 203(m). The WHD concluded that the sushi chefs could participate in a tip pool because the sushi chef position was not unlike the position of a counter person, and “[i]t has been [the WHD’s] longstanding position that counter persons who serve customers may participate in tip pools.” The WHD cited to a previous January 25, 1983 opinion letter finding that a waiter chef who brings food orders from the kitchen and cooks it on a hibachi grill in front of customers could participate in a tip pool.

Uniforms

In the second opinion letter, the WHD found that that if an employer supplies a “reasonable and sufficient number” of uniforms and replaces any uniforms that are damaged in the course of work-related duties, the employer has satisfied its obligations under the FLSA. The employer had routinely provided tipped employees with a sufficient number of uniforms made of regular wash-and-wear materials. The uniforms were routinely washed and dried with other personal garments by the employees, and did not require special laundering. The employer provides replacement uniforms at no charge. One employee, however, had damaged multiple uniforms while riding a skateboard on his days off. The employer asked if it could require the employee to pay for his own uniform. 

An employer must be able to show that tipped employees receive at least the applicable minimum wage when wages and tips are combined. See 29 U.S.C. § 203(m). Under 29 C.F.R. § 531.35, “[w]hether in cash or in facilities, ‘wages’ cannot be considered to have been paid by the employer and received by the employee unless they are paid finally and unconditionally or ‘free and clear.’  The wage requirements of the Act will not be met where the employee ‘kicks-back’ directly or indirectly to the employer . . . part of the wage delivered to the employee.” The FLSA further requires that expenses that are “primarily for the benefit of the employer” cannot be counted as wages and thus must be paid by the employer (or reimbursed) if failure to do so would bring the employee’s wages below minimum wage in any week. See 29 U.S.C. § 206(a)(1); 29 U.S.C. § 203(m); 29 C.F.R. § 531.3(d). Uniforms required by the employer to be worn while on duty are considered to be for the benefit or convenience of the employer. Employees may not be required to pay for such items if, by so doing, their wages would be reduced below the required minimum wage or overtime compensation. This is true even if an economic loss suffered by the employer is due to the employee’s work-related negligence. Employers may not avoid FLSA minimum wage and overtime pay requirements by having the employee reimburse the employer in cash for the cost of such items because the effect is the same as deducting the cost from the employee’s wages. See 29 C.F.R. §§ 531.3(d), 531.32(c), 531.35.

The WHD found that the employer did not have to continue to provide uniforms to the employee who damaged the uniform on non-work days: “[a]n employer’s obligations under the FLSA are not unlimited . . . [i]f an employer supplies a reasonable and sufficient number of wash and wear uniforms and replaces any uniforms that are damaged in the course of work-related duties, the employer has satisfied its duty to pay expenses that are primarily for the benefit of the employer.” The WHD analogized this situation to a scenario where an employee was using clothes for personal use, and found that the FLSA was inapplicable to that scenario: “[t]he FLSA does not compel the employer to supply its employees with clothing for personal use.”


DOL Posts New Opinion Letters


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On January 8, 2008, the Department of Labor’s Wage and Hour Division (WHD) posted eleven new opinion letters discussing a variety of wage and hour issues. Charged with administering the Fair Labor Standards Act (FLSA), the WHD periodically issues opinion letters in response to questions submitted by employers. This article discusses recent opinion letters on (1) the executive exemption to overtime, (2) the inclusion of a discretionary bonus into an employee’s regular rate, and (3) the compensability of on-call time.

Executive Exemption

The FLSA requires that overtime compensation be paid at a rate of not less than one and one-half times the regular rate of pay for all hours worked in excess of 40 in a workweek. See 29 C.F.R. Part 778. The regular rate of pay of an employee “is determined by dividing his total remuneration for employment (except statutory exclusions) in any workweek by the total number of hours actually worked by him in that workweek.” 29 C.F.R. § 778.108. The FLSA includes several exemptions from its overtime provisions, including an exemption for employees whose “primary duty” is performing managerial tasks.

In the first opinion letter, the WHD found that bona fide exempt managers could attend a seven-week training course and not lose their exempt status during the training. The employer annually selected store managers for a seven-week training course where the managers would train to be district managers. During the first week of the training period, the managers spent little time performing exempt work, and during the first several weeks of training, they were unlikely to spend more than half of their time performing exempt work. 

The WHD found that the temporary suspension of exempt duties did not alter the managers’ exempt status “because the primary duty test for executives need not be met each and every workweek in all cases.” The WHD stressed the importance of a “holistic approach” to exemption determinations under the FLSA. The managers’ “primary duty,” even when engaging in the non-exempt activities during the training program, “continues to be that of an exempt store manager.”

Discretionary Bonuses

In the second opinion letter, the WHD found that an employer did not have to include a bonus in an employee’s regular rate when the bonus was discretionary and there was no prior agreement or promise to pay such a bonus. The employer had decided to pay a $1,000 bonus to full-time emergency communications operators in recognition of the high stress level of the employees’ duties. The parties formalized the approval by signing a memorandum of understanding (MOU) that subsequently became a part of the bargaining unit contract and made provisions for future bonus payments. The employer paid out the first bonus after the MOU was distributed. The employer was concerned that, because it actually paid the first bonus after signing the MOU, the bonus was no longer “discretionary.”

Generally, bonus payments are excluded from the regular rate if “both the fact that payment is to be made and the amount of the payment are determined at the sole discretion of the employer at or near the end of the period and not pursuant to any prior contract, agreement, or promise causing the employee to expect such payments regularly.” 29 U.S.C. §207(e)(3)(a). If an employer announces in advance that it will pay a bonus, it no longer has total discretion and the payment cannot be excluded from the employee’s regular rate. 29 CFR § 778.211(b). “Bonuses which are announced to employees to induce them to work more steadily or more rapidly or more efficiently or to remain with the firm are regarded as part of the regular rate of pay.” 29 C.F.R. § 778.211(c).

The WHD found that the bonus in question was “discretionary” because it was not paid “pursuant to any prior contract, agreement, or promise.” The WHD discounted the fact that the bonus was actually paid after the MOU because the employer “did not issue the bonuses pursuant to the MOU, but rather used the agreement to formalize a decision previously made.”  Under these circumstances, the WHD concluded that the bonus was discretionary and did not have to be included in the regular rate.

On-Call Employees

In the third opinion letter, the WHD found that an on-call employee who must be reachable at all times while on duty, abstain from alcohol or other substances, and report to work within one hour of notification need not be compensated for the time spent on-call.  In submitting the issue for review, the employer posited that the employee was rarely called while on duty.

In general, on-call time is compensable when the on-call conditions are so restrictive or the calls so frequent that the employee cannot effectively use that time for personal purposes. See 29 C.F.R. § 553.221(d). The federal courts examine a variety of factors when determining whether on-call time is compensable, including but not limited to (1) whether there are excessive geographical limitations on an employee’s movements, (2) whether the frequency of calls received or a fixed time limit for response is unduly restrictive, (3) whether the employee could easily trade on-call responsibilities, (4) whether use of a pager could ease restrictions, and (5) whether the on-call policy is based on an agreement between the parties.

In finding the on-call time was not compensable, the WHD stressed the low frequency of calls the employee received while on duty. The WHD concluded that the one-hour temporal limitation reasonable and stated that the employee could use the on-call time for “personal purposes.” Additionally, the WHD clarified that the employer could discipline employees who refuse to follow on-call restrictions because the FLSA “does not require employers to pay for the inconvenience of being on call if such periods are not otherwise compensable . . . [and] disciplinary actions resulting from an employee’s refusal to be on call is not within the FLSA’s purview.”


DOL Issues New Regulations Governing H-2A and H-2B Visas and Reporting of Social Security Numbers Under the Davis-Bacon Act


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The Department of Labor (DOL) recently issued several new rules governing H-2A and H-2B visas, and the Davis-Bacon Act. 

H-2A Rule.  On December 18, 2008, theU.S. Department of Labor’s Employment and Training Administration (ETA) and Employment Standards Administration (ESA) published a final rule amending the H-2A program for employing foreign workers in temporary or seasonal agricultural jobs. The final rule re-engineers the process by which employers obtain a temporary labor certification from the DOL for use in petitioning the Department of Homeland Security (DHS) to employ a nonimmigrant worker in H-2A (agricultural temporary worker) status. The final rule utilizes an attestation-based application process based on pre-filing recruitment and eliminates duplicative H-2A activities currently performed by State Workforce Agencies (SWAs). 

The H-2A temporary agricultural visa is a nonimmigrant visa which allows foreign nationals to enter into the U.S. to perform agricultural labor or services of a temporary or seasonal nature. “Temporary or seasonal nature” means employment performed at certain seasons of the year, usually in relation to the production and/or harvesting of a crop, or for a limited time period of less than one year when an employer can show that the need for the foreign workers is truly temporary.

Under the new process, employers must complete a general attestation stating that they will abide by the H-2A process. Additionally, employers must take four positive recruitment steps: (1) submit a job order to the SWA serving the area of intended employment; (2) run two print advertisements (one of which must be on a Sunday); (3) contact former U.S. employees who were employed within the last year; and (4)  recruit in all states currently designated, based on an annual determination made by Secretary of Labor, as a state of traditional or expected labor supply with respect to each area of intended employment in which the  employer’s work is to be performed. Finally, employers must submit a job order to the applicable SWA. 

The rule also establishes enhanced penalties for violations and new tools to ensure employer compliance, including audits, revocation of approved labor certifications, increased debarment authority and substantial increases in fines - up to $100,000 for violations resulting in serious injury or death of a worker. The rule also will prohibit employers and recruiters from charging fees to workers for access to jobs, a practice that in the past has led to many reported abuses.  The rule will go into effect on January 17, 2009.

H-2B Rule.  On December 18, 2008, the U.S. Department of Labor’s Employment and Training Administration (ETA) and Employment Standards Administration (ESA) published a final rule amending the H-2B program for employing foreign workers not working in agricultural jobs. The final rule re-engineers the process by which employers obtain a temporary labor certification from the DOL for use in petitioning the DHS to employ a nonimmigrant worker in H-2B status.

The H2B working visa is a nonimmigrant visa which allows foreign nationals to enter into the U.S. temporarily and engage in nonagricultural employment which is seasonal, intermittent, a peak load need, or a one-time occurrence. 

To show a “one time occurrence,” the employer must establish that the employer has not employed workers to perform the services or labor in the past and the petitioner will not need workers to perform the services in the future, or that it has an employment situation that is otherwise permanent, but a temporary event of short duration has created the need for a temporary occurrence. 

To show a “seasonal need,” the employer must establish that the services or labor is traditionally tied to a season of the year by an event or pattern and is of a recurring nature. 

To show a “peak load need,” the employer must establish that it regularly employs permanent workers to perform services or labor at the place of employment and that it needs to supplement its permanent staff at the place of employment on a temporary basis due to a seasonal or short term demand and that the temporary additions to staff will not become a part of the employer’s regular operation.

Similar to the new process for H-2A visas described above, the new H-2B visa rule also adopts an employer-attestation model. Under the threat of fines and other penalties, employers will attest that they have complied with all the H-2B program’s requirements and submit evidence of their recruitment efforts along with their application.  The DOL may debar for up to three years employers, attorneys and agents found to have committed fraud or willful misrepresentation concerning the H-2B employment-based immigration program, or failed to cooperate with Labor Department audits or investigations.

The regulations also allow the DOL to reinstate illegally laid off U.S. workers, assess civil monetary penalties up to $10,000 and award back wages for violations of the program.  The final rule is effective on January 18, 2009.

Davis-Bacon Rule. On December 19, 2008, the DOL’s Wage and Hour Division (WHD) published a final rule revising regulations under the Davis-Bacon and related Acts (DBRA) and the Copeland Anti-Kickback Act to discontinue the reporting of employee social security numbers and personal addresses on weekly certified payrolls. Instead, employers will be required to use individual identifying numbers for employees that, “in virtually all cases,” will be the last four digits of each employee’s social security number. 

The Davis Bacon and Related Acts (DBRA) requires all contractors and subcontractors performing work on federal or District of Columbia construction contracts or federally assisted contracts in excess of $2,000 to pay their laborers and mechanics not less than the prevailing wage rates and fringe benefits for corresponding classes of laborers and mechanics employed on similar projects in the area. The prevailing wage rates and fringe benefits are determined by the Secretary of Labor for inclusion in covered contracts.

Employers working under DBRA-covered contracts should redact this personal information from weekly submissions to the WHD.  The final rule is effective on January 18, 2009.


DOL Wage and Hour Division Issues New FMLA Rule


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On November 17, 2008, the Department of Labor’s Wage and Hour Division (WHD) published its final rule for the Family and Medical Leave Act (FMLA). Enacted in 1993, the FMLA provides that covered employers must grant eligible employees up to 12 weeks of unpaid leave within a 12-month period for the birth and care of a newborn child, the adoption of a child, the care of an immediate family member with a serious health condition or medical leave when the employee himself or herself is unable to work due to a serious health condition. In addition to reorganizing the prior FMLA rule to make it clearer, the final rule makes several substantive changes, including (1) incorporating the National Defense Authorization Act of 2008 (NDAA), which had extended the FMLA to allow leave in certain circumstances to care for a family member who has served in the Armed Forces, and (2) revising other provisions of the FMLA rule to reflect criticisms and comments in the FMLA’s application.

Incorporating the NDAA

The NDAA amended the FMLA to allow for greater care for injured service members of the Armed Services. The NDAA provides that the new leave policies would apply to an employee who is the “spouse, son, daughter, parent, or next of kin of a covered service member.”  While the existing FMLA definition of son or daughter only includes minors under 18 years of age and adults who are incapable of self-care, the final rule applies a more expansive definition of “son or daughter” in determining eligibility to care for covered service members.

The NDAA authorizes two major grants of leave.  First, employers must grant employees up to 12 weeks of leave for certain qualifying exigencies arising out of a covered military member’s active duty status, notification of an impending call, or order to active duty status. Second, employers must grant employees up to 26 weeks of leave in a single 12-month period to care for a covered service member recovering from a “serious injury or illness” incurred in the line of duty on active duty. “Serious injury or illness” includes conditions where the service member is “(1) undergoing medical treatment, recuperation, or therapy; or (2) otherwise in outpatient status; or (3) otherwise on the temporary disability retired list.” 

Revising the FMLA

The final FMLA rule largely tracks the proposed rulemaking issued in February 2008. For a more detailed discussion of how the new rule changes the operation of the FMLA, please see our March 10, 2008 analysis of the proposed rule. In short, the final rule confirmed a number of changes in the proposed rulemaking:

▪           Joint Employer Coverage. Professional Employer Organizations (PEOs) that perform merely administrative functions (like managing payroll or benefits) are not joint employers.

▪           “Serious Health Condition.” While there was no change to the substantive “serious health condition” definition, the new rule now requires employees claiming “chronic illnesses” to visit a health care provider twice in a year and employees claiming incapacity to visit a health care provide twice within 30 days of the incapacity.

▪           Primary Worksite.  For employees who physically work at one location but whose primary employer assigns work from a different site, the primary employer’s location remains the primary worksite for one year. Only after a year of physically working at the remote site will the remote site become an employee’s primary worksite.  

           Scheduling Intermittent Leave. Employees seeking intermittent leave must make a “reasonable effort” to schedule leave so as not to unduly disrupt an employers’ operations.

▪           Substitution of Paid Leave. Employers are not required to permit employees to substitute their paid leave for unpaid FMLA leave if that substitution would be inconsistent with employers’ policies for paid leave (e.g., advance notice requirements, etc.).

▪           Holidays. If a holiday falls within a partial week of FMLA leave, then the holiday is not counted against an employee’s FMLA leave, unless the employee would otherwise have been required to work on the holiday. If the holiday falls within a full week of FMLA leave, then the holiday has no effect and the week is counted as a week of FMLA leave. 

▪           Bonuses. Employers can disqualify employees from achievement bonuses if employees fail to make a goal because of FMLA leave, so long as employees on other forms of leave are treated in the same way.

▪           Employer Notice Requirements. Employers must provide notice that leave is designated FMLA leave within five days after employees provide notice of leave. Employers can retroactively designate leave as FMLA leave if such a designation “does not cause harm or injury” to the employee.

▪           Employee Notice Requirements. An employee must give at least 30 days’ advanced notice for foreseeable leave. For unforeseeable leave, employees must give notice “as soon as practicable,” which is defined to mean “as soon as both possible and practical, taking into account all of the facts and circumstances in the individual case.”

▪           Medical Certification. While health care providers still cannot disclose an employee’s medical information without his or her consent, employers can use an employee’s refusal to provide consent as grounds to question a certification. Employers can require annual medical certification when the serious health condition extends for more than one year.

▪           Restructuring the FMLA Rule. Various provisions have been reorganized to improve readability. For example, several provisions implicating pregnancy have been collected into the new § 825.120 and the provisions implicating FMLA rights with regard to adoption or foster care have been consolidated into the new § 825.121.


DOL Wage and Hour Division Releases New Opinion Letters On Regular Rate Calculation


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The Department of Labor’s Wage and Hour Division (WHD) recently published seven opinion letters offering guidance on the proper application of the Fair Labor Standards Act (FLSA). The opinion letters addressed three main subject matters: (1) the proper calculation of an employee’s regular rate for on-call and commissioned employees, (2) the application of the FLSA in non-profit situation, and (3) the application of the teaching exemption in several contexts. The two regular rate opinion letters are discussed in greater detail below.    

The FLSA requires that overtime compensation be paid at a rate of not less than one and one-half times the regular rate of pay for all hours worked in excess of 40 in a workweek. See 29 C.F.R. Part 778. The regular rate of pay of an employee “is determined by dividing his total remuneration for employment (except statutory exclusions) in any workweek by the total number of hours actually worked by him in that workweek.” 29 C.F.R. § 778.108.

The first WHD opinion letter deals with how to calculate the regular rate for an employee who was paid $2.50 an hour for on-call time as per the company’s collective bargaining agreement. During a two-week pay period, employees worked one week on-call and one week not on-call. The employer wanted to see whether compensation for on-call time in a specific week could be averaged over a two-week period. The WHD determined that averaging was not a lawful practice because the “FLSA takes the single workweek as its standard and does not permit the averaging of hours over two or more weeks whether the employee is paid on a daily, weekly, biweekly, monthly, or other basis.” If an employee worked overtime during a week when that employee was on-call, then the employee must be paid one and one-half times the sum of his normal salary and his on-call pay.

The second WHD opinion letter addressed how employees working for commissions should be paid overtime. An employer paid truck drivers a commission of 27 percent of the gross revenue received by the employer for the materials delivered by the driver each week. At the end of each workweek, the employer divided the commission amount by the total number of hours worked to determine each truck driver’s regular rate of pay. The WHD found that this was the proper way to compensate commissioned employees. See 29 C.F.R. § 778.118.

The other five opinion letters concerning non-profits and the teaching exemption are available for review on the WHD Web site, located at:  http://www.dol.gov/esa/whd/opinion/opinion.htm.


The Potential Impact of the Obama Administration on the Labor and Employment Legal Landscape

  Part III - Federal Workplace Regulation

This is the third installment in our series on potential changes ahead in the labor and employment area as a result of the 2008 election.  In addition to pursuing the legislative priorities described in Parts I and II, President-elect Obama has expressed a desire to increase the enforcement and inspection roles of various labor-related agencies with responsibility for regulating the workplace, including the Occupational Safety and Health Administration, the Wage and Hour Division of the Department of Labor and the Equal Employment Opportunity Commission.  Today, we examine the possible agendas of these three key agencies.

Occupational Safety and Health Administration

The Occupational Safety and Health Administration (OSHA) is the main federal agency responsible for providing employees with a safe and healthy workplace.  With an expansive legislative mandate from the Occupational Safety and Health Act (”OSH Act”), OSHA promulgates and enforces detailed health and safety regulations for nearly all working men and women.

Since Democrats took control of Congress in 2006, both the House and the Senate have pressured OSHA to become more aggressive in its enforcement activities.  Congress has held hearings and introduced legislation intended to encourage OSHA to issue more stringent citations and penalties on employers for violations of safety rules.

We expect that President-elect Obama will continue this trend during his administration.  In an April 2008 statement issued to the International Brotherhood of Boilermakers, then-Sen. Obama declared that “Congress must play a greater role in improving workplace health and safety.”  In addition, President-elect Obama supported increased funding levels for OSHA to improve the agency’s ability to reduce workplace injuries and fatalities.  President-elect Obama has also endorsed a number of substantive and procedural changes to OSHA policy that will materially increase the steps an employer must take to comply with federal health and safety laws.

A New Ergonomics Rule

President-elect Obama has promised to issue a new ergonomics regulation.  This regulation is likely to provide the same stringent requirements and broad scope of the controversial ergonomics standard that was issued near the end of the Clinton administration and then repealed almost immediately by President Bush and the Republican Congress.

After a long, protracted debate, on November 14, 2000, OSHA issued its Ergonomics Program Standard, which became effective on January 14, 2001.  This standard attempted to minimize musculoskeletal disorders engendered by low-impact, repetitive movements.  It broadly defined a “musculoskeletal disorder” as a disorder of the muscles, nerves, tendons, ligaments, joints, cartilage, blood vessels or spinal discs that affect the neck, shoulder, elbow, forearm, wrist, hand, abdomen, back, knee, ankle and foot.  In addition, the standard provided that musculoskeletal disorder injuries could be manifested by diagnoses including, but not limited to, carpel tunnel syndrome, rotator cuff syndrome, lower back pain, trigger fingers, tarsal tunnel syndrome, sciatica, tendinitis and herniated spinal discs.

On March 20, 2001, President Bush signed a congressional resolution that repealed the ergonomic regulations because of the substantial costs and compliance challenges it imposed on employers.  Businesses estimated that compliance with the new regulations would have cost as much as $100 billion.

Because the vote enacting the resolution fell along party lines during a period in which the Republicans controlled Congress, it is likely that President-elect Obama, with a Democratic Congress, will successfully issue a new ergonomics regulation.

Increased Civil Penalties 

President-elect Obama supports increasing the level of penalties OSHA can impose on employers who violate its regulations.  In his April 2008 statement to the International Brotherhood of Boilermakers, President-elect Obama stated “OSHA systematically imposes small fines on employers, even in cases where safety violations led to a worker’s death.  And it almost immediately discounts a fine if the employer contests it.”  Instead, President-elect Obama wants to reduce an employer’s ability to challenge the most severe penalties.  For example, he supports codifying OSHA’s egregious penalty policy, pursuant to which OSHA issues a penalty for each instance of noncompliance, instead of combining all instances into one citation, in situations where an employer flagrantly disregards its responsibilities to provide a safe and healthy workplace.  Currently, employers often successfully argue that the egregious penalty policy exceeds OSHA’s authority because neither the OSH Act nor any of the OSHA’s regulations mentions the policy.   Codification of this policy would hamstring employers’ ability to challenge OSHA’s enforcement efforts in cases where OSHA has used the egregious penalty policy.

In addition, President-elect Obama cosponsored the Protecting America’s Workers Act (S.1244), which would increase the limits on employer fines from $70,000 to $100,000 for “repeat” and “willful” violations.  Under the bill, the fines for “serious” and “other than serious” violations would increase from $7,000 to $10,000.

Enhanced Criminal Penalties

President-elect Obama would like to amend the OSH Act to strengthen OSHA’s criminal penalties in order “to enable the Department of Justice to prosecute a felony when an employer willfully causes death or serious bodily injury to a worker.”  Currently, the OSH Act allows for companies’ management employees to be imprisoned for up to six months for a “willful” violation that results in the death of an employee.  President-elect Obama supports a drastic increase to the maximum prison term for such violations.  For example, the pending Protecting America’s Workers Act would increase the term of imprisonment for these violations to ten years.

Increase in Workplace Inspections 

President-elect Obama also wants to improve OSHA’s process of inspecting workplaces.  He will encourage Congress to provide OSHA with funding to hire additional enforcement personnel to increase the number of workplace inspections, including inspections against repeat offenders under the Enhanced Enforcement Program, which OSHA uses to target its enforcement activities on employers with prior citations that have arisen out of inspections involving workplace accidents or fatalities.

Wage and Hour Division

The Department of Labor’s Wage and Hour Division (WHD) is responsible for enforcing federal law on minimum wage, overtime pay, recordkeeping, family and medical leave and child labor.  Under the Obama administration, the WHD would likely be more aggressive in its enforcement actions.

In a July 27, 2008 letter to the Department of Labor, President-elect Obama set forth his vision for a WHD that listens to worker advocacy organizations and more actively initiates its own investigations.  President-elect Obama also indicated his desire to expand the scope of WHD’s activities, criticizing the Bush administration’s emphasis on only four industries (agriculture, accommodation and food services, manufacturing, and health care and social services).  He also indicated his desire to increase funding for the WHD in order to actualize the enhanced role he envisioned for it.  With the support of a Democratic Congress, the Obama administration could make this vision a reality.

In addition to increasing the role of WHD, President-elect Obama will also likely push for two wage and hour-related legislative initiatives: increasing the minimum wage and instituting paid sick leave.

Minimum Wage Increase

President-elect Obama has written that “[e]ven though the minimum wage will rise to $7.25 an hour by 2009, the minimum wage’s real purchasing power will still be below what it was in 1968.”  Consequently, he wants to further raise the minimum wage to $9.50 an hour by 2011.  In addition to raising the minimum wage, President-elect Obama endorses a “living wage” where the minimum wage would be indexed to inflation.  Under a “living wage” paradigm, the minimum wage could then rise without subsequent Congressional action.

Paid Sick Days

Under the Family Medical Leave Act, employers are required to give employees up to 12 weeks of unpaid leave to deal with serious health conditions.  As a senator, President-elect Obama cosponsored the Healthy Families Act (H.R. 1542, S. 910), which would amend the FMLA to require employers to provide 7 days of paid sick leave for full-time employees (30 hours or more) and pro-rated paid sickleave for part-time employees.

Equal Employment Opportunity Commission

Under the Obama administration, the Equal Employment Opportunity Commission (EEOC) may affect employers in at least four ways: (1) increasing employer recordkeeping obligations, (2) adopting employee-friendly policies through interpretive guidance or litigation positions, (3) engaging in agency rulemaking and (4) increasing the focus on its “Systemic Initiative” for developing high-impact cases that identify systemic discrimination.

Expansion of Recordkeeping Obligations

Most employers are required to submit an Employer Information Report (EEO-1) to the EEOC on an annual basis.  The EEOC uses the data to support civil rights enforcement and to analyze employment patterns, such as the representation of female and minority workers within companies, industries or regions.  In 2003, the EEOC proposed revisions to the racial and ethnic reporting requirements, including expansion from five to seven identification categories.  Approved by the Office of Management and Budget (OMB) and made effective with the September 2007 reporting cycle, the EEO-1 form now requires an employer to provide race and ethnic information for the following categories:  White (not Hispanic or Latino), Hispanic or Latino, Black or African-American (not Hispanic or Latino), Native Hawaiian or other Pacific Islander (not Hispanic or Latino), Asian (not Hispanic or Latino), American Indian or Alaska Native (not Hispanic or Latino); and Two or More Races (not Hispanic or Latino).

The Two or More Races category, however, does not conform to OMB’s 1997 Standards for the Classification of Federal Data on Race and Ethnicity, which states that multirace responses should take the form of multiple responses rather than a multiracial category.  The EEOC may revisit the multiracial category issue in the coming months, as the EEO-1 form is scheduled for reauthorization by OMB in January 2010.  In addition, it is possible that OMB and the EEOC may seek to include additional ethnic categories.  Any change in the EEO-1 form or information collection processes would likely increase the recordkeeping burden on employers, who only recently adapted to the revised EEO-1 form.

The recordkeeping requirements with regard to Internet job applicants is another area where the burden on employers may be increased during the Obama administration.  The EEOC’s current guidance on employer obligations to retain applicant flow data and validation studies is contained in the Uniform Guidelines on Employee Selection Processes (UGESP), a 30-year old rule jointly issued with several other agencies, including the Office of Federal Contract Compliance (OFCCP), Department of Justice, and Office of Personnel Management.  In 2001, these agencies began considering whether additional recordkeeping guidance was needed in light of the growth of the Internet as a job search mechanism.  Although the agencies published a joint proposal in 2004 consisting of five draft questions and answers, the proposal was never finalized due to lack of consensus among the agencies.  In 2005, the OFCCP on its own published a final rule that addressed recordkeeping by federal contractors and subcontractors about the Internet hiring process and the solicitation of race, gender and ethnicity information from Internet applicants.

In March 2008, the EEOC took steps to ensure that the UGESP remained in effect through 2011.  However, Democratic Commissioners Stuart Ishimaru and Christine Griffin have both indicated their interest in having the EEOC address the Internet applicant issue on its own in the near future and expressed that the standards adopted by the OFCCP may not suffice for EEOC’s purposes, potentially putting employers in the difficult position-in which they are now with the Family and Medical Leave Act and the Americans with Disabilities Act-of having to comply with two overlapping standards that are either conflicting, inconsistent or, at least, inconsistently interpreted by different enforcement agencies.  As an example of the gap between agency rules, while the OFCCP rule addresses mining of databases (e.g., that of monster.com) for candidates, the UGESP rule probably does not reach so far.

Adoption of Employee-Friendly Policies and Litigation Positions

The EEOC has responsibility for interpreting and enforcing Title VII, the Americans with Disabilities Act, and certain other employee rights statutes.  In this role, the EEOC offers subregulatory guidance in such forms as the Compliance Manual, Enforcement Guidance and Policy Guidance documents, and takes policy positions in litigation through amicus briefs.  During the Bush administration, the EEOC has taken some aggressive positions in litigation, such as challenging releases as per se retaliatory, filing a pattern or practice suit for a retaliation claim, and espousing a new theory of “anticipatory retaliation” in the arbitration and retaliation context.  Under the Obama administration, the agency may expand litigation against employers who conduct pre-hire background investigations.  In addition, the EEOC may pursue more expansive retaliation claims, such as attacking no-rehire clauses as per se retaliatory.  Furthermore, in a more aggressive EEOC, the field offices may be subject to less oversight on their litigation decisions.

We have identified at least three specific areas that may be of interest to employers during the Obama administration: (1) discrimination based on caregiver status, (2) consideration of conviction records, and (3) use of credit checks.

In May 2007, the EEOC issued Enforcement Guidance regarding the circumstances under which discrimination against individuals with caregiving responsiblities for children, the elderly and individuals with disabilities might constitute unlawful disparate treatment.  The EEOC noted that caregiving responsibilities for children and the elderly disproportionately affect working women, and that their effects may be even more pronounced among some women of color.  The EEOC advised that employment decisions based on sex-based stereotyping about caregiving responsibilities violated Title VII.

On May 2, 2008, in Chadwick v. Wellpoint, Inc., No. 07-70-P-H (D. Maine), a District Court granted summary judgment to an employer who had allegedly denied a woman a promotion in favor of another lesser qualified woman based on the plaintiff’s parental caregiving obligations.  The court concluded that the plaintiff did not have sufficient evidence from which a jury could conclude that her supervisors considered her caregiving role as a female in their decision not to promote her.  Under the Obama administration, the EEOC may take the litigation position that, because women are overwhelmingly the primary caregivers for children, a decision with respect to a woman based on her caregiving status is evidence of unlawful sex stereotyping sufficient to defeat summary judgment.

The EEOC is presently examining two issues of importance to employers during the hiring process.  Employee advocates have challenged the use of conviction records and credit checks during the hiring process on the theory that such practices have a disparate impact upon minorities.  The EEOC has long taken the position that an employer may only disqualify an applicant or employee based on previous convictions if it takes into account the nature and gravity of the offenses, the time that has passed since the convictions or completion of the sentence and the nature of the job sought or held.  However, in El v. Southeast Pennsylvania Transport Authority, 479 F. 3d 232 (3d Cir. 2007), the Third Circuit declined to give the EEOC’s guidance deference because it had not substantively analyzed the statute in issuing its guidance and then found that the employer’s bright line policy did not violate Title VII.  During the Obama administration, the EEOC may issue guidance that makes it more difficult to use conviction records and credit checks as screening devices in employment decisions.

Rulemaking

In its rulemaking capacity, the EEOC can impact how an employer must implement new employment laws.  For instance, the recently passed ADA Amendments Act and the Genetic Non-Discrimination Act both require the EEOC to issue implementing regulations.

The ADA Amendments Act, which becomes effective on January 1, 2009, altered the definition of “disability” by rejecting certain Supreme Court decisions and portions of the EEOC’s ADA regulation.  While the legislation retains the basic definition of a disability as an impairment that substantially limits one or major life activities, the statute expressly directs the EEOC to revise the portion of regulations that defines “substantially limits.”  Although one would reasonably expect that the EEOC will issue some regulation by the end of the year to avoid having no position on the new definition, this definition may be further revised once the Democrats control the Commission.  Congress also directed the EEOC to issue, by May 2009, a final rule implementing the Genetic Information Non-Discrimination Act, which becomes effective in November 2009.

In March 2008, the EEOC published a notice of proposed rulemaking to address issues related to the Supreme Court’s ruling that disparate impact claims are cognizable under the Age Discrimination in Employment Act (ADEA).  That liability is precluded, however, when the impact is attributable to a “reasonable factor other than age,” a different and lower standard than the job-relatedness and business necessity test used in, for example, Title VII cases.  In its notice, the EEOC invited comments on whether it should issue regulations to provide more information on the meaning of “reasonable factors other than age.”  The EEOC has not issued any guidance, but in Meacham v. Knolls Atomic Power Laboratory, a case decided by the Supreme Court in June 2008, the EEOC took the position in an amicus brief that the “reasonable factor other than age” standard should be that “the challenged employment practice was reasonably designed to further or achieve an important and legitimate business purpose and was administered in a way that reasonably advances that purpose.”  Although the EEOC acknowledged that the reasonable factors test provides “narrower” disparate impact coverage for claims based on age than Title VII provides for claims based on race or sex, it nevertheless contended that its proposed reasonable factors standard is similar to the articulation of the business necessity standard in Wards Cove Packing Co. v. Atonio.

Finally, a Democrat-controlled EEOC may also revisit its December 2007 final rule under which it exempted from coverage of the ADEA the practice of altering, reducing or eliminating employer-sponsored retiree health benefits when retirees become eligible for Medicare or comparable state retiree health benefits.  Commissioner Ishimaru voted against the rule.

Expansion of  the Systemic Initiative

In 2005, the EEOC established its Systemic Task Force, which was charged with reassessing how the EEOC addresses systemic discrimination.  Systemic cases were defined as “pattern or practice, policy and/or class cases where the alleged discrimination has a broad impact on an industry, profession, company, or geographic location.”  Although the EEOC reiterated its belief in the value of the Systemic Initiative earlier this year, the scope of the initiative is limited in part by the funding of the agency.  If the Democratic Congress expands the commission’s resources as part of its overall agenda to expand and enforce the nation’s anti-discrimination employment laws, there will likely be an increased emphasis on the Systemic Initiative.

*   *   *

In our next installment, we will focus on changes in traditional labor law which may occur at the agency level in the Obama administration, either through new DOL regulation or NLRB decisions.