Not So Fast! Texas Court Orders Nationwide Halt to New Overtime Rule

In a month filled with unpredictability and unforeseen surprises, a federal judge in Texas has just issued another shocker that creates substantial uncertainty as to whether and when the United States Department of Labor’s (“DOL”) new Overtime Rule may go into effect.  On November 22, 2016, U.S. District Judge Amos Mazzant III issued a nationwide preliminary injunction temporarily blocking the new Rule from taking effect on December 1, 2016.  As highlighted in our September 22, 2016 post, a coalition of 21 states and a separate group of more than 50 chambers of commerce and other trade associations filed separate lawsuits in the Eastern District of Texas seeking to prevent the Obama administration from implementing the Overtime Rule.  Focusing on the anticipated economic harm to businesses of all sizes and states in their capacity as government employers, both lawsuits sought declarations that the DOL unlawfully exceeded its statutory authority in promulgating the new Rule, which, among other things, called for increasing the annual salary threshold for exempt employees from $23,660 to $47,476, thereby making an estimated additional 4.2 million U.S. workers eligible to receive overtime.  Both lawsuits sought injunctive relief to prevent the Rule from taking effect on December 1.

Defying the general consensus that the two lawsuits had little chance of succeeding, Judge Mazzant issued the injunction, finding in part that Congress never intended that the “white collar” exemptions set forth in the Fair Labor Standards Act included a minimum salary requirement, but instead depended on the duties performed by the particular employee. Judge Mazzant has now put the Overtime Rule on ice, prohibiting the DOL from “implementing and enforcing” it. A copy of the decision can be found here.

In response to the decision, the DOL issued the following statement:

We strongly disagree with the decision by the court, which has the effect of delaying a fair day’s pay for a long day’s work for millions of hardworking Americans. The department’s overtime rule is the result of a comprehensive, inclusive rulemaking process, and we remain confident in the legality of all aspects of the rule. We are currently considering all of our legal options.

While the DOL says it is still considering all of its options, it almost certainly will appeal Judge Mazzant’s decision to the Fifth Circuit. However, an appellate decision may not be handed down before December 1st. This timing does little to provide answers to employers, who are now thrown into a zone of uncertainty. For those employers that have already restructured their compensation systems to comply with the new Rule––and communicated such changes to their employees––it may not be feasible or make business sense to press the “re-set” button and return to their previous systems. Employers that have not yet made changes may decide to maintain the status quo pending a final decision on this issue, which may mean waiting for the Supreme Court to make the ultimate decision. Of course, how this all plays out under the new Administration and the Republican-controlled Congress remains to be seen.

Beck Reed Riden LLP is Boston’s innovative litigation boutique. Our lawyers have years of experience at large law firms, working with clients ranging from Fortune 500 companies to start-ups and individuals. We focus on business litigation and labor and employment. We are experienced litigators and counselors, helping our clients as business partners to resolve issues and develop strategies that best meet our clients’ legal and business needs – before, during, and after litigation. We’re ready to roll up our sleeves and help you. Read more about us, the types of matters we handle, and what we can do for you here.

Massachusetts Salutes Veterans With New Paid Leave Law

On July 14, 2016, Massachusetts Governor Charlie Baker signed into law An Act Relative to Housing, Operations, Military Service, and Enrichment (“the HOME Act”) which, among other things, requires employers with 50 or more employees to provide paid leave for eligible military veterans to participate in community activities on Veterans Day. With Veterans Day (November 11) right around the corner, Massachusetts employers should ensure that their handbooks, policies, and practices are in compliance with the new leave requirements.

Prior to July 14, 2016, Massachusetts employers of all sizes were required to provide leave, paid or unpaid at the employer’s discretion, to military veterans to participate in Veterans Day or Memorial Day exercises, parades, or services. Now, under the HOME Act, employers with 50 or more employees must provide paid leave to veterans consisting of “sufficient time to participate in” Veterans Day events held in the veteran’s community of residence. Smaller employers (with fewer than 50 employees) must also provide leave for Veterans Day activities, but paying for the leave remains discretionary.

Employers are not required to provide such leave where a veteran provides services that “are essential and critical to the public health or safety and determined to be essential to the safety and security of each such employer or property thereof.”

The HOME Act also amended Mass. Gen Laws ch. 151B(4), the Massachusetts Fair Employment Practices Act, to add veteran status as a protected category, making it unlawful for Massachusetts employers to discriminate against individuals based on veteran status in hiring, firing, or compensation decisions.

Please do not hesitate to contact the employment attorneys at Beck Reed Riden for assistance in complying with the HOME Act.

Two Lawsuits Challenge New DOL Overtime Rule

Four months after being formally announced on May 18, 2016, and a little more than two months before it is scheduled to become effective on December 1, 2016, the United States Department of Labor’s (“DOL”) new Overtime Rule has come under a two-pronged attack in federal lawsuits filed in the Eastern District of Texas. A coalition of 21 states and a separate group of more than 50 chambers of commerce and other trade associations filed separate lawsuits on September 20, 2016 seeking to prevent the Obama administration from implementing the Overtime Rule.

As previously noted on this site, the new Overtime Rule increases the annual salary threshold for exempt employees from $23,660 to $47,476. This means that employees who perform duties that otherwise make them exempt from overtime under the “white collar” exemptions set out in the Fair Labor Standards Act, but who earn less than $47,476 per year (or $913 per week), must be paid one-and-a-half times their regular hourly rate for all hours worked beyond 40 in a work week. The new Rule also increases the annual salary threshold for “highly compensated employees” from $100,000 to $134,004. Lastly, it calls for automatically increasing these salary thresholds every three years, beginning on January 1, 2020. The DOL has estimated that under the new Rule, an additional 4.2 million workers in the United States will be eligible to receive overtime – amounting to $1.2 billion in increased wages – in the first year.

Focusing on the anticipated economic harm to businesses of all sizes and to states in their capacity as government employers, both lawsuits seek declarations that the DOL unlawfully exceeded its statutory authority in promulgating the new Rule and injunctive relief to prevent the Rule from going into effect on December 1.

The Eastern District of Texas is known to have a “rocket docket,” processing cases at a rapid pace. However, employers should not sit on their hands in the hope that the judge (who is presiding over both cases), rules in the plaintiffs’ favor before December 1. Unless and until Congress or a court determines that the new Overtime Rule should not become effective in its current form, employers should continue to work toward complying with the new Rule by the December 1 deadline.

Please feel free to contact any of Beck Reed Riden LLP’s employment attorneys with questions regarding this issue.

Massachusetts Governor Signs New Pay Equity Bill Into Law

On August 1, 2016, Massachusetts Governor Charlie Baker signed into law a bill replacing the state’s existing Equal Pay Act (M.G.L. c. 149, § 105A), which was first enacted in 1945. The new Act clarifies the concept of “comparable work” and expressly prohibits employer conduct that – intentionally or unintentionally – has historically contributed to the wage gap between male and female employees.

The new Act prohibits all employers from discriminating “on the basis of gender in the payment of wages, including benefits or other compensation, or pay[ing] a person a salary or wage rate less than the rates paid to employees of a different gender for comparable work.” The new Act clarifies the concept of “comparable work” by defining it as “work that is substantially similar in that it requires substantially similar skill, effort and responsibility and is performed under similar working conditions.” An employee’s job title or job description, by itself, will not determine comparability. Variations in compensation and benefits are not prohibited if based upon a bona fide seniority or merit system; a system under which earnings are measured by quantity or quality of production or sales; geographic location; education, training, or experience, provided such factors are reasonably related to the job and consistent with business necessity; or travel, if the travel is a regular and necessary condition of the particular job.

The new Act also expressly prohibits employers from engaging in the following:

  • Forbidding employees from inquiring about, discussing, or disclosing information about either their own compensation and benefits or those of other employees (already prohibited under the National Labor Relations Act);
  • Screening applicants based on their compensation and benefits or salary histories, including by requiring that an applicant’s prior compensation and benefits or salary history meet minimum or maximum criteria;
  • Requesting or requiring an applicant to disclose prior wages or salary history;
  • Seeking an applicant’s salary history from a current or former employer before making a job offer and without the applicant’s written authorization; and
  • Retaliating against an employee for opposing any act prohibited under the new law or participating in any action to enforce rights under the law.

The new Act also broadens the remedies available to aggrieved employees. It increases the statute of limitations from one year to three and creates a continuing violation provision under which a new limitations period will be triggered each time an employee is paid in violation of the law (similar to the federal Lilly Ledbetter Fair Pay Act of 2009). Employees may file an action directly in court, without having to first file with the Massachusetts Commission Against Discrimination or the Attorney General’s Office. Employers found to be in violation of the new law are automatically liable for double damages and reasonable attorneys’ fees. The Attorney General may also bring an action on behalf of one or more aggrieved employees.

Finally, the new Act creates an affirmative defense for an employer who, within three years of the commencement of an action, has completed a good faith self-evaluation of its pay practices and can demonstrate that reasonable progress has been made towards eliminating gender-based pay differentials in accordance with such evaluation. An employer may design its own self-evaluation as long as it is reasonable in detail and scope in light of the employer’s size. Employers may also utilize templates and forms to be issued by the Attorney General’s Office.

The new Act does not become effective until July 1, 2018. This gives employers plenty of time to review their current pay practices and make any changes necessary to comply with the new statutory requirements. Beck Reed Riden’s experienced employment lawyers are available to assist employers with this task.

DOL Issues Revised Overtime Regulations

The moment employers have anxiously anticipated for months is here. This morning (May 18, 2016), President Obama and United States Department of Labor (DOL) Secretary Tom Perez announced the publication of the DOL’s long-awaited revised federal overtime regulations. The DOL has highlighted the following key aspects of the revised regulations:

  1. The standard salary level for the Executive, Administrative, and Professional exemptions will increase from $23,660 to $47,476 per year. While this new level is lower than the originally anticipated $50,440, the increase nonetheless effectively doubles the previous salary threshold and will have a significant impact on employers’ exempt workforces. Indeed, the DOL estimates that the new salary level will make 4.2 million employees newly eligible for overtime pay.
  1. Employers will be able to satisfy up to 10% of the standard salary level through nondiscretionary bonuses and incentive payments including commissions, as long as such payments are made in accordance with the new regulations. Many employers have commissioned workforces and this provision could help them to cushion, albeit minimally, the impact of the increased salary level.
  1. The total annual compensation required for an employee to be considered exempt as a Highly Compensated Employee, will increase from $100,000 to $134,004.
  1. The revised regulations also contain a mechanism by which these salary and compensation levels will automatically update every three years beginning on January 1, 2020.
  1. Although many sources had anticipated that employers would be provided with only a 60 or 90-day compliance period, the effective date is not until December 1, 2016. This effective date provides employers with significantly more time than originally expected to bring their pay practices into compliance.

Given these changes, employers have approximately six months to analyze their exempt workforces and determine how best to comply with the new revisions. Initial guidance for employers from the DOL is available here. This will undoubtedly be a labor-intensive process that will require significant changes for many employers. We at BRR look forward to working with you on these issues in the coming months.

Thanks to my colleagues Nicole Daly and Shannon Lynch for putting this post together!

DOL Proposes Revisions to White-Collar Overtime Exemptions

The U.S. Department of Labor (the “DOL”) has issued a “Notice of Proposed Rulemaking” (“NPRM”) aimed at increasing the number of white-collar employees eligible for minimum wage and overtime pay protections under the Fair Labor Standards Act (the “FLSA”).

The FLSA guarantees a minimum wage and overtime pay at a rate of not less than one and one-half times the employee’s regular rate for hours worked over 40 in a work week unless an employee falls under a statutory exemption. For an employee to be classified under one of the so-called “white-collar exemptions” (executive, administrative, or professional), the employee must meet certain minimum tests related to his or her primary job duties and be paid on a salary basis at not less than a specified minimum amount.

Under the NPRM, the salary threshold for a full-time, salaried employee to be classified as exempt from the overtime laws would be increased from $455 per week (or $23,660 annually) to $970 per week (or $50,440 annually). These proposed figures would set the standard salary level at the 40th percentile of weekly earnings for full-time, salaried employees. Additionally, the DOL proposes to increase the annual salary requirement for the highly compensated employee exemption (which applies to employees who customarily perform one or more of the exempt duties of an executive, administrative, or professional employee) from $100,000 annually to $122,148 annually. The DOL has updated the salary-threshold requirements seven times since 1938, most recently in 2004. The NPRM also creates a mechanism to automatically update the salary-threshold levels annually in the future.

The DOL predicts that, if finalized, the NPRM will extend overtime coverage to an additional five million Americans. The NPRM is subject to a 60-day public comment period. Subsequently, the DOL will issue a Final Rule, which will be reviewed, before publication. While a Final Rule is not expected before 2016, it is not too soon for businesses to start thinking about how to address these likely changes in their policies and practices.

A fact sheet describing the proposed rule may be found on the Department of Labor Website or here. A complete copy of the proposed rules is available here.

Massachusetts AG Issues Long-Awaited Final Earned Sick Time Regulations

Last November, Massachusetts voters approved Ballot Question Four, which amends the Massachusetts Wage Act and creates new mandatory sick time for Massachusetts employees beginning July 1, 2015. Under the new law, private employers must allow their Massachusetts employees to earn and use up to 40 hours of sick time per calendar year. Whether the sick leave is paid or unpaid depends on the size of the employer. Employers with 11 or more employees must provide paid sick leave, while employers with ten or fewer employees must provide unpaid sick leave.

Final Earned Sick Time Regulations

On June 19, 2015, the Massachusetts Attorney General issued the long-awaited Final Earned Sick Time Regulations, 940 CMR 33.00 et seq., which can be accessed here.

The Final Regulations contain a number of revisions and clarifications of earlier proposed versions, including:

  • Employers may require employees to use earned paid sick time to receive pay when taking other authorized leave that would otherwise be unpaid, such as FMLA leave or Massachusetts Parental Leave.
  • Employees can use earned sick time for travel to and from an appointment, a pharmacy, or other location related to the purpose for which the time was taken.
  • Further clarification on breaks in service relative to the use of accrued sick time and vesting periods.
  • The circumstances under which an employer can require documentation in support of an employee’s use of earned sick time have been expanded. For example, an employer can require documentation if an employee takes earned sick time within 2 weeks of the employee’s last day of employment.
  • Employees must submit requested documentation related to the use of earned sick time within 7 days after the earned sick time is taken, unless they demonstrate good cause for not doing so. (The earlier proposed regulations had a 30-day timeframe for producing documentation.)
  • If an employee fails to provide the required documentation related to the use of earned sick time without reasonable justification, the employer may recoup the earned sick time paid to the employee from future pay, as an overpayment. However, employers must put employees on notice of this practice.

Safe Harbor for Employees with Existing Paid Time Off Policies

The Attorney General has created a “Safe Harbor” for qualifying employers to help them comply with the new law. Under the Safe Harbor provision, employers with a paid time-off or sick leave policy that has been in existence since at least May 1, 2015 do not have to implement a new sick time policy, provided the existing policy provides for sick time comparable to that required under the new law. Employers that qualify under the Safe Harbor have until January 1, 2016 to bring their PTO/sick time policies into full compliance with the earned sick time law. In addition to the Final Regulations, information about the Safe Harbor can be found here.

Notice Obligations

On or before July 1, employers are required to post the Attorney General’s notice regarding Earned Sick Time in a conspicuous place accessible to employees in every location where eligible employees work. The required notice can be accessed here. Employers are also required to provide a hard copy or electronic copy of this notice to all eligible employees or include the employer’s earned sick time policy in any employee handbook.

Next Steps

  1. No later than July 1, 2015, employers should determine whether they can rely on the Safe Harbor through December 31, 2015, or whether they need to update their paid time off policies. Employers that qualify for the Safe Harbor need to ensure that their paid time off policies are fully compliant with the Earned Sick Time Law by January 1, 2016.
  1. No later than July 1, 2015, employers should post the AG’s workplace notice and either distribute copies of the notice or include their relevant paid time off policies in their employee handbook.
  1. Employers need to ensure that their revised paid time off policies are consistent with their related policies including, but not limited to, attendance, tardiness, and call-in procedures.

The attorneys at Beck Reed Riden are available to assist businesses in complying with the new Earned Sick Time Law.

Authored by Shannon Lynch.