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As this blog previously covered here and here, the United States Department of Labor under President Obama cracked down on misclassification of workers as independent contractors and broadly interpreted who was considered a “joint employer.” Today, new U.S. Secretary of Labor Alexander Acosta announced that the DOL would withdraw its previously-issued guidance from 2015 and 2016 on these topics. You can find the announcement here.

This should be welcome news for most companies as the previous guidance took an expansive view of when a worker is considered an “employee” (as opposed to an independent contractor) and when a company is considered an “employer” of a particular worker (particularly in the context of temporary hires and workers employed through staffing agencies). Interestingly, as you can see here, the DOL has removed the previous guidance from its website altogether.

However, it is important to note that the actual significance of this announcement is difficult to predict and remains to be seen. First, as the announcement makes clear, this is not really a change in the law per se because the guidance was only the DOL’s interpretation of the law. But, this announcement does signal that the DOL under Secretary Acosta will be taking a different approach to the concepts of joint employment and independent contractor classification. Second, it is unclear how this announcement affects the fact sheets and other DOL “guidance” on its website.

As to the issue of classifying a worker as an employee or an independent contractor, the FLSA (and the DOL’s interpretation of it) is only one of many things to consider. For instance, the Internal Revenue Service and the South Carolina courts have their own interpretation of what constitutes an “independent contractor,” and employers would be wise to tread carefully when making classification decisions as the penalties for misclassification can be steep.

As to the joint employment issue, the Fourth Circuit (which includes South Carolina) has developed its own test to determine when an entity is a joint employer for purposes of Title VII liability. The Fourth Circuit’s test is outlined in detail in this blog post and the announcement from the DOL will not impact this decision.

Since the election, employers have wondered what to expect from Donald Trump, particularly with significant changes like the new overtime rule that is now sitting in limbo. On December 8, 2016, Donald Trump named Andrew Puzder as his planned nominee for Secretary of Labor.  So, what does that mean?

In many ways, Puzder fits what one might expect as a Trump nominee. Puzder is a business man.  He has served as CEO of CKE Restaurants (the parent company of Hardee’s and Carl’s Jr) since 2000.  Before that he served as the company’s General Counsel.  Puzder’s track to CKE is somewhat interesting.  He practiced law as a commercial trial lawyer in St. Louis from 1978 through 1991, where he met Carl Karcher, the founder of CKE.  At the time, Karcher was experiencing significant financial issues and asked Puzder to be his personal attorney.  Puzder is credited with resolving these issues and allowing Karcher to retain a significant ownership interest in the company while also avoiding bankruptcy.  Puzder was named Executive Vice President and General Counsel for CKE in 1997, and CEO in 2000.  He is credited with turning around CKE.

Puzder has consistently voiced opposition to what he has called “overregulation” and the “regulatory burdens” of the Obama administration. For example, in writing on his blog about a recent speech, Puzder stated that President-elect Trump’s win can help change “the impact of overregulation on the restaurant industry, jobs, and the economy . . .”  He further wrote that “[i]n order to lower the burdens businesses face and to create strong economic growth, we need a new set of policies.”  Puzder specifically attacked “Obamacare” for its “increased labor costs for businesses.”[1]

Puzder has also opposed an increased minimum wage specifically, as well as the new overtime rule which more than doubled the salary level required to meet the FLSA’s executive, administrative, and professional exemption. In fact, on May 18, 2016, the day that the overtime rule was released, Puzder wrote an opinion in Forbes voicing his opposition. “This new rule will simply add to the extensive regulatory maze the Obama Administration has imposed on employers, forcing many to offset increased labor expense by cutting costs elsewhere.  In practice, this means reduced opportunities, bonuses, benefits, perks and promotions.”[2]

I personally saw Puzder speak in May 2014 at the DRI Retail and Hospitality Litigation and Claims Management Seminar. He spoke passionately about his frustrations over the regulation imposed by the Obama Administration.  His passion on the topic seemed to catch many in the audience off-guard.  Little did I know the man on stage would later be nominated as Secretary of Labor.  With Puzder at the helm of the DOL, employers can expect a much more pro-employer approach and that Puzder will work towards reducing the compliance costs incurred by employers.

[1] Available at http://andy.puzder.com/

[2] Andrew Puzder, “The Harsh Reality of Regulating Overtime Pay,” (May 18, 2016) (available at: http://www.forbes.com/sites/realspin/2016/05/18/the-harsh-reality-of-regulating-overtime-pay/#415bd30b2321).

Late Tuesday, November 22nd, a federal judge issued an order that effectively pauses the new “overtime rules” that had been scheduled to take effect December 1, 2016. The ruling enjoins the Department of Labor from implementing or enforcing the new “overtime rules” on a nationwide basis “pending further order” of the court. It is important to remember that the ruling is not final. Rather, it is a preliminary injunction that suspends the new rule during the litigation or further order form the court.

It is very likely that the rule will ultimately be enforced because its promulgation could be found to be within the Department of Labor’s authority granted to it by Congress when the Agency was created. For more on the power of administrative agencies, see this post. However, at least for the time being, employers are granted a reprieve from the new rule. Thus, employers may continue to follow the “old” rules for now if they choose. But, what should you do? This is a tougher question that will depend largely on your particular situation. There is no one-size-fits all approach. If you have not notified your employees of changes that will be made to their pay or their classification status, then you may wish to hold off on implementing any changes until further notice.

On the other hand, if you have already implemented changes to comply with the new rules, such as raising salaries to maintain exempt status, you should carefully consider whether it is prudent to leave those changes in place, despite this ruling. There are many factors that should be weighed, such as employee morale and South Carolina state law on providing notice of decreasing an employee’s pay. For those employees that have been reclassified as “non-exempt” you may want to continue classifying those employees as exempt for the time being.

After much anticipation (as discussed previously on our blog here), the final rule regarding the salary threshold for exempt executive, administrative, professional and outside sales and computer employees under the Fair Labor Standards Act was announced today.  The good news is that the rule does not go into effect until December 1, 2016, so employers have time to assess and comply.  The difficult news for employers is that the threshold, while slightly lower than originally anticipated, is still more than double the previous salary requirement for classifying employees as exempt.  The final rule also includes an automatic increase.

As of December 1, 2016:

  • Exempt employee salary level is $47,476 (current threshold is $23,660)
  • Total annual compensation level for highly compensated employees (HCEs) is $134,004 (current threshold is $100,000)
  • Salary level will automatically increase every three years based on the 40th percentile of the weekly earnings of full-time salaried workers in the lowest-wage Census region (the South) beginning January 1, 2020 (HCEs will also automatically increase based upon the 90th percentile of full-time salaried workers nationally)

The final rule does not include any changes to the duties tests for exempt employees. However, your salaried employees must meet the duties test and be paid at least the annual salary set by the new rule in order to be exempt from overtime regulations. More information on the final rule can be found at the Department of Labor’s website at https://www.dol.gov/whd/overtime/final2016/index.htm.

Employers must quickly review those employees classified as exempt and determine if a salary adjustment will be needed or if the salaried employee needs to be reclassified come December 1, 2016. Employers need to review their current policies regarding overtime, communicate changes effectively with their employees and properly train the non-exempt employees and their managers who will be affected by this new change.  Additionally, employers need to be prepared to handle the three-year automatic hike and consider changing annual reviews and compensation changes to be timed with the January 1st timeline.

On Monday of this week, the U.S. Department of Labor (“DOL”) took the next step in finalizing its proposed new overtime regulations by sending its final rule to the White House Office of Management and Budget (“OMB”) for review. [1]  This latest move from the DOL came earlier than anticipated and signals the DOL’s eagerness to finalize this rule prior to the November elections.

The OMB now has up to one hundred and twenty (120) days to review, but could finish its review early. This could mean a final rule as early as April or May. The final rule will be published in the Federal Register and take effect within sixty (60) days of publication. The SHRM announcement on this new development can be found here.

We will continue to provide updates on this important new regulation as they become available and urge employers to prepare now for the rule’s implementation.

[1] You can find our previous posts on this topic here and here.

As we move into the new year, it is a good time to review your employee handbook and make sure it is compliant with current law. Remember that your employee handbook can provide you with a guide for how to handle problems in the work place and is often your first line of defense if an employee or former employee claims you violated the law or that he or she has otherwise been treated unfairly.

Some of the most common problems I see in handbooks are the following:

1) Missing the at-will disclaimer unique to South Carolina

South Carolina does not have many state labor laws, but we do have a law requiring an at-will disclaimer in order for your handbook not to be considered an employment contract.  Without the specific disclaimer you are exposing the company to unintended promises. The required disclaimer language can look rather awkward, but the law requires it to be underlined, in all capital letters, on the first page of the handbook, and signed by the employee.

2) Unnecessary use of words like “shall” or “must” or “will”

Employers often limit the discretion they have to deal with employment-related situations by using definitive language like “shall”, “must” or “will.”  This is not advised, especially when it comes to disciplinary procedures.  Employers should leave themselves freedom to decide whether a particular offense warrants just a verbal warning or termination without being restricted by mandatory language or a progressive disciplinary scheme in the handbook.  Using the mandatory language can have a particularly unintended result if you do not have the necessary South Carolina at-will disclaimer on your handbook.

3) Overly broad confidentiality and social media policies

Last year, the National Labor Relations Board (NLRB) issued guidance on employee handbooks that took a very expansive view of language that is prohibited by the National Labor Relations Act (NLRA).  Even if you are not unionized, the NLRA still applies to your business and the NLRB can investigate and penalize you if you are unnecessarily restricting or prohibiting “protected concerted activity,” which includes an employee’s right to talk about your company’s working conditions and their wages.  29 U.S.C. § 157.  The NLRB’s 2015 guidance admonished any general or broad restrictions concerning confidentiality or social media policies.   Employers must engage in a careful balancing act in drafting these kinds of policies to make sure they are adequately protecting the reputation and confidential information of the business without inviting a complaint to the NLRB.

4) Limited discrimination and harassment policies

Employers often have a great harassment and discrimination policy but it is limited only to sexual harassment and sex discrimination. To comply with the law, your policy should embrace all forms of discrimination and harassment in the workplace.

5) Subjecting your business to employment laws that do not apply

Many employment laws do not apply until your company has a certain number of employees. For example, Title VII and the Americans with Disabilities Act only apply to business with 15 or more employees, and the Family Medical Leave Act applies only to business with 50 or more employees.  Referencing laws in your handbook that otherwise would not apply to you can make your company subject to all the regulations and enforcement actions that come with the law, creating unnecessary headaches for your business.

Check out more information to make sure your handbooks comply with current law here.

The White House, Equal Employment Opportunity Commission (“EEOC”), and Department of Labor (“DOL”) announced Friday, January 29, a new plan to address payment discrimination against women and minorities. Under the proposed plan, the federal government intends to collect pay data from employers with over one hundred employees.

The EEOC will collect the data by revising the Employer Information Report, EEO-1 form, a document filed by large companies (100 or more employees) that provides the federal government with workforce statistics broken down into categories of race, ethnicity, etc. The revised form will require companies to disclose pay ranges and hours worked.

According to the EEOC Press Release, “[t]he agencies would use this pay data to assess complaints of discrimination, focus agency investigations, and identify existing pay disparities that may warrant further examination.”[1]

The proposed rule will not go into effect until 2017, but South Carolina businesses and citizens have until April 1, 2016 to voice their comments. The full press release from the EEOC can be found here: http://www.eeoc.gov/eeoc/newsroom/release/1-29-16.cfm.

[1] http://www.eeoc.gov/eeoc/newsroom/release/1-29-16.cfm.

While employers continue to prepare for the Department of Labor’s proposed new overtime rules, the DOL’s Solicitor of Labor recently announced that the final regulations will not appear until “late in 2016.” While this gives employers more time to consider how they will handle the changes to the overtime rules, it could also mean a shorter window of time between publication of the final rule and the date which the rule becomes effective. The DOL received more than 290,000 comments to the proposed rule.

You can read more about the DOL’s informal announcement here: http://www.shrm.org/legalissues/federalresources/pages/late-release-overtime-rule.aspx.

In a recent opinion, the Fourth Circuit has definitively stated that its jurisdiction, which includes South Carolina, recognizes the “joint employer doctrine” in determining liability in Title VII employment discrimination disputes.  This means that multiple entities may be considered employers at the same time for purposes of Title VII.  (See Butler v. Drive Automotive Industries of America, Inc., U.S. Court of Appeals, Fourth Circuit, July 15, 2015.)

The concept of joint employers is not new in South Carolina where courts have considered it in a number of employment-related disputes.  However, in this case, the Fourth Circuit articulated a “hybrid test” that must be used when determining if an entity is a joint employer and, therefore, considered an employer for purposes of liability in Title VII employment discrimination cases.

In Butler, the employee wore a temp agency’s uniform, was paid by the temp agency, and the temp agency handled all discipline and termination of its employees.  PG EmploymentHowever, the company where the temp agency worker was placed supervised and controlled her day-to-day activities and had the power to tell the temp agency who to discipline or replace.  In her lawsuit against the company, the plaintiff alleged she had been sexually harassed by her supervisor at the company and, after she was fired, sued the temp agency and the company for employment discrimination.  After the parties agreed to dismiss the temp agency from the lawsuit, the company obtained an order from the district court in its favor, finding that it was not her joint employer.  The Fourth Circuit reversed that finding, and in so doing, articulated important factors all companies should be mindful of when dealing with workers that come from outside staffing agencies.

In applying the “hybrid test,” the court reiterated a number of times throughout its opinion that the amount of control an entity exercised over an employee was still the “principal guidepost” in determining its relationship with the employee.  However, it went on to specify “a new set of factors” that courts must consider in assessing whether an individual is jointly employed by two or more entities that may be liable for employment discrimination.  Those factors are as follows:

  1. authority to hire and fire the individual;
  2. day-to-day supervision of the individual, including employee discipline;
  3. whether the supposed employer furnishes equipment used and place of work;
  4. possession of and responsibility over the individual’s employment records, including payroll, insurance, and taxes;
  5. the length of time during which the individual has worked for the supposed employer;
  6. whether the supposed employer provides the individual with formal or informal training;
  7. whether the individual’s duties are akin to a regular employee’s duties;
  8. whether the individual is assigned solely to the supposed employer; and
  9. whether the individual and supposed employer intended to enter into an employment relationship.

A savvy employer will recognize similarities between these factors and those articulated by the courts and the Department of Labor to determine if workers are correctly classified as independent contractors.  The court’s decision is yet another reminder to employers in this state to be very careful of the potential liability they may have to workers in their company that come from outside third parties, like temp agencies.

tipThe plethora of litigation against restaurants for alleged improper tip practices continues.  Follow this link to see new litigation brought against a restaurant for requiring tipped employees to perform non-tipped work.

If a restaurant takes a tip credit, those employees who are paid pursuant to the tip credit cannot perform non-tipped work more than 20% of the time.   (The DOL has indicated that an employee’s status will be viewed on the basis of his activities over an entire workweek.  See DOL Opinion Letter, 1997 WL 998047 (Nov. 4, 1997).)  In other words, if a tipped employee is performing related duties not directed at tips, then the related duties can be compensated pursuant to the tip credit as long as those related duties only comprise 20% or less of the employee’s time.  No tip credit may be taken for time spent on unrelated duties, and a tipped employee must be paid full minimum wage for such duties.

For example, a waitress may be employed in a dual job.  If she customarily and regularly receives at least $30 a month in tips for her work as a waitress, then she is a tipped employee only with respect to employment as a waitress. While a tip credit can be taken for the time worked in the tipped position, she must be paid at least minimum wage for those hours spent working in the non-tipped position.  Such a situation is distinguishable from that of a waitress who spends part of her time cleaning and setting tables, toasting bread, making coffee and occasionally washing dishes or glasses. These are considered related duties in an occupation that is a tipped occupation even though they are not by themselves directed toward producing tips.

You can find helpful guidance on assessing and using tip credit here.