Law and the Workplace

Louisiana Minimum Wage Increase Fails in Senate

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On May 24, 2017, the Louisiana Senate Finance Committee voted 7-3 against Senate Bill No. 153, which aimed to increase the state minimum wage to $8.00 per hour in 2018 and to $8.50 per hour in 2019. The bill also would have required the state minimum wage to be raised to match any increase to the federal minimum wage, should it be raised above the state minimum. The Senate’s most recent rejection means Louisiana remains one of the 5 states without a state minimum wage law on the books and one of the 21 states that have not adopted state minimum wage requirements above the federal minimum of $7.25 per hour, which was last raised in 2009.

*Special thanks to Kyle Hansen, Summer Associate, for his assistance in preparing this post.

SCOTUS Denies Cert in Regular Rate Case; Ninth Circuit Decision Requiring Overtime on “Cash-in-Lieu” of Benefits Stands

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Even the Supreme Court doesn’t want to talk about the regular rate of pay.

The City of San Gabriel, California, provides a flexible benefits plan to its employees under which they receive a designated monetary amount to be used to purchase medical, vision, and dental benefits. Employees can decline to purchase medical benefits (say, because of coverage under a spouse’s plan), in which case they receive the balance of their unspent dollars in the form of a “cash-in-lieu” payment.  Based on § 207(e)(2) of the FLSA, which excludes from the overtime calculation “payments to an employee which are not made as compensation for his hours of employment,” the city did not factor such “cash-in-lieu” payments into its overtime pay calculations.  (Because the city pays the unused benefits directly to its employees and not to a trustee or third person, they cannot be excluded from the regular rate under FLSA § 207(e)(4).)

A group of police officers sued the city, alleging that the failure to include such payments in the overtime calculation amounted to a willful violation of the FLSA. The Court of Appeals for the Ninth Circuit affirmed the district court’s determination that the cash could not be excluded from the overtime calculation under § 207(e)(2), even though it was not specifically tied to the hours an employee works.  According to the Court of Appeals, § 207(e)(2), like other provisions in the FLSA, must be narrowly construed in the employees’ favor.

The Court of Appeals also rejected the city’s argument that liquidated damages were inappropriate and found the violation to be willful, supporting a longer statute of limitations. Under § 260 of the FLSA, if an employer shows that the act or omission giving rise to the violation was in good faith and that it had reasonable grounds for believing that it was not a violation, a court may decline to award liquidated damages.  Under its practice, San Gabriel’s payroll department consults its human resources department to determine whether or not a certain type of payment is includable in the overtime calculation.  Once a payment was classified in the payroll system as includable or not, the city conducts no further review of the designation, although the human resources department notifies the payroll department if it learns of new authority concerning the classification of a payment.  The Court of Appeals found these compliance efforts to be “paltry,” noting that an employer who “fail[s] to take the steps necessary to ensure its practices complied with [the FLSA]” and who “offers no evidence to show that it actively endeavored to ensure such compliance” has not satisfied the “heavy burden” to avoid a finding of willfulness under the statute.  The court remanded the case to the district court to enter judgment for the plaintiffs on liquidated damages.

On whether or not the city’s actions were “willful,” the Court of Appeals noted that the city was aware of its obligations under the FLSA and presented “no evidence of affirmative actions taken … to ensure that its classification of [such] payments complied with the FLSA.” Rejecting the city’s arguments that it had included other types of payments in the overtime calculation (demonstrating its good faith efforts at compliance) and that there was no authority in the circuit on whether “cash-in-lieu” payments must be included, the Court of Appeals observed that “only a small subset of FLSA violations would be considered willful if the existence of binding authority on the subject were our only consideration.”  (Under § 255 of the FLSA, willful violations carry a three-year statute of limitations, as opposed to the two-year statute of limitations for non-willful violations.)

The city filed a petition for certiorari, citing conflicting interpretations of § 207(e)(2) in the federal courts of appeal and arguing, among other things, that the Ninth Circuit misstated the “willfulness” standard under the FLSA. The Supreme Court denied the petition—in City of San Gabriel v. Flores, No. 16-911—on May 15, letting stand a troubling result for employers in California and elsewhere who provide “cash-in-lieu” of benefits payments without including such amounts in the overtime calculation.

New York Court of Appeals Clarifies Application of New York’s Criminal History Discrimination and “Aiding and Abetting” Provisions

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In Griffin v. Sirva, Inc., the New York Court of Appeals held that while only “employers” may be liable for criminal conviction history discrimination under Section 296(15) of the New York State Human Rights Law (“NYSHRL”), a covered employer may extend beyond a worker’s direct employer to also include entities that exercise “order and control” over the individual’s work. The court further held that the “aiding and abetting” provisions of the NYSHRL may apply to entities even where a direct or indirect employment relationship cannot be shown.

As we previously reported, the case involves two former employees who were terminated after past criminal convictions were discovered through a background check.  The former employees worked directly for Astro Moving and Storage Co., which in turn performed work for Allied Van Lines, Inc. pursuant to an agency contract.  The terminated employees filed suit under the NYSHRL, alleging that an Allied policy that disqualified employees or contractors convicted of certain felonies from performing jobs for Allied violated the NYSHRL because it did not take into account all the factors enumerated in Article 23-A of the New York Corrections Law, as is required under Section 296(15).  The plaintiffs sued both Astro and Allied (as well as Allied’s ultimate parent).

On appeal following a grant of summary judgment in favor of Allied and its parent, the Second Circuit certified three questions to the New York high court:

  1. Does Section 296(15) limit liability for unlawful denial of employment only to a worker’s “employer”?
  2. If so, what is the scope of the term “employer,” i.e., does the term extend beyond an employee’s “direct employer” to include those who exercise “a significant level of control over the discrimination policies and practices” of the direct employer?
  3. Does the “aiding and abetting” liability provision contained in Section 296(6) of the NYSHRL apply to Section 296(15), such that an out-of-state principal corporation that causes its New York State agent to discriminate unlawfully may be held liable?

The court answered the first question by holding that liability under Section 296(15) is limited only to an aggrieved party’s employer. The court relied on the fact that Section 296(15) imposes liability where there has been a violation of Article 23-A.  Article 23-A, in turn, specifies that it applies “to any application by any person for a license or employment at any public or private employer.”

The court began its discussion of the second question by noting that a variety of factors are relevant to the determination of whether “employer status” may be conferred on an entity that is not the aggrieved party’s direct employer. After examining definitions derived from various sources (including case law decided under Title VII), the court concluded that New York common law applies and that four factors are relevant, i.e., the alleged employer’s involvement in: (i) the selection and engagement of the servant; (ii) the payment of salary or wages; (iii) the power of dismissal; and (iv) the power of control of the servant’s conduct.  Of these factors, the “greatest emphasis [should be] placed on the alleged employer’s power to order and control the employee in his or her performance of work.”

The court also held that the “aiding and abetting” provision of Section 296(6) “extends liability to persons and entities beyond joint employers, and this provision should be construed broadly.” The court placed particular emphasis on the fact that Section 296(6) applies to any “person.”  Thus, “[u]nlike section 296(15), nothing in the statutory language or legislative history limits the reach of this provision to employers.”  The court went on to find that Section 296(6) “also applies to out-of-state defendants,” citing the NYSHRL’s extraterritoriality provision, which provides that the provisions of the law “shall apply . . . to an act committed outside this state against a resident of this state . . . if such act would constitute an unlawful discriminatory practice if committed within this state.”  The court noted that it has previously held that “[t]he obvious intent of the State Human Rights Law is to protect ‘inhabitants’ and persons ‘within’ the state . . . .”

In a dissent, Judge Jenny Rivera stated that “[t]he majority’s approach disregards the express statutory terms of the [NYS]HRL and the legislative mandate that it be construed liberally to achieve its remedial antidiscrimination purpose,” and that Section 296(15) on its own should be read broadly to impose liability on employers and non-employers alike when a violation is found.

Mayor Signs Into Law New York City Bill Restricting Employer Inquiries Into Applicants’ Salary History

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New York City Mayor Bill de Blasio has signed into law a bill that will make it unlawful for employers to inquire into or rely upon job applicants’ wage history during the hiring process, with limited exception.  The law will take effect on October 31, 2017.

As we previously reported, the law prohibits employers, employment agencies, and their agents from inquiring about an applicant’s salary history, and/or relying on an applicant’s salary history in determining the salary, benefits or other compensation for that applicant during the hiring process, including as part of the negotiation of a contract.

There are certain carve outs, however, including that employers may:

  • consider (as well as verify) salary information for the purpose of formulating salary, benefits and compensation where a prospective employee voluntarily and without prompting discloses his or her salary history; and
  • without inquiring about salary history, engage in discussion with an applicant about his or her expectations with respect to salary.

The law further will not apply in certain circumstances, including in the case of an internal transfer or promotion with a current employer or where disclosure or verification of salary history is required by law.

Employers should begin taking steps to inform their recruiters, hiring managers, human resources personnel, and others involved in the interview and hiring process of the new prohibition on salary history inquiries. Employers should further review their job applications and other hiring documents to ensure that prohibited salary inquiries are not included in these materials.

House Passes Private Sector “Comp Time” Bill, But Is It Practical For Employers?

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In the private sector, the ability of employers to offer “comp time” for nonexempt employees—future time off as a reward for working extra hours, in lieu of overtime pay—is quite limited.  To avoid having to pay for overtime work, the employer would generally have to ensure that the “comp time” is taken in the same workweek as the extra hours are worked.  For example, if an overtime-eligible employee who regularly works 8 hours a day Monday to Friday performs 12 hours of work on Monday and 8 hours of work Tuesday through Friday, the employee would normally be entitled to 4 hours of overtime pay for the week.  Under a “comp time” model, the employee could be given 4 hours of “comp time” on any other day that week, such that at the end of the week, the employee would only have worked 40 hours in total and therefore be owed no overtime pay under federal law.  But the employer could not offer “comp time” in a subsequent workweek to avoid paying for those 4 hours of overtime in the current workweek.

The House passed a bill on May 2 that would amend the Fair Labor Standards Act and change the private sector “comp time” rules.  The bill, called the “Working Families Flexibility Act of 2017” (H.R. 1180), would change these longstanding rules and allow for private sector “comp time” in limited circumstances.

Under the bill, an employee can choose to receive—in lieu of overtime pay—compensatory time off at a rate not less than one and one-half hours for each overtime hour worked.  The practice would only be allowable if the employee and employer entered into an agreement—before the performance of the overtime work—in which the employer has offered and the employee has chosen to receive “comp time” in lieu of overtime pay.  (If the employee is a member of a union, the union can agree to such a practice on behalf of its members.)  The agreement must be “knowingly and voluntarily” on the employee’s part, and could not be a condition of employment.

There are number of other rules and limitations in the bill:

  • “Comp time” would only be allowed for employees who have worked at least 1,000 hours for the employer during a period of continuous employment with the employer in the 12-month period before the date of agreement or receipt of “comp time.”
  • An employee cannot accrue not more than 160 hours of “comp time.”
  • An employee who has accrued “comp time” must be allowed to use such time within a reasonable period after requesting to do so, provided the time off does not “unduly disrupt the operations of the employer.”
  • An employee who has agreed to receive “comp time” can withdraw the agreement at any time.
  • Within 30 days of an employee’s request, the employer must cash out all accrued but unused “comp time.”
  • The employer can cash out an employee’s accrued but unused “comp time” in excess of 80 hours at any time, on 30 days’ notice to the employee.
  • On or before January 31 of each year, the employer must cash out any accrued but unused “comp time” from the prior year.  (The employer has the right to choose a different 12-month period—for example, its fiscal year—and cash out the unused “comp time” within 31 days after the end of such 12-month period.)
  • Upon termination of employment for any reason, an employee must be cashed out for accrued but unused “comp time.”
  • Except where a collective bargaining agreement provides otherwise, an employer that has adopted a policy offering “comp time” to employees can discontinue the policy on 30 days’ notice.

The bill prohibits an employer that offers “comp time” from directly or indirectly intimidating, threatening, or coercing (or attempting to intimidate, threaten, or coerce) any employee for the purpose of interfering with the employee’s right to request or not request “comp time” or requiring the employee to use accrued “comp time.”

Importantly, in any circumstance where “comp time” is cashed out, it must be paid at the higher of the “regular rate earned by such employee when the compensatory time was accrued” or “the regular rate earned by such employee at the time such employee received payment of such compensation.”  This creates the possibility that an employer is liable for more overtime pay than it would have owed had it not offered a “comp time” option in the first place—which many employers might view as problematic.

For example, an employee who receives a raise after accruing “comp time” and then requests payment for the accrued “comp time” would, under a plain reading of the bill, be entitled to a higher payment than she would have received had the employer simply paid her for her overtime hours when worked.  Similarly, an employee who requests and receives payment of accrued “comp time” during a week in which she receives commissions, weekly bonuses, shift differentials, or other compensation in addition to her base pay may well have a significantly higher regular rate than the week in which the “comp time” was earned.

The combination of an employee’s right to request payment of accrued “comp time” and the employer’s obligation to pay for that time at a potentially higher regular rate of pay than when it was earned would seem to make the arrangement unattractive for many employers.  Predictable payroll is a basic budgeting necessity for employers.  Especially for larger employers, the possibility of multiple employees requesting a payment within 30 days for up to 160 hours of accrued “comp time” would be very concerning.   For example, if 100 employees with 100 accrued hours of “comp time” earning $15 per hour each requested payment for accrued “comp time,” the employer would have to write a $225,000 check within 30 days.

Beyond this, it is unclear whether a “comp time” arrangement under the bill would satisfy state overtime requirements.  Employers generally must consider federal, state, and local laws with respect to minimum wage and overtime obligations, and the ability to substitute “comp time” for overtime pay under the FLSA may not necessarily discharge a state law obligation to provide an overtime payment.  If not, the bill is of limited utility to employers.

Finally, the administrative burden of tracking “comp time” for payroll purposes, and of paying it out when requested or otherwise when required, would seem considerable.

It is unclear whether the bill—which contains a sunset provision under which the law would expire within five years of enactment—will pass the Senate.  With only a slim Republican majority in the Senate and the reality that the bill may face some bipartisan opposition, the potential for defeat or a Democratic filibuster is significant.

Stay tuned to our Wage and Hour blog for further developments..

Immigration Fact and Fiction for the U.S. Employer: Is There a Future for H-1b Visa Holders After The President’s Executive Order of April 18, 2017?

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We commented on all those public announcements about H-1B’s in our blog of April 5, 2017, skeptical as to whether they indicated that the program would really be restructured. Then on April 18, the President issued his Executive Order: Buy American and Hire American.  The prior agency announcements coupled with this Executive Order have created a lot of confusion, misunderstanding, and fear, so much so, that many non-immigrants in the United States sincerely believe that their days in the United States are numbered.  In fact, this is not the case.  It is time to address how the state of affairs came to be and what the actual reality is.

Question: Announcements by government officials and reports in the press seem to indicate that the U.S. work visas, as we know them, particularly the H-1B visa are under attack and may soon be history.  Is this true?

Both supporters of the Administration, and its opponents will agree that a significant element of the announced initiatives is to disrupt the status quo and shake things up. Within the context of “legal immigration” there has been an attempt to draw attention to, and successfully so, to the issue of compliance with warnings not to abuse the system to the disadvantage of American Workers. To assure maximum impact as to these announcements, and statements, they were timed to correspond with the massive filing of new H-1B cases (cap cases) that takes place at the beginning of April every year.  However, the pre-existing process in place for selection of H-1 cap cases and their adjudication remained unchanged this year and, in fact, less petitions were filed. Accordingly, a higher percentage of beneficiaries will be selected for adjudication this year.  In a certain sense, “the disruption strategy” may have already been, from the perspective of the administration a success by discouraging petitioners from filing. But for those who participated, there is a better chance for success!

Question:  Isn’t true however that there have been a number of announcements as to enforcement initiatives with reference to H-1B petitions?  Isn’t this, a significant change?

In fact, the announcements made at the beginning of April by the Department of Justice, the Department of Homeland Security [United States Citizenship & Immigration Services], and the Department of Labor made no substantive changes in law, procedure, or process. The agencies publicized the importance of insuring that companies do not abuse the H-1B system by hiring foreign nationals to replace Americans and encouraged all parties to report any abuse that they see through a hotline or email addresses which were already in existence previously.

Question:  Didn’t USCIS, as an attack on the H-1 process, suspend “Premium Processing” [a procedure for expedited processing of H-1 petitions] at the beginning of March? 

In fact, this was a strictly operational decision which was being discussed at a management level within USCIS for many months to address problems with reference to workload capacity. USCIS reluctantly chose to forego millions of dollars in filing fees, concluding that they would not have the capacity to adjudicate all of those petitions within the 15-day time frame mandated by the “Premium Processing” program.

Question:  What about the President’s Executive Order on April 18, 2017?  Doesn’t it portend the end of H-1B visas, or at the very least, severe restrictions?

The Executive Order, in and of itself, makes no changes.  It does not suggest or mandate any changes to the actual statute governing H-1B classifications and the number of visas to be issued annually or to the provisions of law enacted under AC21 to allow for extensions of H-1 Classification while ‘permanent resident’ [green card] applications are ongoing.  It creates a mandate for the agencies to propose and draft regulations that will assure that the H-1 program is properly used to bring in workers who are truly needed, described in the Executive Order as the most skilled and/or highest-paid.

The relevant section of the Executive Order reads in its entirety as follows:

“Sec. 5.   Ensuring the Integrity of the Immigration System in Order to “Hire American.”  (a)  In order to advance the policy outlined in section 2(b) of this order, the Secretary of State, the Attorney General, the Secretary of Labor, and the Secretary of Homeland Security shall, as soon as practicable, and consistent with applicable law, propose new rules and issue new guidance, to supersede or revise previous rules and guidance if appropriate, to protect the interests of United States workers in the administration of our immigration system, including through the prevention of fraud or abuse.

(b)  In order to promote the proper functioning of the H-1B visa program, the Secretary of State, the Attorney General, the Secretary of Labor, and the Secretary of Homeland Security shall, as soon as practicable, suggest reforms to help ensure that H-1B visas are awarded to the most-skilled or highest-paid petition beneficiaries.”

Question:  Doesn’t the March 31, 2017 policy memorandum of USCIS  which clarified that “computer programmers” would not necessarily qualify as specialized knowledge employees eligible for H-1B classification without additional documentation as to the professional nature of their duties, reflect the beginning of an onslaught on substantive H-1 eligibility?

Not so. No doubt there is a heightened focus on the parameters of eligibility for H-1B classification in the current environment.  But the computer programmer job category requiring a modest skill set to qualify, has, within the hierarchy of IT positions  been troublesome to USCIS for a number of years and, while it might be disingenuous of USCIS to characterize the memorandum as simply a clarification while rescinding a previously issued and outdated policy, it does not represent radical change.

Question:  Doesn’t this policy memorandum indicate that entry level or junior positions may be challenged as qualifying for H-1B classification?

This may be so. It would be consistent with the intent reflected in the President’s Executive Order that highly skilled and well-paid professionals are more deserving of H-1B visa classifications.

Question:  Doesn’t this mean that current H-1B visa holders who were granted such status shortly after graduation transitioning from F-1 “optional practical training” are at risk?

Not likely. There is really no expectation whatsoever that individuals already  in  H-1 status will have their petitions “re-examined”.  When it comes time to apply for renewal or extension of H-1 classification, usually three years after they have already been engaged in their professional occupation, there will be adequate opportunity to document under whatever guidelines might be in place at that time that the beneficiary already employed for a number of years is clearly a functioning at a skill level or pay level that justifies renewal of H-1B classification.

Question:  So what is the take-away for current H-1B visa holders?

Although an atmosphere of concern and uncertainty has been created and is likely to continue, there is no reason to believe that current H-1B visa holders, including those who are in the middle of, or are, initiating a permanent resident [green card] process need have major concerns. Those already in this classification who are renewing after years of employment in H-1B capacity, should be able to establish eligibility on an on-going basis and will have significant notice before any changes are in place, as they will require regulatory changes.  Proposed regulations must be published in the federal register and an opportunity for comment provided before they are finalized.  The provision to allow for continued extensions of H-1 classification while a green card case is going on is statutory and not likely to change.

Question: Aren’t you being overly optimistic?  Are you saying things won’t be more difficult? 

Processing may very well be more difficult, as there will clearly be heightened scrutiny of petitions and applications and in all likelihood there will be a higher number of “requests for evidence” and more denials of marginal cases. In addition, the USCIS site visit program will be more focused as such visits will target petitions which have a higher indicator of abuse.  USCIS in its preliminary announcements suggests that there will be more site visits for H-1B dependent employers and for H-1B beneficiaries working at 3rd party sites.  However, this is not the death knell of the H-1B program and it is not the end for H-1B visa holders who seek to continue their employment in the United States and qualify for permanent residence here.

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