Last week the Illinois Senate moved forward with Governor Pritzker’s priority to increase the minimum wage to $15/hour by 2025. Read more about it here. We’ll keep you posted as this effort moves forward….
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Last week, the Department of Labor (DOL) issued a news release stating that going forward, it will use the seven-factor “primary beneficiary” test — set forth by the 2nd Circuit and applied by other Circuits — to determine whether interns working at for-profit employers are employees under the Fair Labor Standards Act (FLSA), expressly rejecting its previous test from 2010.
The “primary beneficiary” test that will now be applied by the DOL analyses the following seven, non-exhaustive factors:
- The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa.
- The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands‐on training provided by educational institutions.
- The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
- The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
- The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
- The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
- The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.
The DOL noted that this new test will be applied in a “flexible” manner, and that whether an intern qualifies as an employee under the FLSA depends on the unique circumstances of each case.
It is widely agreed that the primary beneficiary test is easier for companies to satisfy than the DOL’s prior test, but it’s too early to tell how much of an impact this change will be. If you do have an internship program, it’s a great time to review intern classifications and make sure that they are being treated properly under employment laws.
In a very employer-friendly decision, the 7th Circuit Court of Appeals held that the Americans with Disabilities Act (ADA) does not give employees the right to take an extended leave of absence.
In Severson v. Heartland Woodcraft, Inc., the 7th court considered a discrimination claim brought by an employee who was fired when his 12 weeks of FMLA-protected leave for a pre-existing back condition expired and he was still unable to return to work. The employee claimed that his firing violated the Americans with ADA because the “at least two additional months” that he needed to recover from surgery after his FMLA leave ended was a “reasonable accommodation.” The 7th Circuit strongly disagreed, holding that the employee’s proposed accommodation of at least two additional months of leave was not reasonable. According to the Court, the ADA “is an anti-discrimination statute, not a medical leave entitlement.”
This ruling is contrary to the position taken by the Equal Employment Opportunity Commission (EEOC) that multi-month leaves of absences may be required under the ADA. According the EEOC, leave or extended leave as a job accommodation should be considered when a worker’s doctor is able to estimate a specific endpoint for the leave, the employee asks for the leave ahead of time, and the leave will likely enable the employee to fully perform the job afterward.
In light of the decision in Severson, employers (especially those in Illinois, Indiana and Wisconsin) can feel more comfortable refusing requests for multi-month and indefinite leave requests under the ADA. And while the language in Severson should apply to shorter leaves as well, its holding is limited to extended leaves, so employers still need to consider whether an employee’s request for a shorter leave (either after the expiration of an FMLA leave or if the employee did not qualify under the FMLA) would be a reasonable accommodation.
In a surprise ruling, a federal judge in Texas today issued a nationwide injunction preventing the new overtime rules issued by the Department of Labor from going into effect on December 1. Twenty-one states had filed suit against the U.S. Department Labor challenging the validity of the new rules. In granting the request for a preliminary injunction, U.S. District Judge Amos Mazzant decided that the states were likely to succeed in their challenge and that there would be irreparable harm if the rules were allowed to go into effect next month.
As discussed in prior posts, the rules would have implemented a new minimum salary threshold of $913/week for employees falling within the “white collar” exemption under the Fair Labor Standards Act.
Although it is clear that the rules will be delayed as a consequence of the ruling, it is not clear whether this delay will be measured in weeks or months. It also is possible that the injunction may lead the incoming Trump administration to roll the rules back in their entirety or to implement one of the compromise positions urged on the administration by business groups.
Until further action by the court or the Department of Labor, employers who have not yet taken steps to comply with the new overtime rules may want to put any contemplated changes on hold. We will provide further information about developments in this area as soon as they occur.
The new salary minimum for employees to be considered exempt under the White Collar exemptions becomes effective in just 7 business days. Companies that haven’t already taken steps to confirm compliance and plan for this change need to act quickly to meet this deadline. While litigation seeking to stop the regulations is still pending, it is likely that the regs will go into effect as scheduled on December 1st.
As we’ve previously reported, the new regulations more than double the salary minimum for the Executive, Professional and Administrative exemptions from $455/week ($23,660/year) to $913/week ($47,476/year). The new regulations also increase the minimum salary for the Highly Compensated Employee exemption (though employers should keep in mind that some state minimum wage laws, including Illinois’, don’t adopt the Highly Compensated Employee exemption).
Employers need to act now to confirm that all employees who are classified as exempt under the White Collar exemptions are paid at least the new salary minimum. Likewise, to the extent that the new regulations have led you to reassess other employees’ exempt status, it is important to act before they become effective.
We would be happy to answer any questions you might have regarding how employees are classified, the logistics of converting employees to non-exempt status and recording their time, and other related issues.
This week twenty-one states filed an emergency motion for a nationwide injunction to block the new overtime regulations that are set to go into effect on December 1st. However, as we’ve previously reported, the success of this and other efforts to stop or delay the regulations is far from clear. Unless and until one of these efforts is successful, companies should move forward with their planning and make sure that they are prepared to be in compliance on December 1st.
Each year, LP’s Labor & Employment Practice Group is pleased to provide a short checklist of steps that all companies should consider taking to measure their readiness for the coming year. We hope you find this 2016 Labor and Employment Law Checklist a helpful guide to best practices for the year ahead.
Look out for the new FLSA overtime regulations and prepare for them. The proposed Fair Labor Standards Act (FLSA) overtime regulations likely will be issued in late 2016. The new regulations will drastically increase minimum salary thresholds with annual increases after implementation. It’s possible that the final regulations also will include changes to the job duties tests. We expect that the new regulations will take effect 30 days after they are published. To prepare, check how many of your exempt-classified employees are paid a salary (or other guaranteed pay) of less than $52,000 per year and consider which of the two options for these employees – increasing salary or paying overtime – is the better solution for your business. Also consider whether you have any larger issues with how employees are classified, as the new regulations will provide a good opening for reclassification.
Carefully reconsider independent contractor relationships. The DOL recently warned employers that most workers qualify as employees under the FLSA – regardless of what the worker and the company may have agreed to. Other agencies, too, are coming after companies for improperly classifying workers as independent contractors when, under applicable legal standards, they should be treated as employees. The consequences of misclassification are steep, including damages and penalties under tax, wage and hour, and other employment laws. In addition, the Affordable Care Act exposes companies that misclassify workers to significant penalties based on failure to offer coverage to the required portion of the workforce and in situations where a misclassified worker obtains coverage on an exchange.
Consider instituting a formal policy on after-hours smartphone use. Does your team communicate with non-exempt employees after hours? If so, do you have a clear, formal policy on how after-hours smartphone use is handled (including any procedures to be followed by employees to report time spent after hours)? This type of policy can significantly improve your chances of employees bringing a wage claim.
Pay attention to staffing/temporary firm relationships. More and more companies are working with staffing firms to provide a flexible workforce. Unfortunately, the agreements between staffing companies and their clients often lack necessary protections, which could expose both parties to significant liability. Make sure your staffing contracts appropriately allocate responsibilities and risk, require compliance with laws, and provide the framework for the true partnership that is the hallmark of a successful staffing relationship.
Review unpaid internship programs. Unpaid internships were in the spotlight in 2015, and we expect that light to continue to shine in 2016. If you have unpaid interns, make sure that they qualify as “non-employees” under the test that applies in your state. If they don’t, they need to be paid at least minimum wage and overtime for hours over 40.
Understand the new NLRB “Quickie Election” rules and prepare for organization efforts. The NLRB’s new rules, which took effect on April 14, 2015, shorten the election process and reduce the types of challenges employers can make, giving the union an advantage in most elections. As soon as a representation petition is filed, there may be as few as 10 days until the election is held. Given this short time frame, it’s important that employers prepare for a union campaign before a petition is filed by keeping communication channels open with employees, making sure all employment policies and practices comply with the NLRA, considering possible unit determination issues, and providing periodic training for managers and supervisors on how to detect union “storm warnings.” Employers may also consider drafting a “war plan”—which may include campaign materials—that is ready to go as soon as a petition is filed.
Consider sexual orientation and gender identity as protected categories. The EEOC has taken the position that Title VII protects against discrimination based on sexual orientation and gender identity. And while that issue is currently before the courts, many states (including Illinois) separately prohibit discrimination on these grounds. To help guard against claims, include these classifications in your EEO and harassment policies and consider them just as you would other protected categories before taking any adverse employment action.
Understand new requirements for federal contractors and subcontractors. The minimum wage for employees of federal contractors and subcontractors increased to $10.15 in 2016. Prohibitions on discriminating against applicants and employees who discuss, disclose, or inquire about compensation (which is defined very broadly to include all types of pay and benefits) or based on sexual orientation or gender identity are now effective as well.
Make sure you are complying with new pay and benefit requirements. Chicago’s minimum wage is now $10/hr, as is the state-wide minimum wage in California, while the minimum wage in New York State increased to $9/hr and the minimum wage in the District of Columbia increased to $10.50/hr (and will increase again on July 1st to $11.50/hr). Equal pay requirements are also getting tighter, as the Illinois Equal Pay Act now applies to all employers, regardless of size (with increased penalties for violations), and New York and California have both implemented new, stricter prohibitions on pay discrimination. In addition, certain employers in New York City, San Francisco, and the District of Columbia are now required to provide transit benefit programs.
Ensure that sick leave laws are being followed. California, Connecticut, Massachusetts, Oregon, and the District of Columbia now require most employers to provide paid sick leave – though the specific requirements vary from state to state. Likewise, federal contractors and subcontractors will have to provide paid sick/family leave for contracts beginning in 2017.
For a PDF of this checklist, please click here.