U.S. Department of Labor Overtime Exemptions Under the Fair Labor Standards Act

President Obama has directed the U.S. Department of Labor to "revamp its regulations to require overtime pay for several million additional fast-food managers, loan officers, computer technicians and others whom many businesses currently classify as 'executive or professional' employees to avoid paying them overtime." In particular, it appears that the minimum wage and minimum job responsibilities to meet the exemption tests may be changed as early as February of 2015.

Currently, managers/supervisors whose primary responsibility is managing a discreet unit of a company and who earn no less than $455/week are exempt. This translates to approximately $12/hour. It is expected that the minimum pay to qualify for an exemption may be significantly increased and that a new primary duty test would require that more than 50% of the employee’s work involve exempt activities.

Employers should prepare for the changes that are likely to come by conducting a Wage & Hour audit of their workforce and company policies. Such an audit should review payroll practices, and records of work hours, as well as the responsibilities and wages of all exempt employees. In addition, while this is being done it is advisable to review other wage and hour policies including payment of overtime, meal breaks, and vacation pay policies and procedures. The federal government is also considering “black listing” those employers who violate labor, wage and hour or discrimination laws to keep them from working on federal contracts. If the federal government is successful in creating such a black list, the state of Massachusetts will not be far behind in doing the same.

 

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EEOC Initiatives

A. Pregnancy Discrimination

The PDA (Pregnancy Discrimination Act) prohibits discrimination as the result of pregnancy, childbirth or related medical conditions. The ADA (Americans with Disabilities Act) prohibits discrimination on the basis of a disability. Impairments related to pregnancy may be disabilities under both the PDA and ADA if 1) they substantially limit one or more major life activities, 2) they substantially limited major life activities in the past, or 3) if pregnancy is perceived as a disability by the employer. Both Acts must be considered with pregnancy related issues. Employers are required to treat employees who fall under the ADA and PDA in the same way they treat non-pregnant employees/applicants or other employees who have a comparable ability or inability to work. It is also a violation of law to discriminate against someone who “has an association” with an individual with a disability. For example, discipline of a spouse/partner for taking time off for pregnancy related doctor’s appointments could violate both laws.

The PDA provides that women cannot be discriminated against because they are pregnant, were pregnant or intend/hope to become pregnant. Protection under the law extends to differing treatment of individuals which is based on fertility or childbearing capacity. Therefore, an employer cannot keep an employee from performing a job for fear that her fertility or fetus may be impaired by the job or exposure required by the job. An employer, however, may reassign a pregnant employee to alternative work based on concerns about her health or the health of her fetus if it can establish that non-pregnancy or non-fertility is a Bona Fide Occupational Qualification.

Pregnant women must be provided with the reasonable accommodations such as access to the same light duty positions that are offered to employees on Worker’s Compensation or employees who have other disabilities. Employers are not required to provide accommodations which create an “undue hardship” for the employer.

If leave is provided to women beyond the period of the pregnancy and birth, the same parental leave must be provided to male employees. And, health insurance benefits, if they cover other disabilities, must cover pregnancy to the same extent. An employer’s health insurance plan must cover prescription contraceptives on the same basis as other prescription drugs, devices and services used to prevent the occurrence of other medical conditions. The only exception to this requirement results from the Supreme Court case Burwell v. Hobby Lobby Stores, Inc. in which the Court ruled that the Affordable Care Act’s contraceptive mandate violated the Religious Freedom Restoration Act as applied to closely held for profit corporations whose owners have religious objections to providing certain types of contraceptives.

See Q&A about the EEOC’s Enforcement Guidance on Pregnancy Discrimination and Related Issues.

ACTION STEPS

• Males are eligible for the same leaves as women who take child care leaves beyond the period of pregnancy and birth.

• Pregnant females needing work related accommodations must be offered same accommodations offered to disabled employees.

• Review policies to insure compliance with the law.

• Advise managers of the requirements of the law.

 

B. Settlement Agreements

The EEOC, concerned about clauses in settlement agreements that could be construed as preventing an individual from cooperating or communicating with a federal or state investigatory agency, filed suit against CVS contending the chain violated Title VII of the Civil Rights Act of 1984.

The suit in Illinois contended that settlement agreements negotiated by CVS conditioned the receipt of benefits on limitations relating to 1) non-disparagement of CVS, 2) non-disclosure of confidential information, 3) a release of claims, covenants not to sue and consequences for breach of the agreements, and 4) required the employee to notify CVS of any inquiry regarding legal proceedings including an administrative investigation.

EEOC argued that the agreements limited employees’ ability to report violations of law to the EEOC and other agencies and prevented the employees from providing information to those agencies. EEOC sought to prohibit these clauses in order to “preserve (employee) access to the legal system” and to ensure that employees remain “free from fear of adverse consequences” if they file complaints with EEOC. The Complaint was dismissed because EEOC had failed to try to conciliate the matter before filing the Complaint.

ACTION STEPS

In drafting settlement agreements:

• Specifically define the proprietary information to be protected. That prohibition should not relate to issues within the jurisdiction of the EEOC.

• State that the release does not prevent the employee from communicating information to the EEOC.

• Non-disparagement should be limited to research and products or other matters not within the jurisdiction of EEOC.

 

C. Restrictions on Employers’ Use of Criminal History Information

A Guidance published by the EEOC states that an employer’s use of criminal history information may disproportionately impact minority applicants or employees because the majority of individuals in the criminal justice system are minorities.

EEOC argues that disparate treatment liability may occur when an employer relies on criminal history reports. To avoid such charges, the employer should consider only convictions, not arrests, and make an individualized assessment in each instance as to the relevance of the conviction. In making a decision on relevance, the employer must consider 1) the nature of the crime, 2) the time elapsed since the crime was committed, and 3) the nature of the job. For example, a man convicted of DUI whose job related responsibilities do not include driving or even using mechanical equipment would probably not be excluded based on his criminal record.

 

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NLRB Decisions and Rules

 

A. Employee Use of E-Mail on Company Computers

The NLRB has reversed a 2007 decision (Register Guard) holding that employer property rights in their email systems outweighed employee rights and which allowed employers to prohibit employee use of company e-mail for non-business reasons such as communicating dissatisfaction with the company or trying to unionize.

Purple Communications, Inc. (Cases 21-CA-095151; 21-RC-091531; and 21-RC-091584) reverses Register Guard and holds that, except in very limited circumstances, employees have the right to use their employer’s e-mail systems to communicate about organizing and other workplace issues. Purple’s electronic communications policy prohibited employees from, among other things, using the employer’s e-mail system to engage in “activities on behalf of organizations or persons with no professional or business affiliation with the Company” and from sending “uninvited email of a personal nature.” When a union failed to win elections at two of the employer’s work sites the union filed objections to the elections as well as unfair labor practice complaints with the NLRB claiming that the employer’s email communication policy interfered with employee rights to engage in protected concerted activities. Protected concerted activities include communications between or on behalf of employees concerning terms and conditions of employment or attempts to organize a union.

The NLRB held that employees who have been granted access to an employer’s e-mail system for work purposes are presumed to have the right to use that system during non-work time to communicate concerns including wages, benefits, job responsibilities as well as information on unions. Only in very rare situations would an employer be able demonstrate special circumstances that could result in a ban on non-business use of the system.
The decision does not allow outsiders to use the Employer’s email system and does not require an employer to grant access to the system to employees not authorized to use the system for their work. While this decision will be appealed, its requirements are currently being enforced.

ACTION STEPS

• Revise internet use policies to conform to NLRB decision.

 

B. Concerted Protected Activities and Employer Policies

In the past four years the Obama NLRB has issued numerous decisions on the illegality of Employer policies relating to behaviors on and off the job. The NLRB’s contention is that many employer policies impede employees’ engagement in protected activity and “chill” their potential involvement in concerted or pro-union endeavors. Protected activities under the Act include discussions of wages, attempts to organize, and presentation of grievances to the employer.

To determine whether a policy violates the National Labor Relations Act (“the Act”), the NLRB determines whether the policy:

• Explicitly restricts employee rights to engage in concerted protected activities; 

• Even if the policy does not restrict protected activities, it violates the Act upon a showing that: 

(i) employees would reasonably construe the language to prohibit their right to engage in protected activity; 
(ii) the rule was published to respond to union activity; or
(iii) the rule has been applied to restrict such protected activitiy

In making these determinations, the NLRB states it will reasonably interpret the policy as a whole but if the policy language is ambiguous it will be ruled unlawful.

Some examples of policies which have been found to violate the Act are:

1. Causing, creating or participating in a disruption of any kind during working hours on Company property. Purple Communications.

2. Banning boisterous activity. Professional Electric Contractors of CT.

3. Requiring employees to be “courteous, polite and friendly to customers, vendors and suppliers and (fellow) employees and prohibiting “disrespectful. . . or any other language which injures the image or reputation of the (employer).” Knauz BMWand First Transit, Inc.

4. Barring “negativity” and “negative comments” and requiring that employees represent the company in the community in a positive and professional manner. Hill & Dales.

5. Requiring employees to sign a confidentiality agreement covering “financial information, including costs and personnel information and documents.” Flex Frac Logistics LLC

6. Electronically posting statements that “damage the company, defame any individual or damage any person’s reputation.” Costco Wholesale Corp.

7. Prohibiting the posting of information that is false, misleading obscene, defamatory, profane, discriminatory, libelous, threatening, harassing, abusive, hateful or embarrassing to another person or entity. Valero Services Inc.

8. Banning insubordination, the discussion of tips with workers or guests, unauthorized dispersal of sensitive company material, conduct affecting the company’s smooth operation, disrespect to the company and employees, and the posting of negative comments about the company or any information concerning a co-worker. Hoot Winc LLC

9. Barring participation in “(O)utside activities that are detrimental to the company’s image or reputation, or when a conflict of interest exists.” First Transit, Inc.

ACTION STEPS

• Review/revise company policies, manuals and confidentiality agreements with an attorney well versed in the decisions of the NLRB. 

• Where policies may raise concerted activity concerns, provide examples of what conduct is at issue.

 

C. Employers and Their Subcontractors May Be Joint Employers

Browning-Ferris Industries of California, Inc., et al., v. Sanitary Truck Drivers and Helpers Local 350, International Brotherhood of Teamsters (“BFI”) is a case currently before the NLRB which will determine whether the BFI is a joint employer of the subcontractor’s employees. The current standard articulated in TLI, Inc., 271 NLRB 798 (1984), and Laerco Transportation, 269 NLRB 324 (1984) holds that legally separate entities are joint employers only when they directly and immediately share the ability to control or co-determine the essential terms and conditions of employment (i.e., hiring, firing, discipline, supervision, and direction to employees).

In BFI the Teamsters union sought to organize recycling sorters employed by BFI subcontractor, Leadpoint Business Services. The Teamsters claimed BFI was a joint employer with Leadpoint. The NLRB’s Regional Director, used the Laerco standard to find no joint employer status ruling that BFI did not exert sufficient control over Leadpoint’s workers because: 

• Leadpoint had its own Human Resources personnel,

• BFI did not control pay or benefits,

• BFIdid not have authority to recruit, hire or fire,

• BFI did not control the sorters who had Leadpoint supervisors, and

• BFI gave only routine instructions to Leadpoint’s employees.

The Teamsters appealed, provocatively stating, “This case presents an opportunity … to address how best to evaluate joint-employer status in this increasingly common setting: workplaces where employers use labor contractors or staffing agencies to supply workers.” The NLRB granted the appeal and invited interested parties to file amicus briefs on the issue of the joint employer standard.

The NLRB has also issued notice of joint employer status with regard to McDonald’s and a number of its franchisees. Both the BFI and McDonald’s decisions will be appealed.

 

D. “Quickie” Union Election Rule to be In Effect as of April 14, 2015

The NLRB has re-issued rules meant to expedite union elections. Employers name this the “Quickie Election” or “Ambush Election” rules. The rules are designed to reduce the period between the Union’s filing of a Petition for an Election and the date of the secret ballot election.  Currently, following the union’s filing of a Petition for an Election with the NLRB, there is a period of 35 to 42 days before the secret ballot election is held. Under the new rules, elections will be held on the “Earliest Date Practicable,” which could be 10 and 20 days from the date the Petition is filed.

Because most unions organize employees in secret, asking employees to sign union authorization cards at their homes, restaurants or local institutions where employees gather and also tell employees not inform management of the union campaign, the decreased time table will reduce the period available to employers to communicate their message to employees.

The new changes require:

• Instead of the 35-42 days employers now have to communicate their position to employees, elections will be held within 10 to 20 days following the filing of a Petition,

• Issues involving which classifications should be included in the unit of employees eligible to vote will be investigated and adjudicated after the election is held,

• Names, addresses, phone numbers, and emails on file for all eligible employees must be provided to the union within 2 days of the filing of the petition.

ACTION STEPS

• Do not wait for a Petition to be filed before communicating company concerns about unions and the benefits of and the reasons why employees and employers prefer to work without union contracts.

• Remember that there are limits on what an employer may say in such communications.

Employers should also consider:

• Training management on appropriate employee relationships and the laws relating to union activity,

• Insuring that wages and benefits are comparable to those of the relevant union,

• Telegraphing upcoming positive changes in wages and benefits,

• Providing letters or pay stubs to employees enumerating the cost of all the benefits the employer provides,

• Soliciting grievances from employees and dealing appropriately with employee work related concerns,

• Explaining how unions work and the problems the unions have in terms of unemployment and pension fund shortfalls.

 

E. “Micro” Units and Union Recognition Elections

In the past few years the NLRB has also changed its rules relating to the units in which elections may be held. In the past, a wall to wall unit or a unit encompassing all employees with a “community of interest” in the vote were preferred organizational group for votes on union representation. Employees were deemed to have a community of interest if they, inter alia, were managed by the same people, received the same benefits, were assigned the same or interrelated tasks and were brought together for employer meetings.

In Specialty Healthcare and Rehabilitation Center of Mobile, 356 NLRB No. 56 (2010) the NLRB changed the rules holding that, only where there is an “overwhelming community of interest” could the petitioned for unit be expanded to cover additional employees.

DTG Operations, Inc., 357 NLRB No. 175 demonstrates the difficulties in meeting the new standard. The Teamsters filed a petition to represent only 31 rental service agents who worked behind the rental company’s counters at a DTG operation with 109 employees. Other hourly employees had a similar pay scale and the same managers but the NLRB found no overwhelming community of interest because other employees were not required to have at least 9 months of sales experience, wore uniforms that were not as “classy” as the rental agents and were not subject to demotion for failing to promote incentive upgrades.

The advent of the “micro unit” allows a union to insert its foot in the door of an employer by picking off and seeking representation in a small but vulnerable unit of employees. Once it wins representation of that unit, it can engage the employer in contract negotiations with the motive of demonstrating the union’s strength and capabilities to the rest of the employees by demanding greatly enhanced wages, benefits and working conditions. Elections in successive small units of employees may also involve an employer in constant collective bargaining over each group of employees.

ACTION STEPS

• Provide wages and benefits in line with what unionized company offer

• Train managers to appropriately deal with employee issues and in the law relating to union organizing

• Maintain fairly constant communications with employees about increased wages and benefits as well as about their work related concerns

If you have any questions, please do not hesitate to contact us.

Stoneman, Chandler & Miller LLP
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Boston, MA 02110
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