American FlagThere is no question that President Trump will have significant impact on various federal labor and employment issues. First, he will be nominating (at least) one individual to the U.S. Supreme Court. That pick could certainly be the deciding vote in a number of issues, and even whether a case is heard. Additionally, President Trump has nominated Andrew Puzder for Secretary of Labor. Puzder is currently the CEO of CKE Restaurants, Inc., which owns and operates Carl’s Jr. and Hardee’s. His confirmation hearing, however, first set for January 11, 2017, has been delayed again to February 2.

There is no doubt that any Trump nominee will run a very different Department of Labor than that under the Obama Administration. Wage and hour laws are not going to magically change overnight, but employers may see operational, investigation, and guidance/opinion letters start to change first. For example, the new DOL Administrator could chose to not pursue the Texas overtime regulation appeal pending before the Fifth Circuit, and then start issuing guidance letters which interpret the rules and regulations differently than the earlier administration.

Additionally, when the Obama administration came to office, the DOL promptly retracted numerous opinion letters which they decided were not mailed in time – “Some of the posted opinion letters, as designated by asterisk, were not mailed before January 21, 2009. While the Wage and Hour Division is making these letters available to the requestor and to the public, the agency has decided to simultaneously withdraw these letters for further consideration. A final response to these opinion letter requests may be provided in the future in an Administrator Interpretation issued in accordance with the guidance provided in the Administrator Interpretations section of the Final Rulings and Opinion Letters Web page.”  No shock here, but the WHD never finalized these responses and they’ve been sitting since 2009.  Accordingly, I would not be surprised if they are promptly finalized now.

That being said…forget not, we are in Minnesota. In the world of wage and hour law (or even employment law for that matter), the more employee-friendly rules and laws apply. Thus, Minnesota employers will see far less local impact than a more employer-friendly state.

The United States Department of Labor has added yet another website, this time providing a framework for individuals to research whether they are properly classified as an “independent contractor” or an “employee”. This new site provides information about pay and misclassification; health and safety concerns on the job; unemployment insurance and misclassification; anti-retaliation/anti-discrimination rights; federal taxes and misclassification; health care and retirement benefits; and state and federal government resources. Why is classification important? Independent contractors have no taxes withheld (responsible for paying their own), are not provided benefits, minimum wage, overtime, fringe benefits, unemployment compensation, workers’ compensation and the like through the hiring business. So, the DOL is responsible to ensure that an employer does not skirt those obligations by falsely labeling a worker.

There has been no change in the law, just heightened awareness and enforcement. Accordingly, employers who are heavy users of independent contractors (outside of the computer sciences arena) should take a look at how the individual is being utilized to ensure a true independent contractor relationship is appropriate. There is no bright line test, unfortunately, and the IRS, DOL and courts all have different factors they consider. The IRS uses the “control test” which looks at the degree of control over the worker based on three areas: (1) behavior control; (2) financial control; and (3) the relationship of the parties. For more information on this method, click here. Keep in mind that, especially with long-term independent contractors, if the degree of control changes, a worker may start out in one classification and end up in another. Thus, when you are doing an HR audit of wages and compensation, that is a good time to also look at your independent contractor classifications as well.

 

 

fireworksI realize I am late to this blog party, but as they say, better late than never, right?! As I was starting a new post today, I realized I had 99, which meant my next would be 100. It kind of feels like earning your first $1 on a new business (okay, I haven’t had that experience, but it’s in all the movies). In any event, I wanted to pause and say thanks to all my readers for your support – and my friends and colleagues early on who helped me develop this idea (Emily, Brittany, Caitlin, and anyone else who would listen). Here’s to another 100 – and 1,000!

fitness

I cannot say this enough. Even if payroll deductions are authorized and/or allowed (for example, an employee agrees or a court order for child support), an employer cannot take so many deductions that an employee’s regular rate dips below minimum wage. Period. End of story. There are no exceptions to this that I am aware of (okay, well, at least for employees who are subject to minimum wage laws – there are a few specific exceptions not worth mentioning here – if you are in the industry, you know it). I wrote about this in an earlier post related to deductions for losses, theft or damage. An employee cannot agree to deductions that will take their regular rate below minim wage – even if they want you to take excessive deductions, you cannot do it.

Case in point – the DOL has recently announced that Life Time Fitness has agreed to pay 15,909 employees for back wages and liquidated damages in an amount of $976,765 (remember, employees get double damages). In Life Time’s situation, it appears that the DOL found violations at the Life Time Fitness locations in Fridley, Lakeville, Roseville, and corporate-wide.  While the DOL vaguely reports it found “the employer violated federal minimum wage requirements at its health clubs and fitness center locations in 26 states”, it hints that the violations were related to taking deductions for the cost of uniforms (which is okay in Minnesota), but so much so that the employee’s earnings were dipped below the federal minimum wage (which is not okay). Now, I have been around long enough to know that there has got to be much more to this story than the DOL would like to announce, and the violations were probably not as black and white. But, it still serves as a good reminder for employers.

So what are you supposed to remember? Spread out deductions over several pay periods if necessary so the wages divided by hours worked results in at least minimum wage. However, on a larger scale, payroll personnel should be trained to verify that an employee’s regular rate does not dip below minimum wage, and/or utilize a software program to flag when the regular rate dips below a preset rate (and know when the applicable minimum wage increases!). Keep in mind that this is not only for uniform deductions – but all deductions – even court-ordered. And, as you can see, violations add up quicker than one could imagine (that is the deterrent, after all).

Man runningOn December 8, 2016, the 5th Circuit Court of Appeals granted the Department of Labor’s request for an expedited appeal in the Texas overtime litigation. Recall, this is the litigation that put a halt to the December 1, 2016 revisions to the FLSA salary thresholds for white collar workers. What does this mean for employers? The wait continues. Briefing will take place through late January 2017, and then oral argument will be scheduled thereafter. Notably, this means that the DOL will be under the oversight of President-Elect Trump before it goes to oral argument, and therefore it may chose to drop the appeal at that time. I’ll keep you posted.

news-426892One of my new “fall favorite” shows is ABC’s Notorious. In it, a criminal defense attorney teams up with a major TV producer to attempt to control the media, justice, and public opinion by putting various individuals on the edgy national news show. So, when I got the United States Department of Labor (DOL) email today from the news subscription service, I read it and chuckled, instantly thinking of Notorious.

Following up to my post earlier today, the DOL issued a news release late this morning regarding its decision to file a Notice of Appeal in the Texas overtime litigation. In the release found here, the DOL argues its case via the media to the public:

The Department has always recognized that the salary level test works in tandem with the duties tests to identify bona fide EAP employees.  The Department has updated the salary level requirements seven times since 1938.”

Naturally, the DOL points out that it “strongly disagrees with the decision by the court” and that the Final Rule “is the result of a comprehensive, inclusive rule-making process” and notes that, “we remain confident in the legality of all aspects of the rule.”

Notice of Appeal_Page_1On December 1, 2016, the day the Final Rule regarding the Fair Labor Standard’s Act (FLSA) was to go into effect, the U.S. Department of Labor (DOL) filed its Notice of Appeal of the Eastern District of Texas’ November 22, 2016 Memorandum Opinion and Order to the Fifth Circuit. What does this mean? Well, it seems largely symbolic to me – the DOL had plenty more time to file the Notice of Appeal, but did it on December 1. Coincidence? I think not. From here the Fifth Circuit will set a briefing schedule and decide whether to hear oral arguments. That being said, the briefing will not be due until after the Trump Administration takes office. So, whether the DOL chooses to withdraw the appeal, only time will tell. For now, employers should stay the course – continue to verify your employees are properly classified, and keep your ears open on this issue until a final decision has been made.

HighwayToday the State of Minnesota Department of Labor and Industry (MnDOLI) issued a Notice of Correction to Highway Heavy Prevailing Wage Rates. If you’re on their email list you should have gotten the notice. If not, you can sign up here. Here’s the notice in its entirety that I received from the email list (funny enough, but not surprising, it’s hard to find this notice on MnDOLI’s website):

Continue Reading MN Highway Heavy Contractors – Prevailing Wage Rates Corrected

Money2Well, by now everyone is aware of the injunction on the December 1, 2016 FLSA overtime Final Rule. Many employers had decided (a/k/a were forced) to increase an exempt employee’s salary to $47,476 to meet the DOL’s new (and now on hold) $47,476 threshold. So, now what? Can an employer just revert the employee’s salary, or not increase it as planned? Let’s put employee morale aside too…because certainly any reversion of a salary is not going to sit well with the employee who now may feel undervalued (and/or question whether he or she is properly classified anyway).

The Fair Labor Standards Act (FLSA) doesn’t address “promised” wages; accordingly, there is no federal requirement that an employee be paid a promised wage following an intervening event. Similarly, the Minnesota Fair Labor Standards Act (MnFLSA) does not impose any requirements on “promised wages”. But, Minnesota law does provide employees some protections in certain circumstances.

In Minnesota, “wages” is defined as: “Compensation due to an employee by reason of employment”.  Minn. Stat 177.23, Subd. 4.  Further, an employer cannot “directly or indirectly and with the intent to defraud…(2) directly or indirectly demand or receive from any employee any rebate or refund from the wages owed the employee under contract of employment with the employer…” or the employer can be liable for twice the amount in dispute.  Minn. Stat. 181.03. Why do I bring up this statute? Well, a salaried employee who is told she is getting a raise may try to argue she has a contract that she is “owed” those wages for the work she performs during the time frame she was told she’d get the raise. Is this a stretch? Probably, but then again, I’ve heard more far-fetching arguments than that. Also, notice the bold – “intent to defraud” – I think it’s safe to say, no employer was attempting a bait-and-switch here; it was all regulation driven and employers had the full intent (at the time) to increase a salary just to meet the new threshold.

In any event, for the cautious employer, you may want to provide the employee notice of the decrease prior to the period in which the employee would earn that money. So, for example, if the employee was told on November 25 that she would be getting a raise to $47,476 effective December 1, and the next payroll cycle is for the workweeks of November 21 to December 4 and paid on December 9, you may want to consider reverting back during the next payroll cycle that is for the workweek of December 5 to December 18 (so long as the employee is notified prior to December 5). That being said, this approach is being cautious – certainly in this instance there would be no “intent to defraud”, however, with this delayed decrease, there is no arguable “contract” with the salaried employee for the following payroll cycle (they may argue there is a contract for the payroll cycle encompassing December 1-5).

Yes, I’m fully aware that I did not address hourly employees here. Given they are hourly, and “earn” wages on an hourly basis, I would not expect the same argument to ever even remotely pop up. Finally, don’t forget to document the payroll change, preferably with the employee signing that he or she understands the change and applicable start date of the change.

MinnesotaJudicialCenterThe Minnesota Supreme Court has finally issued its Order stemming from this summer’s City of Minneapolis $15 minimum wage roller coaster.  On July 28, 2016, I wrote about Vote for 15MN’s petition to the City of Minneapolis to amend its Charter to require a $15 minimum wage by 2020 for large employers, and 2022 for small employers. If Vote for 15MN had its way, it would have forced the City of Minneapolis to put a ballot question for the general election which would ask voters to decide whether the City of Minneapolis Charter should be amended to require all Minneapolis workers to be paid at least $15 by the year 2020 for 500+ employers and 2022 for smaller employers (and thereafter adjusted based on the consumer price index).

However, later that day, the City of Minneapolis Attorney publicly filed a memorandum declaring that the proposed Charter was inappropriate for a ballot referendum. Vote for 15MN filed a lawsuit, Vasseur et al. v. City of Minneapolis et al., Court File No. 27-CV-16-11794, (Minn. Fourth Judicial District, Aug. 22, 2016), forcing the issue.  On August 22, 2016, Hennepin County District Court Judge Susan M. Robiner held in favor of Vote for 15MN, and resurrected the $15 minimum wage ballot question for the City of Minneapolis to put on the November 8, 2016 ballot, which I wrote about here. Not surprisingly, the City appealed Judge Robiner’s Order to the Minnesota Supreme Court for accelerated review. Funny enough – by that point, I refused to write about and speculate how I thought this would turn out! Not a bad idea on my part…as it turns out, the City of Minneapolis Attorney was correct in her analysis.

On August 31, 2016, the Minnesota Supreme Court revised the District Court’s order, concluding the proposed minimum wage amendment falls exclusively within the authority vested in the City Council over legislation and policy making. Given the accelerated nature of the review, the Minnesota Supreme Court deferred its detailed order on the issue, which was released yesterday. In sum, the Court opined:

Because Minneapolis residents do not have legislative and policymaking authority under the City Charter, we hold that the district court erred in granting the petition and ordering the City to place the wage amendment on the ballot for the general election.”

Accordingly, this issue is dead in the water for this method of changing minimum wage in any Minnesota city. That being said, certainly this is a movement that is not going to go away, so I expect the $15 minimum wage campaigns to continue, and perhaps statewide legislative efforts in lieu of City efforts.