Employers who are required to submit the 2017 and 2018 Component 2 EEO-1 data (wage data) can now do so via the EEOC’s portal here. In addition, the EEOC has released a FAQ that may answer many employer questions such as filing requirements, summary compensation data, hours worked, multi-establishment reporting, acquisitions and mergers, spinoffs, professional employer organizations, the online filing system, confidentiality and data security.
Not to be outdone by the State of Minnesota’s Wage Theft Law, the City of Minneapolis is proposing its own wage theft ordinance, which “compliments” its Minimum Wage and Sick and Safe Time ordinances. The new wage theft ordinance would allow the City to investigate wage theft complaints on its turf. On July 29, 2019, there is a public hearing on the proposed ordinance, which is expected to pass at the August 9, 2019 City Council meeting.
What is Expected?
- Pre-hire notice will include information about the safe and sick leave laws, tipping, and overtime.
- Changes to notice information must be signed by employee before the change goes into effect (unlike state),
- Pay stubs will also need to include local workplace information.
- A new poster will need to be displayed.
- There will be a presumption of retaliation if any action is taken against an employee within 90 days who has begun an action of alleged wage theft.
- Wage theft will prohibit city contracts, with a list of employers published.
Expected Differences with State Wage Theft Law:
- Ordinance will not limit wage theft “with the intent to defraud” (that language is removed).
- Any changes to the information in the notice (like wage change) must be signed by the employee before it takes effect.
- Employer will need to provide the prehire notice to ALL employees (not just new employees) as of the effective date, if they have not already been provided all the information.
Effective July 3, 2019, the City of Minneapolis’ revised rules implementing the Sick & Safe Time Ordinance Rules go into effect. Notably, non-resident employers (employers located outside of Minneapolis but who have employees performing work in Minneapolis) are now subject to enforcement. If non-resident employers provided employees with a paid time off program or paid leave plan that was available for uses including illness, and the employer is adopting that plan now to comply with the Sick and Safe Time Ordinance, the employer may deduct an employee’s actual use of the paid time off or leave since July 1, 2017 from the amount of accrual required under the Ordinance.
In other words, all employees who work more than 80 hours in Minneapolis are entitled to accrued sick and safe time based on the hours worked in the City since July 1, 2017. However, if a non-resident employer did not have a time off policy that complied with the Ordinance during that time, but is now adapting its plan to comply, it may take credit for an employee’s actual use of paid leave since July 1, 2017 required under the Ordinance.
Note: Hours spent traveling through Minneapolis do not count towards the 80 hours for coverage. However, stopping to make deliveries or perform other duties is covered work. Attendance at a convention, educational class, training, or similar activities is not covered if the individual performs no other work in the City (suggesting if they do perform some work in the City, such time would be included).
The City reminds employers as follows in their press release today:
“Employers are reminded that they may comply with the ordinance either by (1) crediting covered employees with Sick and Safe time at a rate of 1 hour per 30 hours worked in the City, capped at 48 per year and 80 overall, or (2) front-loading a lump sum of 48 hours for the first year of the employee’s employment and 80 hours at the beginning of every year thereafter (also capped at 80 hours overall). Employers may therefore comply with the ordinance without individual historical calculations at this time by crediting each covered employee with 80 hours of accrued Sick and Safe time. Employers are permitted to choose different methods of compliance (accrual or frontloading) for different employees.”
Employers looking for more information can also read the City’s Sick & Safe time FAQ here.
Employers (wherever located) with employees working in Minneapolis – don’t forget that the minimum wage increases today, July 1, 2019, to $11/hr for small businesses and $12.25 for large businesses.
Quick Facts – Reminders:
- Small business = 100 or fewer employees.
- Large business = more than 100 employees.
- An “employee” is someone who works at least 2 hours in Minneapolis in a workweek (even if the employer is located elsewhere).
- Tips/gratuities don’t count towards minimum wage.
- Employees under 20 may be paid 85% of minimum wage for the first 90 days of employment, but only if they are in a city-approved training and apprenticeship program.
- Next increase is July 1, 2020.
Effective today, Minnesota employers must follow the new so-called “Wage Theft Law” (it is actually just a bunch of amendments to existing law). This is primarily a change in recordkeeping and employee notices, creating an administrative burden likely to cause many in HR to want to raise the white surrender flag. While I’m not a big fan of government model documents, like the FMLA paperwork, this is another document that I do think employers will benefit from using the model notice – you can get it here. But beware – even though the State is providing this notice, it notes the notice must be completed “properly”. In other words, make sure you dot your “i’s”, cross your “t’s”, and fill in all the blanks with the correct information. The new employee notice must be provided to all new hires as of today, July 1, 2019 and a copy must be kept in the employee’s personnel file. Also, employers must be prepared to provide the information to the Minnesota Department of Labor and Industry (MNDOLI) within 72 hours of demand.
Employee Notice – Possible Pitfalls – What Can Go Wrong?
- Make sure all the blanks are completed, even write “N/A” if, for example, the employee does not have a different mailing address. This confirms you read and answered the question.
- Make sure the information is correct – if they negotiate for a different wage rate at the last minute, be sure it is in there at the right rate.
- Leave benefits available – be sure to clarify when benefits start (when the employee is eligible).
- Deductions – what the state is looking for is unclear and may be unduly burdensome. If you list everything you can think of you may leave out things. Accordingly, since this says “may” consider just: “usual and customary taxes and withholdings and authorized deductions”.
- Be sure the employee signs it before they start work!
- Keep the second page with the notice to confirm they were provided the notice in multiple languages.
- As the information changes (i.e. rates of pay, deductions, vacation time, etc.) new notice must be given (for just the changed information). And yes, it is going to be an administrative nightmare. Every time something on the form changes, the employee needs a new notice with respect to that item only. Best practices (if possible) would be to have the employee sign the notice, though they do not need to.
Earnings Statements – New Information Required – Check With Your Payroll Provider
Information provided on employee’s payroll (pay stubs or earnings statements) must now include the following information – your payroll provider should be aware:
- Employee’s rates of pay and basis for such rates (i.e per hour, shift, day, week, salary, piece, commission or other method).
- Allowances claimed for permitted meals and lodging.
- Employer’s telephone contact information.
- Physical address of employer’s main office or principal place of business and mailing address (if different).
- Unchanged (you should already be providing):
- Wages paid (gross and net after deductions)
- Hours Worked
- Deductions made
- Benefits accrued
- Pay period start and end date
- Employer’s legal and operating name
Other Records that Must Now Be Kept By Employers:
- Hours worked each work day and workweek – including, for all employees paid at a piece rate, the number of pieces completed at each piece rate.
- A list of personnel policies with brief descriptions of each, including the date provided (suggest a list of documents and having the employee sign it – consider attaching your handbook’s table of contents).
- A copy of the new notice that is required to be provided and signed by each employee at the start of employment and a copy of any written changes to the notice that were provided to each employee.
Remedies and Penalties for Noncompliance Are No Joke:
- If the employer’s records do not provide sufficient information for MNDOLI to determine the exact amount of back wages due – the Department may decide for you the wages due based on the evidence provided.
- Employers have a “substantive right” to the payment of commissions and wages, and to be paid on a regular payday.
- Employers cannot retaliate against an employee for exercising their substantive rights.
- The Department has enforcement authority to enter and inspect records, and interview non-management employees in private (without an employer representative).
- The Department can order an employer to pay a penalty for each day payment is not made in compliance with an order.
- Many other penalties… (see the summary here).
- Criminal sanctions for wage theft – up to 20 years imprisonment and a fine of up to $100,000 if value of wages stolen is more than $35,000. The lesser criminal sanctions is imprisonment not more than 1 year and fine of not more than $3,000 for wage theft more than $500 but less than $,1000. The rest is somewhere in between.
In all, the changes are designed to give employees clear information up front about their wages and deductions. However, in reality, it’s just creating a lot more paperwork for HR and potential penalties and fines for not having kept the proper information (think about technical I-9 violations – they add up quick!).
On May 29, 2019, the City of Minneapolis issued a notice stating that it will be enforcing its Sick & Safe Leave Ordinance against non-resident employers (employers located outside of the City, but with employees who perform work in the City), for all hours worked in the City since July 1, 2017. In a token gesture, the City noted it “may exercise some enforcement discretion during summer 2019” for employers attempting to comply. Recall this has been in litigation for years, and the final outcome was the win for the City (you can search my blog for the key term “Minneapolis”).
Generally, employers must either: (1) credit covered employees with 1 hour of leave per 30 hours worked in the City or (2) front-load a lump sum of 48 hours for the first year of employment and 80 hours at the beginning of every year thereafter. Both methods may be capped at 80 hours in a leave bank overall (and 48 hours accrued per year). Recall that employers with 6 or more employees must provide the paid leave, while under 6 may provide paid leave but must provide at least unpaid leave.
For employers who did not adopt (or already have) a time off policy that is compliant with the Ordinance on July 1, 2017, the City notes that compliance may be achieved “without historical calculations at this time by crediting each covered employee with 80 hours of accrued sick and safe time.” In other words, if each employee that has worked in the City since July 1, 2017 is provided 80 hours of accrued sick and safe time today, the City seems to suggest that no enforcement action will be taken for the employer’s historical failure to provide such leave. Of course, this is way easier said then done with employees who perform periodic work in the City.
If you are unsure as to whether your paid time off or unpaid time off policy complies, and you have employees who perform(ed) work in the City of Minneapolis, you should seek legal advice regarding such compliance. While the City has issued this notice, keep in mind that no notice trumps a law (in this case the Ordinance), and is not binding, and so employers should tread lightly when working through this issue.
In the 6th letter of 2019, the U.S. Department of Labor (DOL) issued Opinion Letter FLSA2019-6, which analyzes whether a worker is an employee or independent contractor. While opinion letters are specific to the employer that has sought the letter, they provide useful insight for all employers. In this opinion letter, the DOL states that it interprets whether someone is an “employee” based on whether the individual, “as a matter of economic reality, follows the usual path of an employee and is dependent upon the business to which he or she renders service.” In short, the DOL notes the “touchstone” of the test is “economic dependence” and whether the worker can work on his or her own terms, freely, and without restriction (such as non-compete, non-solicitation agreements).
The DOL notes the six primary factors to be weighed in determining economic dependence (though it may look at other factors not listed):
- The nature and degree of the potential employer’s control;
- The permanency of the workers’ relationship with the potential employer;
- The amount of the workers’ investment in facilities, equipment, or helpers;
- The amount of skill, initiative, judgment, or foresight required for the worker’s services;
- The worker’s opportunities for profit or loss; and
- The extent of integration of the worker’s services into the potential employer’s business.
My favorite part of the entire opinion letter is thus, however:
In short, while the FLSA has a very broad scope of coverage, it is not so broad that all workers are caught within its reach – far from it….Recognizing this limitation on coverage protects the freedom of workers to operate as independent contractors and remain outside the FLSA’s scope.
This statement by the DOL recognizes that many individuals who desire to be an independent contractor (for whatever reason), and that the interpretation of the FLSA should be made in a fair way, and to allow individuals the freedom to chose to operate outside the employer-employee relationship. That being said, keep in mind that an individual/employer cannot contract around statutorily rights (minimum wage, overtime). Thus, if a person fails the above test, the employer is possibly on the hook for backwages (overtime, minimum wage), taxes, benefits and, if it was sued out, attorneys’ fees (both sides).
On April 1, 2019, the DOL issued a Notice of Proposed Rulemaking (NPRM), relating to whether two or more entities are “joint employers” for purposes of the Fair Labor Standards Act (FLSA). This arrangement becomes significant when determining overtime for an individual who does not work overtime at either employer, but combined, does (and thus, would be owed overtime if it was a single employer). As important as this is, the rule has not been amended since 1958 and was overdue. The DOL is proposing a four-factor test at 29 C.F.R. § 791.2. The “four factors are whether the other [employer]: (i) Hires or fires the employee; (ii) Supervises and controls the employee’s work schedule or conditions of employment; (iii) Determines the employee’s rate and method of payment; and (iv) Maintains the employment records.”
The saga continues! Businesses required to file an EEO-1 must submit the usual Component 1 data to the U.S. Equal Employment Opportunity Commission (EEOC) by May 31, 2019. However, whether businesses with 100 or more employees must submit Component 2 pay data has been up in the air since 2016 (you can search my blog for the long convoluted history), when the EEOC first proposed revisions to the yearly report to require employers to report pay data in order to detect discriminatory pay practices. Long story short, on April 29, 2019, the EEOC released the following statement:
EEO-1 filers should begin preparing to submit Component 2 data for calendar year 2017, in addition to data for calendar year 2018, by September 30, 2019, in light of the court’s recent decision…The EEOC expects to begin collecting EEO-1 Component 2 data for calendar years 2017 and 2018 in mid-July, 2019, and will notify filers of the precise date the survey will open as soon as it is available…
While the U.S. Department of Justice appealed the D.C. Court’s decision, such appeal does not stay the Order. According, “Filers should continue to use the currently open EEO-1 portal to submit Component 1 data from 2018 by May 31, 2019”.
Who must file an EEO-1?
Generally, private employers with more than 100 employees, or a smaller company that is an affiliate of an enterprise with over 100 employees. Additionally, federal contractors/first-tier subcontractors subject to Executive Order 11246 (government contract over $10,000) with 50 or more employees, and a prime contract or first-tier subcontract of $50,000 or more. However, the Component 2 data must only be reported by private employers (including federal contractors and subcontractors) with 100 or more employees.
What is Component 1 and Component 2 data?
Component 1 data consists of demographic data of employees by job category, sex, ethnicity and race; this is unchanged. Component 2 data consists of hours worked data and W-2, Box 1 wages, each among twelve (12) pay bands for each job category by sex, ethnicity and race. As for reporting “hours worked”, non-exempt employees are straightforward – report actual hours worked during the calendar year. As for exempt employees, if employees track their time, employers may use actual hours or (for the rest) a 40 hour week for full-time employees, and 20 hour week for part-time employees, multiplied by the number of weeks actually worked in the calendar year.
Employers who must file the EEO-1 should be sure to file the Component 1 data by May 31. Those who also need to file Component 2 data should start gathering the required hours and wages information now (for 2017 and 2018), and begin to prepare to submit the data due in September. Sadly, it’s going to take more time than you think so start now!
On March 29, 2019, the U.S. Department of Labor (DOL) published a Notice of Proposed Rulemaking (NPRM) under the Fair Labor Standards Act (FLSA). The proposed rules will clarify for employers what types of compensation must be included when determining an employee’s “regular rate” in order to determine the overtime rate. This is a conversation I have with various employers weekly and will be welcome guidance.
Recall, overtime is time and one-half the “regular rate”. Currently, given the extremely outdated regulations and changes in payments to employees (i.e. more fringe benefits such as tuition reimbursement, etc.), employers are understandably confused whether certain payments for employee perks must be included into the employee’s regular rate calculation. For example, if an employee works 40 hours and makes $400 a week, the employee’s regular rate is $10/hr. Easy enough. However, if that employee is provided a $100 discretionary bonus that week because the company was doing well, the regular rate remains the same. Easy, if you don’t misidentify a non-discretionary bonus as a discretionary bonus. However, if the employee earns a $100 non-discretionary bonus (i.e. sales incentive plan or other bonus that the employee knows how to earn), the regular rate is $500/40 = $12.50/hr. Thus, the overtime rate increases.
The proposed rule will clarify which payments, perks and other benefits must be included in the employee’s “regular rate”. As currently drafted, the following payments are proposed to be excluded from the definition of “regular rate”:
- Costs of providing wellness programs, onsite specialist treatment, gym access and fitness classes, and employee discounts on retail goods and services.
- Payments for foregoing holidays or paid leave (including sick pay, holiday, vacation, etc). For example, if an employee is paid to work on a holiday and also receives holiday pay (like those not working) – the holiday pay may be excluded from overtime.
- Payments for bona fide meal periods. Unless there is an agreement to pay for such time as hours worked, paid meal periods would be excluded.
- Reimbursed expenses (not just those “solely” for the employer’s benefit).
- Reimbursed travel expenses that do not exceed the maximum travel reimbursement permitted under the Federal Travel Regulation System regulations and which meet other regulatory requirements (ensuring that it is “reasonable”).
- Certain overtime premiums under FLSA Section 7(e)(5) and (6) even without a prior formal contract with employees to exclude such time.
- Pay for time that wouldn’t qualify as “hours worked”, such as bona fide meal periods (unless agreement or established practice shows that the parties have treated the time as as hours worked).
- Certain discretionary bonuses.
- Certain tuition programs (such as reimbursement or repayment of educational debt) so long as not tied to hours worked and optional.
- “Call-back”, “show-up” etc. pay that is not prearranged and that is not the pay for the actual hours worked.
- Employee discounts on retail goods or services (as long as not tied to an employee’s hours worked or services provided).
In short, the more compensation an employee earns, the greater their “regular rate”. The greater the regular rate, the greater the overtime. Thus, clarity in this regard will assist employers (and make it easy to show employees) in properly excluding additional non-work payments from the employee’s regular rate.