I think I’m in movie mode; last week I was blogging Back to the Future, this week I’m channeling my inner Top Gun.  In any event, on to the less exciting legal mumbo jumbo.  With remote work and expanding businesses, many more employers have employees throughout the U.S., some of which may be military members as well. If you are one of those Minnesota businesses, you should be aware of a few court of appeals cases that have addressed an “issue of first impression” (meaning, the court has not opined on it before) this year regarding an employee’s rights, and an employer’s obligations, under the Uniformed Services Employment and Reemployment Act (USERRA). Specifically, the courts held that an employer’s paid time off policy (for example, 3 days for bereavement or 5 days for sick leave) created a right to comparable paid leave for short-term military duty. You read that right – because a policy provided time off for x, y, or z, that same time off must be provided for military leave. Similarly, if an employee on paid time off/vacation is allowed to continue to accrue profit sharing, an employee on military leave must also be allowed to accrue profit sharing.

On August 10, 2021, the 3rd Circuit Court of Appeals (covering PA, NJ, DE) joined the 7th Circuit Court of Appeals (covering WI, IL, IN), finding that an employer failed to properly compensate an employee while on short-term military leave.  See White v. United Airlines, Inc., 987 F.3d 616 (7th Cir. 2021); Travers v. Federal Express Corp., __F.4th__ (3rd Cir. Aug. 10, 2021). Interesting to note, each of the lower district courts got it wrong – in other words, they found in favor of the employer and were overturned.  There is also a case pending in the 9th Circuit Court of Appeals (AK, AZ, CA, HI, ID, MT, NV, OR, WA), Clarkson v. Alaska Airlines, Inc., regarding the same issue; it is anticipated that court will also find in the employee’s favor (overturning the district court) based on that court’s previous liberal leanings. Minnesota, as you may recall, is in the Eighth Circuit. However, with the 3rd, 7th, and likely 9th Circuits all agreeing (and the 3rd and 7th typically more conservative), I would expect the trend will be towards this interpretation of USERRA (in favor of requiring paid leave).

These cases center around USERRA’s requirement that employees on military leave be given the same “rights and benefits” as comparable, non-military leaves.  Specifically, they address whether an employer is required to provide paid leave for a military absence if the employer provides other paid leaves (i.e., jury duty, bereavement leave, sick leave, vacation time, city-required sick and safe time, and paid time off), and similar benefits (i.e., earning credit under profit sharing plans).  Collectively, they find that an employer’s paid leave policy(ies) (or other benefits) can be as generous as they want, however, they must be equal (comparable) for both military and non-military members.  The DOL looks to three factors to consider whether leaves are comparable – (1) the duration; (2) the purpose; and (3) the ability to choose when to take it.  The first factor being the most significant.

This means, if you have an unlimited PTO policy, presumably, a military member could take unlimited paid military leave. However, the employee must demonstrate the leaves are comparable in duration. For example, a 3-day jury duty paid leave is not comparable to a 20-day military leave; however, unlimited time off is unlimited time off. If you allow salary continuation for one group, you must allow salary continuation for the other (military) group.  Basically, a military member cannot be at a disadvantage because of a military leave than an employee who took leave for another (non-military) reason. In short, you should be sure to treat one group the same as the other, and thus, provide the same paid time off for a USERRA qualifying event as you would for other leaves of absence.

I get that USERRA is triggered very infrequently for some employers, and more so for those that actively seek to hire reserve or guard members. However, if you’d like to read up on it, you can find USERRA guidance from the DOL here. Just something to keep in mind when you’re work on your paid leave plans in your handbook. Remember…no points for second place. You don’t want to find yourself on the wrong side of a wage and hour issue.

Last, but certainly not least, thank you to all who have served, continue to serve, and are family of service members. I recognize the timing of this blog is not ideal, but the 3rd circuit opinion just came outlast week, so I felt it was important for employers to understand the rights and obligations related to USERRA as this law is quickly evolving. I feel the need…the need for speed!

Duluth employers take note – the Earned Sick and Safe Time (ESST) Ordinance has been amended, and the revisions take effect August 19, 2021. What’s new, you ask? Here’s the good stuff:

  • ESST may be used for “Lost work hours due to closure of employee’s place of employment for public health reasons” (read: COVID).
  • All new employees must be given a copy of the ESST policy (or the substantially equivalent paid leave policy that encompasses ESST leave).
  • The ESST policy must be included in the Employee Handbook (if you have a handbook – which you should!).
  • If there is a violation found, employers may be ordered to notify employees in writing.
  • Appeals of findings are via the city’s administrative hearing process.

That’s all folks!

On August 5, the U.S. Department of Labor (DOL) announced it has settled yet another matter whereby a Golden Valley, MN home healthcare business paid only straight time to its employees regardless of how many hours they worked. In this case it was related to skilled nursing, private duty, personal aide and therapy services. In this case, the employer had to pay $241,582 in back wages AND $241,582 as liquidated damages. In other words, twice as much as it would have had to pay had it paid overtime correctly to begin with. For those of you unaware, this is the dreaded “double damages” we talk about in the wage and hour world. The employer has to pay what it is owed and then the same amount as a penalty.

Remember, this is something I blogged about recently here. I have worked with several of these businesses and cannot stress enough how important an internal pay practice audit can be. I would highly encourage all home healthcare agencies to review your pay practices (remember just because “everyone else” is doing it doesn’t make it okay!) with an attorney and determine whether changes need to be made (and how to implement them and/or address any errors in past pay practices) – BEFORE the DOL comes knocking.

Great Scott! In another Department of Labor (DOL) reversal of its own rulemaking during the Trump Administration, the Final Rule, Joint Employer Status Under the Fair Labor Standards Act, which had gone into effect (and I wrote about here) March 16, 2020, has been rescinded. Effective September 28, 2021, employers need to forget everything the DOL previously said in 2020 about joint employment, and go back in time (see what I did there?) to prior guidance when deciding when an employee may have a joint employer.

This is important if two companies share employees. However, employers should have a good faith defense that they relied on then-DOL regulations in determining joint employment status. However, if that is the case, employers should show that once the rescission takes effect (September 28, 2021), they will go back to (or start if new situation), treating the employee as a joint employee for purposes of minimum wage and overtime under the Fair Labor Standards Act. For example, if you own two businesses and employees work at both locations (even if their job is different at each), generally you need to add their hours and make sure that they receive overtime for all hours worked at both locations.

If you’re a federal contractor, you’ve probably seen the headlines – on July 22, 2021, the U.S. Department of Labor (DOL) issued a Notice of Proposed Rulemaking outlining how it wants to enforce Executive Order 14026, Increasing the Minimum Wage for Federal Contractors. But what exactly does this mean? President Biden tasked the DOL with creating regulations to increase minimum wage to $15/hr. for federal contractors beginning January 30, 2022, and to increase for inflation thereafter. He also asked for regulations to eliminate the tip credit by 2024 (which does not affect Minnesota employers as we are not allowed to take a tip credit under Minnesota law).

Accordingly, the DOL has until November 24, 2021 to issue final regulations to implement the order’s requirements.  At this point, the DOL has taken the first step by issuing the Notice of Proposed Rulemaking (this is like a “draft” for everyone’s review). Accordingly, once the timeline for comments closes (August 23, 2021), the DOL will review the comments make any changes it feels are prudent, then finalize for the final rule to be published.

At this point, federal contractors will want to review the notice and keep an eye on the final rule (which must be published by November 24, 2021).  For example, determine whether it will even apply to your business and/or which employees. Just because your company may  be a federal contractor does not mean this automatically applies to your business (or all your employees). For example, the proposed rules provide, “This part does not apply to contracts for the manufacturing or furnishing of materials, supplies, articles, or equipment to the Federal Government…”  It will also be applicable only to workers who spend more than 20% of their time performing “on” or “in connection with covered contracts”. However, in an example, the DOL suggests wide coverage with it’s interpretation of “in connection with” – stating that a payroll clerk would be performing covered work “in connection with” a covered contract as their work would be necessary to the performance of the contract.

Also – keep in mind that the minimum wage will only be applicable to new contracts on or after January 30, 2022 (or renewed, extended or optioned contracts thereafter). The government contracting agency will be required to include notice of this requirement in all covered contracts and solicitations. Thus, for new contracts, it should be crystal clear; in renewals or options, if it is not clear, ask the contracting agency to confirm whether it applies (and get it in writing). Though you can’t rely on that (yes, the government can screw up), it can be used as a good faith argument to avoid a willful violation claim.

In sum, I think I said a whole lot of nothing: There is a rule that is coming requiring federal contractors to pay $15/hr. minimum wage on or after January 30, 2022, that may apply to your business (or not), may apply to some or all employees (or not), and we don’t know exactly how it will work, but it might work as proposed, or it may change. You’re welcome!

I know, it’s been awhile since I’ve done one of these. I’m thinking of trying to keep this going.  Or maybe starting a “Why Not Wednesday” (telling stories of what NOT to do and why)! Here’s a fun fact for your Friday…

Minnesota’s 2021 minimum wage for large employers (gross annual revenue greater than $500,000) is $10.08 per hour and $8.21 for small employers.  MN is:

  • 1 of 30 states that has its own minimum wage.
  • The 21st lowest of the 30 states that have a minimum wage.
  • 1 of 18 states that annually adjusts its minimum wage based on a formula (inflation).
  • 1 of 4 states that has a different minimum wage rate based on business receipts.

If you want to geek out with me a bit, there is a 2014 article from MinnPost that details the history of Minnesota’s minimum wage laws back to 1913.

Effective January 1, 2022, Minnesota employers with more than 15 employees will be required to provide PAID “reasonable break times each day” for a new mother (child less than 12 months old) to express breast milk. The Minnesota Women’s Economic Security Act (WESA) currently requires unpaid breaks.  It also currently has no age limit, though it is likely the great majority do not breastfeed for more than a year. WESA was also amended to require the break times to be at the same time as any other break time already provided. An employer, “shall not reduce an employee’s compensation for time used for the purposes of expressing milk.”

So, what does this mean in practice? A nursing mother can (and must) use her already-scheduled break times for expressing milk. Since break times (if provided) are typically 15 minutes or less, they are already paid. Accordingly, nothing really should change in that situation.  However, for employees who only receive reasonable time to use the bathroom each day and an unpaid lunch, this may result in providing additional paid breaks to express milk.

WESA also has been amended to include an entirely new provision for pregnancy accommodations for mothers.  I know this is a wage and hour blog, so consider this a bonus post. In sum, reasonable accommodations must be made (unless undue hardship results) for health conditions related to pregnancy and childbirth upon request, and certain requests (more frequent water, food and restroom breaks, seating, and limits of lifting over 20 pounds) do not need to be supported by a doctor’s note. Employers do not need to create a new position, discharge an employee, transfer another employee, or promote an employee as an accommodation.  Importantly, one other thing I want to highlight as I have spoken to employers about this, (and now it’s crystal clear), “An employer shall not require an employee to take a leave or accept an accommodation.”

Wait, what? In other words, sometimes an employer is annoyed at a request for an accommodation (maybe they think the employee is milking the system – this never happens!).  And, because we know that an employer does not have to accept the employee’s requested accommodation, but may suggest ones the will accomplish the same goal, an employer may have in the past forced a pregnant employee to take the accommodation the employer created to address the medical issue. No can do as of January 1, 2022. For example, a pregnant employee requests 1 day off a week and asks for Friday off. The employer can say sure, but you can take off Wednesdays, not Fridays.  The employee responds, no thanks, I will just work all 5 days then.  Currently, an employer may say nope, you asked for a day off because you said you needed it for your health conditions related to pregnancy, so you can have it and must take it. This causes the pregnant employee to not get paid to work one day a week (though they asked for it). The amendment allows the pregnant employee to decide whether to accept the offered accommodation. Thus, the “be careful what you wish for” adage no longer applies (as of January 1, 2022).

On July 1, 2021, the U.S. Department of Labor (DOL) issued yet another press release regarding recovery (this time $1.5 million) of back wages for 242 home healthcare workers (this is not a MN employer, but this is a nationwide DOL effort). In this instance, according to the DOL, the employer paid straight-time wages for all hours an employee worked in a week, rather than straight time for all hours under 40 and overtime (time and one-half) for all hours over 40. By lowering the “regular rate” each week and then paying “overtime” based on the changing regular rate, the employees actually received the same hourly rate of pay each week no matter how many hours they worked, depriving them of overtime pay. As the DOL notes, this is a “scheme” which violates the Fair Labor Standards Act (FLSA). The employer was also fined a civil money penalty for the willful nature of the violations.

Here’s how the scheme works (don’t do this) so that the employee is paid the same amount for all hours worked – but it appears they receive “overtime”:

  1. Mary and Employer “agree” she will make $25/hr. for all hours worked.
  2. Mary works 40 hours week 1.  She is paid $25/hr. (regular rate).  40hrs x $25 = $1,000.
  3. Mary works 60 hours week 2.  She is paid $25/hr. (regular rate) and $25 (overtime).  60hrs x $25 = $1,500.
  4. On the payroll, Employer lowers Mary’s regular rate to show $21.44/hr. and notes an overtime rate of $32.16/hr.  Accordingly, she is paid (40hrs x $21.44) + (20hrs x $32.16) = $1,500.80.
  5. Mary should have been paid (40hrs x $25) + (20hrs x $37.50) = $1,750, a shortfall of $249.20.

This is one of many press releases the DOL has put out in the past year regarding violations of overtime rules by home healthcare agencies. Here’s another scheme the DOL has previously noted by home healthcare agencies (don’t do this either):

  1. Mary and Employer “agree” she will make $1,000 a week.
  2. Mary works 40 hours week 1.  She is paid $25/hr. (regular rate).  40hrs x $25 = $1,000.
  3. Mary works 60 hours week 2.  She is paid $14.29/hr. (regular rate) and $21.44 (overtime).  (40hrs x $14.29) + ($21.44 x 20) = $1,000.30.
  4. Mary should have been paid 40hrs x $25 + 20hrs x $37.50 = $1,750, a shortfall of $750.

Unfortunately, home healthcare agencies have unique issues insofar as they are only paid $X per hour worked by the State of Minnesota, and overtime is not typically reimbursed. Accordingly, if an employee works overtime (whether they want to or not), the employer may not actually be getting reimbursed by the state enough to cover the overtime amounts (and thus, loses money on the contract). Accordingly, it is not surprising that such employers desire creative solutions so that the employee is paid a higher hourly wage (to be competitive), and yet the employer does not lose money on the contract.

What can such employers do? You can prohibit the working of overtime (though, if overtime is worked, you must pay for it), or lower the employee’s hourly rate (and keep it at the agreed-upon rate) so that when overtime is worked, you are not losing money. Also, keep in mind that employers and employees cannot agree to be paid outside of what the law requires. Therefore, even if an employee agrees to be paid say, $30 for all hours worked, or agrees to a certain set amount each week (as in the examples above), that is not allowed – hourly (non-exempt) employees must be paid overtime at time and one half (we won’t get into the fluctuating workweek method here…).

Employers also need to remember Minnesota’s wage theft law – employees must be made aware of their wages prior to the wages being earned.  Changing wages each week after work is performed is inconsistent with this law as well. This invites a recordkeeping violation as well. When in doubt – have your pay system checked out by counsel to determine if there are any potential issues and if so, how to correct them.

 

 

Back in 2016, one of the first posts I wrote on this blog concerned whether the Fair Labor Standards Act (FLSA) applied to Native American tribes.  My conclusion was that there was currently no clear answer in Minnesota.  However, we were recently given a bit more clarity. On June 28, 2021, the federal District Court of Minnesota dismissed a case brought against the Leech Lake Band of Ojibwe (“Band”) for, among other things, alleged violation of the Equal Pay Act (EPA), 29 U.S.C.  206(d), which is a part of the FLSA. In Butler v. Leech Lake Band of Ojibwe, et. al, Judge Doty granted the Band’s motion to dismiss based on lack of jurisdiction.

In Butler, the Plaintiff was a director of the Band from 2018, until her termination in 2020. She thereafter filed this lawsuit in the United States District Court for the District of Minnesota (not the Band’s Tribal Court). The Band sought to have the lawsuit dismissed based on lack of jurisdiction (i.e., arguing the federal court is the wrong court to decide the matter) due to tribal sovereign immunity. Judge Doty held that the Band did not waive its sovereign immunity and the EPA lacks Congressional abrogation of the Band’s sovereign immunity. In other words, a tribe may only be sued where Congress has authorized it or the tribe has waived its immunity.  The Court concluded, “As such, the Band is immune from suit.”

However, Judge Doty took it one step further (thank you, Your Honor), and opined that, even if the Band were not immune, federal statutes, including the FLSA and its EPA, do not apply to, “Indian tribes when the matters at issue are purely internal, as here.” As to the EPA claim, the Court relied on guidance from Snyder v. Navajo Nation (9th Cir. 2004), noting that, “…the Fair Labor Standards Act, which includes the EPA, does not apply to Indian tribes when the law would interfere with tribal self-government).” So, there it is…one mystery partially solved, 5 years later…

 

Well…I hate to say I called it but…on May 6, 2021, the U.S. Department of Labor (DOL) issued a final rule at 86 FR 24303, withdrawing the Independent Contractor Status rule issued January 7, 2021. As you may recall, that rule was set to change the test as to whether a worker was an independent contractor or employee. While the DOL previously used the “economic realities” test, the new rule would have used an “economic dependence” test. The new test would have narrowed the definition of “employee”, allowing more individuals to classify as independent contractors. Alas, we are back to where we were with the DOL using the economic realities test.

What is the test, you ask? Well, it is not the same test the IRS uses (confusing, I know), but is based on the concept that there are seven factors to consider:

  1. The extent to which the services rendered are an integral part of the principal’s business.
  2. The permanency of the relationship.
  3. The amount of the alleged contractor’s investment in facilities and equipment.
  4. The nature and degree of control by the principal.
  5. The alleged contractor’s opportunities for profit and loss.
  6. The amount of initiative, judgment, or foresight in open market competition with other required for the success of the claimed independent contractor.
  7. The degree of independent business organization and operation.

Keep in mind that the following common misconceptions are not sufficient alone (the economic realities test must still be met):

  • An employer and worker cannot agree on a classification – if the worker does not meet the criteria, they must be paid as an employee.
  • Remote work
  • Providing a 1099 (versus W-2)
  • State or tax law does not determine FLSA status
  • Using an EIN, LLC, etc.
  • Executed independent contractor agreement
  • Paying in cash, check, etc. to an entity other than the worker

In other words, I’ve said it before – if it looks like a duck, quacks like a duck, the DOL is going to say it’s a duck.