As 2018 comes to a close, it is a great time for employers to address lingering issues that have been on the back burner and start “fresh” in the new year. A new year is a great time to roll out changes for both administration purposes and for employees; new year, new policies. Here are some items you may want to consider auditing internally and bringing up to current if need be for a January 1, 2019 revision date:

  • Wage disparities (male/female/minority)
  • Job classification (exempt, non-exempt, independent contractor)
  • Job descriptions (should reflect what the employee actually does – jobs morph over time)
  • Incentive compensation / bonus plans (the far majority I review need significant modification as they are written by sales folks and not HR/legal and thus leave out at-will language, deductions, prepayments, “earned” versus “accrued” and payout terms with absences, discipline, termination, etc.)
  • Minimum wage increases (State, Minneapolis, St. Paul)
  • Safe and Sick Leave Act ordinances (Minneapolis, St. Paul, Duluth)
  • Changing paid time off methods / calculations (from up front to accrual, etc. – and in compliance with any applicable ordinance)
  • Overtime (calculated weekly, all hours paid, no flex time between workweeks) – also, the new federal overtime rule is expected to be published in March 2019 – stay tuned on that (I would only be guessing as to how the DOL is going to roll it out).
  • Recordkeeping (best practices being followed; exempt/salaried employees can be made to record their time – which is very good to have if their classification is challenged in the future)
  • Wage deduction / loans / tuition reimbursement policies

With Thanksgiving tomorrow and Christmas right around the corner, employees start to question holiday time off and pay (or lack thereof). In Minnesota, there is no requirement that employers provide certain days off, with or without pay. Accordingly, employers just need to follow their policy (best practices – have it written), whatever it is. If employees must work on a holiday, employers must pay them for that time worked, but may also chose to pay an additional half-time or double time and/or additional PTO to be taken another day. Those hours worked count towards overtime. In addition, the additional pay will change the regular rate for overtime purposes and thus, the hourly overtime rate will increase. For employers who provide time off without pay, or time off with pay, those hours are not “hours worked” and thus, do not count towards overtime. Key here is that your policy is written in a way that allows you flexibility as business needs arise. If your policy is not always followed, it is time to dust it off and revise it to be consistent with actual business practices.

On November 14, 2018, the St. Paul City Council passed an ordinance implementing a minimum wage of $15 for employees who work within the geographic boundaries of St. Paul. Employees based outside of St. Paul, but who occasionally perform work in St. Paul, are also covered if, “over the course of one week [the employee] performs at least two hours of work for an employer within the geographic boundaries of the city.” This means that the Ordinance (for now) appears to apply to employers both located within St. Paul, and those outside of St. Paul with employees who work two or more hours in a week in St. Paul. I cannot imagine that this will not be challenged, however, similar to the challenge made (and won) in Minneapolis by non-Minneapolis employers with respect to the scope of its Sick and Safe Time Act Ordinance.

Employers are defined in the Ordinance as “Macro” (more than 10,000 employees); “Large” (more than 100); “Small” (100 or less); and “Micro” (fewer than 5). The minimum wage hike begins January 1, 2020 for Macro businesses at $12.50 and ends up at $15 by July 1, 2022, with automatic increases thereafter. All other size employers begin the first increase on July 1, 2020. Large businesses start at $11.50 and end up at $15 by July 1, 2023.  Small businesses start at $10 and end up at $15 by July 1, 2026. Micro businesses start at $9.25 and end up at $15 by July 1, 2028. Once an employer has hit the $15 minimum wage, thereafter the minimum wage is automatically increased to whatever the City Minimum Wage rate is that applies to the City of Saint Paul (the adjusted minimum wage rates will be announced September 1 of each year). For purposes of determining company size, all employees, including temporaries, are included. Franchises with more than 10 locations nationally are based on all locations owned and operated by a single franchisee.

A few other items to note – there is no exemption for tipped employees.  Thus, like with our State minimum wage, employers cannot apply a tip credit to meet the minimum wage requirements. There are exceptions for youth wages, city-approved youth-focused training or apprentice program, persons with disabilities, extended employment program workers, independent contractors, and others. Finally, like Minneapolis, St. Paul will prepare a notice for employers to use, as well as accompanying regulations for the finer details…and likely a flashy website to make it easy for employees to learn their rights and file complaints.

The U.S. Department of Labor issued several opinion letters on November 8, 2018.  One of those, Opinion Letter FLSA2018-27, reproduces verbatim the text of Opinion Letter FLSA2009-23, which was (one of many) withdrawn by the Obama Administration “for further consideration”. This Opinion Letter clarifies the definition of a “tipped employee” for purposes of the Fair Labor Standards Act tip credit. However, since Minnesota does not allow a “tip credit” against minimum wage, I won’t go into more detail here, except to note it for those of you who have multi-state restaurants.

On November 14, 2018, the Eighth Circuit Court of Appeals held in Baouch v. Werner Enterprises, Inc. that per diem travel payments made to truck drivers driving away from home at night as reimbursement for travel expenses are “wages,” even though not taxed as part of an “accountable plan” under Treas. Reg. §1.62-2(c)(2). To qualify as an “accountable plan” a payment plan has to meet the IRS’ business connection, substantiation and return of excess expenses requirements. The Court held that the payments under the accountable plan were part of the drivers’ “regular rate,” as they were made as remuneration for work performed under the FLSA. The Court held that representations made by the employer to the IRS were not inconsistent with the FLSA’s governing the calculation of regular rates for the purposes of minimum wages. As the payments were made based on miles driven, and thus, hours worked, the payments were correctly included in the regular rate calculation, even though the primary effect of the payments were to cause participating drivers to take home more pay due to the non-payment of taxes on the payments.  The Court concluded that “per diem payments that vary with the amount of work performed are part of the regular rate.”

So, what does this mean?  Well, an employer who has an “accountable plan” for the payment of mileage reimbursement may be able to include that payment as “wages” for establishing the “regular rate” under the FLSA for purposes of meeting minimum wage.  However – you can’t have your cake and eat it too.  More often an employer argues that per diem is not part of the regular rate (as that increases overtime). Accordingly, employers should be careful that if per diem payments under an accountable plan are tied to hours worked, they may indeed be included in the regular rate for purposes of overtime. Finally, the Court noted such an analysis should be reviewed on a case-by-case basis, and look at factors such as whether the payments were unrestricted (employees need not report expenses or provide receipts and could spend the money as they liked) and the purpose and intent of the payments.

Quick reminder – on January 1, 2019, Minnesota’s minimum wage will increase to $9.86 per hour for large employers, and $8.04 an hour for all others (small employers, training wage rate and youth wage rate).  Employers located in Minneapolis should already be paying $10.25 per hour for small businesses and $11.25 for large (more than 100) businesses.  Remember, the higher rate applies if you are a Minneapolis employer; those rates increase every July 1.  As for St Paul employers, the City Council announced a new minimum wage ordinance on October 9, 2018, which it hopes to pass into law before the end of the year (more on that later in a future post).

 

The U.S. Department of Labor (DOL) was extremely busy with its announcements on August 28, 2018. Along with issuing 6 opinion letters, a directive, and launching a new web page (all of which I previously wrote about), it also announced the creation of not one, but two new websites, as well as the new Office of Compliance Initiatives. The new websites, worker.gov and employer.gov provide one location for information for federal worker protections (worker.gov) and information for employers about their responsibilities for federal worker protections (employer.gov).

The employer.gov website provides information regarding pay and benefits; workplace safety and health; small business resources; required posters; nondiscrimination; federal contractor requirements; and veteran and service member employment. It has frequently asked employer questions as well. In theory, the Office of Compliance Initiatives will work to promote greater understanding of federal labor laws and regulations, and will work with enforcement agencies to ensure compliance with the law.

What does that mean for the average employer? I have no idea. It seems to me to be yet another pair of government websites designed to provide consolidated information and links. But as always, nothing is as easy as it seems, and thus, it’s just one more set of data to review. In any event, Minnesota employers should also keep in mind that our laws cannot be ignored and so just because something is allowed under federal law, does not necessarily mean it is under state law. Thus, while this may be handy from a federal perspective, don’t forget about the Minnesota Department of Labor and Industry agency regulations and our Minnesota state wage and hour laws.

I’m a big fan of volunteering, and am highly involved in several community groups.  In one of them that I’m involved in, we frequently joke about being “voluntold” to do something (go ahead and suggest a good idea…dare you!). Yet, when is volunteering truly volunteering and not compensable work? In another of the U.S. Department of Labor’s (DOL) August 28, 2018 opinion letters, the DOL clarified when a volunteer need not be paid in FLSA2018-22. While this particular opinion letter talks about professional exam graders for a nonprofit organization, the opinion can help other employers who provide volunteer opportunities for employees. In the facts presented, these graders (typically high-level multi-national executives) used to get a fee for taking a week or two to travel overseas to grade professional exams. It was considered an honor to be asked and they are at the top of their profession. The nonprofit wanted to clarify if they could be classified as “volunteers,” even though their travel, room and board, etc. was paid for. The DOL said, “yes”.

The DOL noted that the FLSA does not require payment to an employee who “volunteers without contemplation or receipt of compensation”, as the FLSA, “recognizes the generosity and public benefits of volunteering and allows people to freely volunteer time to religious, charitable, civic, humanitarian, or similar nonprofit organizations as a public service.” However, the volunteer service must be “freely without coercion or undue pressure” (direct or implied). In other words, employees cannot “volunteer” to perform their job, and cannot be pressured to do so (i.e. everyone is expected to volunteer). Seems simple enough, but of course there is always grey – for example, the opinion notes that this is related to a nonprofit. But what about employees that “volunteer” to run or organize a fundraising campaign through work? What if the company has a relationship with the nonprofit and benefits from it (i.e. employee morale, jeans days, etc.). That is where hairs start getting split and the facts should be carefully considered.

On August 28, 2018, in FLSA2018-20, the US Department of Labor (DOL) issued another opinion letter stating that the Fair Labor Standards Act (FLSA) does not require that employers pay employees to attend voluntary wellness activities, biometric screenings, and benefits fairs held during (or outside of) work hours – if some conditions are met. First, they must be voluntary. Second, it must not be related to the employee’s job. Third, they must not be a part of new employee orientation and open to all employees. Fourth, the employer must not receive direct financial benefit as a result of employee participation.  And Lastly, they must be outside of normal work breaks.  In short, the activities must be “predominantly for the benefit of the employee”.

In this instance, “wellness activities” are offered by the employer as a way for employees to potentially decrease monthly insurance premiums through health education classes, gym classes, phone health coaching, participating in Weight Watchers, and engaging in voluntary fitness activities. The biometric screenings measures things such as cholesterol, blood pressure, and nicotine usage. The benefits fairs allow employees to learn about financial planning, college opportunities, and employer benefits.

The DOL concluded that the FLSA does not require payment for such time, as it is “off duty” time per 29 C.F.R. § 785.16. One footnote (literally in the opinion) – this analysis is based on such events taking more than a standard 20 minute break time.  For example, if these events are offered during a break of up to 20 minutes, then they would be compensable (paid) under 29 C.F.R. 785.18, because so long as an employer provides a paid break, it does not matter how the employee spends that time for his or her own benefit.

Small businesses (100 or fewer employees) have less than one month left until the first phase of the Minneapolis Minimum Wage Ordinance goes into effect. The Minneapolis Minimum Wage Ordinance went into effect for large business (more than 100 employees) on January 1, 2018, when the minimum wage increased to $10.00. However, as I mentioned here, the ordinance differentiates based on employer size. Thus, on July 1, 2018, small employers are facing their first minimum wage increase under the ordinance, while large employers are on their second minimum wage increase.  Starting July 1, small Minneapolis employers must pay employees a minimum wage of $10.25 per hour, while large employers must pay $11.25 per hour.