In addition to my blog about the Emergency Family and Medical Leave Expansion Act (EFMLA), the Families First Coronavirus Response Act (Families First Act or FFCRA) also contains the Emergency Paid Sick Leave Act (EPSLA).  Emergency paid sick time (EPST) will go into effect 15 days after the Families Act is enacted – April 1, 2020. The EPSLA applies to employers with less than 500 employees and generally works as follows (obviously summarized here for your reading pleasure):

  • Every employee is entitled to employer-paid sick time if they are unable to work (or telework) because of COVID-19 and they are:
    1. Subject to a quarantine or isolation order.
    2. Advised to self-quarantine by a health care provider.
    3. Experiencing symptoms.
    4. Caring for an individual subject to (1) or (2) above.
    5. Caring for a son or daughter whose school or child care was closed or whose child care provider is unavailable.
    6. Experiencing any other “substantially similar condition”.
  • Full-time employees are entitled to 80 hours of paid sick time.
    • The definition of “employee” and “employer” under the EPSLA are too specific for this general blog audience. If your business is in a unique situation, read the Act or call an attorney for interpretation.
  • Part-time employees are entitled to “a number of hours equal to the number of hours that such employee works, on average, over a 2-week period.”
  • Caps on paid sick time – employers do not need to pay more than:
    • $511 per day and $5,110 in the aggregate for the use for reasons 1-3 above.
    • $200 per day and $2,000 in the aggregate for the use in reasons 4-6 above.
  • Rates to pay:
    • The employee’s regular rate (as defined by the FLSA) or minimum wage, whichever is greater.
      • For part-time employees, it is an average (see the Act).
    • For paid sick time related to reasons 4-6 above, the required compensation is only 2/3rds of the employee’s regular rate.
  • Employers signatory to a multiemployer bargaining agreement may make contributions to the multiemployer fund, plan or program (see the Act for more details).
  • Does not carry over into 2021.
  • Paid sick time “shall cease beginning with the employee’s next scheduled workshift immediately following the termination of the need for paid sick time” set forth in 1-6 above.
  • Employers may not require employees to find a replacement for their shift.
  • Paid sick time must be available to the employee “immediately” regardless of how long the employee has been employed by the employer.
  • Employees may first use paid sick time before PTO, vacation/sick time – and cannot be forced to first use other paid time off banks if available. A word of caution – given the generous nature of the leave, I think it is safe to presume that any employee who uses their normal paid time off instead of paid sick time is going to draw some red flags in an investigation that they were not allowed to use paid sick time (because why would they? There is zero upside to an employee using PTO versus paid sick time for one of the reasons above).
  • Notice poster must be posted (the DOL will have a notice available with 7 days).
  • Shocker…employers cannot retaliate or discriminate against employees who use this leave or file a complaint about the same.
  • Violation is considered the same as violating minimum wages and unlawful termination under the FLSA. Which means employers who violate this Act are liable for the backwages – doubled, plus having to pay an employee’s attorneys’ fees (plus your own attorneys’ fees, among other things). In other words, you don’t want to mess this up…
  • The DOL Secretary must issue guidelines within 15 days following enactment.
  • After any portion of the first workday that an employee receives paid sick time, an employer may require an employee “follow reasonable notice procedures in order to continue receiving such paid sick time”.
  • Applies to employers with LESS THAN 500 employees.  However, the DOL has the authority to issue regulations to exempt small businesses (less than 50 employees) when the imposition of paid sick time would jeopardize the viability of the business as a going concern, and certain health care providers and emergency responders.
  • The Act expires on December 31, 2020.

I held off as long as possible, but it seems like we are getting inundated these past few days with wage and time off questions relating to Coronavirus – COVID-19 as it moves into Minnesota. So, below is my take on the situation, and an overview of considerations for employers. As always, be sure not to discriminate against employees based on race, etc. when addressing such issues – if you make one person in a department work remotely, they should all work remotely.

Fair Labor Standards Act – Deductions From Pay & Paid Time Off

The Department of Labor (DOL) has issued a FAQ regarding COVID-19 and public health emergencies as it relates to the Fair Labor Standards Act (FLSA). It is actually a great article and I’d encourage employers to review it. In short, hourly employees get paid by the hour, so naturally, they are not due any wages for hours not worked. Employers may force the use of paid time off (PTO) or sick time and vacation, unless your Handbook or other policy specifically prohibits that. However, of course it is never that easy during a pandemic.

Employers want to keep employees happy during such a situation that is out of everyone’s control, and thus, may want to consider allowing employees to go negative PTO. What is that?  That is when an employer pays an employee for time off, but once the employee returns to work, any PTO accrued is first taken applied to the PTO they took but hadn’t yet earned. Employers could also make a special policy in light of the current pandemic to allow employees to chose either unpaid time off (UPTO) or negative PTO.

Deduction from wages for absences of salaried employees is much more tricky (that could easily be its own blog). The DOL has addressed this in their FAQ (linked above). In short, as long as a salaried employee works any time in a week, you should not deduct their salary for an office closure. However, you may deduct their salary for full weeks in which they perform no work. Keep in mind that remote work (phones, iPads, etc.) is still work (and thus paid). Employees must be completely disconnected from working.

Family Medical Leave Act

The DOL has also issued a great FAQ regarding Family Medical Leave Act (FMLA) and COVID-19.  Again, the best quick resource is to read that, though I’m happy you’re still reading my blog this far… In general, employers covered under FMLA need to remember to offer FMLA to employees who need leave for their own serious medical condition (which could include COVID-19 if a physician signs off on the certification – typically when there are complications from it) or to take care of their spouse, child, or parent who has a serious health condition.  Some states like Wisconsin have their own FMLA policy that may offer the employee greater coverage (i.e. domestic partner and parents of spouses/domestic partners) so don’t forget to review the law of the state that the employee is located if you are a Minnesota-based employer with a national workforce.

Minneapolis Sick and Safe Time Ordinance

Employers who fall under the Minneapolis Sick and Safe Time Ordinance should remember that employees may use their earned sick and safe time (ESST) for caring for a family member during emergency closure of school or place of care. Thus, if an employee’s child’s school closes due to an infectious disease outbreak, they should be allowed to use sick and safe time for those days (as long as they have time left to use). Update – Minneapolis has now come out with its own FAQ related to ESST and COVID-19 which you can read here.

St. Paul Earned Sick and Safe Time Ordinance 

The St. Paul Earned Sick and Safe Time Ordinance similarly allows for the use of ESST for caring for a family member whose school or place of care has been closed due to unexpected closure. As you may know, the St. Paul Federation of Teachers announced they were to strike effective March 10. St. Paul took the position that because the strike was noticed in advance it was not an “unexpected closure”. Thus, by that logic, St. Paul may take the position that ESST will only be applicable in a school closure situation when it is unexpected (i.e. no notice is given) versus advance notice (i.e. we will close after spring break for another week). However, I would like to think that would not happen and St. Paul will follow Duluth’s lead (read below) and encourage the use of ESST for COVID-19 absences. From an employer perspective, the use of ESST is not a bad thing as you will not have an interference claim, discrimination claim, and that liability will be off the books once used.  As of March 23, 2020, St. Paul has not yet come out with a FAQ related to COVID-19 and its ESST.

Duluth Earned Sick and Safe Time Ordinance

Duluth does not have the same provision as St. Paul and Minneapolis regarding school closures. However, it has issued ESST and COVID-19 Frequently Asked Questions. Duluth has taken the position that an employer may allow an employee to use ESST for reasons not covered by the ordinance – certainly implying that an employer could allow an employee to use it for school closures related to the Coronavirus or other infectious disease pandemic.

School Closures & Other Approved Time Off

Employers who are not under the purview of a sick and safe leave ordinance may always allow employees greater flexibility than the law. In other words, employers may allow employees to use negative PTO as addressed above, they may allow the use of ESST or sick time for school closures, they may allow an approved, unpaid leave of absence, or working remotely. Employers may go above and beyond and will want to consider the health and safety of its workforce when making such decisions (i.e. temporarily stopping absenteeism points to encourage employees to stay home when ill). At the end of the day, employers should treat all employees the same, consider long-term employee retention when enacting or enforcing policies, and remember the duty to maintain a safe workplace.

Blog Updates

Finally- if you would like to get my blogs delivered to your email, feel free to subscribe.  On the right side of the blog there is a “Stay Connected” box – you can type your email in there.  While it’s usually set for Wednesday updates, I will be moving to daily updates during the COVID-19 pandemic to keep you all informed.

In the past week there was nothing really Earth-shattering as far as wage and hour updates, but certainly some updates to note:

  • MnDOLI issued a reminder to employers that most Minnesota employers are subject to both state and federal wage laws…employers must review both laws (and ordinances) to ensure compliance!  For example, unlike FLSA:
    • Minnesota does not allow any partial-day absence deductions for salaried (exempt) workers.
    • Minnesota does not have a computer exemption (I have this conversation with employers often)…and computer geniuses may be genius but whether they are exempt is another matter.
    • Minnesota does not have a “highly compensated” worker exemption.
    • The Wage Theft Prevention Act’s employee notice form requires employers to state the actual basis for the exemption (administrative, executive, professional) – be sure it is not “computer” or “highly-compensated”!  And no, “exempt” is not sufficient.
    • The Minnesota Rules (5200.0190.0200 and .0210) provide for the various duties test for executive, administrative or professional under Minnesota law.  Again, this is not the same as FLSA…two totally different tests.
  • The City of Minneapolis has published its final versions of the Minneapolis Wage Theft Prevention Ordinance FAQs and Rules (though they are unchanged from the version published January 24, 2020.
  • The Minnesota Department of Labor & Industry (MnDOLI) has issued a Notice of Correction to its commercial wage rates for prevailing wages applicable to jobs advertised to be on or after January 27, 2020.  All prevailing wage contractors should be signed up to receive MnDOLI’s wage rate notifications (at the link above).
  • The NLRB is expected to issue its final rule tomorrow (February 26, 2020) regarding its joint-employer standard under the National Labor Relations Act – this is a huge reversal and restores decades of decisions prior to 2015.

 

So this is exciting! No, really, it is! As you know, under the Fair Labor Standards Act (FLSA), the employee of one company can be found to be a “joint employee” of another, making both jointly and severally liable for that employee’s wages (and thus, overtime). Historically, whether two companies were “joint employers” was been subject to various balancing tests created by the courts as the Department of Labor (DOL) had not issued a rule on the subject for over 60 years.

However, here’s the fun part! In a final rule issued on January 16, 2020, the DOL articulated a comparatively simple four-part test, effective March 16, 2020.  The new test considers whether the claimed joint employer:

  • Hires or fires the employee;
  • Supervises and controls the employee’s work schedule or conditions of employment to a substantial degree;
  • Determines the employee’s rate and method of payment; and
  • Maintains the employee’s employment records.

While no one factor is dispositive of the issue, and the weight to be given each factor can vary from one case to the next depending on its facts, the rule clarifies that a joint employer must actually exercise at least one of the four types of control identified by the four factors, and that merely reserving the right to exercise such control, without more, does not suffice. Additionally, the rule explicitly states that a franchisor-franchisee relationship does not impact the joint employer analysis, and lays out a number of examples to assist employers in applying the rule. Cheers to clarity!

So probably not super exciting or applicable for many employers,  but, as I blog all things wage and hour, here you go! On January 7, 2020, the Department of Labor (DOL) released Opinion Letter FLSA2020-2, opining as to whether educational assistants paid on a per-project basis can meet either the “salary basis” or “fee basis” requirement for exemption from overtime pay under the Fair Labor Standards Act (FLSA). Two scenarios were posed – in the first, an educational consultant was placed on a 20-week project and paid $80,000 in bi-weekly installments ($4,000 per pay period). In the second, the same consultant was concurrently added to a second project to last eight weeks, receiving an additional $6,000 in four biweekly payments ($1,500 per pay period).

The DOL opined that the salary basis requirement were satisfied by both arrangements. The $80,000 payment qualified as a salary, and the additional $6,000 qualified as “extra” compensation under 29 C.F.R. § 541.604(a), which permits an employer to offer additional compensation to an employee without losing the overtime exemption or violating the salary basis requirement. This is true even though the employer acknowledged that the projects were subject to change, which could result in the employee receiving more or less compensation—so long as the total compensation stayed above the threshold, and the changes weren’t so frequent that the salary would become “the functional equivalent of an hourly wage.”

On January 7, 2020, the U.S. Department of Labor issued its first Opinion Letter of the new year –  FLSA2020-1.  In this instance an employer pays employees a non-discretionary lump sum bonus of $3,000 who complete a 10 week training program and agree to continue training for another 8 weeks. However, the employee will receive the bonus if they complete the 10 weeks and sign up for the 8 week program, but only complete a week. During the 10 weeks, an employee works 40 hours most weeks,  but 47 and 48 hours during two of the weeks. The question posed to the DOL was what method should be used to calculate the additional overtime payments due.

29 C.F.R. 778.209(b) allows two methods to compute overtime pay for bonuses that cannot be identified with a particular workweek. In the situation above, the DOL confirmed that since the bonus was for completing a 10 week program, it is appropriate for the employer to allocate the $3,000 lump sum to each of the 10 weeks. Thus, $300 is added to each week, and during the workweeks where the employee worked 7 and 9 hours of overtime, the $300 is added to each weekly wages to determine the new (higher) regular rate, from which the increased overtime rate is then calculated and the additional half-time monies due.

Clear as mud? Let’s break it down and assume the employee makes $10/hr ($5/OT):

Week 1 – 47 hours.  40 x $10 = $400 (straight time pay) + 7 x $15 = $105 (overtime pay).  After bonus regular rate becomes ($400+$300)/47 = $14.89.  Overtime rate is now $7.45/hr.  Employee is owed $7.45-$5 = $2.45/hr x 7 = $17.15 extra.

Week 2 – 49 hours.  Paid $400 straight time hours and $135 for OT hours.  After bonus regular rate becomes ($400+$300)/49 = $14.29.  Overtime rate is now $7.15/hr.  Employee is owed $7.15-$5 = $2.15/hr x 9 = $19.35 extra.

In short, it’s nothing earth shattering, but the DOL has stated that it is updating its Field Operations Handbook at 32c03(c) to reflect this as an appropriate method for determining earnings that cannot be identified with a particular workweek.

On December 30, 2019, the Office of Federal Contract Compliance (OFCCP) issued a Notice of Proposed Rulemaking that aims to clarify the process for its two formal notices – the Predetermination Notice (PDN) and Notice of Violation (NOV). In addition, the new regulations will allow contractors in violation to enter into a conciliation agreement prior to a PDN or NOV being issued. The new procedure will be called the Expedited Conciliation Option (ECO).

Why an Expedited Conciliation Option?

Contractors who have been through an OFCCP compliance audit know that it can be a long a tedious process. This new ECO allows a contractor who has been preliminary found to have either a discrimination violation(s) or material violation(s) to bypass the PDN and NOV process and resolve the matter sooner than later. It’s akin to the decision to tearing off a band-aid and getting it over with when the findings are not worth disputing. Federal contractors with multi-establishments have had the unwritten option for early resolution in the past, but this rule would codify the procedure for all.

What Evidence the OFCCP Must Find to Support a Violation is Clarified

Further – and much needed – the proposed rule clarifies exactly what the OFCCP must find before issuing a PDN or NOV. Historically, the OFCCP has been tight-lipped with respect to how it came up with the decision that there is a statistically significant disparity caused by an employment action. Gone will be the days where the OFCCP can refuse to provide its methodology and share its calculations. Specifically, the OFCCP has proposed the following definitions:

Nonstatistical evidence may include testimony about biased statements, remarks, attitudes, or acts based upon membership in a protected class; differential treatment through review of comparators, cohorts, or summary data reflecting differential selections, compensation and/or qualifications; testimony about individuals denied or given misleading or contradictory information about employment or compensation practices; testimony about the extent of discretion or subjectivity involved in making employment decision; or other anecdotal or supporting evidence.”

Statistical evidence means hypothesis testing, controlling for the major, measurable parameters and variables used by employers (including, as appropriate, other demographic variables, test scores, geographic variables, performance evaluations, years of experience, quality of experience, years of service, quality and reputation of previous employers, years of education, years of training, quality and reputation of credentialing institutions, etc.), related to the probability of outcomes occurring by change and/or analyses reflecting statements concluding that a difference in employment selection rates or compensation decisions is statistically significant by reference to any one of these statements:

(1) The disparity is two or more times larger than its standard error (i.e. a standard deviation of two or more);

(2) The Z statistic has a value greater than two; or

(3) The probability value is less than 0.05″

For those contractors who have already been involved in an OFCCP compliance audit, you can appreciate the above. For those that have not yet been audited, this information will be useful both now and later. For example, when you are making compensation decisions, you can see from the above what the OFCCP will look at. Be sure that there is no nonstatistical or statistical evidence that would support a violation of your affirmative action obligation as a federal contractor. Finally, OFCCP has updated its Federal Contract Compliance Manual, which you can view here.

As I have blogged about previously, the City of Minneapolis’ Wage Theft Prevention Ordinance went into effect January 1, 2020. While Minneapolis adopted some of the State of Minnesota’s Wage Theft Act, it also added additional requirements, summarized below compliments of the City of Minneapolis:

Under the ordinance, employers must:

  • Provide employees with written pre-hire notices of certain employment terms. It must be signed by employees. (Download at minneapolismn.gov/laborenforcement.) (This example may be used to comply with both city and state wage theft laws.)
  • Follow a regularly scheduled payday.
  • Provide earnings statements at the end of each pay period.
  • Provide sick and safe time accrual and use balances on all earnings statements.
  • Distribute a Minneapolis labor poster to all new hires. (Download at minneapolismn.gov/laborenforcement).

Resources for businesses:

Example pre-hire notices, FAQs, and Minneapolis labor posters downloadable now at minneapolismn.gov/laborenforcement.

I greatly suspect that everyone reading my blog is aware by now that Minnesota’s minimum wage increased January 1, 2020 ($10 for large employers; $8.15 small employers). However, for those employers who use minimum wage for certain activities (i.e. travel time) –  be sure to change that rate in your payroll system as well! Also, if you have a minimum wage guarantee for salespersons, same concept – be sure you have updated those records as well. Remember, with the passage of the Minnesota Wage Theft Law, this is not something you want to let slip through the proverbial cracks!

Also, keep in mind that both Minneapolis and St. Paul have higher minimum wage rates then the State wage, so if you are conducting business in those cities, be aware of those wages as well. Minneapolis’ minimum wage increases every July 1, while St. Paul increases its minimum wage every July 1 (with the exception of macro businesses – 10,000+ employees went up January 1, 2020).

On December 16, 2019, the U.S. Department of Labor published a Final Rule clarifying whether certain benefits and other payments must be included in the “regular rate” for purposes of overtime pay. I’ve posted about this numerous times (one recently). Recall, a “discretionary bonus” must truly be discretionary in order for an employer to not have to include that pay as a part of the employee’s regular rate (which the increases amount due for overtime). If you’ve heard of the company that recently gave its employees a cut of a $10 million holiday bonus – THAT is a discretionary bonus (did you seek the surprised look on their faces?!).

However, there are other types of pay and bonuses and perks that the DOL has clarified do not need to be included into the “regular rate,” similar to a discretionary bonus:

  • Parking benefits, wellness programs, onsite specialist treatment, gym and fitness access/classes, employee discounts on goods and services, tuition benefits and adoption assistance.
  • Payments for unused paid leave such as PTO, vacation, sick & safe time.
  • Payments for certain penalties under state and local scheduling laws.
  • Reimbursed expenses such as cell phones, exam fees, membership dues.
  • Sign-on bonuses and longevity bonuses.
  • Office coffee and snacks to employees as gifts.
  • Discretionary bonus (which is not new), but clarifies that the label given a bonus does not determine whether its discretionary (which I know you already know because you’ve been reading my blog!).
  • Contributions to benefit plans for accident, unemployment legal services or other events that could cause future financial hardship or expenses.
  • Call-back pay no longer needs to be “infrequent and sporadic” to be excluded (but yet can’t be prearranged and regular).

Of course, this is just a summary, and there are always exceptions to the rule (and exceptions to the exceptions), and nuances. The actual Final Rule provides many examples. Accordingly, before attempting to exclude pay from the regular rate, you should always check the law first! Happy Holidays!