This update is short and sweet. On August 28, 2018, the U.S. Department of Labor’s (DOL) Office of Federal Contract Compliance Programs (OFCCP) launched a new web page titled “Contracting Officer Corner“. The OFCCP’s new web page is designed to be a one-stop shopping, if you will, for federal contractors. It includes a new Pre-Award Process Guide, links to the Pre-Award Registry, Notification, Federal Acquisition Regulations, debarred contractors search, regional office staff contacts, and downloadable EEO workplace posters. That’s it!
For those of you who are federal contractors, and have had the pleasure of being audited by the U.D. Department of Labor’s (DOL) Office of Federal Contract Compliance Programs (OFCCP), you know how close to the vest the OFCCP has historically kept their formulas, pay analysis groupings theories, and statistical modeling theories/backup, making early settlement frustrating if not impossible. Effective August 24, 2018, the DOL issued a new directive, DIR 2018-05, that outlines their procedures for conducting their compliance evaluation (audit) with the priority of eliminating pay discrimination. I am encouraged by this directive, insofar as the OFCCP appears to be taking measures to improve transparency and working more on correcting true pay disparities versus paying a game of “gotcha”.
DIR 2018-05 notably nods to this history, stating that upon review “OFCCP is concerned that contractors lack the clear guidance Directive 307  intended to give”. The OFCCP hopes the new directive will allow federal contractors to better conduct meaningful self-audits to proactively identify and address any pay disparity issues. I’d bore you all to death if I set forth a summary of the directive, but wanted to at least point out what the directive contains (the link to DIR 2018-15 is above).
The directive explains how it uses statistical and other evidence to evaluate pay practices, as well as data requests via a Scheduling Letter, which is used to request data such as the employers Affirmative Action Program (AAP). The directive further notes how it determines its similarly-situated analysis groupings by developing pay analysis groupings (PAGs) that mirror a contractor’s compensation system (this has been a fight for contractors in the past). Finally, the directive discusses how the OFCCP applies statistical methodology and modeling in a desk audit and during the compliance evaluation, which control variables are used and how, and how it will facilitate transparency, consistency, and resolution through conciliation.
On July 13, 2018, the Department of Labor Wage and Hour Division (WHD) released Field Assistance Bulletin No. 2018-4 providing guidance on when caregiver registries are an “employer” of caregivers under the Fair Labor Standards Act (FLSA). Rather than providing in home care services directly, registries provide individuals, such as seniors and those with disabilities, support for finding in-home care by offering referrals of qualified pre-screened caregivers from their database. This may be nurses, home health aids, personal care attendants, or home care workers, however titled. For the past four decades, the WHD’s position has been that generally a registry, even one that performs payroll services, is not an employer under the FLSA; however, if the registry directs and controls the caregivers work and sets the rate of pay, it is an employer. However, regulation changes and requests for additional guidance promoted the WHD to pen the bulletin.
To determine whether a registry is an employer, the WHD engages in a fact-specific assessment of the relationship between the registry and the caregiver, known as the “economic reality” test. Field Assistance Bulletin 2018-4 identifies common practices of registry business practices and operations that the WHD may analyze when determining if an employment relationship exists. While the individual factors identified in the Field Assistance Bulletin are not dispositive, the factors are helpful for employers to identify business practices that may establish an employment relationship, therefore triggering obligations under the FLSA:
- Conducting Background and Reference Checks
- Hiring and Firing
- Scheduling and Assigning Work
- Controlling the Caregiver’s Work
- Setting the Pay Rate
- Receiving Payments of Caregiver Services
- Paying Wages
- Tracking Caregiver Hours
- Purchasing Equipment and Supplies
- Receiving EINs or 1099s
Notably, the WHD does not focus on a single factor, but rather looks at the “totality of the circumstances,” including the control and influence the registry has on the caregiver’s terms and conditions of employment.
According to Donate Life America, every 10 minutes another person is added to the waiting list for an organ. Twenty-two (22) people die each day waiting, and yet one organ/eye/tissue donor can save and heal more than 75 lives. According to the United Network for Organ Sharing, 114,370 people are currently waiting for a lifesaving transplant; in Minnesota, there are 3,155 people waiting (62 under the age or 18). While many may “check the box” when obtaining/renewing a drivers’ license, few think about making a living donation (approximately 6,000 per year). In Minnesota, we are fortunate to have the Gift of Life Transplant House, a place for immune-suppressed transplant patients (only) and their caregivers to stay while receiving medical treatment in Rochester. The Gift of Life Transplant House was founded in 1973 by Edward Pompeian, who then received a donated kidney, the “gift of life”, from his mother.
For those like Mr. Pompeian’s mother that decide to make a living organ donation, the U.S. Department of Labor (DOL) has made it a little less burdensome to donate life to another. On August 28, 2018, the DOL opined in FMLA2018-2-A, that organ donation surgery is a “serious health condition” under the Family Medical Leave Act (FMLA), so long as the individual requires overnight hospitalization (as it commonly requires) and/or post-surgery recovery. Again, the employer must be subject to the FMLA, the employee must be FMLA eligible, and the employee must present acceptable medical certification supporting the need for leave.
When a local movie theater started serving food during the movie, I was quite excited (until I realized how loud it would be while watching the movie). Yet, not once did I think about whether my server fell under the “motion picture theater” (movie theater) exemption to the Fair Labor Standards Act (FLSA)…nor had I heard of such a thing, frankly. On August 28, 2018, the U.S. Department of Labor (DOL) addressed the question of what constitutes an “establishment” for purposes of the overtime exemption in opinion letter FLSA2018-23. While the question was asked in the context of a restaurant within a movie theater, the DOL’s opinion provides insight to all employers.
When determining what constitutes an “establishment” for purposes of the FLSA, the DOL looks at the nature of the business, not the work performed by the employee. The DOL also notes that an “establishment” is a “distinct physical place of business” not “an entire business or enterprise”. Thus, so long as business units or portions of a business located on the same premises share bookeeping, records, taxes, invoices, banks, and employees, etc. they are one “establishment” for the exemption. Thus, in this case, the DOL opined that the movie theater and restaurant constituted one “establishment” for purposes of the motion picture theater exemption, and thus employees who work both in theater as an usher, and in the theater’s full-service restaurant as a server are not entitled to overtime. However, don’t forget – just because the FLSA does not apply, does not mean that state law does not (overtime after 48 hours per workweek).
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.
In another of the six opinion letters issued by the U.S. Department of Labor on August 28, 2018, the DOL clarified in FLSA2018-21, that an employer that sells technology to merchants that allow them to accept credit card payments from mobile devices is indeed, a “retail or service establishment,” for purposes of the Fair Labor Standards Act exemption. While this seems to apply to a pretty limited amount of employers (for which the rest of you are wondering why you care about this and are still reading this post), the opinion letter provides guidance applicable to all.
First, the DOL references the recent U.S. Supreme Court Encino Motorcars case, noting that exemptions under the FLSA should be fairly – not narrowly – interpreted. Thus, the DOL recognizes that it “must apply a ‘fair reading’ standard to all exemptions to the FLSA – including the Section 7(i) exemption”. In doing so, the DOL opines that just because the employer sells its product to commercial entities does not mean it does not qualify for the retail and service establishment exemption. Further, the DOL notes that courts have confirmed that case law does not require a physical location accessed by the public, that a business is open to the public if they receive orders on the phone, for example.
Additionally, the DOL noted that the sales of the product (a credit card reading platform) are indeed retail sales – not wholesale, because the employer does not sell large quantities of the platform to individuals, but instead tailors the product to their customers who then use it for their clients. That being said, the DOL does caution that, while it has “considerable discretion”, the courts have final say with respect to whether sales are recognized as “retail” in a particular industry.
The result? The FLSA’s retail or service establishment exemption applies (and thus, no overtime is due) to employees of an employer that sells customer technology to commercial clients, so long as the employee’s regular rate of pay exceeds 1.5 times minimum wage in the workweeks they work overtime and commissions constitute more than half of their earnings (in other words, usually commissioned inside sales representatives).
The U.S. Department of Labor’s August 28, 2018 Opinion Letter FMLA2018-1-A confirms that, in certain circumstances, an employer may “freeze” an employee’s attendance points during periods of Family Medical Leave Act (FMLA) leave. Attendance points are often used in a manufacturing or other settings when attendance is critical and HR needs a simple way to monitor and decide when to write up/terminate an employee. In this instance, the employer has a no-fault attendance policy whereby employees accrue attendance points over the course of 12 months “active service”, until a certain amount is hit (18 points), at which point they are automatically terminated.
Key here, is that employees do not accrue points for certain absences such as FMLA-protected, workers’ compensation, vacation, or other specified/approved leaves. However, the points collect over 12 months of “active service”, thereby freezing the points when the employee is on an approved leave. When the employee returns, their points pick up where they left off (thus, the points may be on their record for more than 12 months).
The DOL opines that such a method is acceptable under the FMLA, as the person is in no better or worse position because of taking FMLA. However, the DOL does caution that such practice is okay, so long as, “employees on equivalent types of leave receive the same treatment”. In other words, employers do need to be careful to ensure that all types of leave are treated the same and freeze the points for all approved absences (such as workers’ compensation, vacation, etc.), and may want to consider, for administrative purposes, a minimum time such as two weeks before absences freeze points.
The U.S. Department of Labor (DOL) has not forgotten about the proposed overtime regulation overhaul, though it’s been a bit sleepy on this issue this past year since its July 26 2017 Request for Information. On August 28, 2018, the DOL announced it will hold five “listening sessions” (none in Minnesota- the closest being Kansas City, MO). These sessions are open to the public and scheduled between September 7 and 24, 2018. Notably for those of us in Minnesota who are nowhere close to attending one, the DOL is asking for input on the following questions:
- What is the appropriate salary level (or range of salary levels) above which the overtime exemptions for bona fide executive, administrative, or professional employees may apply? Why?
- What benefits and costs to employees and employers might accompany an increased salary level? How would an increased salary level affect real wages (e.g. increasing overtime pay for employees who current salaries are below a new level but above the current threshold)? Could an increased salary level reduce litigation costs by reducing the number of employees whose exemption status is unclear? Could this additional certainty produce other benefits for employees and employers?
- What is the best methodology to determine an updated salary level? Should the update derive from wage growth, cost-of-living increases, actual wages paid to employees, or some other measure?
- Should the Department more regularly update the standard salary level and the total-annual-compensation level for highly compensated employees? If so, how should these updates be made? How frequently should updates occur? What benefits, if any, could result from more frequent updates?
Realistically, this indicates it is going to be a long while yet before we see any changes to the overtime regulations, I do believe.