New Year – New Labor and Employment Law Developments Every Employer Should Know
In 2019, several federal agencies, including the U.S. Department of Labor, Equal Employment Opportunity Commission, and the National Labor Relations Board have either issued new regulations, new guidelines, or employer-friendly decisions that every employer should be aware of as we begin our journey into this 2020 election year. Most of the changes coming at the federal level are the result of the Trump administration’s agenda to level the playing field for employers by tilting back for employers the shift that occurred in the legal landscape during the Obama administration. Here are the latest labor and employment law developments every employer should know as we venture into 2020.
U.S. Department of Labor (DOL)
New Overtime Regulations Go into Effect January 1, 2020
Effective January 1, 2020, the salary threshold necessary to exempt executive, administrative and professional employees from the Fair Labor Standard Act’s minimum wage and overtime pay requirements increases from $23,660 (or $455 per week) to $35,568 (or $684 per week). The DOL’s new rule is the product of the Trump administration’s efforts to reset the Obama administration’s 2016 final rule that established the salary threshold at $47,476 per year or $913 per week. Now is the perfect time for employers to audit their payroll data to make sure that every employee who is being treated as an exempt executive, administrative or professional employee is being paid at least the salary threshold amount of $35,568 (or $684 per week). Employees who do not meet this new minimum salary threshold should be treated as non-exempt and employers should begin to pay these newly minted non-exempt employees overtime compensation (1.5 times their regular rate) if they work over 40 hours in a workweek.
DOL Issues Final Rule Clarifying the Regular Rate of Pay
In December, the DOL announced a final rule clarifying for employers what “perks” and benefits must be included in the regular rate of pay when calculating overtime compensation. The “regular rate” is the hourly rate that is paid to employees and must not only include an employee’s hourly wage rate, but it must also include in its calculation other forms of compensation received in a workweek, including bonuses, commissions, and other forms of compensation, subject to eight specified exclusions. Perplexing to employers, and exposing employers to additional risk for overtime liability, was the uncertainty as to whether certain kinds of “perks,” benefits, or other miscellaneous payments must be included in the regular rate. The DOL attempted to eliminate this uncertainty in its final rule by confirming what employers may offer to employees through the following non-exhaustive list of “perks” and benefits without the risk of additional overtime liability:
- The cost of providing certain parking benefits, wellness programs, onsite specialist treatment, gym access and fitness classes, employee discounts on retail goods and services, certain tuition benefits (whether paid to an employee, an education provider, or a student-loan program), and adoption assistance;
- Payments for unused paid leave, including paid sick leave or paid time off;
- Payments of certain penalties required under state and local scheduling laws;
- Reimbursed expenses including cellphone plans, credentialing exam fees, organization membership dues, and travel, even if not incurred solely for the employer’s benefit; the DOL also clarified that reimbursements that do not exceed the maximum travel reimbursement under the Federal Travel Regulation System or the optional IRS substantiation amounts for travel expenses are per se “reasonable payments”;
- Certain sign-on bonuses and certain longevity bonuses;
- The cost of office coffee and snacks to employees as gifts;
- Discretionary bonuses, by clarifying that the label given a bonus does not determine whether it is discretionary and providing additional examples; and
- Contributions to benefit plans for accident, unemployment, legal services, or other events that could cause future financial hardship or expense.
The DOL’s final rule becomes effective on January 15, 2020.
National Labor Relations Board (NLRB)
Employers Can Cut-Off Union Dues Upon CBA Expiration
In a 3-1 ruling, the NLRB overturned an Obama-era decision (Lincoln Lutheran of Racine, 362 NLRB 1655 (2015)) requiring employers to continue to honor the dues checkoff provision in an expired labor contract. In Lincoln Lutheran of Racine, the NLRB held that an employer’s statutory obligation to check off union dues continues to be enforceable under Section 8(a)(5) of the National Labor Relation Act after expiration of a collective bargaining agreement that establishes the checkoff arrangement. The Obama-era Board reasoned that the “dues checkoff” provision could not just dissipate once a contract expired, but instead could be ignored only if all parties to the contract agreed. On December 16, 2019, the NLRB reversed course in Valley Hospital Medical Center, 368 NLRB No. 39 (2019), holding that while dues checkoff provisions are mandatory subjects of bargaining, they also fall into a special “limited category” of unique union rights that are contractual in nature and do not necessarily relate to wages, pensions, welfare benefits, and other terms and conditions of employment. Given its special category, a dues-checkoff provision remains enforceable only during the term of the agreement in which those contractual obligations were created by the parties. Consequently, the Board held that there is no independent statutory obligation to check off and remit dues after expiration of a collective-bargaining agreement containing a checkoff provision, just as no such statutory obligation exists before parties enter into such an agreement. The Board’s ruling brings more balance to the bargaining table and provides the employer some leverage when contract negotiations may extend beyond the expiration of the labor agreement. It also incentivizes the union to reach an agreement before expiration of the labor agreement to avoid loss of union dues. Of course, the right to cut-off union dues under the Board’s Valley Hospital decision does not exist when the employer and the union agree to extend the labor agreement during the pendency of negotiations.
NLRB Provides Employers, Once Again, the Power to Control Company-Owned Email
On December 17, 2019, in Caesars Entertainment (368 NLRB No. 143) the NLRB overturned its 2014 controversial Purple Communications decision (361 NLRB No. 126) which had held that employees have the right to use their employers’ email systems for non-business purposes, including communicating about union organizing. The NLRB’s Purple Communications’ decision overturned its 2007 Register Guard decision (351 NLRB No. 70) where the Board recognized the long-standing precedent that the NLRA generally does not restrict an employer’s right to control the use of its equipment, which applies to company-owned email systems, and held that while union-related communications cannot be banned because they are union-related, facially neutral policies regarding the permissible use of employers’ email systems are not rendered unlawful simply because they have the “incidental” effect of limiting the use of those systems for union-related communications. The Purple Communications decision upset this precedent and held, for the first time in the history of the Board, that employees do have the right to use company-owned equipment for non-work purposes. The Board’s decision in Caesars Entertainment basically restored the standard set forth in the Register Guard decision before the Purple Communications decision stripped employers of an important property right with the only exception being those rare cases where an employer’s email system provides the only reasonable means for employees to communicate with one another. Now, under the Caesars Entertainment decision, employers may prohibit employees from using company-owned email systems for non-work-related purposes, including communications concerning union organizing activities. Employers, however, are permitted to implement such a prohibition only if the employer’s rules or policies are not applied discriminatorily by singling out union-related activities or communications.
NLRB Restores Employers’ Right to Impose Confidentiality in Workplace Investigations
On December 16,2019, in a 3-1 decision, the NLRB overruled a 2015 NLRB precedent (Banner Estrella Medical Center, 362 NLRB 1108) that required a case-by-case determination of whether an employer may lawfully require confidentiality in specific workplace investigations. The Board had ruled that employees have a Section 7 right to discuss discipline and ongoing investigations involving themselves and other co-workers. In Apogee Retail, 368 NLRB No. 144 (2019), however, the NLRB returned to its previous standard, and now allows employers to implement blanket nondisclosure rules requiring confidentiality in all workplace investigations. The NLRB’s ruling aligns itself with the EEOC’s position against the backdrop of the #MeToo movement where confidentiality rules imposed during a workplace sexual harassment investigation encourage victims and witnesses to come forward. The standard set forth by the Board in Apogee Retail only applies to open and-on-going investigations and only to those employees directly involved in the investigation. Obviously, on the other hand, any confidentiality order or rule imposed by the employer cannot be imposed on employees not involved in the investigation or to an investigation that has concluded. The Board’s decision in Apogee Retail provides employers an important tool to maintain the integrity of its internal investigations without fear that imposing the safeguards of confidentiality requirements during the pendency of an investigation violates Section 7 rights.
Equal Employment Opportunity Commission (EEOC)
EEOC Rescinds Policy Against Binding Arbitration
The EEOC voted 2-1 to rescind its 1997 Policy Statement on Mandatory Binding Arbitration where the EEOC had stated its position that mandatory arbitration agreements that keep workers’ discrimination claims out of court clash with the civil rights laws the agency enforces.
The EEOC based its decision to rescind its policy regarding binding arbitration based on the fact that its policy statement did not reflect current law, especially given the Supreme Court’s numerous and consistent decisions since 1997 that favor agreements to arbitrate employment-related disputes as being enforceable under the Federal Arbitration Act (FAA). The EEOC found that its 1997 policy conflicted with the arbitration-related decisions of the Supreme Court where the Court rejected the EEOC’s previously enunciated concerns with using the arbitral forum – both within and outside the context of employment discrimination claims. It should be noted by employers, however, that the EEOC’s decision to rescind its 1997 policy statement on mandatory arbitration should not be construed to mean that employees cannot file charges of discrimination with the agency if they signed an agreement to arbitrate or that the EEOC is prohibited from investigating such charges. Moreover, the EEOC makes clear that its rescission of its 1997 policy should not be interpreted as limiting the EEOC’s ability, or that of the employee, to challenge the enforceability of any agreement to arbitrate. This change in the EEOC’s policy position regarding mandatory arbitration of employment disputes is not surprising given the long-line of Supreme Court decisions favoring arbitration in employment disputes. Given the positive change in the EEOC’s position on mandatory arbitration agreements in employment, along with strong precedent-setting federal court decisions favoring arbitration, employers should consider revisiting whether they should be utilizing agreements with their employees for mandatory arbitration of employment disputes.