On March 5, 2018, the California Supreme Court changed the test for factoring flat sum bonuses into the overtime rate in Alvarado v. Dart Container Corporation of California, ordering a calculation that will increase the costs of overtime for employers who pay such bonuses. Under the federal formula, an employer must divide an employee’s total weekly pay (including non-discretionary bonuses) by the total number of hours the employee worked in a week to get the regular rate; the employer then must pay time-and-a-half that rate for all overtime hours. But under the Alvarado court’s formula, the employer must divide the total weekly pay by only “the number of nonovertime hours the employee [actually] worked during the pay period.” That smaller divisor will lead to higher overtime rates.
Following the recent wave of sexual harassment and assault allegations, a wake of news stories emerged about how HR departments have failed to conduct proper investigations into such complaints. Women claimed HR failed to write down their complaints or take any action; one woman claimed HR told her “We don’t want to get involved in this.” The stories asserted that HR “is supposed to protect the company’s interests,” not the employee’s. But as any experienced employment lawyer or HR manager knows, HR cannot protect the company if it conducts a subpar investigation.
Two of the most common harassment investigation missteps include (1) using investigators that lack sufficient training about how to conduct an investigation, and (2) failing to involve legal counsel at the right time.
Earlier this month, the Wage and Hour Division of the Department of Labor reissued 17 opinion letters from the Bush administration. The letters provide employers important guidance on a wide-range of issues under the Fair Labor Standards Act.
The reinstatement marks the first publication of opinion letters since the DOL announced last June that it would bring back that form of guidance. The Obama administration had eliminated the practice and withdrawn many existing opinion letters, including many of those reissued this month.
The reinstated letters do not upend any existing laws, but they provide important guidance and a possible safety net to employers facing similar situations. Many of the reinstated letters concerned application of Section 13(a)(1)’s overtime exemption for executive and administrative employees. The letters also discussed whether certain bonuses must be included in the regular rate for purposes of calculating overtime and whether certain on-call time qualified as compensable working hours.
The letters contain a cover letter noting that someone had specifically asked the DOL to reissue that particular opinion letter. Thus, employers who would like to rely on previously withdrawn opinion letters should consider asking the DOL to reissue them under its new policy.
The Sixth Circuit yesterday outlined narrow circumstances under which an employer can show good faith reliance on a Department of Labor opinion letter in setting wage-hour policy. In Perry v. Randstad General Partner, No. 16-1010 (6th Cir. Nov. 20, 2017), the Court held the employer did not establish a good faith reliance defense despite undisputed evidence that the employer relied on a 2005 DOL opinion letter in determining that its employees met the administrative exemption of the FLSA. The opinion serves as a note of caution to employers relying on DOL opinion letters for wage-hour policies.
On Monday this week, Arizona Governor Doug Ducey signed Executive Order 2017-07 to provide “second chance opportunities” for the 1.5 million Arizonans with criminal records. The Order prohibits state agencies from initially questioning job applicants about their criminal records. Arizona cities Phoenix, Tempe, and Tucson already have similar laws for city job applications.
Importantly, Ducey’s Order still allows state agencies to check the applicant’s criminal record—just after the applicant has received an initial interview—and the Order does not apply to private Arizona employers. Ducey affirmed that he doesn’t “set policy for private employers.” Instead, he stated, “We’re trying to lead the way in terms of examples from state government.”
Arizona joins 29 other states that have prohibited questions about criminal records in initial state employment applications. Ten states, including California, have imposed the same limitation on private employers.
The “ban the box” movement continues to spread. Employers should check local laws before creating application forms or interview questions that call for the applicant’s criminal history.
On October 3, 2017, California Governor Jerry Brown signed into law Senate Bill 306, dramatically limiting an employer’s right to defend itself against allegations that it retaliated against an employee for making wage claims. In short, the law makes it far easier for employees and the California Labor Commissioner to obtain injunctive relief in retaliation cases, potentially requiring employers to reinstate discharged employees before an employer can fully defend itself against the allegations. The law takes effect January 1, 2018.
The law allows the Labor Commissioner or an employee to obtain injunctive relief against an employer based on a mere showing that “reasonable cause exists to believe a violation has occurred.” That’s a far lower burden of proof than a court’s typical standard for injunctive relief, which requires a showing that (1) the employee will suffer irreparable harm, (2) the employee will likely succeed on the merits, and (3) the employee’s interests outweigh the employer’s. The law also requires a court considering a request for an injunction to evaluate “the chilling effect on other employees.”
Other features of the new law that restrict employers’ rights include:
- Authorizing the Labor Commissioner to seek injunctive relief before concluding its own investigation;
- Permitting the Labor Commissioner to initiate investigations on its own, “without a complaint,” if the suspected retaliation occurred during the adjudication of a wage claim or a field inspection, or in instances of immigration-related threats;
- Allowing the Labor Commissioner to issue its own citations ordering reinstatement or back pay, without going to court;
- Placing a heavy burden on the employer to challenge Labor Commissioner citations, including requiring the employer to post a bond equal to the total amount of back pay allegedly owed.
Key Takeaways: The new law increases the need for California employers to make careful, well-reasoned, and thoroughly-documented disciplinary and discharge decisions. Notably, when employees make wage claims, they often also simultaneously engage in protected concerted activity under Section 7 of the NLRA. Given the potential overlap between the Labor Commissioner’s jurisdiction and the NLRB’s jurisdiction, employers facing legal action under the new law should consider whether an NLRA preemption defense applies.
On September 28, 2017, the Supreme Court agreed to review whether service advisors at auto dealerships qualify as exempt from overtime under the Fair Labor Standards Act, in Encino Motorcars, LLC v. Navarro. The employer’s petition asks the Court to overturn the Ninth Circuit’s decision that the employees who advise customers about repair work could continue their wage-hour lawsuit against a California Mercedes Benz dealership. A Supreme Court decision could have wide-ranging impact on how lower courts interpret exemptions under the FLSA. (We’ve previously written about misclassification issues here.)
The Court also agreed to rehear the issue of whether requiring non-union employees in the public sector to pay fees to unions violates their First Amendment rights, in Janus v. AFSCME, Council 31. The petitioners seek to overturn the Court’s 1997 decision in Abood v. Detroit Board of Education, which affirmed that unions can require fees from non-members to cover costs of collective bargaining, contract administration, and grievance handling. The Court reheard the issue in March 2016 shortly after Justice Scalia’s death, but the case ended in a 4-4 tie. Newly-appointed Justice Gorsuch is expected to provide the clinch vote to ban to fees.
In related news, the Court will hear oral argument on Monday, October 2, 2017, in the consolidated cases asking whether arbitration agreements that bar employees from pursuing class or collective action claims violate Section 8(a)(1) of the NLRA.
On August 31, a Texas federal court struck down the Obama-era Department of Labor rule that significantly increased the salary threshold for the white collar exemptions to overtime pay. The court temporarily enjoined the rule in November 2016, and this latest ruling makes that decision final (save for an unlikely appeal).
The court ruled that the DOL “does not have the authority to use a salary-level test that will effectively eliminate the duties test” set forth in the Fair Labor Standards Act.
Notably, new Secretary of Labor Alexander Acosta issued a request for information on the DOL’s overtime rules in late July. The request solicited several comments on whether the DOL should update the current $23,660 salary threshold. So while the Texas court’s ruling gives employers some temporary certainty on overtime exemptions, it remains to be seen what the Trump Administration’s DOL will do.
The Industrial Commission of Arizona (ICA) held a public hearing on August 8 on its proposed rules under Arizona’s new paid sick time (PST) law of the Fair Wages and Healthy Families Act. Those who attended had an opportunity to ask ICA representatives, including Labor Department Director Steve Welker, questions about the ICA’s interpretation of the law. Here’s a summary of information shared during the hearing:
On August 2, Arizona’s highest court released a unanimous opinion explaining its March 14 rejection of several constitutional challenges to the state’s new paid sick time (PST) law. You may remember that, upon denying the requested injunction and special action relief, the Court said it would issue a written opinion further explaining its decision in due course. The August 2 opinion does just that. It discusses the constitutionality of the PST law under the Revenue Source Rule (Ariz. Const. art. 9, § 23), the Separate Amendment Rule (art. 21, § 1), and the Single Subject Rule (art. 4, pt. 2, § 13). Although informative, the opinion does not change anything for Arizona employers. The PST law remains effective and enforceable.