FLSA

President Trump Says “Not So Fast” — The Future of Overtime, Fiduciary, and Pay Reporting Rules Remains Uncertain Under the Trump Administration

On January 20, 2017, shortly after Donald Trump became the 45th President of the United States, his Chief of Staff, Reince Priebus, issued an Executive Memorandum mandating a 60-day freeze on published federal regulations that have yet to take effect to allow Trump’s appointees time to review the regulations. Although such action is fairly standard during a change of administration, the impact could be significant if certain regulations set to take effect in 2017 are delayed or ultimately replaced.  Regulations potentially affected by the 60-day freeze include the Department of Labor’s (“DOL”) overtime and fiduciary rules, and the Equal Employment Opportunity Commission’s (“EEOC”) EEO-1 pay reporting requirements.

DOL Overtime Rule

In May 2016, the DOL announced significant changes to the overtime rules under the Fair Labor Standards Act (“FLSA”). As we’ve previously blogged about here, the overtime rules mandated that, beginning December 1, 2016, the salary requirement for exempt employees would increase by nearly double – from $23,660 to $47,476 per year.  Under these new rules, employees who earn less than $47,476 would no longer meet the overtime exemption from the FLSA, and would be entitled to overtime compensation for all hours worked over 40 in a workweek.

The new overtime rules made headlines late last year when a federal district court in Texas issued a preliminary injunction enjoining its implementation.  The decision was issued on November 22, 2016, just days before the new rules were set to take effect.

Between the ongoing litigation over the legality of the overtime rules and the recent 60-day regulatory freeze, the future of the overtime rules remains uncertain. Other than publicly advocating a small-business exemption, Trump has remained non-committal about the overtime rules and has not signaled whether he will ask the Department of Justice (“DOJ”) to drop its defense of the matter.  Notably, the DOJ has sought a stay in the ligation while the new administration reconsiders its position.  As a practical matter, this places employers in a difficult position.  Many employers already implemented changes to comply with the new overtime rules in anticipation of the December 1, 2016 effective date, by increasing salaries, reducing workforces, cutting benefits, and changing employees’ schedules.  In addition, the language in the Executive Memorandum could also muddy the waters.  The Executive Memorandum provides for postponing, for 60 days, published regulations that “have not taken effect.”  Employee advocates have argued that, as the effective date for the overtime regulations was December 1, 2016, the Executive Memorandum does not apply.  This hyper-technical reading would likely be rejected by a court.  And, the argument has no practical effect as the rule is enjoined.

DOL Fiduciary Rule

The Executive Memorandum, however, will not stop the fiduciary rule train. It became effective on June 7, 2016.  The fiduciary rule, which is scheduled to be phased in starting April 10, 2017 through January 1, 2018, expands the definition of “investment advice fiduciary” under ERISA to include persons who provide investment advice or recommendations for a fee or other compensation with respect to retirement accounts.  Under the new rule, investment advice includes recommendations regarding the advisability of buying or selling securities or other investment property and recommendations as to the management of securities or other investment property.

Being a fiduciary requires financial professionals to put their clients’ best interests above their own. As a result, financial professionals who earn commissions are required, under the new rule, to provide clients with a Best Interest Contract Exemption disclosing potential conflicts of interest, fees or charges to be paid by the investor, and compensation the fiduciary expects to receive in connection with recommended investments.  The impact of the new rule on the financial services industry is significant due to the potential for lost commissions and the additional expense of complying with the heightened fiduciary standard.

Financial professionals are left to hoping that the new administration will roll back the rule. However, barring extraordinary action by Congress, there may be little that Trump can do on his own as the rule was promulgated through notice and comment rulemaking.  Further, rolling back the rule does not appear to be a high priority. Trump has not taken a position publicly on the fiduciary rule.  However, he generally supports broad roll backs of regulations and, Anthony Scaramucci, one of his key advisors, has publicly promised to repeal the fiduciary rule.  Those in the financial services industry who have already taken steps to comply with the new rules in anticipation of the April 10, 2017 implementation date should continue their efforts until they receive a clear signal from the administration or Congress.

EEOC Revised EEO-1 Form

On September 29, 2016, the EEOC announced approval of a revised EEO-1 form to collect pay data from employers with 100 or more employees beginning with the 2017 report to be submitted by March 31, 2018.   It is unclear what effect, if any, the 60-day regulatory freeze will have on the pay reporting requirements because, technically, the information collection procedures for the form did not have an effective date.  However, as Trump has already appointed a new EEOC Chair, Victoria Lipnic, signs point to a rollback.

The revised EEO-1 form requires certain employers to submit summary pay data, including the total number of full and part-time employees employed during the year in each of twelve pay bands listed for each job category on the EEO-1. Pay data is based on employees’ W-2 forms.  The revised EEO-1 form does not require employers to report individual pay or salaries.  Additionally, employers required to submit an EEO-1 form must report the number of hours worked during the year by employees in each pay band.  According to the EEOC, the purpose of collecting pay data from employers is to allow the EEOC to better assess allegations of pay discrimination, but many fear that providing pay data without context will fuel costly, meritless class action lawsuits.

Many predict that the future of the EEOC’s pay reporting rule is vulnerable under the Trump administration, while others believe that Ivanka Trump’s statements in support of equal pay may not indicate a complete pullback of the pay equity focus. Regardless of whether the 60-day freeze affects the pay reporting requirements, the issue of pay equity will be at the forefront of legal issues facing employers in 2017.  This blog will continue to provide updates as new developments occur.

Game Over for NCAA Student Athletes Seeking Employee Status? 7th Circuit Affirms Dismissal of U. Penn Athletes’ FLSA Complaint

On December 5, 2016, the Seventh Circuit affirmed dismissal of a complaint filed by two University of Pennsylvania track and field athletes against the National Collegiate Athletic Association, the university, and more than 120 other NCAA Division I universities and colleges alleging that student athletes are entitled to minimum wage under the Fair Labor Standards Act (“FLSA”). In Berger v. NCAA, the court held that student athletes are not “employees” within the meaning of the FLSA and thus, are not entitled to a minimum wage for their athletic activities. READ MORE

Top Ten Employment Regulations or Initiatives Employers Want Trump to Dump or Fix

After the Obama administration’s employee friendly policies, employers will have a wish list of changes they believe a Trump administration would favor.  Here are ten items that should be at the top and why employers want to see action. READ MORE

Pay Raises Across the Nation? Not So Fast Say Several States and Business Groups: 21 States and 55 Business Groups Challenge New Federal Overtime Rule

On Tuesday, September 20, 2016, twenty-one states filed a complaint in federal court in Texas challenging the new overtime rule finalized by the Department of Labor (“DOL”) in May of this year.  The States seek to prevent implementation of the new rule, which is scheduled to become effective on December 1, 2016.  That same day, fifty-five business groups, including several chambers of commerce, filed a similar lawsuit in Texas federal court to block the rule.

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Digging Into the New Overtime Regulations

In 2015, the Department of Labor (“DOL”) proposed substantial changes to the minimum salary level requirements, sought input on whether bonuses and incentives should be included in meeting the salary level test and considered changing the duties test to establish overtime eligibility. Taken together, these proposed changes would have had a drastic effect on the obligation of employers to pay overtime. On May 18, 2016, DOL issued its Final Rules and employers have until December 1, 2016 to comply. Overall, the changes strike a middle ground as DOL declined to adopt the more restrictive California 50% duties test. However, doubling the salary level threshold and other changes present significant economic and compliance challenges for employers. Below is a summary of key takeaways and steps employers should consider to address these changes and ensure compliance.

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Will HR Managers Get Cooked? Second Circuit Says Culinary Institute’s Human Resources Director May Face Individual Liability Under FMLA

Whether a Human Resources Director will be deemed the “employer” and held individually liable for alleged violations under the Family Medical Leave Act (“FMLA”) should be left to the jury, according to the Second Circuit’s recent FMLA decision.  In Graziadio v. Culinary Institute of America, et al., 15-888-cv (2d Cir. Mar. 17, 2016), the Second Circuit found that there could be a viable claim for individual liability under the FMLA and it also announced the standard for what could be considered unlawful “interference” with FMLA rights.

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Pork Processing Plant Employees Can Keep the Bacon: Supreme Court Affirms Jury Award and Permits Proof of Wage and Hour Class Claims By Representative Evidence

While the Supreme Court in Tyson Foods, Inc. v. Bouaphakeo dashed employers’ hopes that the Court would broadly preclude statistical evidence and severely limit wage and hour class actions in a fashion similar to its restriction of discrimination class actions in Wal-mart v. Dukes, the Court was also clear that this type of evidence will not be appropriate or probative in all wage and hour claims.  In ruling for the class action claimants, the Court affirmed a $2.9 million jury award for overtime claims related to donning and doffing at an Iowa pork processing plant.  In so ruling, the Supreme Court refused to adopt the position advanced by Tyson Foods and several of its amici that class actions cannot be resolved by reliance upon representative evidence or statistical samples.  It also refused to embrace Tyson Food’s reading of Wal-mart v. Dukes as standing for the proposition that representative sample is an impermissible means of establishing class-wide liability.  But the Court also made clear whether statistical evidence could be used for liability depends on the claims asserted and the particular evidence.  While the decision is not unsurprising after oral arguments, it seems likely that employers will see an uptick in plaintiffs aggressively relying on “representative” statistical evidence in wage and hour collective and class cases.  There are, however, several “lessons learned” based upon the majority’s decision.

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Game-Changing Overtime Regulations Advance to OMB Ahead of Schedule, Final Rule Could Arrive as Early as April 2016

The U.S. Department of Labor (DOL) sent its much anticipated final overtime regulations to the Office of Management and Budget (OMB) for review on March 14, 2016.  Technically, this move came slightly ahead of schedule.  OMB now has 90 days to review, which would put its “due date” in mid-June – ahead of the July regulatory agenda publication date we previously reported.  However, as these overtime regulations are a top-line priority subject to intense political scrutiny, there is reason to believe OMB may not complete its review within the 90-day window. 

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DOL Continues to Push Its Agenda with New Guidance on Joint Employment

Solicitor of Labor Patricia Smith likes to quip that the Department is “working overtime on overtime.”  DOL took a break from the much-anticipated overtime regulations and issued new guidance yesterday on the question of who qualifies as a “joint employer” under the Fair Labor Standards Act (FLSA) and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA).  The guidance (Administrator’s Interpretation (AI) No. 2016-1) issued by Wage and Hour Division (WHD) Administrator Dr. David Weil, sets forth a broad (and sometimes ambiguous) reading of statutory provisions, regulations, and case law to address joint employment issues under the two statutes.  The guidance was not unexpected as some advocates have been asking for the DOL’s position on joint employment since the NLRB’s expansion of joint employment in Browning-Ferris, 362 NLRB No. 186 (Aug. 27, 2015).  Notably, the level of coordination between DOL and the NLRB on joint employment issues has been the subject of Congressional oversight and the oversight committee now claims that DOL provided suspect responses to members of Congress regarding interactions between the agencies on the issue

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Please Pass the Settlement: Second Circuit Widens Split Over Stipulated FLSA Dismissals

A recently filed petition for certiorari asks the U.S. Supreme Court to clarify the procedural requirements for ending private causes of action under the Fair Labor Standards Act (“FLSA”).  Specifically, petitioner Dorian Cheeks is asking the Supreme Court to review a decision from the U.S. Court of Appeals for the Second Circuit holding that Federal Rule of Civil Procedure 41 (“FRCP 41”) prohibits the dismissal of FLSA claims through private, stipulated settlement agreements absent approval from either a federal district court or the U.S. Department of Labor (“DOL”).

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