This installment of our ongoing series prognosticating about the new Presidential administration focuses on the regulatory environment employers may face. President-elect Trump has promised to revoke a number of the more employee-friendly measures that the Obama Administration has passed over the previous eight years. Additionally, Ivanka Trump, who was influential throughout her father’s campaign, has reiterated her intention to fight for equal pay for women and family leave policies. Continue Reading
A Texas federal court judge has issued a preliminary nationwide injunction blocking the U.S. Department of Labor (DOL) from implementing the controversial overtime rule set to take effect December 1. The rule would have more than doubled the weekly salary threshold for the federal Fair Labor Standards Act’s so-called “white collar” exemptions, from $455/week to $913/week.
The decision stems from a lawsuit filed earlier this year by 21 states, arguing that the DOL overstepped its authority when drafting the overtime rule by focusing on employees’ compensation rather than the work they perform. The Court noted that the increased wage levels could impermissibly supersede Congress’s intent to focus on the nature of the duties employees perform in determining whether they are exempt from overtime payment requirements.
The Court also questioned the indexing mechanism in the new overtime rule — which would have automatically increased the salary threshold every three years. This automatic increase fails to consider current economic conditions or the effect on resources. It also contravenes the statutory language and legislative history suggesting that lawmakers never contemplated such increases. Specifically, the judge wrote that the “state plaintiffs have established a prima facie case that the Department’s salary level under the final rule and the automatic updating mechanism are without statutory authority.”
Employers prepared for the December 1 effective date once again face uncertainty. While the preliminary injunction is a strong signal that the Court will permanently halt enforcement of the changes, that result is far from certain. Further clouding the situation, there are indications that the incoming Trump administration would overturn the overtime rule in the first quarter of 2017.
Employers must now decide whether to undo their recent changes in their compensation scheme, delay anticipated changes, or proceed as planned. Employers must also once again consider individual states’ laws, such as New York, that set higher “white collar” salary thresholds than $455/week. Given that the case against the DOL’s overtime rule is likely far from over, employers should consult with counsel immediately about next steps and strategy.
As a presidential candidate, Donald Trump voiced many opinions about his priorities and goals for the country. Yet as President-elect Trump prepares to take office in January, employers remain uncertain as to what the American workplace will look like under a Trump administration. As a lead-up to the presidential inauguration, we will provide a series of posts looking at five areas critical to employers and prognosticating as to how the new administration will impact these areas. Continue Reading
We invite our blog readers to attend a free one-hour seminar on Thursday, December 1: “The (Over) Time is Now.” Reed Smith attorney Miriam Edelstein will join a panel to discuss the Department of Labor’s new overtime rules. The program will be held at the headquarters of Namely (the HR, Payroll, and Benefits platform provider) in New York City.
Unprecedented rule changes from the Department of Labor are set to give millions of employees access to overtime. These changes aside, the DOL estimates that over 70 percent of employers are in violation of existing rules already.
On December 1—the same day that the rules formally take effect—Namely will host a panel of human resources leaders from leading NYC businesses and legal experts to weigh in on the new rules’ impact and implementation. Topics include:
- Navigating the nuances and potential pitfalls of the duties test
- Training recently reclassified employees—and their managers
- Budgeting for future changes and making compensation decisions
- How to have reclassification discussions with employees
- Preserving workplace flexibility post-overtime rule
- November’s historic election results, and their potential impact on the rule
Come hear from leading industry experts and network with other local professionals. Food and drinks will be provided.
Thursday, December 1, 2016
9:00 AM – 10:00 AM EST
195 Broadway 11th Floor
New York, New York 10007
Starting January 1, 2017, the new Illinois Freedom to Work Act will prohibit private sector employers from entering into covenants not-to-compete with “low-wage employees” who work in the state, and render unenforceable any such restrictions that are entered into on or after that date.
The Act defines a “low-wage employee” as one who earns the greater of $13.00 per hour or the minimum wage required by applicable federal, state, or local law. As of January 1, 2017, that would include any private sector employee in Illinois who is paid $13.00 per hour or less.
The Act defines a “covenant not to compete” as an agreement between an employer and a low-wage employee entered into on or after January 1, 2017, that restricts the employee from performing any work for another employer for a specified period of time, any work in a specified geographical area, or work for another employer that is similar to the employee’s work for the employer that is a party to the agreement. The Act thus appears limited to non-competes rather than barring covenants not to solicit customers or employees, or confidentiality agreements. Continue Reading
In New York, a large number of wage and hour requirements are statutorily codified in the Labor Law. Many others requirements, however, are set forth in regulations known as wage orders, which are issued and updated from time-to-time by the New York State Department of Labor (NYSDOL). The NYSDOL publishes wage orders covering the hospitality, building service, nonprofit, agricultural, and miscellaneous industries. Adherence to the statutory Labor Law, but not the wage orders, can have disastrous consequences.
To that end, on October 19, the NYSDOL proposed amendments to each of the wage orders that, assuming they are adopted, will have a tremendous impact on how New York employers pay their workers.
Changes for Non-Exempt Employees
First, the NYSDOL updated the wage orders to reflect the minimum wage increases that were passed earlier this year. As readers may recall, the minimum wage increase announced by Governor Andrew Cuomo last spring presents perhaps the most complex wage scheme the state has ever seen. It accounts for regional differences and staggers implementation over as many as five years in parts of the state. Specifically:
- For workers in New York City employed by large businesses (those with at least 11 employees), the minimum wage will rise to $11/hour at the end of 2016, then another $2/hour each year after that, eventually reaching $15/hour on December 31, 2018.
- For workers in New York City employed by small businesses (those with 10 employees or fewer), the minimum wage will rise to $10.50/hour by the end of 2016, then another $1.50/hour each year after that, eventually reaching $15/hour on December 31, 2019.
- For workers in Nassau, Suffolk, and Westchester Counties, the minimum wage will increase to $10/hour at the end of 2016, then $1/hour each year after that, reaching $15/hour on December 31, 2021.
- For workers in the rest of the state, the minimum wage will increase to $9.70/hour at the end of 2016, then another $0.70/hour each year after until reaching $12.50/hour on December 31, 2020, after which it will continue to increase to $15/hour on an indexed schedule to be set by the Division of Budget in consultation with the NYSDOL.
- The minimum cash wage for food service workers receiving tips will be two-thirds of the minimum wage rates listed above, depending on the location where the employee works.
The proposed wage order amendments also address the increases to the tip credit, uniform maintenance pay, meal, lodging, and utilities allowances, and spread of hours pay resulting from the impending minimum wage changes, as well as the new minimum wage scheme for fast food workers that was adopted in September 2015.
Changes for Exempt Employees
Perhaps just as, if not more, important, the wage orders would also set new salary thresholds for exempt executive and administrative employees. As most employers know by now, the salary threshold for exempt – i.e., salaried – executive, administrative, and professional employees under the federal Fair Labor Standards Act is set to increase to $913/week on December 1. What has been less clear, until now, is whether the salary threshold for exempt executive and administrative employees would also increase under state law in the near future (unlike federal law, New York does not impose a salary minimum for exempt professionals). At present, the salary threshold for exempt executives and administrators is $675/week.
The proposed wage orders have finally answered this question. The NYSDOL’s proposal would substantially increase the existing, $675/week salary level and, like the minimum wage increase for non-exempt employees, would be region-specific and stagger implementation over as many as five years in certain areas. While a full summary of the amendments can be found here, the proposed New York salary thresholds for executive and administrative employees would exceed the looming $913/week federal level:
- On December 31, 2017, for large businesses (those with at least 11 employees) in NYC, and will eventually rise to $1,125/week by the end of 2018
- On December 31, 2018, for small businesses (those with 10 employees or fewer) in NYC, and will eventually rise to $1,125/week by the end of 2019
- On December 31, 2019, for employers in Nassau, Suffolk, and Westchester Counties, and will eventually rise to $1,125/week by the end of 2021
- On December 31, 2020, for all other New York employers (depending on the increase to the federal salary threshold scheduled to occur on January 1, 2020)
Although the NYSDOL is technically accepting public comments on the proposed wage order amendments until December 3, it is a good bet that they will be adopted in full. And regardless of their ultimate content, the new wage orders will take effect on December 31. We will therefore continue to monitor this issue and provide an update once the final wage orders are published.
On October 27, the New York City Council, long known for pushing the envelope when it comes to employment legislation, passed a first-of-its-kind bill, known as the “Freelance Isn’t Free” Act, that requires written agreements between certain independent contractors and the entities that engage them (the Act). The Act also bars wage theft and retaliation against contractors, and imposes substantial penalties on businesses that fail to comply with these and other requirements surrounding the independent contractor relationship. In short, the Act represents a major sea change with the use of independent contractors.
Written Agreement Required
Perhaps most notably, the Act requires that virtually all entities that engage a “freelance worker” for $800 or more in services execute a written agreement with the contractor before the work begins. “Freelance worker” means “any natural person or any organization composed of no more than one natural person, whether or not incorporated or employing a trade name, that is hired or retained as an independent contractor by a hiring party to provide services in exchange for compensation.”
The written agreement must include, at a minimum:
- The name and mailing address of both the hiring party and the freelance worker
- An itemization of all services to be provided by the contractor
- The value of the services
- The rate and method of the contractor’s compensation
- The date on which the contractor must be paid or the mechanism by which such date will be determined
- Any other terms that the newly created Office of Labor Standards (OLS) designates by rule
The Act directs OLS to make available model contracts, in English and six other languages, on its website for use by the general public. OLS will also be in charge of educating the public – both freelancers and the business community – about the new law, through what the Act calls a “navigation program.” Under the navigation program, OLS will, among other things, provide freelancers with general information about classification as an employee or independent contractor.
Unlawful Payment Practices and Retaliation
In addition to requiring a written independent contractor agreement under most circumstances, the Act:
- Requires that all compensation earned by an independent contractor be paid on or before the date such payment is due as specified in the parties’ agreement or, if the agreement does not specify, within 30 days following completion of the contractor’s services
- Requires that once a freelance worker has begun performing under the contract, the hiring party cannot require as a condition of timely payment that the contractor accept less than the contractually specified compensation
- Bars retaliation – including threats, intimation, discipline, harassment, denying a work opportunity, and discrimination – against contractors who exercise or attempt to exercise their rights under the Act (e.g., opposing a practice prohibited by the Act or filing a complaint or commencing an action alleging a violation of the Act). The Committee Report accompanying the Act also notes that “[e]xamples of retaliation include blacklisting a freelance worker from an industry, discrediting a freelance worker to other potential hiring parties or canceling a multipart contract after the contracted work has begun. Subject to surrounding circumstances, a claim of retaliation might also exist if, having established the terms of a contract for freelance services, the hiring party cancels the agreement in response to a request by the freelance worker to memorialize the agreement in a written contract.”
These provisions appear to apply even if the value of the services rendered is less than $800.
Legal Recourse and Available Damages
The Act provides allegedly aggrieved contractors with several avenues of recourse. First, the Act prescribes an extremely nuanced procedure for contractors to file complaints with OLS. Second, separate and apart from the administrative route, contractors may also commence civil actions in court against allegedly non-compliant businesses.
Regardless of the forum in which a contractor pursues his/her claims, violations of the Act can have steep consequences, including:
Failing to Provide a Written Agreement
- If the only violation committed is the hiring party’s failure to provide a written agreement as required by the Act, statutory damages of $250 (and only then if the contractor can show that (s)he requested a written contact from the hiring party before work began)
- If, however, the hiring party failed to provide a written agreement and also violated another provision of the Act – by either failing to make timely and proper payment or retaliating against the contractor – statutory damages equal to the value of the contract plus any damages for the additional violation(s), as set forth below
Unlawful Payment Practices
- Double damages and injunctive relief
- Statutory damages equal to the value of the contract
Notably, irrespective of the type of violation committed, a successful plaintiff can also recover reasonable attorneys’ fees and costs. For contractors seeking to avail themselves of these remedies, a two-year statute of limitations applies to claims that the hiring party failed to provide a written agreement, while a six-year limitations period applies to all other claims (i.e., unlawful payment practices and retaliation).
Lastly, the Act permits the city’s corporation counsel to commence a civil action where reasonable cause exists to believe that a hiring party has engaged in a pattern or practice of violating of the Act. If the court determines that the hiring party has engaged in a pattern or practice of violations, a civil penalty of up to $25,000 may be levied.
In addition to the above, the Act specifies that:
- Any agreement purporting to waive a contractor’s rights under the Act will automatically be deemed void as a matter of public policy. The precise scope of this provision – and whether it would bar contractors from entering into settlement agreements resolving their claims under the Act – remains to be seen, and will likely need to be resolved by the courts.
- Failure to comply with the Act will not render any contract between a hiring party and a freelance worker void or voidable, or otherwise impair any obligation, claim, or right related to such contract.
- The Act is not to be construed as providing a determination about the legal classification of any individual as an employee or independent contractor.
- The $800 requirement for a written agreement is satisfied when the contract for freelance services has a value of $800 or more either by itself or when aggregated with contracts made between the same parties in the immediately preceding 120 days.
- Technically, the requirement for a written contract can be satisfied by any writing or writings that meet New York state law requirements for a contract and contain the required terms. For example, an email, a letter, an advertisement or a text message, or some combination of those, that satisfy the state law requirements for a contract and contain the information required by Act, would satisfy the requirement to reduce the contract to a writing.
Undoubtedly, OLS will issue guidance in the coming months expanding upon these and other aspects of the Act.
When Will the Act Take Effect?
After receiving unanimous support from the NYC Council, the Act now moves to Mayor Bill de Blasio’s desk to be signed. Although the mayor himself has not explicitly said whether he will sign the bill, his office has signaled that it supports the measure. Once signed, the Act will take effect 180 days later – meaning likely sometime late next spring – and will only apply to contracts entered into on or after the effective date. In the meantime, all NYC businesses that use independent contractors should review and update their independent contractor agreements as appropriate, or speak with counsel about preparing such an agreement, and align their payment practices with the Act.
In part I of this two part series reviewing the employment law class of 2017 we focused on developments in discrimination, anti-retaliation and discharge, hiring and background checks, and workplace health and safety. In part II we will focus on developments in wage and hour law, leave laws, industry-specific regulations, and California’s recent legislation affecting choice-of-law in employment contracts. Similar to the laws featured in part I, a majority of these laws amend previous employment legislation. This trend demonstrates that the 2016 legislative session focused more on expanding and addressing lingering questions that stem from existing workplace mandates, than creating new rights under California law. As the majority of the laws take effect on January 1, 2017, HR departments and employment counsel are off and running, to get employers prepared for a new year of implementation. Continue Reading
Amend, extend and clarify: the 2016 legislative session was not so much about creating new rights and responsibilities under California employment law, but more about expanding and addressing lingering questions that stem from existing workplace mandates. However, don’t be fooled by the lack of “new” regulations. By amending many of California’s complex existing laws, the legislature certainly placed HR departments and employment counsel in a difficult position to prepare for compliance by the looming January 2017 implementation date (for most of these laws). With a full plate of issues, such as workplace health and safety, pay equity, hiring, leave laws, harassment and discrimination, and, of course, wage and hour updates (no big surprise there), the class of 2017 will make an impact that will last for years and spur on dramatic change.
In this first portion of our two-part review of the employment law class of 2017, we will focus on developments in discrimination, anti-Retaliation and discharge, hiring and background checks, and workplace health and safety. In part II we will focus on developments in wage and hour law, leave laws, industry-specific regulations, and California’s recent legislation affecting choice-of-law in employment contracts. Continue Reading
The Southern District of New York (SDNY) recently announced a new pilot mediation program for cases filed under the Fair Labor Standards Act (FLSA). Effective October 3, 2016, any federal wage and hour cases that are assigned to Judges Abrams, Bricetti, Carter, Daniels, Ramos, Sebel, and Woods, will be ordered directly to mediation. The mediation will take place before the initial scheduling conference, and must occur within 60 days of the order to mediate. This automatic referral to mediation for FLSA cases is similar to the program the SDNY has had in place since 2011 for all employment discrimination cases.
In light of the upcoming December 1, 2016, deadline to implement the Department of Labor’s new overtime pay requirements for white collar workers, discussed here, employers should expect an increase in wage and hour litigation. Early mediation is often an excellent tool for expedient case resolution and management. Continue Reading