Well, 2017 is here; and Cozen O’Connor has just issued its annual Labor and Employment Observer, which contains thoughtful analysis on the year and review of what to expect in the future. A link to the materials can be found here.
With a new President and a Republican majority in Congress, changes are likely to be coming fast and furious once the inauguration is done. Some employment issues likely to get immediate attention are changes to Obamacare and deciding the fate of the Department of Labor’s effort to raise the minimum salary threshold (which was stayed by a federal judge in Texas and is currently on appeal).
My contribution to the 2017 Observer was an article on the rise of state and local employment legislation. This is a trend to watch as it will likely pick up steam as democrat-controlled cities and states seek to fill in the perceived gaps in areas like minimum wage and sick pay laws. As an example of where this trend may be headed, see the attached article discussing an effort in Philadelphia to limit an employer’s right to question applicants about their salary histories.
The enforceability of employee restrictions on competition has traditionally been up the states, with some, like California, largely banning such agreements, while others, like Texas, allowing them with reasonable limitations. On Tuesday, October 25, the White House took the unprecedented step of calling on state legislatures to ban non-compete agreements. A news report on the White House announcement can be found here.
Although the Obama administration’s effort will be largely symbolic, and have no legal effect, it is important as it may be the first in a series of steps to apply pressure to states or employers that allow restrictions on employee competition. For example, it would not be a surprise to see this President, or a future one, restrict government contracts for employers that require employees to sign non-compete agreements. Other legal avenues of attack may include regulations or enforcement actions under anti-trust laws.
For those businesses that rely on such agreements, this is a major wake-up call as it is the first time a President has taken a position on state laws in this area. If we have another Democratic President, or a change in control of Congress, it is possible this issue could gain more traction.
You can add anti-trust laws to the long list of legal risks that must now be managed by corporate HR departments. According to a recent guidance document prepared by the Federal Trade Commission and the Department of Justice, the following acts could result in not only civil liability, but criminal prosecution:
- Agreements between companies to not recruit or hire the other’s employees (a/k/a no-poaching agreements)
- Talking to other industry members about establishing uniform pay scales or caps on pay
- Agreements between competitors to limit or reduce fringe benefits
These laws can be especially tricky in the context of trade associations or other industry groups that exist to promote sharing of information among industry members. Generally, sharing information without any agreement to take uniform action is not a violation of the law, but the lines between legal and illegal conduct can be blurry. The threat of criminal prosecution and the encouragement of competitors to report violations to the DOJ’s hotline make it even more important for HR departments to understand the law in this area. Our firm’s client alert on the subject can be found here, and the recent “Antitrust Guidance for Human Resource Professionals” can be found here.
This year, the Department of Labor (DOL) announced new regulations that would double the minimum threshold for a salaried employee exempt from overtime from $455 per week to $913 per week (or $47,476). The regulations also tied the salary threshold to inflation with an automatic adjustment every three years. These changes are scheduled to take effect December 1, 2016, and more details can be found on the DOL’s website, here, or our firm’s client alert on the subject, here.
Recently, there have been two separate legal efforts to stop the increase on December 1. First, the House of Representatives passed a bill on September 28, 2016 that would delay the increase by six months. The bill has not been taken up by the Senate, where its chances of passing are tougher. Regardless of the result in Congress, it is doubtful the President would sign a bill delaying one of his administration’s most important accomplishments (his press secretary has already said it would be vetoed). Put simply, employers should not expect a new law which would delay the December 1 deadline.
The second effort to stop the DOL regulations is a legal challenge filed in a federal court in East Texas by 21 states and more than 50 business groups. Challenging the DOL’s authority to raise the minimum salary threshold, however, is not likely to be successful. The agency has raised the threshold multiple times since the law’s creation, under both Democratic and Republican Presidents. That said, there is a serious legal question regarding whether the DOL has the authority to tie the minimum salary to inflation and create, by regulation, an automatic increase every three years. This is unprecedented, and the court may find that this section of the regulation overstepped the agency’s authority under the law. If that happens, it will be of little value to employers as the December 1 deadline will be unaffected, as the first automatic increase is not scheduled until January 2020.
Texas and many other states in the South have passed state laws in recent years restricting employers from terminating employees who keep their lawfully-licensed concealed handgun locked in their vehicle. For the most part, these laws do not create a private cause of action that would allow a suit for damages against the employer. For example, in Texas, an employee’s recourse would be to file a complaint with the Texas Attorney General.
This week, in a case of first impression, the United States Court of Appeals for the Fifth Circuit (Texas, Louisiana and Mississippi) reversed the dismissal of a wrongful termination claim against an employer and concluded that an employee can sue for damages under Mississippi law. The case is Swindol v. Aurora Flight Sciences Corp., No. 14-60779, and can be found here. Generally, the facts of the case are that Swindol parked his truck on his employer’s lot with his firearm locked inside. Management learned of the gun and fired Swindol for violating its strict company policy prohibiting firearms on company property. This policy, however, was in conflict with state law that allowed Swindol to store his handgun in a locked vehicle on his employer’s property.
The federal court sent a certified question to the Mississippi Supreme Court asking whether it would consider a violation of the state concealed handgun law to be a violation of an important “public policy,” warranting an exception to the employment at will doctrine. The Mississippi Supreme Court answered “yes,” which meant the wrongful termination case could proceed.
Not all states recognize a public policy exception to the employment at will doctrine. For example, Texas does not recognize this exception. But, many do. For that reason, employers should be careful to understand that simply because the relevant statute governing employee gun rights does not provide for a cause of action, that does not mean such a claim is foreclosed.
The latest craze is Pokémon Go, an app for smartphones that allows people to “catch” Pokémon creatures by integrating the real world with the virtual world. So what do you do if you see one of your employees wandering around your warehouse hunting a mythical animal, or, even worse, a delivery driver decides to multitask and hunt Pokémon while driving? For those who think such scenarios are unlikely, keep in mind Pokémon Go is now on more phones than Tinder and is chasing Twitter as one of the most popular apps in the world. It is a global phenomenon, and, without a doubt, any good size company has employees who are sneaking onto the app during work hours.
So, what is a company to do? Have we really reached the point of crafting a Pokémon policy? Maybe – but the odds are that your company already has policies that fit the bill – what you really need is a reminder. Here are some areas that deserve mention.
- Driving: Playing Pokémon while driving is dangerous. If you have employees who drive on company business, you should already prohibit texting or otherwise using a smartphone while driving.
- Playing Pokémon on Company Time: Can your employees spend hours playing cards or surfing the web at work? Probably not. Pokémon is no different and you have the right to discipline employees who are not productive or who use company time for personal leisure.
- Safety: Pokémon players “chase” animals while looking at their smartphones. This is not so dangerous in a park, but can be a problem in your warehouse or parking lot. Employees should be reminded that they should be alert at all times while on the premises and that, even off the clock, employees should never lose focus on their surroundings or ignore safety rules.
- Phone policy: The Pokémon app allows you to see and “catch” a Pokémon with a phone’s camera, integrating the real world with the Pokémon. This is a neat feature when you take a picture of a cartoon animal in your front yard. Things get a little more complicated when an employee takes a picture of a Pokémon it caught in the conference room and posts the picture on Facebook. Many companies restrict photography in the workplace, and coworkers may not appreciate being part of a coworker’s Pokémon picture. More importantly, a Pokémon hunter walking around the workplace looking at the camera will be disruptive and make some coworkers uncomfortable, fearing they are being recorded.
- Trespassing/Off Duty: If your company is lucky/unlucky, it might be a hot spot for Pokémon (a/k/a “Pokéstop”). This could cause off duty employees to hunt Pokémon on your premises, or even bring their children to work after hours. Depending on your property, this could pose safety issues and also violate policies regarding off duty access or trespassing. You should make clear whether off duty Pokémon hunting is acceptable, especially if employees are bringing children to the workplace.
Although some employees will no doubt push the boundaries of acceptable workplace conduct, most employees will follow the rules. Pokémon will come and go, and the workplace will survive. While it is popular, depending on your company’s culture, consider using Pokémon as a team building exercise, or as a way to promote fitness. The new Pokémon app is a social activity, and more enjoyable in groups. Think about organizing Pokémon hunts after work in a local park. You may be surprised at the participation you get from your employees.
Please join us on Wednesday, July 13, as David Barron, a member of Cozen O’Connor’s Labor & Employment Department, and a panel of Human Resources Professionals from Briggs & Veselka Co., along with other industry professionals, host a seminar on The New Overtime Regulations: Practical Strategies and Tips for Compliance.
The final overtime regulations have been released and it is critical that all employers, large and small, ensure they are in compliance by December 1, 2016. If your business employs exempt salaried employees, you will now be required to pay a minimum annual salary of $47,476 (almost double the old requirement of $23,660) to avoid overtime.
Houston City Club
1 City Club Drive
Houston, TX 77046
Wednesday, July 13
Registration and Breakfast is from 7:30 a.m. – 8:30 a.m.
Seminar from 8:30 a.m. – 10:30 a.m.
CLE credits pending approval.
Please RSVP by Wednesday, July 6.
This seminar will cover:
- Strategic options for re-classifying exempt employees as non-exempt eligible for overtime;
- Practical tips from both lawyers and Human Resources Professionals for messaging of re-classification to avoid confusion and potential litigation;
- Overview of new allowance for up to 10 percent of non-discretionary incentives to be included in salary; and
- Refresher on all white collar exemptions, and strategies for broader wage and hour audits in light of increased scrutiny
Join us for this comprehensive and informative seminar on regulations that will have a profound impact on every company’s labor costs and the risk for wage and hour litigation. Bring your questions!
One of the few concessions made by the Department of Labor (DOL) to employers in the new overtime regulations is permission to count non-discretionary incentive payments towards the minimum salary threshold for exempt employees. Our firm’s alert on the new regulations can be found here, and, in a nutshell, the new rules bump the minimum salary amount for exempt employees from $455 per week to $913, starting December 1, 2016.
To make the huge increase more palatable, DOL will allow employers to count bonuses and commissions towards the minimum salary, but there are important caveats.
- First, the payments must be made quarterly, or more frequently. Annual bonuses won’t count.
- If you pay more frequently than quarterly, and don’t hit the minimum, an employer may also make a “catch up” payment no later than the next pay period after the end of the quarter.
- A “catch up” payment only counts against the previous quarter’s salary amount, not the one in which it is paid.
- The DOL still requires that 90 percent of the salary be fixed, and not dependent upon the quality or quantity of work. Payroll records should reflect the fixed salary separately from any fluctuating incentive payments.
Lastly, and most important, the bonus or commissions must be “non-discretionary.” The regulations define this term as “promised bonuses such as those announced to employees to induce them to work more efficiently or to remain with the firm.” The DOL has given examples such as “individual or group production bonuses, or bonuses for quality and accuracy of work.” See 29 C.F.R. 778.211. I suspect that the amount of litigation over whether incentive plans are non-discretionary will increase dramatically with the new regulations because this analysis could be determinative of whether an employee is owed overtime. Simply, if done properly, the employee is lawfully exempt. If a mistake is made, and the employee’s salary does not otherwise meet the minimum threshold without the incentive payment, overtime would be owed. For that reason, employers relying on this 10 percent provision should make sure they thoroughly review their plans with counsel.