Don’t Halt Compliance Efforts Just Because of Legal Challenges to the New Overtime Rule

On Sept. 20, 2016, Nevada and Texas led 21 states, including the Commonwealth of Kentucky, in filing a lawsuit to challenge the Department of Labor’s (DoL’s) new overtime rule changes set to go into effect Dec. 1 of this year. Right behind them, the U.S. Chamber of Commerce, National Automobile Dealers Association, National Association of Wholesaler Distributors and other groups filed their own appeal.

justice-building

“The DoL went too far in the new overtime regulation,” said Randy Johnson, senior vice president of Labor, Immigration, and Employee Benefits for the U.S. Chamber. “We’ve heard from our members, small businesses, nonprofits, and other employers that the salary threshold is going to result in significant new labor costs and cause many disruptions in how work gets done,” Johnson said in a press release. “Furthermore, the automatic escalator provision means that employers will have to go through their reclassification analysis every three years. In combination, the new overtime rule will result in salaried professional employees being converted to hourly wages, and it will reduce workplace flexibility, remote electronic access to work, and opportunities for career advancement.”

The  Chamber Suit

  • The Chamber suit charges that the rule departs from the intent established by Congress in the Fair Labor Standards Act (FLSA) 78 years ago in that:
  • It sets an excessively high threshold for determining which positions qualify as executive, administrative, and professional.
  • The DoL “ignored regional and industry differences that have been previously acknowledged,” which results in a one-size-fits-none salary threshold.
  • The automatic triennial update “with no rulemaking or taking input from affected parties is not authorized by the Fair Labor Standards Act or any other relevant statute.”

The  States’ Suit

The states’ suit notes:

  • The new rule disregards the actual requirement of the FLSA by doubling the minimum salary threshold (from $23.660 to $47,476) that applies regardless whether an employee actually performs white-collar duties.
  • The best first indicator of white-collar exempt status is if a person in the exempt position actually performs white-collar work, not whether the salary meets the minimum.
  • The triennial salary increase based on the 40th percentile of the weekly earnings of full-time salaried workers in the lowest wage Census region. The increase “not only evades the statutory command to delimit the exception from ‘time to time,’ as well as the notice and comment requirements of the Administrative Procedure Act, it also ignores the DoL’s prior admissions [in President George W. Bush’s administration] that ‘nothing in the legislative or regulatory history…would support indexing or automatic increases.”

The new rule unconstitutionally requires states to pay overtime to state employees that are performing white-collar functions when the employees earn less than an amount to be determined by the executive branch of the federal government.

Lawsuits Can Fail

As heartening as these lawsuits may be to businesses, there is always the possibility that the lawsuits fail. Nearly since the rule was proposed, there have been experts who have predicted that the rule would be challenged in the courts.

But as Lawrence Mishel, Ph.D., economist and president of the Economic Policy Institute, a nonpartisan, Washington, D. C., think tank said in a recent interview by Society for Human Resource Management, “The DoL fulfilled all of their obligations during the rulemaking proceeding. They crossed every t and dotted every i. The final overtime pay rule update should be implemented as planned starting Dec. 1.”

With that in mind, don’t stop preparations for complying with the new overtime rule. The deadline for having everything in place will be here sooner rather than later.

Information provided by writer, Diane Faulkner, is not legal in nature. All reviews and opinions are submitted and based upon extensive research, experience in the human resources and labor relations fields and are not, in any way, legal opinions.

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Don’t Halt Compliance Efforts Just Because of Legal Challenges to the New Overtime Rule

Pay Transparency and You: OFCCP Issues Final Rule

This month, the Office of Federal Contracts Compliance Programs (OFCCP) issued its final rule on Executive Order 13665, otherwise known as pay transparency. The regulations will become effective January 11, 2016.

What Does This Mean?

With the Order in place, federal contractors will be prohibited from discriminating against employees, and even applicants, who enquire about or discuss compensation. The requirements will apply to all contractors and subcontracts covered by the non-discrimination and affirmative action provisions of Executive Order 11246. This includes contractors who are not required to develop written Affirmative Action Plans.

Who Qualifies as a Federal Contractor?

According to federal guidelines, an organization meets the “federal contractor” criteria if it:

– has a single federal contract, subcontract, or federally assisted construction; or
– has federal contracts or subcontracts that, combined, are worth more than $10,000 in    any 12-month period; or
– has government bills of lading; or
– serves as a depository of federal funds; or
– is an issuing and/or paying agency for U. S. Savings Bonds and notes in any amount.

The Final Rule will apply to contracts entered into or modified on or after January 11th of next year. (Contracts are considered “modified” if there is any alteration in their terms and conditions, including supplemental agreements and extensions).

What is Protected?

Under the new rule, employees cannot be disciplined for asking about or discussing their own or other employees’ pay and benefits. Applicants cannot be discriminated against for asking about or discussing employees’ compensation.

Equal Opportunity Clause Changes

The Equal Opportunity Clause has been revised to include the following language:

“The contractor will not discharge or in any manner discriminate against any employee or applicant for employment because such employee or applicant has enquired about, discussed, or disclosed the compensation of the employee or applicant or applicant has enquired about, discussed, or disclosed the compensation of the employee or applicant or another employee or applicant . . .”

This non-discrimination provision does not apply if the employee has access to the employer’s compensation information as part of h/her job responsibilities.

Other revised language includes:

“This provision shall not apply to instances in which an employee who has access to the compensation information of other employees or applicants as part of such employee’s essential job functions discloses the compensation of such other employees or applicants to individuals who do not otherwise have access to such information, unless such disclosure is in response to a formal complaint or charge, in furtherance of an investigation, proceeding, hearing, or action, including an investigation conducted by the employer, or is consistent with the contractor’s legal duty to furnish information.”

Other Modifications

The OFCCP modified its proposed definition of “essential job functions” in a way that benefits contractors. Under the proposed definition, a contractor would have violated the provision if it had disciplined an employee who had authorized access to compensation information, but such access was not a “fundamental” part of the employee’s job responsibilities.

In response to concerns expressed by the contractor community, the Final Rule defines a job function as essential if:

– the access to compensation information is necessary in order to perform that function or another routinely assigned business task; or
– the function or duties of the position include protecting and maintaining the privacy of employee personnel records, including compensation information.

The Main Issue

The OFCCP recognized the main issue as whether an employee has authorized access to compensation information rather than the importance of that access in performing the job.

How is Compensation Defined?

Under this rule, compensation is defined as “any payments made to, or on behalf of, an employee or offered to an applicant as remuneration for employment, including, but not limited to, salary, wages, overtime pay, shift differentials, bonuses, commissions, vacation and holiday pay, allowances, insurance and other benefits, stock options and awards, profit sharing and retirement.”

Compensation information is defined as “the amount and type of compensation provided to employees or offered to applicants, including, but not limited to, the desire of the contractor to attract and retain a particular employee for the value the employee is perceived to add to the contractor’s profit or productivity, the availability of employees with like skills in the marketplace; market research about the worth of similar jobs in the relevant marketplace; job analysis, descriptions, and evaluations; salary and pay structures; salary surveys; labor union agreements; and contractor decisions, statements and policies related to setting or altering employee compensation.”

Can Contractors Defend Against Alleged Retaliation?

As long as the defense is not based on a policy that prohibits, or tends to prohibit, employees or applicants from discussing compensation, contractors do have a defense against claims alleging retaliation for discussing compensation. A contractor can take advantage of this defense by showing that it has consistently and uniformly disciplined similarly situated employees. Also, the “essential job functions defense,” which the OFCCP describes as a “complete defense,” provides protection to contractors who take adverse action against an employee who has access to compensation information and discloses the information to individuals who do not otherwise have access to it. The employee’s disclosure, however, would still be protected if it was “in response to a formal complaint or charge, in furtherance of an investigation, proceeding, hearing, or action, including an investigation conducted by the contractor, or is consistent with the contractor’s legal duty to furnish information.”

Must Contractors Provide Notice?

Contractor must use language prescribed by the OFCCP when notifying applicants and employee of their rights. This mandatory language must be included in existing employee handbooks or other manuals, and must be posted electronically or in conspicuous places. The OFCCP will also be updating the “EEO is the Law” poster to include this notice.

Disclaimer: I am not a licensed attorney. My blogs are based on my own experiences, interviews (where credited), and loads of research, and do not represent legal advice.

Pay Transparency and You: OFCCP Issues Final Rule

OFCCP Releases Final Rule on LGBT Non-discrimination

The Office of Federal Contract Compliance Programs announced this month that it is issuing a Final Rule that implements President Obama’s Executive Order that prohibits federal contractors from discriminating on the basis of sexual orientation and gender identity.

This Final Rule will be effective 120 days after publication in the Federal Register (which has not yet occurred) and will apply to federal contracts entered into or modified on or after that date.

What does the Final Rule change?

The EO Clause has been changed to include “sexual orientation” and “gender identity.” Those contractors who incorporate the EO clause by reference, however, will not need to physically alter their subcontracts or purchase orders.

Contractors must notify applicants and employees of their non-discrimination policy by posting the “EEO is the Law” poster. Presumably, the government will be updating this poster to include these two new categories.

Contractors are also obligated to expressly state in job advertisements that all qualified candidates will receive consideration for employment without regard to race, color, religion, sex, sexual orientation, gender identity, or national origin. The Final Rule provides that employers can satisfy this requirement by including that verbiage or simply indicating that the company is an “equal opportunity employer.”

Although employees hired outside of the United States are not covered by the regulations, if a contractor is not able to obtain a visa of entry for an employee or potential employee to a country in which it is doing business, the regulations require the contractor to notify both the OFCCP and the U.S. Department of State if the contractor believes that the refusal of the visa is due to the individual’s protected characteristic. This requirement now applies to sexual orientation and gender identity status. 

Affirmative Action Plan Placement Goals Changes

The section of the regulations regarding Placement Goals in AAPs has also been updated. Contractors are prohibited from extending preferences on the basis of race, color, religion, sex, sexual orientation, gender identity, or national origin due to specific placement goals.

What is not affected by the Final Rule?

The Final Rule does not change contractors’ reporting and information collection requirements, so contractors are not required to survey or report on the number of LGBT applicants or employees. The required components of Affirmative Action Plans are also not affected.

What should contractors do to comply?

The Final Rule simply adds sexual orientation and gender identity to the sections of the regulation where the other protected categories are listed, so the affect on federal contractors is limited. Contractors should, however, begin the process of determining whether and when they need to do the following:

• Update the EO Clause in subcontracts and purchase orders;

• Amend the EEO and AA policy to include sexual orientation and gender identity;

• Obtain new “EEO is the Law” posters;

• Modify their EEO tagline on job solicitations; and

• Train appropriate personnel on the new protections.

In addition, the OFCCP has issued FAQs regarding its interpretation of the Final Rule. These will probably be updated periodically as contractors pose questions to the OFCCP.

Why no proposed rule?

The OFCCP bypassed the Notice of Proposed Rule-making and comment period. They stated that the “Executive Order was very clear about the steps the Department of Labor was required to take and left no discretion regarding how to proceed. In such cases, principles of administrative law allow an agency to publish final rules without prior notice and comment when the agency only makes a required change to conform a regulation to the enabling authority and does not have any discretion in doing so.”

If you have any questions regarding this Final Rule, please contact a board certified labor attorney.

OFCCP Releases Final Rule on LGBT Non-discrimination