Time-Limited Non-Enforcement Exception to FLSA New Rules

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As you are by now aware the Department of Labor’s Final Rule updates the salary level required for exemption from overtime. These changes go into effect December 1, 2016 and the result is that millions of employees will have to be reclassified as non-exempt.

The salary threshold change sets the standard salary level at $913 per week or $47,476 annually for a full-year worker.

However, the Department of Labor has issued one time-limited non-enforcement exception to be aware of. For providers of Medicaid-Funded services for individuals with intellectual or development disabilities in residential homes and facilities with fifteen or fewer beds, the Department of Labor will not enforce the update salary thresholds until March 17, 2019 against these provider employers.

If you have questions about employment law or other civil litigation issues, please call Tracy Stroud at 252-321-2020.

 

Defend Trade Secrets Act of 2016 and Employment Agreements

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On May 11, 2016, President Obama signed the Defend Trade Secrets Acts of 2016 (DTSA) into law and the law took effect immediately. It provides federal civil remedies for misappropriation of trade secrets and aligns the definition of trade secrets with the Uniform Trade Secrets Act, which most states have adopted.

The Act prohibits a wide range of conduct from theft to violation of a preexisting duty owe by the defendant or even by some third party. Such a preexisting duty may be express, arising from a contract or implied, such as the duty of employees to protect the trade secrets of their employers.

There are two ways a person or company may be found liable in a civil action for misappropriation of trade secrets under the DTSA: (1) acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or (2) disclosure or use of a trade secret of another without express or implied consent.

Employment agreements needs to be updated if they include language about misappropriation of trade secrets. It makes sense to review your agreements to preserve all rights and to make sure employees are aware of their rights under the new law. For example, the DTSA does provide protections to employees divulging trade secrets for whistleblowing purposes. DTSA cannot be used to restrict employees from moving to jobs with competitors. Companies will still have to look to state law and restrictive covenants to protect them in that arena. State law is not pre-empted by the DTSA.

Please call Tracy Stroud with questions about employment law or other civil litigation issues at 252-321-2020.

EEOC Lawsuits and LGBT Employment Rights

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No federal law explicitly bans discrimination on the basis of sexual orientation; therefore, LGBT employees can still face discrimination in the workplace. The EEOC issued guidance several years ago that discrimination against an individual because of sexual orientation is discrimination because of sex and therefore is prohibited under Title VII.

On March 1, 2016, the EEOC filed two federal cases, one in Maryland and one in Pennsylvania, challenging discrimination on the basis of sexual orientation as sex-based discrimination.

The lawsuit against Scott Medical Health Center is a harassment lawsuit. It alleges that the manager of a gay male employee repeatedly used anti-gay epithets and made other offensive comments about the employee’s sexual orientation. The clinic’s director refused to stop the harassment after the employee complained.

The lawsuit against IFCO Systems is a harassment and retaliation lawsuit. A lesbian forklift operator was fired after she complained she was being harassed by her supervisor.

Sexual discrimination charges filed with the EEOC based on sexual orientation are also on the rise. In fiscal year 2015, ending September 30, 2015, the EEOC has received 1,412 charges that included allegations of discrimination based sexual orientation, gender identify or transgender status. That is a 28% increase from fiscal year 2014.

Even though federal law does not explicitly prohibit discrimination based on sexual orientation, best practice for employers is to include sexual orientation status as a protected classification in its employment handbook. Further best practice is to treat discrimination and harassment on the basis of sexual orientation as the employer would any other form of discrimination.

If you have questions about employment law or other civil litigation issues, please call Tracy Stroud at 252-321-2020.

An Act to Restore the State Tort Claim for Wrongful Discharge

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The General Assembly adjourned the 2016 short session late in the evening on Friday, July 1, 2016.  Before they adjourned, they added language to House Bill 169 to restore state claims to sue for wrongful employment discharge for discrimination that HB 2 took away.  The bill, HB 169, was an effort to address that one concern with HB 2.  However, this is only a partial restoration in the way that the statute of limitations for wrongful termination in NC was cut from 3 years to 1 year.  Further, the State’s public policy as set forth in N.C.G.S. s 143-422 still only provides for discrimination based on ‘sex’ (like HB 2’s “biological sex”) and not ‘gender.’  You can read HB 169 here: http://www.ncleg.net/Sessions/2015/Bills/House/HTML/H169v7.html

If you have questions about employment law or other civil litigation issues, please call Tracy Stroud at 252-321-2020.

Employee Misappropriation or Disclosure of Sensitive Information and the North Carolina Computer Trespass Statute

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Employees must have access to confidential and proprietary information in the workplace, most often in electronic format. The problem is when employees leave the employment, it is easy enough for them to misappropriate the electronic information to the detriment of the employer.

One potential cause of action against the employee is violation of the North Carolina Computer Trespass Statute (N.C. General Statute Section 14-458), which states “it shall be unlawful for any person to use a computer or computer network without authority and with the intent” to remove computer data or make an unauthorized copy of the data. Violation of the statute is a criminal offense ranging from a Class 3 Misdemeanor to a Class I Felony; however, a person may also bring a civil suit to recover damages and costs N.C.G.S. 14-458(c). “Without Authority” is defined in the statute as “exceeding right or permission.” Therefore, in the employment context, even if the employee had permission to access the information on the computer or the network, using it in a way detrimental to the employer, such as taking the information when departing, or using it to solicit the employer’s clients or to compete with the employer, is clearly defined as “without authority.”

A federal case from the Eastern District of North Carolina (Spirax Sarco, Inc. v. SSI Engineering, Inc.) has interpreted the North Carolina statute to apply to employees misappropriating information in employment situations because the employee took the information without authority.

Please call Tracy Stroud with questions about employment law or other civil litigation issues at 252-321-2020.

Changes to FLSA and How to Prepare Your Employees

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Please call Tracy Stroud with questions about employment law or other civil litigation issues at 252-321-2020.

Changes to FLSA and How to Prepare Your Employees

This Final Rule changes to the Fair Labor Standards Act updates the salary level required for exemption. These changes go into effect December 1, 2016 and the result is that millions of employees will have to be reclassified as non-exempt.

The changes are as follows: (1) It sets the standard salary level at $913 per week or $47,476 annually for a full-year worker; (2) It sets the total annual compensation requirement for highly compensated employees (HCE) subject to a minimal duties test to $134,004; (3) It establishes a mechanism for automatically updating the salary and compensation levels every three years to maintain the levels at the above percentiles and to ensure that they continue to provide useful and effective tests for exemption; and (4) It amends the salary basis test to allow employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level.

Practical Effect

The federal government estimates that as many as 4.2 million, the number of currently exempt workers in the United States, will now become non-exempt under the Final Rule on white-collar exemptions under the Fair Labor Standards Act.

Here are a few tips for employers to make the transition to “new non-exempt” less painful: (from JD Supra)

Let the employees know that the reclassification was the government’s mandate. Let them know the reclassification was required by a change in the law.

Provide training on timekeeping issues. If you decide to let the employees keep their flexibility, they’ll have to understand the importance of accurately documenting their time worked – even if it’s something as “trivial” as taking a business call in the car on the way to work or answering some emails in the evening at home. This is a very hard habit to start.

Communicate that you want them to accurately post time. Many new non-exempt employees are going to want to keep doing their work the way they always have and not write down their time. Persuade the new non-exempt employees that they must post all hours worked. This communication will be an on-going battle.

Do not let the “new non-exempt” take off in the middle of the work day for personal matters, come in late or leave early without accurately posting. Many exempt employees are used to having the freedom and flexibility. If want to let the new non-exempt employees be flexible, that’s great, but they’ll need to accurately record their non-working time, too. If they’re being paid according to the fluctuating workweek method, then you’d normally have to pay them for a full week if they worked any time during that week unless the time off was covered by PTO.

Learn the FLSA overnight travel rules because you’ll need to apply them. The rules during the workday are relatively simple: Commuting time (between home and workplace) is generally not compensable unless work is performed, but all travel time that occurs “in a day’s work” (between worksites) is covered, even if no actual “tasks” are performed. Travel time between home and an off-site assignment may be at least partially compensable, depending on the length of the trip.

But if your new non-exempt has to go out of town overnight, then all kinds of crazy rules apply.  Make sure you know them.

 

EEOC Enforcement Priorities

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Please call Tracy Stroud with questions about employment law or other civil litigation issues at 252-321-2020.

 

These are some of the areas the Equal Employment Opportunity Commission has been focusing on for the last several years:

Sexual Discrimination and LGBT Coverage

Title VII of the Civil Rights Act of 1964 does not explicitly include sexual orientation or gender identity in its list of protected classes, but the Commission, consistent with case law from the Supreme Court and other courts, interprets the statute’s sex discrimination provision as prohibiting discrimination against employees on the basis of sexual orientation and gender identity. In 2012, the EEOC held that discrimination against an individual because that person is transgender (also known as gender identity discrimination) is discrimination because of sex and therefore is prohibited under Title VII. See Macy v. Department of Justice, EEOC Appeal No. 0120120821 (April 20, 2012). The Commission has also held that discrimination against an individual because of that person’s sexual orientation is discrimination because of sex and therefore prohibited under Title VII. See David Baldwin v. Dept. of Transportation, EEOC Appeal No. 020133080 (July 15, 2015). The EEOC’s district, field, area, and local offices will accept and investigate charges from individuals who believe they have been discriminated against because of transgender status (or because of gender identity or gender transition).

Americans with Disabilities Act as Amended

EEOC has given breath to the ADAAA, filing and successfully prosecuting cases involving conditions such as diabetes, cancer, intellectual disabilities, and epilepsy, often difficult to cover as disabilities prior to the Amendments. EEOC v. United, 693 F.3d 760 (7th Cir. 2012) “Best qualified” policies do not trump the ADAAA’s reassignment-as-reasonable-accommodation obligation. EEOC v. UPS, 2014 WL 538577 100% return-to-work policy could be job qualification under the ADAAA. EEOC v. Creative Networks, 912 F. Supp. 2d 828 (D. Ariz. 2012): Rigid policy of refusing to provide an ASL interpreter at orientation/training for deaf and hearing-impaired employees is a violation.

Interplay of Pregnancy Discrimination Act and ADAAA

Title I of the ADAAA protects individuals from employment discrimination on the basis of disability and requires that an employer provide a reasonable accommodation for an employee or applicant with a disability. Pregnant workers and job applicants are not excluded from the protections of the ADAAA. Changes to the definition of the term “disability” in 2008 make it much easier for pregnant workers with pregnancy-related impairments to demonstrate that they have disabilities for which they may be entitled to a reasonable accommodation under the ADAAA. Reasonable accommodations available to pregnant workers with impairments that constitute disabilities might include allowing a pregnant worker to take more frequent breaks, to keep a water bottle at a work station, or to use a stool; altering how job functions are performed; or providing a temporary assignment to a light duty position.

 

Fair Labor Standards Act – Salary Level Threshold May Change in 2016

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The current salary level threshold for exemption is that an employee must be paid at not less than $455 per week or $23,660 annually to meet the salary level test under the FLSA. The new proposed salary threshold in proposed regulations for exemption is $970 per week or $50,440 annually.

Remember, however, to be exempt, an employee must meet all three tests, not just the salary level test.

The tests are: How employees are paid? (1) SALARY BASIS: Employee must be paid a pre-determined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed. (2) SALARY LEVEL: Currently this is $455/week or $23,660 per year; and (3) JOB DUTIES TEST: Each category of exemption – Executive, Administrative and Professional has different job duties as set forth in the regulations.

If this new salary level regulation goes into effect, any salaried “exempt” employees (i.e. currently ineligible for overtime pay) that make less than $970 per week will be reclassified as non-exempt and entitled to overtime when the final rule goes into effect. Also employers will be required to keep up with the DOL’s record keeping requirements for these new non-exempt employees including keeping records in these employees for: (1) Hours worked each day; (2) Total hours worked each week; (3) Daily/weekly straight time earnings for the workweek; and (4) Overtime earnings for the workweek.

The impact if this regulation is put into effect is that more employees will be entitled to overtime. The DOL estimates almost 5 million employees will become non-exempt under the new regulations, which will result in more overtime claims and lawsuits and an increase in number of Department of Labor audits.

How can employers prepare? Determine which employees will possibly be re-classified; determine how many work hours is the employee currently working for the compensation paid; beware of “hidden overtime”, meaning even if position is scheduled for less than 40 hours per week, are you confident that the employee is performing no duties outside working hours (e.g. answering emails, reading work materials, etc.), and install time tracking mechanism.

The comment period for these proposed rules ended on September 4, 2015. At this point, the Department of Labor will either: (1) Proceed with the proposed changes and issue a Final Rule, which means employers will likely have as little as 120 days to comply; (2) Issue a new or modified proposed rules, which will include a new comment period; OR (3) Take no action of the proposed rule.

Stay tuned—The proposed rules may or may not become effective. Colombo Kitchin Attorneys and I will keep you updated on this issue in this employment blog.

Employment Background Checks Revisited: What Every Employer Needs to Know

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In light of increased lawsuits against employers for violations under the Fair Credit Reporting Act (“FCRA”), every employer should insure it is performing employment background checks correctly. This law covers both credit and criminal background checks. A successful lawsuit under the FCRA can recover statutory damages between $100 and $1000 per violation, attorney’s fees, and costs, punitive damages as well as actual damages to the employee.

An employer must have written authorization and disclosure from a job applicant or employee prior to conducting an employment background check. The authorization and disclosure must stand alone, and cannot be combined with other forms or hidden within the job application. Many employers get the authorization and disclosure requirement wrong. Waiver forms or liability disclaimers cannot be added to the authorization form.

Another essential requirement of the FCRA is the adverse action notification. The Adverse Action is a two-step process that must be followed strictly. Many employers get tripped up by skipping one or even both steps: Step one, the “pre-adverse action” notice is sent to the applicant prior to making a “no hire” decision based on the background check. You have to provide the applicant with a notice, send a copy of the report, and attach a Summary of Rights under the FCRA. Step two, the “adverse action” notice, is sent after the final decision has been made and must contain information on how to dispute the background check.

Colombo Kitchin can provide you with the proper authorization and disclosure forms as well as proper adverse action notices. If you would like an evaluation of your employment background process, please contact our firm. We will be glad to help.

Intersection of the Affordable Care Act and Employment Discrimination Law

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The Affordable Care Act (ACA) provides increased incentives for employer wellness programs. See 26 CFR Part 54; 29 CFR Part 2590; 45 CFR Parts 146 & 157. The ACA also created incentives to small businesses to begin wellness programs. First, the ACA has increased the maximum permissible reward under a health contingent wellness program offered in conjunction with a group health plan from twenty percent (20%) to thirty percent (30%) of the cost of coverage and would increase the maximum reward to fifty percent (50%) for wellness programs designed to prevent or reduce tobacco use. The rewards may be in the form of a premium discount, reduced cost sharing, the absence of a surcharge, or a benefit that would not otherwise be provided under the plan. Also, $200 million per year has been made available through 2015 for wellness grants for small businesses that employ fewer than one hundred (100) individuals who work twenty-five (25) hours or more per week. The grants will be available to businesses that did not have a wellness program in place when ACA was passed in March 2010.

The Departments of Health and Human Services (HHS), Labor and the Treasury have released joint proposed rules on wellness programs to reflect the changes made by the ACA, and these proposed rules will be effective for plan years starting on or after January 1, 2014.

The proposed rules support workplace wellness programs, including “participatory wellness programs” which generally are available without regard to an individual’s health status.  These include programs like reimbursement for the cost of membership in a fitness center; providing a reward to employees for attending a monthly no-cost health education seminar; or rewarding employees who complete a health risk assessment without requiring them to take any further action.

The rules also outline standards for non-discriminatory “health contingent wellness programs,” which generally require individuals to meet specific standards to obtain a reward.  Examples of these health contingent programs are rewards for the abstention or decrease of use of tobacco, programs providing rewards for achieving specified cholesterol or weight levels or those who fail to meet a biometric target but take certain additional affirmative required actions.  The proposed rules try to protect consumers from unfair practices occurring in implementing health contingent wellness programs.

The rules are, unfortunately, vague and ambiguous, and it is unclear how the standards will be enforced. The rules are as follows:  (1) The programs must be reasonably designed to promote health or prevent disease and to be considered such a program, the program must offer a different, reasonable means of qualifying for the reward to individuals who do not meet standards based on measurement, test or screening. (2) The individuals in the plan must be given notice of the opportunity to qualify for the same reward through other means. (3) The programs must have a reasonable chance of improving health or preventing disease and not be overly burdensome for the individual. “Overly burdensome” is not defined. (3) As well, the programs must be reasonably designed to be available to similarly situated individuals.

However, if employers are not careful, these wellness programs can run afoul of the Americans with Disabilities Act as Amended (ADAA) and the Genetic Information Non-Discrimination Act (GINA). For those of you not familiar with GINA, like the ADA and most other Title VII laws, it applies to employers with fifteen (15) or more employees and prohibits obtaining or using genetic information for employment decisions. GINA became effective November 21, 2009. The final GINA rules make clear that employers may not offer financial inducements for individuals to provide their genetic information as part of a wellness program. However, employers may use the genetic information voluntarily provided to guide that individual into an appropriate disease management program. GINA rules do allow offering financial incentives for entering disease management programs if the program is open to employees with current health conditions whose lifestyle choices put them at increased risk of developing a condition, not just those employees with a genetic predisposition to have a certain disease.

The EEOC has not offered any clear guidance regarding the ACA incentive provisions in relation to ADA and GINA. However, in 2000 and in 2011 the EEOC did issue some enforcement guidance regarding disability-related inquiries and medical examinations of employees. The 2000 guidance briefly addressed wellness programs. The EEOC stated that under the ADA employers can conduct voluntary medical examinations and voluntary activities including the taking of medical histories as part of an employee wellness health program without having to show that they are job related and consistent with business necessity. A wellness program is deemed voluntary as long as the employer neither requires the participation nor penalizes the employees who choose not to participate. Additionally, the medical records acquired as part of the wellness program must be kept confidential and separate from general personnel records.

Further, in 2011, after passage of the ACA, the EEOC publicized an informal discussion letter regarding incentives to employees for wellness programs. In a traditional wellness program, employers can offer employees incentives to participate in wellness programs. However, under ADA and GINA, employers are prohibited from obtaining medical information to identify employees with problematic medical histories. The letter addressed the conflicts between the wellness programs, ADA, and GINA. The letter iterated that employers can conduct voluntary medical examinations and obtain information from voluntary medical histories as part of an employee wellness program. However, the EEOC did not take a position on whether offering financial incentives to employees to participate in wellness programs that include disability-related inquiries or medical examinations (such as blood pressure and cholesterol screening) is prohibited under the ADA or GINA.

As you can see, creation or improvement of wellness programs implicates several complex federal laws. If you are interested in the incentives, it is suggested that you contact not only your health insurer but also a labor attorney to analyze if your wellness program is compliant with the ACA and anti-discrimination laws.