DOL Proposes Overtime Exempt Pay Increases!

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All Employers subject to the FLSA

EFFECTIVE

TBD

  

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  • The minimum salary threshold for the administrative, executive, and professional exemptions is proposed to increase to $1,059 per week, equivalent to $55,068 per year.
  • The “highly compensated employee” exemption is proposed to increase to $143,988 per year.
  • Exempt employees in the motion picture industry who are paid a specified base rate and meet the duties test will have their base rate increased to $1,617 per week.
  • The proposed rule would automatically update the salary threshold every three years.
  • There are no proposed changes to any of the duties tests under the FLSA overtime exempt rule.
  • Any final rule that gets implemented is not expected until 2024.

Discussion

On September 8, 2023, the U.S. Department of Labor (DOL) published a proposed rule in the Federal Register that looks to increase the minimum salary thresholds for overtime exempt employees. The proposal seeks to increase from the current statutory threshold of $684 per week to $1,059 per week for administrative, executive, and professional exemptions. This would increase annual salary minimums from $35,568 to $55,068 for those employees to be exempt from overtime pay.

Interestingly, the DOL set the measurement for determining the minimum salary threshold based on the 35th percentile of weekly earnings of full-time salaried workers in the lowest-wage Census Region (currently the South). To arrive at the proposed number, the DOL used data from 2022, but indicated it would use the most recent data available when it issues the final rule. This could result in an even higher minimum salary threshold for exempt employees. The DOL projects that the salary threshold could be $1,140 per week ($59,285 annually) by the fourth quarter of 2023, and $1,158 per week ($60,209 annually) by the first quarter of 2024.

In addition, the proposed rule seeks to raise the “highly compensated employee” exemption from the current threshold of $107,432 to $143,988 per year. Again, the proposed increase is based on 2022 data, and the DOL expects to issue a final rule based on more current data at the time it is issued. Note that not all states recognize the highly compensated employee exemption, so this change may not impact those states like California. Exempt employees in the motion picture industry who are paid a specified base rate and meet the duties test will have their base rate increased from $1,043 per week to $1,617 per week. The proposed rule would also automatically update the salary threshold every three years. There would also be salary thresholds in U.S. territories subject to the federal minimum wage, with some exceptions. Importantly, there are no proposed changes to any of the duties tests under the FLSA overtime exempt rule.

From here, there will be a 60-day comment period through November 7, 2023 to allow the public time to comment on the rule. There will likely be extensions of this time to accommodate the influx of comments expected. Once the comment period is closed, and after all comments are reviewed, the DOL will determine whether to make any changes to the proposed rule. A final rule will eventually be published and it will go into effect within a few weeks of publishing. Considering all of these steps, a final rule is not expected to be in place until 2024. Additionally, litigation challenging the rule will also likely be filed, potentially further complicating the timeline.

Assuming an increase does occur, employers should start preparing now. Determine which employees currently, or who will in 2024, earn between $35,568 and $55,068 per year. Track their weekly hours worked to assess the potential impact of overtime pay versus the cost of a salary increase to remain exempt. To do this, potential overtime pay should be calculated based on what the employee’s regular rate of pay would be, which is based on their total compensation, including things like nondiscretionary bonuses, commissions, and shift premiums. Employers should also have a plan for communicating with employees about any changes in pay as a result of the expected final rule. Keep in mind that some states, like California, New York, and Washington, already exceed the proposed federal minimum exempt salary. Other states may have additional overtime exempt rules to take into consideration.

Although we may not yet know what the final numbers will be, employers should take steps now in order to have a plan in place when the final rule is issued. Continue to look for updates on this emerging topic.

Action Items

  1. Review the proposed rule here.
  2. Review the DOL’s FAQ on regular rate of pay here.
  3. Analyze potential cost of converting employees to either non-exempt or exempt based on the new proposed minimum thresholds.

Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2023 ManagEase

Davis-Bacon Act Final Rule Brings Major Changes for Government Contractors

APPLIES TO

All Federal Government Contractors and Subcontractors

EFFECTIVE

October 23, 2023

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  • The U.S. Department of Labor (DOL) published a final rule making several changes to the Davis-Bacon Act (DBA) for federal government contractors and subcontractors working on construction projects.
  • The threshold for setting the prevailing wage has been reduced to 30% instead of 50%.
  • New technology projects like solar panels, wind turbines, broadband installation, and installation of electric car charges are now covered by the DBA.

Discussion

On August 8, 2023, the U.S. Department of Labor (DOL) published a final rule making several changes to the Davis-Bacon Act (DBA). The DBA governs wage payment for federal government contractors and subcontractors working on construction projects that are federally funded or assisted. The rule also addresses projects that sought to take advantage of energy tax credits and carbon capture under the Inflation Reduction Act (IRA). Several of the most significant changes are summarized below. However, government contractors are encouraged to review the entire rule to determine the extent of the changes that are set to come.

Expanded Coverage. New technology projects like solar panels, wind turbines, broadband installation, and installation of electric car charges are now covered by the DBA. Certain prefabrication work is also covered as is demolition when it is done to clear the way for new construction. The addition of these categories helps address the tax credits provided by the IRA.

30% Rule Reinstated. The threshold for setting the prevailing wage has been reduced. Now, 30% of workers must be paid a particular wage for that to become the prevailing wage rather than 50% of workers. The same calculation also applies for fringe benefits. The Bureau of Labor Statistics’ wage escalators are also to be used every three years.

Fringe Benefits. Fringe benefits also must be “annualized” with contractors required to obtain DOL review and approval of existing fringe benefits. Approval must be obtained within 18 months after the published rule.

Prevailing Wage Updates. The final rule also changes when and how prevailing wages can be updated. Whenever a contract is extended or modified to include newly scoped work, the prevailing wage can be updated. Long-term, indefinite contracts also require annual prevailing wage updates. Most notably, prevailing wages are a part of the contract by operation of law even if the contracting agency did not include it in the contract.

Wage Determination Geography. Urban and rural counties are to be counted together for the purpose of calculating the prevailing wage. There is no longer a prohibition on mixing and matching rural and urban data to determine the wage rate. Where states use different wage rate calculations for their own state-funded construction projects, the DOL is allowed to incorporate the stage wage determination into the federal process.

Whistleblower Protection. Individuals engaged in protected whistleblowing are entitled to reinstatement, back pay, compensatory damages including damages for emotional distress in the event of retaliation.

DOL Expanded Powers. The DOL is now empowered to withhold funds from contractors engaged in multiple federal construction projects. Also, controlling shareholders, members of an entity holding a prime contract, or participants or partners of a joint venture of partnership holding the contract can be held liable for underpaid prevailing wages in addition to the prime contractor.

Increased Recordkeeping. Contractors now must retain all contracts, subcontracts, bids, proposals, amendments, modifications, and extensions for a period of at least three years after all the work on the prime contract is completed. This is in addition to the existing requirement of retaining certified payrolls and back-up wage payment information for the same retention period.

These points only address a few of the major changes in the 800+ page final rule. Federal contractors and subcontractors on construction projects are highly encouraged to review the changes with their legal counsel to make sure they are able to comply with the new requirements.

Action Items

  1. Review the final rule here.
  2. Update policies and procedures for compliance, if applicable.
  3. Consult with legal counsel to update prevailing wage calculations and ensure compliance with the new requirements.

Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2023 ManagEase

More NLRB Decisions Change the Employer Landscape

APPLIES TO

All Employers Subject to the NLRA

EFFECTIVE

As Indicated

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  • “Quickie” union elections will be reinstated as of December 26, 2023.
  • NLRB announced a new framework for determining when employers are required to bargain with unions without a representation election.
  • Employers cannot justify discretionary unilateral changes as a “past practice” during a contractual hiatus or during negotiations for a first contract.
  • An employer’s past practice of unilateral changes that was developed under a management-rights clause in a collective-bargaining agreement cannot authorize unilateral changes made after the agreement expires and while bargaining for a new agreement is under way.
  • Concerted advocacy by statutory employees on behalf of nonemployees is protected by the NLRA when it can benefit the statutory employees.
  • NLRB returned to the “totality of the circumstances” test for determining whether employees intending to induce group action by fellow employees are engaged in protected concerted activity.

Discussion

The National Labor Relations Board (NLRB) has been very active recently. There have been a number of recent rulings impacting union elections, bargaining, and the overall determination of concerted activity. Even where employers may not currently have a union presence, the changes make it easier for a union to be elected. In a time where unions are seeing a significant resurgence, employers should be aware of recent changes.

“Quickie” Union Elections. As of December 26, 2023, “quickie” union elections will return to their 2014 status. Pre-election hearings will generally be scheduled to open approximately 10 days sooner than under the current 2019 rule. The new rule eliminates the existing 20-day period between the direction of an election and the election itself in favor of elections being held on the “earliest date practicable.” Pre-election hearings will be limited to issues regarding whether the election should take place. Litigation of any eligibility and inclusion issues will be delayed post-election unless those issues must be resolved to determine whether an election should even be held. The employer’s Statement of Position responding to the representation petition will generally be due approximately three days sooner under the new rule, and unions may respond verbally at the start of the pre-election hearing rather than filing a written response.

Representation Election Proceedings. On August 25, 2023, in Cemex Construction Materials Pacific, LLC, the NLRB announced a new framework for determining when employers are required to bargain with unions without a representation election. When a union requests recognition on the basis that a majority of employees in an appropriate bargaining unit have designated the union as their representative, an employer must either recognize and bargain with the union or promptly file an RM petition seeking an election.  However, if an employer who seeks an election commits any unfair labor practice that would require setting aside the election, the petition will be dismissed, and—rather than re-running the election—the Board will order the employer to recognize and bargain with the union.

Employer’s Duty to Bargain. On August 26, 2023, in Wendt Corporation, the NLRB overruled Raytheon Network Centric Systems (2017) in part saying that allowing employers to justify discretionary unilateral changes as a “past practice” during a contractual hiatus or during negotiations for a first contract was inconsistent with Supreme Court precedent and the National Labor Relations Act (NLRA). That same day, in Tecnocap, LLC, the NLRB overruled another part of Raytheon saying an employer’s past practice of unilateral changes that was developed under a management-rights clause in a collective-bargaining agreement cannot authorize unilateral changes made after the agreement expires and while bargaining for a new agreement is under way.

Protections Advocating for Nonemployees. On August 26, 2023, in American Federation for Children, Inc., the NLRB reversed its 2019 decision in Amnesty International, returning to longstanding precedent that concerted advocacy by statutory employees on behalf of nonemployees is protected by the NLRA when it can benefit the statutory employees. “Standing in solidarity can be a protected act regardless of the employment status of those you stand with—the question is simply whether, in helping others, employees might help themselves and get help in return.”

Concerted Activity Test. On August 25, 2023, in Miller Plastic Products, Inc., the NLRB returned to the “totality of the circumstances” test for determining whether employees intending to induce group action by fellow employees are engaged in protected concerted activity under Section 7 of the NLRA. Section 7 establishes the right “to engage in . . . concerted activities for the purpose of . . . mutual aid or protection.” “To be protected under Section 7 of the Act, employee conduct must be both ‘concerted’ and engaged in for the purpose of ‘mutual aid or protection.’” The Board overruled Alstate Maintenance, LLC, (2019), which the Board said had narrowed the test for determining concerted activity.

Action Items

  1. Review the Quickie Union Election final rule and fact sheet.
  2. Review policies and procedures for compliance.
  3. Have appropriate personnel trained on the definition of “concerted activity” as it impacts potential discipline related to employer policies.
  4. Review changes with legal counsel for compliance.

Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2023 ManagEase

EEOC Proposed Regulations Implementing Pregnant Workers Fairness Act

APPLIES TO

All Employers with 15+ Employees

EFFECTIVE

As Indicated

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  • The EEOC formally published its proposed regulations implementing and enforcing the Pregnant Workers Fairness Act (PWFA).
  • The regulations provide clarifications for a qualifying employee, a known limitation, undue hardship, leave as an accommodation, and many more topics.

Discussion

The Pregnant Workers Fairness Act (PWFA) went into effect June 27, 2023 and requires employers with 15 or more employees to provide reasonable accommodations to qualified employees and applicants with known limitations related to, affected by, or arising out of pregnancy, childbirth, or related medical conditions. As part of the implementation and enforcement of the law, the Equal Employment Opportunity Commission (EEOC) is required to issue final regulations by December 29, 2023. The EEOC formally published its proposed regulations on August 11, 2023. The proposed regulations are subject to a 60-day comment period where there may be some changes, but since the EEOC used existing requirements from Title VII of the Civil Rights Act and the Americans with Disabilities Act, employers should prepare for the following interpretations to be enforced.

Qualifying Employee. The only limitation the regulations provide is that an accommodation should be provided so long as an undue hardship is not created for the employer. Technically, an employee who cannot perform their essential duties may still be qualified for an accommodation since the employee only has to have a “known limitation” due to pregnancy, childbirth, or a related medical condition. There are two definitions of the term “qualified.” Under the ADA, an employee or applicant who, with or without reasonable accommodation, can perform the essential functions of the employment position is qualified. Even if an employee cannot perform one or more essential functions of their job, they are still qualified if: 1) the inability to perform an essential job function is for a temporary period; 2) the essential job function could be performed in the near future; and 3) the inability to perform the essential function can be reasonably accommodated absent undue hardship.

“In the near future” is generally defined as 40 weeks from the start of the temporary suspension of an essential function but does not include the childbirth recovery leave period. Examples of accommodating the inability to perform essential functions includes, temporarily suspending the essential function that is unable to be performed, temporarily transferring the employee, allowing the employee to participate in a light duty program, or allowing a leave of absence if no other accommodation is available. If an employee can perform the essential functions with a reasonable accommodation, then the employer may be required to provide the accommodation on a long-term basis unless it creates an undue hardship.

“Known Limitation.” A “known limitation” is a mental or physical impediment or problem related to pregnancy, childbirth, or related medical conditions, including common or minor conditions, that have been communicated to the employer. A “limitation” means a modest, minor, or episodic impediment or problem. Employees can request accommodations to reduce increased pain or increased risk to the employee’s health that is related to pregnancy, childbirth, or a related medical condition.

A limitation is “known” if it was communicated to the employer by the employee or the employee’s representative. The employee is not required to use specific language to request an accommodation. Once communicated, the employer has an obligation to respond. Some accommodations may be complex and require a detailed interactive process.

Pregnancy, Childbirth, and Related Medical Conditions. The PWFA does not define the terms pregnancy, childbirth, and related medical conditions. The EEOC, however, construes these terms as it would under Title VII. “Pregnancy” and “childbirth” include current pregnancy, past pregnancy, potential or intended pregnancy, labor, and childbirth which includes vaginal and cesarean delivery. “Related medical conditions” examples include, but are not limited to, termination of pregnancy, including by miscarriage, stillbirth, or abortion; infertility; fertility treatment; lactation and conditions related to lactation; use of birth control; menstrual cycles; postpartum depression, anxiety or psychosis; vaginal bleeding; preeclampsia; pelvic prolapse; preterm labor; ectopic pregnancy; gestational diabetes; cesarean or perineal wound infection; maternal cardiometabolic disease; endometriosis; changes in hormone levels; and many other conditions. Medical conditions that are not unique to pregnancy or childbirth but also may arise include, but are not limited to, chronic migraine headaches, nausea or vomiting, high blood pressure; incontinence, and carpal tunnel syndrome.

Undue Hardship. Undue hardship has the same meaning as under the ADA. Factors for creating an undue hardship include: 1) the length of time that the employee or applicant will be unable to perform the essential function(s); 2) whether there is work for the employee to accomplish by allowing the employee to perform all the other functions of the job, transferring the employee to a different position, or otherwise; 3) the nature of the essential function, including its frequency; 4) whether the covered entity has temporarily suspended the performance of essential job functions for other employees in similar positions; 5) whether there are other employees, temporary employees, or third parties who can perform or be temporarily hired to perform the essential function(s); and 6) whether the essential function(s) can be postponed or remain unperformed for any length of time and, if so, for how long.

Accommodations that do not impose an undue hardship are: 1) allowing an employee to carry water and drink, as needed, in the employee’s work area; 2) allowing an employee additional restroom breaks; 3) allowing an employee whose work requires standing to sit and whose work requires sitting to stand; and 4) allowing an employee breaks, as needed, to eat and drink. Requesting documentation from a healthcare provider in these circumstances would not be reasonable. Employers, however, are allowed to choose a less expensive accommodation or an accommodation that is easier for them to provide in situations where there may be more than one effective accommodation.

Leave as an Accommodation. There is no bright line rule as to how much leave is to be provided. The EEOC states that a leave of absence to recover from pregnancy, childbirth, or related medical conditions does not count as time when an essential function is suspended, so it does not matter if the need for leave is temporary or whether the employee can return in the near future. If the employee is eligible for paid leave under a state or local paid sick leave law or under an employer-provided paid leave policy or benefit, employees have the choice to use that paid leave to run concurrently with time off as a reasonable accommodation under the PWFA to the extent that other employees are permitted to choose the type of leave may take.

Documentation. Employers can only request supporting documentation if it is reasonable under the circumstances for the employer to determine whether to grant the accommodation. An employer can seek documentation to describe or confirm: 1) the physical or mental condition; 2) the condition is related to, affected by, or arising out of pregnancy, childbirth, or related medical conditions; and 3) a change or adjustment at work is needed for that reason.

It is not reasonable to request documentation when: 1) when both the limitation and the need for reasonable accommodation are obvious; 2) when the employee or applicant has already provided sufficient information, i.e., the employee has already provided a medical note imposing lifting restrictions for a specific time period; 3) when an employee states or confirms they are pregnant and requests one of the four common accommodations discussed above (carrying water and drinking as needed, taking additional restroom breaks, sitting or standing, and breaks, as needed, to eat and drink); and 4) when the limitation is lactation or pumping.

Lactation Accommodations. Reasonable accommodations related to lactation include extending the period of time during which the employee will be provided breaks and access to a private space beyond what is required under the PUMP Act, and providing a lactation area that is reasonably close to the employee’s work area, has electricity and appropriate seating, and is reasonably close to a sink and a refrigerator for storing milk, among other things.

Examples of Accommodations. The EEOC includes several examples of what could be potential accommodations: job restructuring; part-time or modified work schedules; more frequent breaks; acquisition or modification of equipment, uniforms, or devices; allowing seating for jobs that require standing or standing in jobs that require sitting; appropriate adjustment or modification of examinations or policies; permitting the use of paid leave (whether accrued, short-term disability, or another type of employer benefit), or providing unpaid leave, including to attend healthcare-related appointments and to recover from childbirth; assignment to light duty; telework; and accommodating a worker’s inability to perform one or more essential functions of a job by temporarily suspending the requirement that the employee perform that function, if the inability to perform the essential function is temporary and the worker could perform the essential function in the near future.

Action Items

  1. Review the proposed regulations here.
  2. Review and prepare to update procedures regarding reasonable accommodations for pregnancy, childbirth, and related medical conditions.
  3. Have appropriate personnel trained on the requirements when final.

Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2023 ManagEase

Fifth Circuit: Expanded Title VII Exposure for Employers

APPLIES TO

Employers with 15+ Employees in LA, MS and TX

EFFECTIVE

August 18, 2023

  

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  • Fifth Circuit expands exposure for Title VII liability by finding that employers can be held liable for disparate treatment under Title VII for decisions made regarding hiring, firing, compensation, or “the terms, conditions, or privileges” of employment.
  • Employee scheduling qualifies under “terms, conditions, or privileges” of employment.

Discussion

The Fifth Circuit has expanded its definition of what constitutes an adverse employment action when establishing liability under Title VII, finding that a plaintiff can now allege a disparate-treatment claim under Title VII if they plead discrimination in any hiring, firing, compensation, or decision affecting the “terms, conditions, or privileges” of employment. The Fifth Circuit previously limited actionable adverse employment actions to “ultimate employment decisions,” a term that included only hiring, firing, granting leave, promoting, or compensating an employee.

In Hamilton v. Dallas County, nine female detention officers sued Dallas County, claiming sex-based discrimination stemming from the County’s scheduling policy. Specifically, the County used a sex-based scheduling policy to determine each officer’s two days off each week. Under the policy, only male officers were given the option of having a full weekend off from work whereas women officers were only permitted to take two weekdays or one weekend day plus one weekday off. Initially, the plaintiffs’ claim was dismissed because the district court determined that the Circuit’s existing precedent required a showing of an “ultimate employment decision,” and that changes to an employee’s work schedule, such as the denial of weekends off, did not constitute an “ultimate employment decisions.” The plaintiffs then pursued this interpretation to the Fifth Circuit.

In deciding the case, the Fifth Circuit noted that the plain language of Title VII does not limit actionable disparate treatment liability to only “ultimate employment decisions,” and in fact, prohibits discrimination for both “ultimate employment decisions” and decisions “with respect to [employees’] compensation, terms, conditions and privileges of employment.” The Fifth Circuit also noted that the United States Supreme Court has recognized that “any ‘benefits that comprise the incidents of employment, or that form an aspect of the relationship between the employer and employees’ … falls within Title VII’s ban on discrimination” and that Title VII’s test “is not limited to ‘economic’ or ‘tangible’ discrimination.”

In applying this standard to the current case, the Fifth Circuit found that a full weekend off is a preferred shift for both men and women, and by switching from a seniority-based scheduling system to one based on sex, the County was denying the female officers a “privilege” of their employment that was otherwise provided to the male employees. Ultimately, the Court found that the plaintiffs had met their burden of establishing a discriminatory adverse employment action that was based on their sex, and the case was sent back to the district court for further interpretation.

This ruling brings the Fifth Circuit precedent more in-line with the application of Title VII liability in other Circuits. However, the Court specifically noted that they were not addressing the “minimum workplace harm” that a plaintiff must allege for purposes of showing discrimination. Therefore, employers in the Fifth Circuit should continue to monitor application of this new standard.

Action Items

  1. Review workplace policies for prohibiting discrimination, harassment, and retaliation.
  2. Conduct regular workplace training on anti-discrimination and anti-harassment.
  3. Consult with legal counsel when making decisions that affect the terms, conditions, and privileges of employment to ensure compliance with anti-discrimination laws.

Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2023 ManagEase

Eleventh Circuit: Failure to Accommodate Claims Must Have Adverse Employment Action

APPLIES TO

All Employers with FL, GA, and AL Employees

EFFECTIVE

May 24, 2023

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Quick Look

  • The U.S. Court of Appeals for the Eleventh Circuit said a claim for failure-to-accommodate under the Americans with Disabilities Act (ADA) must include an adverse employment action.
  • Employers should review their options with legal counsel prior to denying a request for a reasonable accommodation.

Discussion

In Beasley v. O’Reilly Auto Parts, the U.S. Court of Appeals for the Eleventh Circuit said a claim for failure-to-accommodate under the Americans with Disabilities Act (ADA) must include an adverse employment action. Here, the plaintiff was deaf with only 30% understanding of verbal communication and worked for O’Reilly Auto Parts (O’Reilly) as a warehouse worker. The employee relied on American Sign Language to communicate, to which O’Reilly agreed to provide an interpreter when needed upon his hire. During a disciplinary meeting for poor attendance, the employee requested and was denied an ASL interpreter. The discipline resulted in a written warning and a lower than usual performance review. O’Reilly used performance reviews to provide merit increases which the employee was now denied. He resigned and filed a claim under Title I of the ADA for failure to provide a reasonable accommodation.

The Court ultimately affirmed the lower court’s ruling that plaintiffs in failure-to-accommodate claims must prove an adverse employment action occurred. The court noted that having an ASL interpreter would not have improved the employee’s attendance score or provided him with a better performance review. There was a genuine issue of material fact as to whether a denied accommodation led to a lower pay increase; however, the employee must still prove that it was an adverse employment action.

With the Eleventh Circuit’s ruling, there is now a split in the federal courts as to whether a failure-to-accommodate claim under the ADA requires an adverse employment action. The U.S. Supreme Court has, for now, declined review of other similar cases to provide a definitive answer for employers. Employers should review their options with legal counsel prior to denying a request for a reasonable accommodation.

Action Items

  1. Review anticipated denials of reasonable accommodations under the ADA with legal counsel.

Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2023 ManagEase

California: Updates to FEHA Regulations for Criminal History Screening

APPLIES TO

All Employers with 5+ Employees in CA

EFFECTIVE

October 1, 2023

  

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  • Criminal background check requirements apply based on expanded definitions of “applicant” and “employer”.
  • Voluntary criminal history information cannot be considered if it would not otherwise be allowed to be considered (e.g., arrests, diversion program participation, expunged records).
  • Individualized assessment, reassessment, and job denial requirements are clarified and expanded.

Discussion

The California Civil Rights Department (CRD) recently issued its final rules modifying the Fair Employment and Housing Act (FEHA) regulations relating to criminal background checks. The following is a summary of the key changes.

Applicability. The definition of “applicant” is expanded to include existing employees who have already started working before the post-conditional offer review, applied for a different position with their current employer, or subject to review because of a change in ownership, management, policy or practice.

The definition of “employer” includes “a labor contractor and a client employer; any direct and joint employer; any entity that evaluates the applicant’s conviction history on behalf of an employer, or acts as an agent of an employer, directly or indirectly; any staffing agency; and any entity that selects, obtains, or is provided workers from a pool or availability list.”

Exemptions. An employer or its agent must be required by law to conduct the criminal background check in order to be exempt from waiting until after a conditional offer of employment is made. This exemption does not apply to any law requiring another entity (e.g., occupational licensing board) to conduct a criminal background check.

Voluntary Information. An employer cannot consider any criminal history voluntarily provided prior to making a conditional offer of employment that it would not otherwise be allowed to consider under FEHA (e.g., arrests, diversion program participation, expunged records), unless an exemption applies.

Individualized Assessment. The individualized assessment required before denying a conditional offer of employment based on criminal history was expanded. The assessment must include, among other things, the nature and gravity of the offense/conduct, time that has passed since the offense or completion of sentence, and nature of the job held or sought.

  • The nature and gravity of the offense or conduct was clarified to include the following non-exhaustive factors: (1) the specific personal conduct of the applicant, (2) whether there was harm to people or property, (3) the degree of harm, (4) the permanence of harm, (5) the context in which the offense occurred, (6) whether a disability contributed to the conduct (e.g., past drug addiction or mental impairment) and if so whether the likelihood of harm arising from similar conduct either could be mitigated by a reasonable accommodation or has been mitigated by treatment, (7) whether trauma (e.g., domestic violence, sexual assault, stalking, human trafficking, duress, or other similar factors) contributed to the offense, and (8) the age of the applicant when the conduct occurred.
  • The time that has passed since the offense or completion of sentence was clarified to include the time passed since the conduct underlying the conviction (which may predate the conviction itself), and/or the amount of time passed since release from incarceration.
  • The nature of the job held or sought may include the following factors: (1) the specific duties of the job, (2) whether the context in which the conviction occurred is likely to arise in the workplace, and/or (3) whether the degree of harm that resulted from the conviction is likely to occur in the workplace.

If any evidence of rehabilitation or mitigating circumstances is voluntarily provided by the applicant or a third party at the applicant’s request before or during the initial individualized assessment, the employer must consider that information as part of the initial individualized assessment. This evidence may include (1) the length and consistency of employment history before and after the offense, (2) circumstances surrounding the offense, (3) the applicant’s participation in self-improvement efforts (e.g., school, job training, counseling, community service, rehabilitation), (4) whether trauma (e.g., domestic violence, sexual assault, stalking, human trafficking, duress, or other similar factors) contributed to the offense, (5) age of the applicant when the conduct occurred, (6) whether a disability contributed to the offense and if so whether the likelihood of harm or the disability can be or has been mitigated, (7) the likelihood that similar conduct will recur, (8) whether the applicant is bonded, (9) the fact that the applicant is seeking employment, and/or (10) successful completion or probation or parole. Evidence may be presented in the form of certificates of participation/enrollment/completion of a relevant program, letters from those who know the applicant, documentation from those who can attest to the applicant’s status as a survivor of domestic or sexual violence or similar offenses, documentation of the existence of a disability, or any other documentation showing rehabilitation or mitigating circumstances.

Employers cannot refuse to accept additional evidence voluntarily provided at any point prior to making a preliminary decision to rescind a job offer, require an applicant to submit any of the additional evidence at any time in the hiring process, require an applicant to provide a specific type of documentation, require an applicant to disclose their status as a survivor of domestic or sexual assault or comparable statuses, or require an applicant to produce medical records to disclose the existence of a disability or diagnosis.

Reassessment. During the reassessment process, an employer must consider any information provided by the applicant on whether or not to rescind a conditional offer of employment, including the applicant’s conduct during incarceration (if applicable), employment history since conviction or sentence completion, community service and engagement since the conviction or sentence completion, or other rehabilitative efforts, as well as the nature and gravity of the offense/conduct, time that has passed since the offense or completion of sentence, and nature of the job held or sought.

Job Denial. When reviewing an applicant’s criminal history, there must be a direct and adverse relationship that justifies denying the applicant the position. An applicant’s possession of a benefit, privilege, or right required for the performance of a job by a licensing, regulatory, or government agency or board is considered “probative” of the applicant’s conviction history not being directly and adversely related to the specific duties of that job.

Action Items

  1. Review the final rule here.
  2. Update criminal history screening procedures for compliance.
  3. Have appropriate personnel trained on the updated requirements.

Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2023 ManagEase

California: Out-of-State Non-Competes Cannot be Enforced in California

APPLIES TO

All Employers

EFFECTIVE

January 1, 2024

  

QUESTIONS?

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Quick Look

  • Noncompete agreements are prohibited by law, regardless of where or when the contract is signed.
  • Violations may be enforced through a private right of action, including potentially under PAGA.

Discussion

SB 699 prohibits employers from entering into or enforcing noncompete agreements in California, regardless of where or when the contract is signed. This means that a noncompete agreement lawfully entered into in another state cannot be enforced in California. This may occur, for example, where an employee leaves an out-of-state company to work for a company in California. The previous employer cannot stop the employee from competing in California, regardless of a valid agreement in another state.

The bill says research shows that noncompete clauses stifle economic development, limit firms’ ability to hire and depress innovation and growth. Noncompete clauses are associated with suppressed wages and exacerbated racial and gender pay gaps, as well as reduced entrepreneurship, job growth, firm entry, and innovation. California’s public policy provides that every contract that restrains anyone from engaging in a lawful profession, trade, or business of any kind is, to that extent, void, except under limited statutory exceptions. California has benefited significantly from this law, fueling competition, entrepreneurship, innovation, job and wage growth, equality, and economic development. The significance of this concept is highlighted by the fact that there were zero “no” votes against the bill. A rare feat in the current political climate.

However, this bill raises a number of questions about its constitutional enforceability. We are likely to see litigation between California and out-of-state companies attempt to resolve this issue.

Additionally, violations of this new bill may potentially be enforced under the Private Attorney General Act (PAGA). PAGA applies to contracts prohibited by law. While noncompete agreements were previously void, soon they will be specifically prohibited by law, including a private right of action to recover injunctive relief, damages, and attorneys’ fees for prevailing plaintiffs. Employers may face significant liability for a violation of the new law.

Action Items

  1. Review the bill here.
  2. Review restrictive covenants with legal counsel.

Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2023 ManagEase

Illinois: Recent Legislative Updates

APPLIES TO

As Indicated

EFFECTIVE

As Indicated

  

QUESTIONS?

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Quick Look

  • Illinois’ Family Bereavement Leave Act is renamed to the Child Extended Bereavement Leave Act (CEBLA) and is expanded to provide leave to eligible employees who lose a child by suicide or homicide.
  • Illinois’ Victims’ Economic Security and Safety Act (VESSA) is expanded to allow employees to take leave for attending the funeral of, making arrangements for, and grieving the death of a family or household member who is killed in a violent crime.
  • Illinois’ Employee Blood Donation Leave Act is renamed the Employee Blood and Organ Donation Leave Act and is expanded to provide leave to eligible employees who seek leave to donate an organ.
  • The new Freelance Worker Protection Act (FWPA) establishes strict protections for freelance workers, including contractual requirements, compensation requirements, and protections for discrimination and harassment.
  • The Illinois Equal Pay Act is amended to require employers to disclose pay scale and benefits information in job listings.

Discussion

During the most recent legislative session, Illinois has passed several laws that either create new rights for employees or expand existing laws that affect employee rights. Employers should begin to review these new and amended laws now and prepare for their upcoming impacts.

Expansion of the Illinois Family Bereavement Law. Effective January 1, 2024, SB 2034 significantly expands the Illinois family bereavement leave law. Originally enacted in 2016 as the Child Bereavement Leave Act, and later expanded and renamed as the Family Bereavement Leave Act in early 2023, the law will again be renamed as the Child Extended Bereavement Leave Act (CEBLA). Under the expanded CEBLA, eligible employees who lose a child by suicide or homicide will be entitled to: (1) up to 12 weeks of unpaid leave if they work for a large employer with more than 250 full-time employees; or (2) up to six weeks of unpaid leave if they work for a mid-sized employer with 50 to 250 employees. Employees may take this leave in a single continuous period or intermittently in increments of no less than four (4) hours.

Employees must complete their leave within one year after having notified their employer of their loss. Under the amended law, employers may require the employee to provide advance notice of their intent to take leave, as well as documentation to support the basis for the leave, such as a death certificate, an obituary, or written verification from a funeral home.

Amendments to the Victim’s Economic Security and Safety Act. Effective January 1, 2024, HB 2493 amends Illinois’ Victims’ Economic Security and Safety Act (VESSA) by expanding the list of qualifying reasons for which employees may take unpaid leave. These additional reasons include attending the funeral of, making arrangements for, and grieving the death of a family or household member who is killed in a violent crime. For this new mourning leave, employees are entitled to two workweeks (10 workdays) of unpaid leave, which must be completed within 60 days after the date on which the employee receives notice of the victim’s death. If the employee is also entitled to leave under the amended CEBLA, then the mourning leave may not exceed or be in addition to leave under the CEBLA. However, the mourning leave will be in addition to the four to 12 weeks of leave to which employees may be entitled for other qualifying reasons (such as seeking medical attention, legal assistance, obtaining counseling, etc.).

If an employee is not entitled to take unpaid leave under the CEBLA, then VESSA’s mourning leave is deducted from the total amount of leave time to which an employee is entitled for other qualifying reasons. In addition to the mourning leave, the amendments also add death certificates, published obituaries and certain other written verifications to the list of documents that will satisfy VESSA’s certification requirements.

New Leave for Employee Organ Donation. Effective January 1, 2024, HB 3516 creates a new leave entitlement for an employee’s organ donation. Amending the Employee Blood Donation Leave Act, the law allows eligible employees of companies with 51 or more employees to use up to 10 days of paid leave in any 12-month period to donate an organ. The law defines an “organ” as “any biological tissue of the human body that may be donated by a living donor,” including, but not limited to, a kidney, liver, lung, pancreas, intestine, bone and skin. HB 3516 also formally renames the law to the Employee Blood and Organ Donation Leave Act.

New Freelance Worker Protection Act. Effective July 1, 2024, HB 1122 creates a new law called the Freelance Worker Protection Act (FWPA) that will require companies that hire freelancers to provide services or products valued at $500 or more to: (1) memorialize the agreement through a written contract; (2) make timely payments after the freelance worker has completed the contract for service or delivered the product (within 30 days); and (3) refrain from engaging in discriminatory, retaliatory, or harassing behavior towards freelance workers. The FWPA defines a “freelance worker” as anyone hired or retained as an independent contractor to provide products or services in Illinois or for any Illinois-based entity in exchange for compensation of at least $500 (either in a single contract or in the aggregate of all contracts during the last 120 days).

However, the FWPA specifically excludes: (1) workers performing construction services; (2) workers performing services as an employee for a contractor who engages in construction; (3) workers engaged in the traditional employer-employee relationship as defined by the Illinois Wage Payment and Collections Act; and (4) all foreign, federal, state, and local government entities including school districts. In preparation for this new law, employers should evaluate whether any independent contractors providing services to the company fall within the definition of a “freelance worker,” and if so, consult with their legal counsel to prepare the appropriate contract for services and arrange for a compliant compensation schedule.

New Pay Transparency Law. Effective January 1, 2025, HB 3129 amends the Illinois Equal Pay Act in several significant ways:

  • New Job Posting Requirements. Under the amended law, covered organizations are required to disclose in their job postings the wage, salary, wage range, or salary range (i.e., the pay scale) and a general description of the benefits and other compensation that the employer reasonably expects to offer for the position. This disclosure requirement pertains to positions that will be physically performed (at least in part) within the state of Illinois, as well as positions that may be performed outside of Illinois, if the employee reports to a supervisor, office, or other work site within Illinois.
  • Internal Job Posting Requirement. The Act requires covered organizations to announce, post, or otherwise make known all job opportunities to all current employees no later than the same day that the job is posted externally.
  • Disclosure of Pay Scale and Benefits to Applicants. Although the amended law does not require employers to make a job posting, employers will be required to disclose to an applicant the pay scale and benefits to be offered for the position prior to any offer or discussion of compensation and at the applicant’s request if no job posting has been made available.
  • Record Keeping Requirements. The amended law imposes a new record retention requirement, requiring employers to preserve records of the pay scale and benefits information for each posted position for at least five (5) years. In the event of an ongoing investigation, however, employers will need to retain them until the Illinois Department of Labor (IDOL) or court order authorizes their destruction.
  • Potential Liability for Third Party Job Postings. Employers may be held liable for a third-party’s failure to include the pay scale and benefits information in a job posting that is posted on the employer’s behalf. To avoid this, employers should monitor postings managed by third party sites closely, and should make sure to provide the third-party sites with the required pay scale and benefits information (or a hyperlink to that information) ahead of the posting, so that it can be appropriately included as part of the job posting.
  • Penalties for Violations. Suspected violations of the pay transparency law will be investigated by the IDOL. If the IDOL determines that a violation has in fact occurred, the employer will have seven (7) days to remedy the violation or will be subject to a civil penalty of $100 per day for each day the violation continues. Under the amended law, each job posting that fails to comply will be considered a separate violation.

Action Items

  1. Review and revise leave policies and practices to account for expanded leave provisions under CEBLA, VESSA, and Employee Blood and Organ Donation Leave Act.
  2. Review independent contractor arrangements to determine whether such individuals qualify as freelance workers.
  3. Consult with legal counsel regarding appropriate contractual agreements required for engagement with freelance workers.
  4. Review job postings to prepare for upcoming compliance with new pay transparency requirements.

Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2023 ManagEase

New Jersey: Religious Tenets Exception is an Affirmative Defense to Discrimination Claim

APPLIES TO

All Employers with Employees in NJ

EFFECTIVE

August 14, 2023

  

QUESTIONS?

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Quick Look

  • Employers prove a religious tenets of faith exception to a discrimination claim.
  • A challenged employment decision must be based solely on employment criteria adopted under the tenets of the employer’s religion.

Discussion

In Crisitello v. St. Theresa School, the New Jersey Supreme Court said that a faith-based school may claim the religious tenets exception to a discrimination claim when it relies on the teachings of its faith to set employment policies, provided it meets certain criteria. The Court clarified that the burden to assert and prove the religious tenets exception, as an affirmative defense, is on the employer. To do so, the employer must prove that the challenged employment decision was based solely on employment criteria that were adopted under the tenets of its religion. Successfully proven, the affirmative defense is “an absolute bar to liability.”

There, a child caregiver advised her employer that she was pregnant and was subsequently fired for engaging in premarital sex in violation of the school’s Catholic teaching. She claimed discrimination based on marital status and pregnancy. However, teachers were required to follow the Code of Ethics under the Archdiocese of Newark’s Policies on Professional and Ministerial Conduct which required them to adhere to the teachings of the Church. The employee handbook also indicated that teachers should serve “as positive role models for their students.” The employee also signed an acknowledgment of the polices. Ultimately, the employee provided no evidence that the reason for termination was other than what the employer claimed.

Action Items

  1. Review policies for reflection of tenets of faith.
  2. Document employee acknowledgment of employer policies.
  3. Consistently apply employer policies.

Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2023 ManagEase