APPLIES TO Employers subject to the NLRA

EFFECTIVE March 8, 2024

QUESTIONS? Contact HR On-Call (888) 378-2456

Quick Look The NLRB’s recent joint-employer rule is no longer enforceable. Employers should continue to follow the 2020 Joint-Employer rule.

Discussion

The National Labor Relations Board’s (NLRB) final rule on joint employment was set to go into effect on February 26, 2024. The final rule would have increased the number of employers found to be a joint employer based on the control of certain terms and conditions of a third party’s employees, even if the authority is merely reserved or only exercised indirectly. However, a number of business groups filed a lawsuit seeking to permanently block the final rule due to its adverse effects on the franchise model of businesses and relationships between contractors.

 

Originally, a Texas federal district court issued a two-week delay of the final rule to March 11, 2024 pending its ruling on the lawsuit. On March 8, 2024, the Texas court ultimately struck down the NLRB’s final rule as being over broad. This means that joint employer status will continue to be evaluated under the 2020 NLRB rule which states that employers must exercise “substantial direct and immediate control” over one or more essential terms or conditions of their employment, including wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction. “[C]ontrol is not ‘substantial’ if only exercised on a sporadic, isolated, or de minimis basis.”.

 

Joint-employer relationships must be individually analyzed based on their particular circumstances. The burden of proof is on the party claiming joint employer status. While this ruling essentially keeps the status quo, employers should continue to have their joint employer relationships reviewed by legal counsel for potential liability.

 

Action Items

1. Review the NLRB FAQ about the existing rule here.
2. Have joint-employer relationships reviewed by legal counsel.

 

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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. © 2024 ManagEase

APPLIES TO Public Entities with DEI Programs

EFFECTIVE March 5, 2024

QUESTIONS? Contact HR On-Call (888) 378-2456

Quick Look Diversity, equity, and inclusion programs by public entities must be narrowly tailored to achieve the agency’s legitimate, compelling interest.

Discussion

On March 5, 2024, a judge in the Northern District of Texas issued a decision finding that the Minority Business Development Agency’s (MBDA) policies that provide financial assistance to minority-owned businesses are unconstitutional. MBDA is a federal agency that provides financial assistance to business owners who are considered “socially or economically disadvantaged.”

 

Under the MBDA’s policies, there is an established presumption of social or economic disadvantage based on race and ethnicity. Because of this, certain business owners were denied or deemed ineligible for MBDA benefits because they did not identify as members of disadvantaged races or ethnicities. These businesses filed suit against the MBDA alleging that the MBDA’s presumption violated the equal protection guarantees of the Fifth Amendment’s Due Process Clause.

 

In deciding the case, the court found that, although the agency had a compelling interest in remedying past discrimination in government contracts, the agency’s policies were not narrowly tailored enough to achieve that interest. As a result, the court permanently enjoined the MBDA from using race as a factor in determining whether to provide financial assistance to businesses.

 

Although the court’s decision does not affect private businesses, employers should be aware of this decision and future developments as DEI programs are analyzed following the Supreme Court’s 2023 decision in Students for Fair Admissions, Inc. v. President & Fellows of Harvard College. In the SFA case, the Supreme Court ruled certain race-conscious college admissions policies violate the Equal Protection Clause of the 14th Amendment. This current case illustrates how the Supreme Court’s reasoning may be applied in the workplace.

Action Items

1. Review any DEI initiatives and qualifications.
2. Adopt objectives, business-related criteria for DEI decision-making.
3. Consult with legal counsel about minimizing risks for DEI practices.

 

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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. © 2024 ManagEase

APPLIES TO All Employers with Employees in KY, MI, OH, TN

EFFECTIVE March 12, 2024

QUESTIONS? Contact HR On-Call (888) 378-2456

Quick Look Employers cannot use any reimbursement strategy, whether it be the IRS milage rate or a cost approximation, that would cause actual reimbursable costs to reduce an employee’s earnings below the required minimum wage or overtime pay. The IRS mileage rate may still be used for expense reimbursement as part of a larger strategy to ensure employees are receiving the required minimum wage and overtime.

Discussion

In Parker v. Battle Creek Pizza, Inc., the Sixth Circuit Court of Appeals said that the IRS mileage rate may not be sufficient for expense reimbursement in some cases, suggesting that employers evaluate their pay and expense reimbursement strategies to ensure compliance with the Fair Labor Standards Act (FLSA). The FLSA states that no wage deductions can be made for expenses for “tools of the trade” if doing so would reduce an employee’s earnings below the required minimum wage or overtime pay. Determining expense reimbursement is clear when the cost amount is fixed. However, the court was asked to address expense reimbursement when the cost amount isn’t clear. Unfortunately, the answer itself was not entirely clear.

 

Here, there were two lower court cases addressing mileage expense reimbursement where the employees were using their own vehicles for pizza delivery and either receiving a fixed rate for mileage reimbursement or an amount lower than the IRS mileage rate. Both employees were paid minimum wage, which meant that they could not incur any amount of business expense as it would cut into their guaranteed wages. One lower court said that the IRS mileage rate should be used to determine expense reimbursement, while another lower court said that a “reasonable approximation” of the drivers’ costs may be used. The Sixth Circuit said that neither standard was appropriate under the circumstances!

 

Rather, the Sixth Circuit said that using a burden-shifting analysis could be appropriate to determine what amounts employees should have been reimbursed. Specifically, the employee would have the initial burden to show that reimbursement was inadequate. The burden would then shift to the employer to show that the reimbursement bore a demonstrable relationship to the employee’s actual costs. Finally, the employee would have the burden to prove the employer’s reasoning wrong. However, this test is not hard and fast; the court said that “the parties and the district courts might want to consider these or other ideas on remand.”

 

The court’s ruling focused on the inaccuracy of measuring expense reimbursement using approximation or the IRS mileage rate. Importantly, “an employee is entitled to the minimum wage specified [in the FLSA]—period.” An approximation of costs would mean that the obligation to pay minimum wage and overtime may not be fulfilled. Additionally, the “IRS’s standard-mileage rate for business deductions … is a nationwide average, which tends to overpay drivers in states where gas taxes are relatively low (like Ohio) and underpay drivers where gas taxes are high (like California). In addition, the estimation of depreciation costs in the IRS rate is weighted toward newer vehicles, which tends to overpay drivers of older vehicles. Moreover, some vehicle models (like the Toyota Tacoma) depreciate more slowly than other models do. And of course some vehicles get better gas mileage than others. The IRS rate also favors low-mileage drivers and disfavors high-mileage ones, like delivery drivers.”

 

While this case creates more questions than concrete answers, it is a cautionary tale for employers. The court highlighted the fact that the employers created this problem by paying their employees minimum wage, requiring them to use their own vehicles, and cutting it close as to whether they have adequately reimbursed their drivers for the cost of providing those vehicles. Presumably, if the employers paid more than the federal minimum wage, provided delivery vehicles, or gave a proper reimbursement amount, this would not be an issue. While the IRS mileage rate may still be used as a method of determining expense reimbursement, it should be looked at in a larger context in connection with the employee’s pay.

 

Moreover, this case has larger implications than just mileage reimbursement. Any time expense reimbursement is provided for a reasonable approximation of a cost, an employer may be exposing itself to liability. Employers should be looking at their wage strategies and expense policies to ensure that appropriate reimbursement methods are used, as well as including a process whereby employees can claim actual cost amounts if an employer provides a set rate rather than an individualized rate. Employers may even consider having employees verify in writing whether their actual cost does or does not exceed the reimbursement amount, to allow the employer the opportunity consider and pay the employee’s claimed cost amount.

 

Action Items

1. Review expense reimbursement policies for compliance.
2. Evaluate minimum wage rates for impact when paid in combination with expense reimbursement.
3. Implement an employee verification process to confirm receipt of actual cost reimbursement.

 

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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. © 2024 ManagEase

APPLIES TO All Employers with Employees in CA

EFFECTIVE March 25, 2024

QUESTIONS? Contact HR On-Call (888) 378-2456

Quick Look Employer-mandated periods waiting and passing through security areas is compensable work time. Time spent traveling between an entry point and a destination point on work premises must be paid as of the first location where the employee’s presence is required for an employment-related reason other than the practical necessity of accessing the worksite. Even though a collective bargaining agreement complies with meal and rest requirements, employees still must be paid for meal periods where the employee is not free to leave the premises.

Discussion

In Huerta v. CSI Electrical Contractors, Inc., et al, the California Supreme Court answered three questions certified to it by the Ninth Circuit Court of Appeals about Wage Order No. 16 and the scope of the term “hours worked.” Wage Order No. 16 applies to employees who work in certain “on-site occupations” in the construction, drilling, logging, and mining industries. There, union workers spent time entering and exiting a worksite through a security gate, which could incur a wait time of 5 to 30 minutes and a security inspection, plus another 15-20 minutes driving between the security gate and employee parking lot. However, they were paid as of the time they arrived and left the employee parking lot. They were also subject to specific safety restrictions while driving on the employer’s premises between the security gate and employee parking lot. Finally, they received unpaid meal periods but were not permitted to leave the premises. The court answered the three certified questions as follows.

 

Is time spent on an employer’s premises in a personal vehicle and waiting to scan an identification badge, have security guards peer into the vehicle, and then exit a Security Gate compensable as ‘hours worked’ within the meaning of . . . Wage Order No. 16? An employee’s time spent on an employer’s premises awaiting and undergoing an employer-mandated exit procedure that includes the employer’s visual inspection of the employee’s personal vehicle is compensable as “hours worked” within the meaning of Wage Order No. 16.

 

Is time spent on the employer’s premises in a personal vehicle, driving between the Security Gate and the employee parking lots, while subject to certain rules from the employer, compensable as ‘hours worked’ or as ‘employer-mandated travel’ within the meaning of . . . Wage Order No. 16? The time that an employee spends traveling between the Security Gate and the employee parking lots is compensable as “employer-mandated travel” under Wage Order No. 16 if the Security Gate was the first location where the employee’s presence was required for an employment-related reason other than the practical necessity of accessing the worksite. Separately, mandated workplace rules on how employees drive to the worksite in a personal vehicle does not make that time “hours worked” because the imposed rules do not create the requisite level of employer control.

 

Is time spent on the employer’s premises, when workers are prohibited from leaving but not required to engage in employer-mandated activities, compensable as ‘hours worked’ within the meaning of . . . Wage Order No. 16, or under California Labor Code Section 1194, when that time was designated as an unpaid ‘meal period’ under a qualifying collective bargaining agreement? When an employee is covered by a collective bargaining agreement that complies with Labor Code section 512(e) and Wage Order No. 16, and provides the employee with an “unpaid meal period,” that time is nonetheless compensable under the wage order as “hours worked” if the employer prohibits the employee from leaving the employer’s premises or a designated area during the meal period and if this prohibition prevents the employee from engaging in otherwise feasible personal activities.  An employee may bring an action under Labor Code section 1194 to enforce the wage order and recover unpaid wages for that time.

 

Action Items

1. Review meal and rest policies for compliance.
2. Review control required of employees when arriving and exiting the workplace to ensure compensable time is captured in timekeeping systems.
3. Ensure meal periods are paid when employees are not permitted to leave the premises.
4. Have appropriate personnel trained on compensable time and meal and rest period requirements.

 

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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. © 2024 ManagEase