APPLIES TO All Employers

EFFECTIVE December 26, 2023

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

Quick Look Joint employer relationships occur if there is direct, indirect, or mere authority (even if not exercised) to control employees’ essential terms and conditions of employment.

Discussion

On October 26, 2023, the National Labor Relations Board (NLRB) issued its final rule on definition joint employer relationships. The final rule will be effective on December 26, 2023.

The new joint employer rule repeals and replaces the 2020 NLRB joint employer rule. The 2020 rule said that joint-employer status exists where a company exercises “substantial direct and immediate control” over the essential terms and conditions of another company’s employees. The 2020 rule was a rejection of the previous line of Browning-Ferris cases that indicated a joint employer relationship could be possible where a company had the authority to control another company’s employees, even where they did not exercise that authority.

The current 2023 joint employer final rule returns to the Browning-Ferris standard with some expansion. Specifically, joint employer status occurs:

• Where one company directly exercises control over the second company’s employees’ essential terms and conditions of employment, OR
• Where the first company’s control is indirect (even through an intermediary), OR
• Where the first company’s control is reserved (i.e., authorized) but not ever actually exercised.

“Essential terms and conditions” of employment are defined to include wages, benefits, and other compensation; hours of work and scheduling; assignment of duties to be performed; supervision of the performance of duties; rules for performance and discipline; hiring and termination; and health and safety work conditions. The final rule notes that an entity’s control over matters that are not material to an employment relationship and that do not apply to the employees’ essential terms and conditions of employment is not relevant to the determination of whether the entity is a joint employer.

Joint employers of particular employees subject to a collective bargaining agreement must bargain collectively for the terms of employment that it controls or has authority to control, even where not “essential” to its joint-employer status. Those joint employers are not required to bargain with respect to any term and condition of employment that they do not possess the authority to control or exercise the power to control.

Joint employer status typically means joint and several liability for labor violations of those areas that the joint employer controls or has authority to control. Employers should have workforce and vendor agreements reviewed by legal counsel to assess and minimize potential exposure.

Action Items

1. Review the final 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. © 2023 ManagEase

APPLIES TO All Employers

EFFECTIVE August 31, 2023

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

Quick Look The Department of Labor’s Wage and Hour Division issued Field Assistance Bulletin No. 2023-3 (Guidance) to instruct its field agents on the prohibition of “hot goods” as defined by the Fair Labor Standards Act (FLSA). The FLSA prohibits the shipment or delivery for shipment of hot goods in interstate commerce if the goods were removed from a producing establishment within 30 days following a child labor violation.

Discussion

The Department of Labor’s Wage and Hour Division issued Field Assistance Bulletin No. 2023-3 (Guidance) to instruct its field agents on the prohibition of “hot goods” as defined by the Fair Labor Standards Act (FLSA). “Hot goods” are those that are produced in a business that uses oppressive child labor. These goods can include “wares, products, commodities, merchandise, or articles or subjects of commerce of any character, or any part or ingredient thereof” and intangibles like ideas, intelligence, and news. If a portion of a good is the product of child labor and the rest of the good is not, the entire product is still considered a “hot good.” The FLSA prohibits the shipment or delivery of hot goods in interstate commerce if the goods were removed from a producing establishment within 30 days following a child labor violation.

The Guidance provides several clarifications to the language included in the FLSA prohibition. “Oppressive child labor” is any violation of the Department of Labor’s Child Labor Regulations and Orders. The act of being “produced” covers a broad range of activities: production, manufacturing, mining, handling of goods, sorting, storing, packing, and labeling. “In or about an establishment” includes performing occupational duties on the premises regardless of whether workers are employed by the owner, or performing work in close proximity if the work duties are directly related to the activities of the producing establishment.

The Guidance also clarifies the good-faith defense provided by the FLSA. Alleged violators can defend themselves by showing they acquired the goods in good faith and relied on written assurances that the goods were produced in compliance with FLSA child labor provisions. The Department of Labor has the authority to assess monetary penalties and file a civil action in federal court to enjoin the shipment of goods via a temporary restraining order, temporary injunction, or permanent injunction. The Guidance also provides examples to illustrate violations and compliance.

Action Items

1. Review hiring procedures and working conditions of minors for compliance.
2. Have appropriate personnel trained on control for hot goods.

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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. © 2023 ManagEase

APPLIES TO All Employers with IL, IN, and WI Employees

EFFECTIVE October 5, 2023

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

Quick Look Employers that provide pay for non-compensable pre- or post-shift activities can impose conditions on such pay.

Discussion

In Meadows v. NCR Corp., the Seventh Circuit Court of Appeals ruled employers that pay for otherwise non-compensable pre- or post-shift activities can impose conditions on that pay. Here, the plaintiff was a customer engineer servicing point-of-sale systems and ATMs. Off-the-clock work was prohibited and work done during regular shifts was to be recorded electronically. If overtime was performed outside this policy, then that time was paid as long as it was recorded in the timekeeping system. The plaintiff performed pre- and post-shift activities and other work during unpaid meal periods like reviewing email, mapping the service route, reviewing work orders, and responding to work calls. His unauthorized overtime was paid but work that was not recorded was not paid per policy. The plaintiff sued for payment of the unrecorded overtime under the Fair Labor Standards Act (FLSA) and the Illinois Minimum Wage Law.

The court ultimately found the work the plaintiff performed that was unrecorded was not integral and indispensable to the principal activities of servicing the employer’s systems. Rather, they were incidental to the commute in a company vehicle. The time could be compensable, however, if the employer had a practice of paying for those activities through an express contractual provision or through a custom or practice. Adopting a custom of paying employees for non-compensable activities means the employer also has the discretion to place conditions on that custom.

Action Items

1. Review overtime and non-compensable time pay practices for compliance.

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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. © 2023 ManagEase

APPLIES TO All Employers with AL, FL, and GA Employees

EFFECTIVE September 11, 2023

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

Quick Look Overtime exemption may apply where an employee receives a salary meeting the minimum requirements plus additional compensation paid on any basis, or where an employee is paid on a quantified basis with a minimum salary guarantee if there is a reasonable relationship between the guaranteed amount and the amount actually earned.

Discussion

In Wilson v. Schlumberger Tech. Corp., the Eleventh Circuit Court of Appeals clarified how the Fair Labor Standards Act (FLSA) overtime exemption applies. The FLSA regulations provide two options for an employer to prove that an employee is exempt from receiving overtime pay: (1) the employee receives the minimum weekly salary basis and may receive additional compensation paid on any basis; and (2) the employee’s earnings may be computed on an hourly, daily, or shift basis if they are guaranteed at least the minimum weekly required amount paid on a salary basis regardless of the number of hours, days or shifts worked, and a reasonable relationship exists between the guaranteed amount and the amount actually earned.

Here, an employee received a guaranteed base meeting the minimum exempt salary threshold regardless of the number of hours, days, or shifts worked, in addition to other hourly rates and bonuses depending on the situation. However, his hourly and bonus pay significantly exceeded the salary pay. The question became whether the first or second exemption test applied.

Ultimately, the court said that the first test applies when an employee receives a base salary and additional compensation, and the second test applies when an employee is merely guaranteed a minimum salary but is typically paid on an hourly, daily, or shift basis. Because the employee here received a fixed base salary and additional compensation in the form of hourly rates and other bonuses, the first test applied.

Action Items

1. Have overtime exemptions reviewed for compliance.

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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. © 2023 ManagEase

APPLIES TO Applies to Venture Capital Companies with Invested Companies in CA

EFFECTIVE January 1, 2024

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

Quick Look Venture capital companies must start collecting demographic data of founding members of invested companies in 2024, and reporting begins in 2025. Data can only be collected when the venture capital company has executed an investment agreement with the business and made the first transfer of funds. Founding members only disclose their information on a voluntary basis and the venture capital company cannot retaliate against them for refusing to disclose.

Discussion

SB 54, Fair Investment Practices by Investment Advisers, requires venture capital companies to collect and report data on the demographic composition of the founding teams of the companies in which they invest.

“Venture capital company” is defined as an entity that satisfies one or more of the following conditions: (1) on at least one occasion during the annual period commencing with the date of its initial capitalization, and on at least one occasion during each annual period thereafter, at least 50% of its assets (other than short-term investments pending long-term commitment or distribution to investors), valued at cost, are venture capital investments; (2) the entity is a “venture capital firm” under the Investment Advisers Act of 1940; or (3) the entity is a “venture capital operating company” under the Employment Retirement Income Security Act of 1974. This may include companies such as private equity firms, accelerators, or investor groups.

Venture capital companies must comply with the reporting obligations if they (1) either primarily engage in the business of investing in, or providing financing to, startup, early-stage, or emerging growth companies, or manage assets on behalf of third-party investors; and (2) either are headquartered in California, have a significant presence or operational office in California, make venture capital investments in businesses that are located in or have significant operations in California, or solicit or receive investments from a person who is a resident of California.

Venture capital companies must report to the Civil Rights Department (CRD) information relating to aggregate demographic information about the founding team of companies in which investments were made (i.e., gender identity, race, ethnicity, disability status, sexual orientation, veteran status, California residency status, and whether information was declined to be provided); the number and amount of investments; and the principal place of each company in which an investment was made. The CRD will provide a survey form to use for this purpose. Surveys can only be provided to founding members when the venture capital company has executed an investment agreement with the business and made the first transfer of funds. Founding members respond to the surveyed information on a voluntary basis and the venture capital company cannot take retaliatory action against them for refusing to provide the data.

The first reporting deadline will be March 1, 2025 for data obtained in 2024. The aggregated data will be published on the CRD’s website. Records must be kept for at least four years following reporting to the CRD. Failure to comply with the requirements may result in court enforcement, penalties, attorneys’ fees, and other relief. Although the bill was signed by the governor, he committed to proposing language in the next proposed budget to clarify the requirements.

Action Items

1. Review the bill here.
2. Implement a voluntary survey for data collection.
3. Prepare for reporting in 2025.
4. Update data privacy notices regarding data collection as applicable.

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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. © 2023 ManagEase