FLSA, FMLA, and ADA Update John E. Pueschel Womble Carlyle Sandridge & Rice, LLP April 8, 2016
Key Issues and Legal Trends • FLSA – Proposed Changes to Overtime Regulations for “White Collar” Workers • FMLA – Family Responsibilities • ADA – Pregnancy – Unpaid Leave as Accommodation
Fair Labor Standards Act Developments and Trends
FLSA – Brief Refresher The Fair Labor Standards Act (“FLSA”) is the primary federal law governing wages and hours in employment. • Establishes a federal minimum hourly wage rate • Establishes overtime pay • Restricts the employment of minors (child labor) • Requires equal pay for men and women • Establishes recordkeeping requirements 4
Current “White Collar” Exemptions FLSA provides an exemption from the minimum wage and overtime pay requirements for certain executive , administrative , and professional employees. • Duties test • Salary level test • Salary basis test
Proposed Changes to Salary Level Test • Current minimum salary employee must earn to be exempt: – $455 per week, or $23,660 per year – Last updated in 2004 • DOL proposes to set the standard salary level at the 40th percentile of weekly earnings for full-time salaried workers – Amount will be adjusted annually – Assuming these regulations become final in 2016, the minimum salary is estimated to be $970 per week , or $50,440 per year .
Proposed Changes for Highly Compensated Employees • Current Regulations – Employee must earn total annual compensation of $100,000 or more (at least $455 per week) – Employee’s primary duty must include office or non-manual work – Employee must perform at least one of the exempt duties or responsibilities of an exempt executive, administrative, or professional employee. • Proposed Regulations – Would increase total annual compensation requirement needed to exempt HCEs to the annualized value of the 90th percentile of weekly earnings of full-time salaried workers ( at least $122,148 annually )
Automatic Yearly Adjustment Mechanism • DOL proposes to “establish a mechanism for automatically updating the salary and compensation levels going forward to ensure that they will continue to provide a useful and effective test for exemption. ” • Two proposed adjustment mechanisms: – Fixed Percentile Approach – CPI-U Approach
Fixed Percentile Approach • Would annually update the thresholds based on fixed percentiles of earnings for full-time salaried workers – Would maintain the minimum salary threshold at the 40th percentile of the weekly wages of all full-time salaried workers – Would maintain the salary threshold for HCEs at the 90th percentile of the weekly wages of all full-time salaried workers – Bureau of Labor Statistics publishes weekly earnings deciles quarterly, so employers could plan for changes
CPI-U Approach • Would update the thresholds based on changes to the Consumer Price Index for All Urban Consumers (“CPI - U”) • CPI-U measures changes in price of a “basket of goods and services” bought by the average consumer • Primary index used by government for: – Federal income tax brackets – Treasury inflation-indexed debt securities’ interest rates – Federal poverty levels, which determine eligibility for many government assistance programs
Focus of Department of Labor • Extending Overtime Protections – “Today the Department of Labor has announced a proposed rule that would extend overtime protections to nearly 5 million white collar workers within the first year of its implementation. ” • Increasing Salary Levels – “Failure to update the overtime regulations has left an exception to overtime eligibility originally meant for highly-compensated executive, administrative, and professional employees now applying to workers earning as little as $23,660 a year. For example, a convenience store manager, fast food assistant manager, or some office workers may be expected to work 50 or 60 hours a week or more, making less than the poverty level for a family of four, and not receive a dime of overtime pay. ” http://www.dol.gov/whd/overtime/NPRM2015/
Areas Unaddressed by Proposed Changes • Duties test • Whether nondiscretionary bonuses may serve to satisfy a portion of the standard salary requirement
Duties Test The DOL did not propose specific regulatory changes to the duties test, but did seek comments on the following issues: • Should employees be required to spend a minimum amount of time performing work that is their primary duty in order to qualify for the exemption? • Should the DOL reconsider its decision to eliminate the long/short duties test structure? • Should there be a limitation on the amount of nonexempt work?
Nondiscretionary Bonuses in Salary Level Requirement The DOL is considering whether to permit nondiscretionary bonuses and incentive payments to count toward a portion of the standard salary level test for the “white collar” exemptions. • Amount would be limited to 10 percent of the standard weekly salary level. • Because the salary basis requirement is designed to ensure that “exempt workers receive a minimum level of compensation on a consistent basis,” “employees would need to receive the bonus payments monthly or more frequently. ”
Business Impact • DOL estimates approximately 4.6 million workers would lose their exemption (and thus be eligible for overtime pay) under proposed regulations, unless employers increase their pay. • DOL estimates that the “average annualized direct employer costs will total between $239.6 and $255.3 million per year. ” • DOL also states that this “proposed rulemaking will also transfer income from employers to employees in the form of higher earnings. Average annualized transfers are estimated to be between $1.18 and $1.27 billion, depending on which of the two updating methodologies is used. ” http://www.dol.gov/whd/overtime/NPRM2015/faq.htm.
Business Impact Look at workers to make sure classifications are correct under new regulations! “For workers who usually work 40 hours a week or less, the DOL assumes that employers will reclassify these workers as overtime- eligible and will pay the same weekly earnings for the same number of hours worked. While these employees will become overtime eligible, employers can continue to pay their current salaries and need make no adjustments as long as the employees’ hours do not exceed 40 hours in a workweek. ” 80 FR 38562.
Business Impact Look at workers to make sure classifications are correct under new regulations! “For employees who work overtime, employers may: (1) Pay the required overtime premium for the current number of overtime hours based upon the current implicit regular rate of pay; (2) reduce the regular rate of pay so total weekly earnings and hours do not change after overtime is paid; (3) eliminate overtime hours; (4) increase employees’ salaries to the proposed salary level; or (5) use some combination of these responses. ” 80 FR 38562-63.
Timeline • DOL’s Fall 2015 Semiannual Regulatory Agenda indicates that the timeline for publishing the final rule is July 2016 • However, the final rule might come at any time. In an interview with Bloomberg BNA on December 16, 2015, Labor Secretary Thomas Perez stated, “I'm confident we’ll get the final rule out by the spring of next year.”
Family & Medical Leave Act Developments and Trends
FMLA – Brief Refresher • The FMLA is a federal law that requires covered employers to provide up to 12 weeks of unpaid, job-protected leave to eligible employees per year • Upon return to work, the eligible employee must be reinstated to the same or equivalent position • Additional protections for military
Who is eligible for benefits under the FMLA? • The FMLA applies to private employers with 50 or more employees (within a 75-mile radius) • Eligible employees must satisfy the following: • Work for their employer at least 12 months • Work at least 1,250 hours in the last 12 months AND • Have a qualifying reason for taking FMLA leave
What is a qualifying reason for taking FMLA leave? • For incapacity due to pregnancy, prenatal medical care, or child birth • To care for the employee’s child after birth, or placement for adoption or foster care • To care for the employee’s spouse, son, daughter, or parent who has a serious health condition • For a serious health condition that makes the employee unable to perform the employee’s job • Military caregiver leave and qualifying exigency leave
FMLA: Serious Health Condition An illness, injury, impairment, or physical or mental condition involving one or more: • In-patient care • Incapacity for more than three consecutive calendar days that includes two or more treatments by health care provider, or one visit and a regimen of continuing treatment • Chronic condition • Prenatal treatment or pregnancy
FMLA: Use of Leave Types of Leave 1. Continuous 2. Intermittent • Scheduled • As needed Interaction with other Leave
Employee Responsibilities • Must provide 30 days notice if need to take leave is foreseeable • Otherwise, notice as soon as practicable Employer Responsibilities • Eligibility Notice • Rights and Responsibilities Notice Certification • Employees may be required to provide a certification and periodic recertification supporting the need for leave
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