Last week, the Department of Labor issued new guidance on whether interns are “employees” covered by the Fair Labor Standards Act’s minimum wage and overtime provisions. In the updated guidance, the DOL has adopted the “primary beneficiary test,” first applied by the U.S. Court of Appeals for the Second Circuit in 2015, and used by a growing number of courts in recent years.
One of the key provisions of the new Massachusetts Equal Pay Act (which goes into effect on July 1, 2018) is that it prohibits employers from requiring prospective employees to disclose their salary history. The reasoning behind this provision is as follows: if employers are allowed to ask applicants about their salary history, and base compensation on the answers to those questions, applicants who have been on the receiving end of discriminatory pay practices in the past will continue to be hampered by past pay inequity throughout their careers. If employers cannot base pay on what an applicant made previously, so the thinking goes, employers will have to set pay based on what the job is worth.
The winter season presents employers with many weather related issues ranging from obligations to keep outdoor areas safe to deciding whether to close the business for all or part of the day. Closing the business due to inclement weather raises pay issues – what pay are employees entitled to when the business closes? It depends, in part, whether the employee is considered exempt or non-exempt and whether, the employee is paid on a salary basis. Continue Reading Winter Weather and Employee Challenges – To Pay or Not to Pay?
Typically with an incoming administration there is a waiting period of sorts before changes in pending and certainly existing regulations kick in. The current administration, however, appears to be working at an accelerated pace toward upending the status quo. So, it appears time for a quick check-in on where we are and what to expect.
On Inauguration day, White House Chief of Staff Reince Priebus Jan. 20 instructed federal agencies to freeze all pending regulations, a move that seems to include a number of labor and employment initiatives that were in the works under the Obama administration.
This type of freeze is not unusual when a new president takes office. An action of this nature does not necessarily mean that significant changes are coming, but given candidate Trump’s campaign promise to roll back regulation on business, we can at least predict that the administration will be in no rush to move on the pending matters. Continue Reading Two Weeks Into the Trump Administration: Where are we with Labor and Employment Regulations?
Upon a motion for preliminary approval of the class-action settlement for $100 million, a federal court found that the settlement between Uber and drivers in two states was “not fair, adequate and reasonable” and denied approval. It ordered the parties to confer about how they wanted to proceed. A joint status report is due on September 8th and a status conference is scheduled with the court for September 15th.
The litigation involves current and former Uber Technologies Inc. drivers in Massachusetts and California who brought claims alleging that they were improperly classified as independent contractors rather than as employees. The actions cover about 385,000 drivers. After three years of contentious litigation, and on the eve of trial earlier this year, the parties reached a settlement of these two class-action lawsuits. Among other terms, Uber agreed to pay $84 million plus an additional $16 million depending if the company went public. Drivers would remain classified as independent contractors and Uber agreed to institute certain processes and procedures internally. See my previous post about some of the settlement terms.
In his review of the proposed settlement, Judge Edward Chen of the U.S. District Court for the Northern District of California cited case law noting that “whether a settlement is fundamentally fair…is different from the question whether the settlement is perfect in the estimation of the reviewing court.” But “when…the settlement takes place before formal class certification, settlement approval requires a ‘higher standard of fairness.'” As the judge explained, in this case, “because the Settlement Agreement covers the claims of both certified class members and drivers who fall outside the class definition and thus have not been certified (for example, all Massachusetts drivers and the California drivers who drove for a third-party transportation company or under a corporate name), this Court must apply the more ‘exacting’ standard in determining whether this settlement is fair, adequate, and reasonable.”
Of primary concern to the court was that the $1 million allocated to California’s “Private Attorneys General Act” (PAGA) claim was modest. PAGA is a law that allows private citizens to seek civil penalties for labor violations. The judge noted that the settled PAGA portion was .1% of the potential $1 billion-plus statutory penalty against Uber claimed in the lawsuit. “Here, the court cannot find that the PAGA settlement is fair and adequate in view of the purposes and policies of the statute.” Essentially, the federal court found that the amount of the settlement allocation to the state was not large enough.
The court also ruled that the arbitration provision on appeal deserved further consideration. The appeal pending at the 9th Circuit Court of Appeals on an earlier decision by Judge Chen involves a determination as to whether certain arbitration agreements signed by drivers are enforceable. Judge Chen recognized that if he were reversed on appeal, it would have a significant impact on the case as many of the drivers would need to proceed through arbitration.
Both sides have reported their disappointment in the ruling. This ruling by the federal court, however, does not prevent the parties from reaching a new settlement which addresses the judge’s concerns, particularly as to the PAGA.
This case is being watched closely by those companies using on demand workers. It is also a good reminder about the potential class-action liability employers face for the misclassification of a group of employees. All employers should be reviewing their independent contractor classifications to make sure those persons are not really employees under an incorrect label.
Co-written by: Jacqueline Botchman, a third year law student at the University of New Hampshire School of Law
The U.S. Equal Employment Opportunity Commission on Wednesday, July 13, 2016 publicized a revised proposal to expand pay data collection through the Employer Information Report (EEO-1). The proposed revision would require private employers and federal contractors with 100 or more employees to include pay and hour data by sex, race, and ethnicity as well as job category to their EEO-1 starting in 2017. Data collected will help the EEOC better understand the scope of the pay gap and focus enforcement resources on employers that are more likely to be out of compliance with federal laws.
The proposal, if accepted, will require employers to collect data on ten job categories by both gender and race and ethnicity.
- The ten EEO-1 job categories are: Executive/Senior Level Officials and Managers; First/Mid-Level Officials and Managers; Professionals; Technicians; Sales Workers; Administrative Support Workers; Craft Workers; Operatives; Laborers and Helpers; Service Workers.
- The seven race and ethnicity groups are: Hispanic or Latino; White (Not Hispanic or Latino); Black or African American (Not Hispanic or Latino); Native Hawaiian or Other Pacific Islander (Not Hispanic or Latino); Asian (Not Hispanic or Latino); American Indian or Alaska Native (Not Hispanic or Latino); and Two or More Races (Not Hispanic or Latino).
The proposal’s goal is to combat pay discrimination by assisting the agencies in identifying possible pay discrimination and helping employers in promoting equal pay in their workplaces.
In the press release, EEOC Chair Jenny R. Yang stated, “More than 50 years after pay discrimination became illegal, it remains a persistent problem for too many Americans.” “Collecting pay data is a significant step forward in addressing discriminatory pay practices. This information will assist employers in evaluating their pay practices to prevent pay discrimination and strengthen enforcement of our federal anti-discrimination laws.”
U.S. Secretary of Labor Thomas E. Perez added, “Better data means better policy and less pay disparity. As much as the workplace has changed for the better in the last half century, there are important steps that we can and must take to ensure an end to employment discrimination.”
Employers must be careful as there are laws protecting employees from sharing information or complaining about pay. As of January 1, 2015, New Hampshire prohibits employers from retaliating against employees for disclosing their wages to another employee. (To view this statute, click here.) Additionally, an employer is prohibited from discharging or discriminating against an employee in retaliation for making a complaint, instituting a proceeding, or testifying in a proceeding concerning New Hampshire’s equal pay laws. Under these laws, an employer may not discriminate on the basis of sex in the payment of wages. An employer who retaliates against the employee could be charged with a misdemeanor. (To view this statute, click here.) Employers should train managers and supervisors on this law.
Members of the public have until August 15, 2016, to submit comments on the revised rule proposal to the United States Office of Management and Budget. The link to provide information to the EEOC is http://www.regulations.gov, which is the Federal eRulemaking Portal. Members can also submit a comment by e-mail or mail.
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In a historic moment, yesterday, Governor Charlie Baker signed into law a comprehensive pay-equity bill aimed at eradicating the wage gap in Massachusetts. With the bill’s passage, Massachusetts has become the first state in the nation to prohibit employers from asking job applicants to provide a salary history during the interview process.
Supporters of the law argued that the practice of requesting a salary history has been shown to disadvantage women, who, on average, are paid less than men. The bill aims to eliminate discrimination in the payment of wages on the basis of gender, promote salary transparency, and encourage employers to review salaries to identify pay disparities within their organizations.
The new law is discussed in more detail here. The legislation goes into effect on July 1, 2018.
In a 158-0 vote, the Massachusetts House of Representatives voted to approve the so-called Pay Equity Act. The Act makes it unlawful for any employer to discriminate “in any way on the basis of gender in the payment of wages,” or to pay someone of a different gender less for comparable work. The term “comparable work” is defined as work which requires substantially similar “skill, effort and responsibility,” and is performed under similar working conditions. These somewhat fuzzy concepts may present substantial liabilities to the unwary employer.
An employer who is non-compliant must pay the employee the unpaid wage differential, as well as an additional amount equal to the unpaid wages – in essence, double damages measured by the amount of unpaid wages for comparable work. The aggrieved employee can sue in Superior Court, and the court may award a prevailing employee his costs and attorneys’ fees. The Act also expressly contemplates class actions. Any agreement to pay employees less than that to which they are entitled under the Act is not a defense to liability.
The Act does allow for wage variations if based upon the following factors:
- a merit system
- earnings measured by quantity/quality of production, sales or revenue
- geographic location
- education, training or experience if related to a particular job
- travel if regular and necessary.
Of course, if the wage payment is challenged in court, the employer would have to prove that the pay differential was the result of one or more of these factors.
The Act also prohibits an employer generally from requiring a prospective employee to refrain from inquiring about or disclosing the employee’s own wages or that of another employee. The Act also allows for an affirmative defense to liability if the employer has completed a self-evaluation of its pay practices, and has made reasonable progress in eliminating wage differentials based upon gender.
Given the momentum on Beacon Hill for this Act, there is a very good chance it will become law. Employers will need to review their pay policies and any variations to ensure compliance.
The United States Department of Labor (“DOL”) yesterday released its long awaited final rule which revises the salary test for the “white collar” exemptions to the Fair Labor Standards Act (“FLSA”). The new rule will be effective December 1, 2016 and is expected to impact some 4.2 million salaried workers based simply on the revision of the salary threshold for exemption. The rule is similar to the proposed rule on which the DOL received an unprecedented number of comments (270,000) from businesses, workers, organized labor and non-profit organizations, but is different in some respects. The highlights are as follows;
- The minimum salary level for the executive, professional and administrative exemptions is raised from $455 per week to $913 per week, the first increase since 2004.
- The salary threshold for automatic exemption as a highly compensated employee (“HCE”) is increased from $100,000 per year to $134,004 per year.
- The salary threshold will be increased automatically every three years beginning January 1, 2020. New salary levels will be posted by the DOL 150 days in advance of their effective date.
- The final rule will allow up to 10% of the salary threshold for non-HCE employees to be met by non-discretionary bonuses, incentive pay or commissions provided the payments are made at least quarterly.
- No changes are made to the duties test which determines whether white collar salaried workers earning more than the salary threshold are ineligible for overtime pay based on the jobs they perform.
The DOL states that the revised regulation will “put more money into the pockets of many middle class workers – or give them more free time.” Businesses have been aware of this impending change since President Obama directed the Secretary of Labor in March of 2014 to update the regulations to reflect the current economy and workforce. Now, however, is the time for those who have not yet done so to prepare for the change. Preparations should include reviewing and updating job descriptions to reflect accurately the tasks performed by workers and reviewing compensation levels to determine whether it is more beneficial or consistent with the law to revise salaries or reclassify employees as non-exempt.
As more information develops, we will continue to post periodic updates and advice on preparing for the changes.
UBER has settled two class-action lawsuits — one filed in California in 2013 (O’Connor) and one in Massachusetts in 2014 (Yucesoy) — by drivers who sought to be considered employees rather than independent contractors. In those cases, plaintiffs were seeking additional compensation, including reimbursement for expenses and tips. The two cases had about 385,000 drivers as class members.
In the settlement reached in April 2016, UBER agreed to pay $84 million to the class of plaintiff-drivers. UBER will pay an additional $16 million if it goes public and if its valuation increases by one and a half times its 2015 valuation within the first year of an IPO.
Additionally, under the terms of the settlement, drivers will remain independent contractors and not employees. UBER will provide drivers with more information about their individual ratings and how each driver compares with his or her peers. It agreed to introduce a policy explaining the circumstances under which UBER deactivates drivers from using its app. The company’s official driver deactivation policy has been posted. UBER also agreed to create an association in each state to allow drivers a venue for discussing drivers’ issues. Furthermore, UBER drivers will be allowed to post signs in their cars that tell passengers that while not required, tips are welcome.
While a judge needs to approve the settlement, UBER’s Co-Founder and CEO Travis Kalanick issued a press release highlighting the settlement terms. He views the resolution a win for the company. He expressed that many drivers prefer to be their “own boss” and would remain independent contractors under these settlement terms. As Mr. Kalanick explains, “Uber is a new way of working: it’s about people having the freedom to start and stop work when they want, at the push of a button. As we’ve grown we’ve gotten a lot right—but certainly not everything. “
Lessons to be learned from UBER? Companies should review how they classify workers. Companies should also review and update any third party services agreements they are currently working under. Misclassification creates risks for companies that may lead to costly class action lawsuits.