David Letterman is retired, but the end of every year brings a new, or not so new, top 10 list of wage and hour violations. The list is prepared by the NH Department of Labor’s Wage and Hour Division, which dutifully keeps track of the various infractions committed by employers. Large and small employers alike find themselves owing back wages and subject to civil penalties. Yes, what you don’t know, does hurt you – and your business.

To read my full article that was published in the New Hampshire Business Review on 1/22/2016, please click here.

As we wrap up another year of legal policies and laws in the employment area, we thought we would look back at the five most viewed blog posts for 2015.  These posts represent some of the changes in the law and the guidance issued by government agencies over the past year.

  1. The Wait is Over: New FLSA Regulations Issued by USDOL
  2. U.S. DOL Released New FMLA Forms, Reminding Employers of Their Obligations under GINA
  3. Are Employees Entitled to Pay if Their Worksite is Shut Down Due to Inclement Weather?
  4. Unlimited PTO: Solution or Problem?
  5. Domestic Workers Bill of Rights Takes Effect in Massachusetts

With a new year, comes new laws.  We look forward to continuing our goal of being a timely resource on employment law issues facing businesses.  Happy New Year!

When the ball drops on New Year’s Eve two important changes to Massachusetts wage and hour law will take place.

The first change is that the Massachusetts minimum wage will increase to $10.00 per hour effective January 1, 2016.  For tipped employees, the minimum wage is increasing to $3.35 per hour.  (The service rate is applicable for service employees who receive tips of more than $20 per month, and the average hourly tips when added to the service rate equals at least the minimum wage.)  The New Year’s increase to $10.00 is the second increase in a three-year legislative program that started with 2015’s increase in the minimum wage to $9.00 per hour.  The minimum wage will increase again on January 1, 2017 to $11.00 per hour ($3.75 for the service rate).  Currently, there are no further changes planned beyond 2017.

The second change is that the so-called “safe harbor” to the Massachusetts Earned Sick Time Law will close on January 1, 2016.  When the earned sick time law went into effect on July 1, 2015, the Attorney General announced a safe harbor, under which employers whose existing paid time off policies met certain minimum requirements would be deemed to be in compliance with the law for the remainder of 2015.  When the safe harbor closes on New Year’s Day, all employers must ensure that their policies and practices are fully compliant with all of the terms of the statue and accompanying regulations.  For more information, see my earlier blog posts about the Earned Sick Time Law, here and here, and the Attorney General’s excellent web page about the Earned Sick Time Law.

Photo: Jasmine Kaloudis via Flickr (CC by ND 2.0)
Photo: Jasmine Kaloudis via Flickr (CC by ND 2.0)

Employer-sponsored wellness programs are a popular tool to incentivize healthy living and maintain an active, engaged workforce.  But such programs can present legal risks to employers and must be specifically tailored to avoid running afoul of certain employment laws.  One such law is the Genetic Information Nondiscrimination Act of 2008 (GINA), a federal law enforced by the U.S. Equal Employment Opportunity Commission.

Among other restrictions, GINA prohibits employers from requesting, purchasing, or requiring disclosure of “genetic information” about job applicants, current and former employees, and trainees.  Genetic information is defined broadly in the statute and implementing regulations, and includes information about an employee’s spouse’s current or past health status.

One exception to GINA’s prohibition on requesting genetic information is when an employee voluntarily accepts health or genetic services from their employer, such as services offered through a wellness program.  Employers may provide financial or in-kind incentives to employees for voluntarily participating in wellness programs.  However, the incentives must be limited in way that does not make participation involuntary.

There is currently a gap in the law that prevents employers from offering incentives to employees for their spouses’ participation in the wellness program.  This is because in applying to participate in a wellness program, employees are often required to complete health risk assessments (HRAs).  Asking an employee’s spouse to complete an HRA could violate the statute because a spouse’s health status information is considered “genetic information” about an employee.  Thus, while an employee could receive incentives for his or her own participation in a wellness program, that same employee could not receive incentives for their spouses’ participation, even though the spouse is part of the employer’s health plan.

On October 29, 2015, the EEOC announced a new proposed rule that would remedy this apparent contradiction in GINA.  Under the proposed rule, an employer will be allowed to request information about the current or past health status of an employee’s spouse who is covered by the employer’s group health plan and is completing an HRA for a wellness program on a voluntary basis.  The rule clarifies that an employer may offer incentives for a spouse’s participation in a wellness program, as long as the employer follows certain requirements in requesting the spouse’s health information.

These requirements include that the spouse provide prior, knowing, written, and voluntary authorization for the employer to collect genetic information.  The authorization form must describe the type of genetic information that will be obtained and the general purposes for which it will be used.

While the new rule provides some clarity to employers, it is important to note a key distinction in GINA’s definition of “genetic information.”  The limited permissible disclosure proposed by this rule applies only to current or past health status, but not other genetic information, such as results of genetic tests.  Employers should therefore be mindful that their HRAs and authorization forms cannot ask for information about the results of genetic tests.

Employers should also limit how they use the health information gleaned from HRAs and other forms associated with wellness programs.  GINA strictly prohibits any form of discrimination based on an employee’s genetic information or makeup, so employers must be sure to compartmentalize how they use the genetic information obtained as part of wellness programs, and not use this information to make job-related decisions.

Recently enacted House Bill 2 includes a tax amnesty plan for all New Hampshire taxes collected by the Department of Revenue Administration.  This is the first New Hampshire general tax amnesty program since 2001 and includes taxes such as the Business Profits Tax, the Business Enterprise Tax, the Real Estate Transfer Tax, the Interest and Dividends Tax and the Meals and Rentals Tax. Under the program, a taxpayer who pays all unpaid taxes between December 1, 2015 and February 15, 2016 will receive amnesty from all penalties and all interest in excess of 50% of the applicable interest rate.  Amnesty applies even if the Department of Revenue Administration has not assessed the tax or if the assessment is, or will be, appealed.  A taxpayer who has not filed a return can participate in the amnesty program by filing the missing return and paying the associated tax by February 15, 2016.  No special form or application is required to request participation in the amnesty program.  The Department of Revenue Administration intends to place an online interest calculator on its website to facilitate amnesty filings.

House Bill 2 also includes a provision requiring mandatory penalties for a taxpayer owing taxes due on or before December 31, 2015 who does not participate in the amnesty program.  The mandatory penalty provision will apply on and after March 1, 2016.  The mandatory penalty provision prohibits “the department or any administrative tribunal or court with jurisdiction” from waiving, abating or reducing a penalty for any reason on taxes due before December 31, 2015.  The Department has taken the position that the mandatory penalty provision does not prohibit the reversal of an improperly assessed penalty on appeal.  The Department has published Technical Information Release 2015-006 describing the amnesty program.  This Release is available at http://revenue.nh.gov/tirs/technical-releases.htm.

House Bill 2 also revises RSA 21-J:3 by adding a provision requiring the Department to implement a Voluntary Disclosure Program.  Under the Disclosure Program, the Department will waive penalties for any taxpayer that self-discloses a failure to file required tax returns.  Several years ago, the Department began an informal disclosure program.  Since then, it has formalized the program.  Thus, the statutory revision will not change Department procedure, but provides authorization for the Department to provide a disclosure program.  Under the existing program, a self-disclosing non-filer agrees to file returns for the past three years in exchange for penalty relief and no requirement to file earlier returns.  Note that as of March 1, 2016, the mandatory penalty provisions in the amnesty program will prevent waiver of penalties for voluntary disclosures of taxes due on or before December 31, 2015.

As reported in my blog post on this page on June 30, 2015, the United States Department of Labor (“DOL”) issued proposed regulations calling for the revision of the salary test for the “white collar” exemptions to the Fair Labor Standards Act (“FLSA”).  The recommendation was to raise the minimum salary level for the executive, professional and administrative exemptions from $455 per week to almost double that.

Shortly after the proposed regulation was issued, the DOL opened a 60 day comment period allowing stakeholders to share thoughts on the proposed change and to provide input on how the current duties tests, to which no changes were proposed, were working.  The expectation was that a final rule would be issued in early 2016.

It looks like the more realistic time frame is closer to the end of 2016.  Just last week, Solicitor of Labor Patricia Smith announced that the volume of comments received and the complexity of the changes necessitated the delay.  She stated that as many as 270,000 individuals and business submitted comments and that this was more than three times the number of comments received in 2004, the last time substantive changes were made to the rules.  Although the number of comments and the need to review them seems to be a valid reason for delay, the comment about the complexity of the changes causes concern.  This may signal that the DOL is considering changes to the duties test, a far more complicated endeavor than simply changes the salary threshold.  That is, of course, speculation.  However, it appears that the business community is once again in “wait and see” mode on this issue.

Official White House Photo by Pete Souza
President Barack Obama (Official White House Photo by Pete Souza)

During a speech in Newark New Jersey, President Obama announced executive action aimed at “banning the box” in federal hiring.  This is the latest step in a national trend toward delaying inquiries into a job applicant’s criminal history until later in the hiring process.  The term “ban the box,” refers to the checkbox appearing on many employment applications asking job seekers to identify whether they have criminal history.  Advocates of “ban the box” measures believe that requiring prospective employees to report their criminal history at the initial application stage prevents many otherwise qualified people with criminal backgrounds from even getting the chance to land good jobs.

According to information provided by the White House, the President is ordering the Office of Personnel and Management (“OPM”) to “take action where it can by modifying its rules to delay inquiries into criminal history until later in the hiring process.”  It is unclear exactly what new policies and procedures will emerge from the President’s directive, and there is no specific timeline for when any changes in federal government hiring practices will take effect.

Thirteen states, including Massachusetts, already have “ban the box” laws.  The Massachusetts “ban the box” law, which went into effect in 2010, prohibits most employers from asking for criminal offender record information in an initial written job application.  Beyond that, Massachusetts law prohibits employers from asking—at any time—about: arrests not resulting conviction; first convictions for drunkenness, simple assault, speeding, minor traffic violations, and other minor offences; and most misdemeanor convictions that are more than five years old.

While the President praised Congress for considering bipartisan legislation that would “ban the box” in hiring by the federal government and federal contractors, his directive to OPM is aimed at making changes to federal hiring practices without the need to wait for Congressional action.  The President has gotten out in front of Congress on other employment-related issues.  In September, he issued an Executive Order mandating that federal contractors provide paid sick time to their employees, and last year, he issued an Executive Order increasing the minimum wage for employees of certain federal contractors.  Whether Congress will follow the President’s lead in making similar changes for all American workers remains to be seen.

Photo: FacebookBrand.com
Photo: FacebookBrand.com

At a recent employment law update forum for human resources professionals hosted by McLane Middleton, Professional Association, one of the most talked about topics was social media.  More specifically, what actions can be taken, if any, against employees who post about or discuss their employment negatively on social media, such as Facebook and Twitter?  With technology continuing to evolve, the law has often struggled to keep up.  However, a recent summary order by the Second Circuit Court of Appeals held that an employee’s use of Facebook’s ever-popular “like” button was concerted activity under the circumstances.  The opinion reminds employers  yet again to carefully review their  social media policies and to think twice before taking disciplinary measures against employees who post or just “like” unfavorable information about their employment on social media, even though it has the possibility to reach thousands, if not millions, of people – including customers.

In Three D, LLC d/b/a Triple Play Sports Bar and Grille v. National Labor Relations Board, No. 14-3284, 2015 WL 6161477, at *1 (2d Cir. Oct. 21, 2015), a Connecticut sports bar appealed a decision of the National Labor Relations Board (“NLRB”) finding that it had violated Section 8(a)(1) of the National Labor Relations Act (“NLRA” or “Act”) by discharging two of its employees for their Facebook activity and by maintaining an overbroad Internet/Blogging policy.  The employee conduct at issue was two-fold: (1) an employee named Spinella “liked” a status update of a former employee, LaFrance, which stated “Maybe someone should do the owners of Triple Play a favor and buy it from them.  They can’t even do the tax paperwork correctly!!! Now I OWE money … Wtf!!!!”; and (2) another employee’s, Sanzone’s, comment to the post stating “I owe too. Such an asshole.”

Section 7 of the NLRA guarantees that employees shall have the right to self-organization, to form, join, or assist labor organizations and to engage in other concerted activities for the purpose of mutual aid or protection.  29 U.S.C. § 157.  Section 8(a)(1) of the Act protects employees’ Section 7 rights by prohibiting an employer from interfering with, restraining, or coercing employees in the exercise of their Section 7 rights.  In its decision, the court noted that an employee’s Section 7 rights must be balanced against an employer’s interest in preventing disparagement of his or her products or services and protecting the reputation of his or her business.  Accordingly, an employee’s communications with the public may lose the protection of the Act if they are sufficiently disloyal or defamatory.

However,  in this case, the court agreed with the NLRB that Spinella and Sanzone’s “like” and “comment” were protected activity under the Act because the discussion concerned workplace complaints about tax liabilities, their employer’s tax withholding calculations, and LaFrance’s assertion that she was owed back wages.  The court also found that the activity was not so disloyal as to lose protection of the Act because the comments did not mention the employer’s products or services, much less disparage them.  The court rejected Triple Play’s argument that a previous decision, NLRB v. Starbucks Corp., 679 F.3d 70, 77 (2d Cir. 2012), suggested that an employee’s obscenities uttered in front of customers would not be protected in most circumstances.  Distinguishing the present case from Starbucks, the court noted that the Starbucks panel premised its decision on a finding that the NLRB had disregarded the entirely legitimate concern of an employer not to tolerate employee outbursts containing obscenities in the presence of customers.  In this case, however, the NLRB stated unequivocally that it had  considered the longstanding recognition that an employer has a legitimate interest in preventing the disparagement of its products or services and in protecting its reputation.  Additionally, the court considered that Spinella’s and Sanzone’s communications were made to seek and provide mutual support looking toward group action, and were not made to disparage Triple Play or undermine its reputation.

The court noted that almost all Facebook posts by employees have at least some potential to be viewed by customers and although some customers might have seen the Facebook discussion, it was not directed toward customers and did not reflect the employer’s brand.  The activity did not lose the protection of the NLRA simply because it contained obscenities that could have been viewed by customers online.  To hold otherwise, the court reasoned, could lead to potentially chilling effects on employees’ Section 7 rights to engage in concerted activities.

The court also affirmed the NLRB’s ruling that Triple Play’s Internet/Blogging policy, which did not explicitly restrict the exercise of Section 7 rights, was still overbroad because employees would reasonably interpret the policy as proscribing any discussions about their terms and conditions of employment deemed inappropriate by Triple Play.  The policy therefore violated Section 8(1)(1) of the NLRA since it would reasonably tend to chill employees in the exercise of their Section 7 rights.

Although the Second Circuit recently decided not to publish its decision, despite a petition to do so by the NLRB, the case is a good reminder that employers must be careful when it comes to disciplining and discharging employees for what seems to be detrimental speech online – whether it is a lengthy post, or just a “like” – it is still speech and may be protected as concerted activity by Section 7 of the NLRA.  This is another step in the NLRB’s increasingly expansive view of what constitutes protected activity by employees online.  Once again, employers should reevaluate their internet policies to determine if they  may  be reasonably interpreted as  violating Section 8(a)(1) of the NLRA.

When is the last time your company did a comprehensive review of its job descriptions?  Never mind; it doesn’t matter.  It’s time to do it again.

The job description is an incredibly valuable tool for an employer, and an astounding number of businesses either do not have them, do not update them,  or spend so little time on them that they are useless.  As I discussed in my June 30, 2015 blog post The Wait is Over: New FLSA Regulations Issued by DOL, the US Department of Labor issued new proposed regulations for determining whether employees meet the Executive, Administrative and Professional exemptions to the FLSA.  Although the proposed regulations address only the salary test, it is very possible that the DOL will also look at the duties tests in conjunction with this comprehensive review.  Even if the duties tests are not amended, now is an excellent time for employers to review their job descriptions and how they have classified their employees and make the appropriate changes.  Undoubtedly, almost every company will discover that at least some employees need to be reclassified and some job descriptions need to be changed.

Properly drafted and accurate job descriptions provide important evidence to justify an exempt classification in the event of a DOL audit.  In addition, job descriptions are critical documents in the following scenarios:

Performance Evaluation:  An accurate job description provides an applicant or new employee with a comprehensive description of his or her job responsibilities.  When it comes time for the annual performance evaluation or a performance discussion, it is important to have in writing the duties of the position against which performance can be measured.

ADA Accommodation Requests:  Most employers are obligated under the Americans with Disabilities Act (“ADA”) to provide reasonable accommodations to otherwise qualified disabled individuals.  An accommodation must be provided if it allows the employee to perform the essential functions of the job without causing an undue hardship to the company.  In order to determine whether that request can be fulfilled, the employer and employee must engage in an interactive process to discuss the needs of both parties.  Without a written document setting out the essential functions of the job, it is almost impossible for the employer to document how it undertook the interactive process and to justify the decision made. In the event of a discrimination claim, the job description could help provide important defenses.

Return to Work/Fitness for Duty: In order to evaluate whether an employee out on worker’s compensation leave can return on light duty or whether an employee previously on FMLA leave due to a serious health condition can return and safely perform his or her job, a medical examination is likely required.  It is critical that the examining physician be provided a comprehensive job description setting out the job requirements.

In order for a job description to be considered complete it should contain the following depending on the nature of the job:

  • Educational requirements including degrees or certifications
  • Skills and experience
  • Soft skills such as communication, empathy for others, ability to interview, need to work in a team environment or open concept space which might be noisy
  • Hours and days of work
  • Physical requirements including lifting, bending, twisting, standing
  • Amount of discretion and judgment required for the position
  • Responsibilities for managing others

The task of creating or even reviewing and updating job descriptions is arduous.  It requires the input of many:  upper management, direct supervisors, human resources and the employee who performs the job.  Perhaps even an occupational nurse should be consulted.  Although the process is time consuming and challenging, it is a critically important risk management tool to protect your business at many different levels and from many different potential challenges.

Photo: US Department of Labor - Tim Evanson (CC by SA 2.0)
Photo: US Department of Labor – Tim Evanson via Flickr (CC by SA 2.0)

Unless they have been run out of a cabin in the woods with no internet for the last five years, most businesses are starkly aware of the ongoing efforts by state and federal regulators to find and eliminate the misclassification of independent contractors. What started as a concern in the construction industry is now affecting all types of businesses, from health care to high tech.  Despite the well-publicized and well-organized battle against misclassification, companies and individuals continue to put themselves at risk by treating people who should more properly be employees as contractors.

If all of the notices and warnings issued by agencies ranging from the state department of labor to the IRS have not made an impression, a cursory read of the US Department of Labor’s recent guidance should bring focus to the issue.  On July 15, 2015, the Administrator of the US Department of Labor issued a document entitled The Application of the Fair Labor Standards Act’s “Suffer or Permit” Standard in the Identification of Employees Who Are Misclassified as Independent Contractors. The lengthy document focused on the so-called Economic Realties Test used to determine whether workers are truly independent.  The Administrator summarized the issue by saying, “ The analysis whether the factors are met must focus on whether the worker is economically dependent on the employer or truly in business for him or herself.”

What does that mean? It means your neighbor’s son isn’t an independent contractor when you hand him a paintbrush and ask him to paint your fence for $50.00.  It means your company’s retired former CFO is not a “consultant” when he fills in for your new CFO who is on maternity leave for the next six weeks.  It means your VP of Sales working out of his home in California is indeed an employee even though he would prefer that you give him a 1099 and not deduct taxes from W-2 wages and is even willing to sign an agreement to that effect.

Is the purpose of this post to tell businesses that they cannot utilize the services of independent contractors without being at grave risk?  Not at all.  However, the most important take away is that a very careful assessment should be done prior to entering into an independent contractor arrangement. The questions to be asked in conducting the analysis follow:

  1. Is the work being performed by the individual an integral part of the employer’s business? If so, the worker is likely not independent as he would more likely be economically dependent on the employer’s business.
  2. Does the worker’s managerial skill affect the worker’s opportunity for profit or loss? If not, it is more difficult to view the individual as being established in her own business.
  3. How does the worker’s relative investment compare to the employer’s investment? The relative investments of the parties are significant to a determination of whether the worker is engaged in an entrepreneurial endeavor.
  4. Does the work performed require special skill and initiative? A worker’s business skills, judgment, and initiative, not her technical skills, will aid in determining whether the worker is economically independent on the employer.
  5. Is the relationship between the worker and the employer permanent or indefinite? Permanency or indefiniteness in the worker’s relationship with the employer suggests that the worker is an employee.
  6. What is the nature and degree of the employer’s control? The worker must control meaningful aspects of the work performed such that it is possible to view the worker as a person conducting his own business.

The test above is one employed by the US DOL.  Each state will also have its own tests, often different ones, for determining whether an individual is an independent contractor for unemployment, worker’s compensation and state wage and hour purposes.  Many of those tests, including those used by the New Hampshire, Massachusetts and Maine Departments are even more stringent than the one described above.

Therefore, the first order of business for a company seeking to engage an independent contractor is to review all of the relevant statutes and tests, preferably with counsel. Once convinced that the criteria are met, do the following:

  • Have a written contract setting out mutual obligations and expectations;
  • Negotiate the fee for service on some basis other than hourly payment for time worked;
  • Require the contractor to carry his or her own worker’s compensation and liability insurance;
  • Determine whether the contractor is in an independent business, preferably established as an LLC or corporation offering similar services to others; and
  • Require the contractor to provide his or her own tools, equipment and assistants.

This issue is likely to remain challenging for businesses, and it is important that careful steps are taken to minimize risk by following the law and documenting all efforts to do so.  The US DOL Administrator’s guidance summed it up by saying that “most workers are employees under the FLSA’s broad definitions.”  Businesses should heed this warning; if you think your contractors are independent, think again and then think one more time.  At least five state and federal agencies are looking to prove you wrong.