In April, we wrote about the U.S. Department of Labor’s new regulations set to take effect on July 1, 2024.  These new regulations significantly increase the minimum salary required for employers to meet the Fair Labor Standards Act’s white-collar overtime exemptions.

A number of legal challenges were filed seeking to block the new regulations from taking effect.  Late on Friday, June 28, 2024, a federal court in Texas issued a narrow injunction blocking enforcement of these new requirements, but only against the State of Texas and only in Texas’s capacity as an employer.  Although the State of Texas sought a nationwide injunction (similar to what was issued in 2016 in response to significant increases to the minimum salary requirement issued by the Obama Administration’s DOL), the court elected to issue a narrow injunction that covered only the State of Texas as an employer.

This decision has no immediate impact on private employers or employers in Pennsylvania.  That means that the new minimum salary requirement of $844 per week for these FLSA overtime exemptions has taken effect for all employers other than the State of Texas, with another significant jump to $1,128 per week set to take effect on January 1, 2025.

Additional legal challenges remain pending, and the ultimate fate of the DOL’s regulations remains unknown.  However, for the time being, non-Texas employers must meet the new increased minimum salary requirements to treat employees as exempt from the FLSA’s overtime pay requirements under most of the white-collar exemptions.

On June 24, 2024, a federal judge in Texas issued a nationwide injunction to block parts of the Department of Labor’s recent regulations updating Davis-Bacon prevailing wage requirements on federally funded construction projects.  The preliminary injunction prevents the DOL from enforcing three provisions of the updated regulations while the litigation proceeds.

Although the preliminary injunction is only temporary, the court’s decision to issue the injunction is based on the court’s conclusion that the plaintiffs are likely to succeed in demonstrating that these challenged aspects of the regulations are invalid.

By way of background, the DOL’s “Updating the Davis-Bacon and Related Acts Regulations” were issued last August and went into effect in October.  The new regulations impose significant new obligations on federal contractors and subcontractors under Davis-Bacon, including expanded coverage for material delivery truck drivers, especially those employed by a material supplier that is also engaged in construction activities on the project.  Shortly after DOL issued the updates, trade groups in Texas sued the DOL seeking to invalidate three of the major provisions of the updated regulations.

The provisions of the regulations that have been enjoined by the court are as follows:

  • The provision limiting the “material supplier” exemption to entities whose sole obligation under a covered contract is supplying materials.  In other words, if a company is supplying materials for the contract, and also engaging in construction activities at the site of the work, that company’s material delivery drivers would be entitled to prevailing wage for the time spent on the site of work, even though drivers delivering materials to work sites where the company does not also engage in construction activities would be subject to the material supplier exemption and, therefore, not entitled to prevailing wage.
  • The provision expanding Davis-Bacon coverage to truck drivers employed by contractors or subcontractors whose work includes “onsite activities essential or incidental to offsite transportation” (i.e., loading and unloading) unless such time is de minimis.
  • The provision that Davis-Bacon requirements will be considered to be part of every covered contract simply by operation of law, regardless of whether the contracting agency includes such provisions in the contract.

The provisions of the updated regulations listed above are not enforceable by DOL at this time.  Because these provisions are not enforceable, the pre-August 2023 rules relating to coverage of truck drivers on Davis-Bacon projects and the material supplier exemption will govern until a final resolution on the merits of the case is reached.  Additionally, during this time, Davis-Bacon requirements will not apply to contracts where the Davis-Bacon requirements have been omitted from the agency contract.

For any questions about prevailing wage coverage for truck drivers or how this nationwide injunction impacts your company’s prevailing wage obligations under Davis-Bacon, contact Andrew Levy, Langdon Ramsburg, or Austin Wolfe.

 

The Supreme Court of the United States recently unanimously ruled against the National Labor Relations Board (“NLRB”) in Starbucks Corp. v. McKinney. The decision reversed the NLRB’s attempt to change the standard for evaluating the right to injunctive relief, and requires courts to analyze four factors before issuing a preliminary injunction to restrict an employer’s actions in pending cases involving labor disputes. The four-factor test is consistent with the test used by courts in the context of other types of requests for temporary injunctive relief.

Often, the NLRB will seek injunctive relief in highly contentious labor disputes and in many cases, the injunction seeks to reinstate a discharged employee.  Courts must weigh the following four factors before granting an NLRB request for injunctive relief under Section 10(j) of the National Labor Relations Act (NLRA): (1) whether the NLRB is likely to succeed on the merits of the underlying case; (2) whether the NLRB’s would be likely to suffer irreparable harm without an injunction; (3) the balance of interests between the NLRB and the employer or union; and (4) the public interest.

Some courts had been applying more lenient standards, including a rule favored by the NLRB that employed a two-factor test assessing whether there is “reasonable cause” that the employer violated the NLRA and whether an injunction would be “just and proper.” The Supreme Court case followed Starbucks’ appeal of a Sixth Circuit decision that utilized the two-factor test. Ultimately, the decision establishes a national, uniform standard for 10(j) injunction cases.

The NLRB argued that the Supreme Court should at least apply a more deferential approach to the “success on the merits” factor, but the majority comprised of eight justices rejected that approach, with only Justice Ketanji Brown Jackson favoring a more relaxed first factor. All nine justices supported the four-factor test.

The decision is the latest development in the ever-shifting landscape of legal standards in labor law. If you have questions about how this decision may impact your business, please contact a member of the McNees Labor & Employment Group.

EEO-1 reports were due on June 4, 2024.  If you have not yet filed your report, you should do so as soon as possible.  The EEOC has provided a late filing deadline of July 9, 2024 to file your 2023 reports.  After that date, the opportunity to file will be lost.  Failure to file your EEO-1 report can result in litigation with the federal government, as some unlucky employers have recently learned.  The EEOC issued a statement on May 29, 2024 reminding employees of the important role EEO-1 reports play in enforcing Title VII.  The EEOC also announced that it is suing 15 employers across the country for failing to file their 2021 and 2022 EEO-1 reports.

As a reminder, all employers with 100 or more employees must file an annual EEO-1 report.  In addition, all federal contractors who have 50 or more employees and a prime contract or first-tier subcontract with a value of $50,000 or more are required to file an EEO-1 report.  Institutions that serve as a depository of government funds in any amount or institutions that are financial institutions which are issuing and paying agents for US savings bonds and notes must also file an EEO-1 report.

Don’t get caught up in federal litigation.  Again, the late filing deadline for the EEO-1 report is July 9. Don’t miss it!

On May 1, 2024, the Pennsylvania Commonwealth Court vacated an arbitration award involving the Pennsylvania State System of Higher Education Officers Association (“Association”) and a former University police officer who was fired due to offensive social media posts. In 2021, several anonymous University students (known as the “Activists”) submitted screenshots of the Police Officer’s social media posts, which contained offensive comments regarding Muslims, the LGBTQ community, and racial minorities, to a website and Instagram account that is monitored by the University. Following this, the University received complaints from students and faculty members, as well as a petition signed by several thousand individuals demanding the University remove the Police Officer from his position. In response, the University launched an investigation and, ultimately, terminated the Police Officer for his social media posts.

 

Following his termination, the Association filed a grievance claiming that the termination was without just cause and in violation of the collective bargaining agreement. The matter proceeded before an arbitrator, who sustained the grievance and ordered that the Police Officer be reinstated with full back pay, as well as future benefits and seniority lost due to the termination. The arbitrator’s decision was based on the fact the University lacked a social media policy that could have provided notice to the Police Officer that his social media posts were inappropriate and could result in discipline.

 

The Pennsylvania State System of Higher Education appealed the arbitrator’s decision to the Pennsylvania Commonwealth Court, claiming that the arbitrator’s award violated well-defined public policy. The public policy defense is a limited exception to the typically broad deference granted to arbitration awards in Pennsylvania.  In a split decision, the panel majority sided with the State System of Higher Education, finding that the arbitrator’s award violated the well-defined and dominant public policy against discrimination, which is grounded in federal and state law. The Court rejected the arbitrator’s reasoning regarding the University’s lack of social media policy, as the Police Officer was neither cited for nor terminated based on a specific violation of the University Police Department’s disciplinary policy. The Court further reasoned that regardless of whether the University maintains a social media policy, there still exists a dominant and well-defined public policy prohibiting discrimination, which is amplified in the realm of law enforcement. The Court held that because the Police Officer’s social media posts were clearly discriminatory, and lack of discipline would suggest tolerance of discrimination, which is in violation of public policy, the arbitrator’s award must be vacated.

 

In the lone dissenting opinion, Judge Wallace agreed with the majority’s decision that the University’s lack of a social media policy should not have prevented the Police Officer’s termination; however, she noted that Court was quick to replace the arbitrator’s judgment with its own. Judge Wallace further noted that she believes the award should have been vacated and remanded back to the arbitrator so that the Police Officer could receive a proper punishment.

 

The Court’s decision is another good example of the public policy exception to arbitrable deference. What does this mean for employers? The idea that courts are scrutinizing arbitration awards more thoroughly may provide employers facing terrible arbitration awards with another bite at the apple if the employer can articulate “well-defined public policy” that may be implicated.  If you have any questions about this decision or how a public policy challenge may help you, please contact a member of the McNees Labor & Employment Group.

The McNees Labor & Employment team will host its 33rd Annual Labor and Employment Seminar next month. The seminar will cover a variety of topics  focused on pressing and novel issues in labor and employment law.

The Seminar will be presented virtually on May 16, 2004. The in-person event will be held on May 17, 2024 at Elizabethtown College.

Those wishing to attend shoulder click here to register. We hope to see you there!

On April 23, 2024, the Federal Trade Commission (“FTC”) issued a Final Rule (the “Rule”) prohibiting the use of non-compete restrictive covenants (with a limited exception) throughout the United States as an unfair method of competition under the FTC Act. The Rule is set to become effective 120 days after it is published in the Federal Register, but employers will face certain compliance obligations that will apply prior to the effective date.

The Rule prohibits employers from: (1) entering into; (2) attempting to enter into; (3) enforcing; (4) attempting to enforce; or (5) representing that a worker is subject to a non-compete clause. The Rule’s definition of “worker” is broad and expands beyond employees.

The Rule contains a limited exception that applies to non-competes with “senior executives” entered into prior to the effective date of the Rule. However, the Rule’s definition of “senior executive” is narrow and limited to individuals meeting a compensation threshold and holding a “policy making position,” which is further defined under the Rule.

Employers must provide “clear and conspicuous” written notice to each worker—past or present—who is currently subject to an existing non-compete clause. This notice must be provided prior to the effective date of the Rule and must comply with certain requirements in form and method of delivery. Employers should consult with legal counsel to ensure compliant notice is provided.

The Rule will face legal challenges. The U.S. Chamber of Commerce filed suit in an effort to block the implementation of the Rule. We anticipate the legal arguments against the Rule will attack the FTC’s authority to make a rule regulating unfair methods of competition, which has never occurred before and therefore is judicially untested. The Supreme Court’s recent hints and trend of challenging agency authority through newly bolstered legal doctrines such as the nondelegation doctrine and the major questions doctrine are likely on a collision course with the FTC’s Rule.

Despite these legal challenges, employers should consider taking action now to prepare for compliance with the Rule. We recommend taking the follow steps, in consultation with legal counsel, prior to the effective date: (1) determine who qualifies as a senior executive; (2) consider entering into compliant non-competes with those who qualify as senior executives prior to the effective date; (3) potentially replace non-compete agreements with other types of restrictive covenants not prohibited by the Rule; (4) determine the non-senior executive workers who are currently subject to non-compete clauses that will need to receive the required notice; and (5) consult with legal counsel on a strategy for whether, when and how to comply with the notice requirements.

 

On April 23, 2024, the U.S. Department of Labor issued its Final Rule sharply increasing the minimum salary requirements for the Fair Labor Standards Act’s white-collar overtime exemptions.  These changes, if they ultimately take effect, will affect the overtime exemption eligibility for millions of currently exempt employees nationwide.

Background and History

The FLSA’s white-collar exemptions apply to “bona fide” executive, administrative, and professional employees and generally include both a minimum salary requirement and a duties test.  To establish that an employee is properly classified as exempt from overtime pay requirements under one of these exemptions, the employer must be able to prove that the employee is paid on a salary basis in an amount at least equal to the minimum salary requirement and meets the primary duties test for one of these exemptions.

Over the last eight years, the minimum salary requirement for these exemptions has become a legal battleground.

In 2016, the Obama Administration DOL issued new regulations that would have more than doubled the minimum weekly salary requirement for most white-collar overtime exemptions from $455 ($23,660 annually) to $913 ($47,476 annually).  A federal judge issued a nationwide preliminary injunction blocking these changes from taking effect in late 2016, and the Trump Administration DOL ultimately abandoned these regulations.

In September 2019, the Trump Administration DOL issued new regulations that increased the minimum weekly salary requirement from $455 to $684 ($35,308 annually).  Those changes took effect in January 2020.

In August 2023, the Biden Administration DOL issued a new Notice of Proposed Rulemaking, proposing its own significant increases to the minimum salary requirements.  After a notice and comment period, during which the DOL received approximately 33,000 comments, the DOL issued its Final Rule on April 23, 2024.

The New Requirements

The DOL’s new Final Rule will raise the minimum salary threshold for these exemptions to $844 per week (i.e., $43,888 annually) effective July 1, 2024.  This represents a 23% increase over the current requirements.  Then, six months later, the minimum salary requirement will rise again, this time to $1,128 per week (i.e., $58,656 annually) effective January 1, 2025.  The Final Rule also contains automatic updates (i.e., increases) every three years based on earnings data, with the first automatic update scheduled for July 1, 2027.

The Final Rule also significantly increases the minimum salary requirement for the FLSA’s highly compensated employee exemption.  However, the Pennsylvania Minimum Wage Act has no equivalent exemption, so this change is of less relevance to Pennsylvania employers.

As occurred in 2016, we expect that legal challenges will soon be filed in court in response to these new regulations.  Whether those efforts will be successful in blocking the regulations from taking effect before their effective date (as what happened in 2016) is unknown.

In the meantime, employers should identify employees currently classified as exempt under one of the white-collar exemptions who are paid a salary amount below the new minimum and consider either increasing those employees’ salaries, identifying another exemption without a minimum salary requirement that may be applicable, or converting these employees to non-exempt status for overtime pay purposes.  However, with the expected legal challenges and uncertainty they bring, employers may want to delay any responsive action driven by these new regulations until as close to July 1 as possible.

Way back in 2018, we wrote about the Supreme Court of the United States’ decision in Janus, which held that compelling public sector employees to pay “fair share fees” to unions violates the First Amendment. As a refresher, a fair share fee is a fee that non-union members must pay to the union to cover the expenses incurred by the union in representing bargaining unit employees.  For the most part, the fair share fees were paid by employees who had opted out of becoming full, dues-paying union members.

Janus made clear that fair share fees were illegal even where expressly authorized by state law.  In a nutshell, SCOTUS held that fair share fees violate public sector employees’ right to free speech as protected by the First Amendment of the Constitution, because such fees forced employees to pay to support an organization that they did not wish to support.  The end result is that public sector employees can opt out of union membership and cannot be forced to pay any fees to the union.  However, public sector unions must still represent these “free riding” employees through collective bargaining and contract administration.

After Janus, Unions have worked hard to reduce the number of free riders, and to lock employees into voluntarily paying union dues.  One approach has been to obtain a voluntary, contractual agreement to make dues payments for a specific duration and to provide a complicated revocation process.  For example, a new public sector employee may be convinced to sign a dues deduction authorization, which contains an agreement to become a dues-paying union member and not withdraw union membership for the duration of the collective bargaining agreement.

When we first wrote about Janus, we indicated that there would be many questions to follow.  One of those questions was, is a contractual agreement to require union dues payment for a certain period of time enforceable?  Recently, in Barlow v. SEIU, Local 668, the Third Circuit Court of Appeals answered that question.  And the answer is a clear yes.

In Barlow v. SEIU, Local 668, some of the plaintiffs signed new union membership applications and voluntarily authorized dues deductions from their paychecks. The authorizations were valid from year to year and irrevocable, unless the plaintiff provided written notice of revocation within a specified annual window of at least ten days and not more than thirty days before the end of the yearly period.  There were other plaintiffs with different deduction authorizations in place, but you get the idea.

Essentially, the Third Circuit held that Janus did not create any new rights for employees who voluntarily elected to become union members.  Janus protected the rights of those public sector employees who had never elected to pay union dues or fees of any sort to the union.  Further, the Court noted that the First Amendment does not provide a right to reject or ignore contractual promises that would otherwise be enforced under state law. Thus, if a public sector employee promises to pay union dues for a certain period of time, Janus will not relieve those employees of that obligation.  Further, Janus will not serve as an “out” if the employee has not effectively revoked his or her authorization for dues deductions.

What are the lessons here? Public Sector employees who are asked to sign union dues deduction authorization contracts should be sure to read the fine print and understand exactly what they are signing.  In addition, public sector employers should consider provisions in collective bargaining agreements that govern dues deductions from employee paychecks, and also understand whether a collective bargaining agreement does, or does not, impact the rights of public sector employees to revoke authorization of dues deductions.

If you have questions about how this decision may impact your business, please contact a member of the McNees Labor & Employment Group

On February 21, 2024, the National Labor Relations Board (“NLRB”) issued a decision finding that Home Depot violated Section 8(a)(1) of the National Labor Relations Act (“Act”) by using Home Depot’s dress code to require an employee to remove the acronym “BLM,” an initialism for “Black Lives Matter,” from the Employee’s work uniform. The decision was the latest in a run of NLRB decisions that employers should consider when applying workplace policies.

The NLRB reversed an Administrative Law Judge (“ALJ”)’s holding that Home Depot did not violate the Act because “BLM” does not have an “objective, and sufficiently direct, relationship to terms and conditions of employment.” The Act protects employees engaging in concerted activities, which is activity taken by two or more employees for the purpose of mutual aid or protection.

For several months, employees at the Home Depot store allegedly raised concerns to management about racially discriminatory behavior in the workplace. The NLRB deemed these concerns protected concerted activity. Management informed the Employee that the BLM insignia on their orange apron violated the dress code after the Employee sent an email to management requesting a more open dialogue regarding racial issues. The dress code and apron policy stated that the work apron is “not an appropriate place to promote or display religious beliefs, causes or political messages unrelated to workplace matters.” The Employee refused to remove the insignia. After management conditioned the Employee’s return to work on removing the initials, the Employee resigned rather than accept the condition. The NLRB concluded these events amounted to a constructive discharge.

According to the NLRB, the Employee’s refusal to remove the BLM marking was a “logical outgrowth” of the employees’ protected concerted activities because the Employee had specifically linked the BLM marking to showing support for coworkers in connection with group complaints.

The NLRB did not find any special circumstances justifying Home Depot’s interference with the Employee’s right to display the BLM insignia. Such justifying circumstances might include employee safety, damage to machinery or products, exacerbation of employee dissention, or unreasonable interference with the employer’s public image.

Although there was no allegation or finding that the dress code policy limiting political messages was facially unlawful, the NLRB found that that Home Depot violated the Act “by applying its facially neutral dress code and apron policy to restrict Section 7 activity.”

The NLRB ordered Home Depot to, among other things, cease and desist from prohibiting employees from engaging in protected concerted activities, reinstate the employee with backpay for lost earnings and benefits as well as compensation for other direct or foreseeable pecuniary harms, and post notice of the decision at the store where the Employee had worked.

When enforcing company policies, employers should first consider whether, in light of the surrounding factual circumstances, such action might be construed as restricting employees’ engagement in concerted activities. If you have questions about how this decision might impact your business, please contact a member of the McNees Labor & Employment Group.