It appears that the U.S. Department of Labor intends to remain busy through the rest of the summer.  After releasing in June a Notice of Proposed Rulemaking seeking public comment on proposed changes to the Fair Labor Standards Act’s  “white collar” overtime exemption regulations, the DOL now has indicated that it will formally seek public input on the thorny issue of mobile device use by non-exempt employees outside their working hours.

The now seemingly ubiquitous use of mobile devices like smartphones and tablets has changed our culture and impacted our work in many ways.  Many employees, including both exempt and non-exempt employees, now have remote access to work-related e-mail, voice-mail, text messages, and telephone calls.  This 24/7 access creates the risk of unpaid overtime for employers if they have non-exempt employees performing work in the form of e-mail, telephone calls, and texting “off-the-clock” outside their normal working hours.  For FLSA purposes, employers are required to count such time for compensation purposes if they “knew or should have known” the non-exempt employees were engaged in such work-related activities, regardless of whether they actually asked the employees to perform such tasks.  Looking the other way can create real liability, and this issue may become the next wave of wage and hour class action lawsuits.

While courts and the DOL recognize that employers are not liable under the FLSA for “de minimis” uncompensated work time, there exists little guidance on what constitutes “de minimis” for these purposes.  Because the time spent to check and respond to e-mail on a mobile device can take as little as a few seconds, it may appear to be de minimis.  However, what if the employee is engaged in such activities five times an hour for hours on end?  The law is unclear on where the line is drawn between de minimis and compensable hours worked, and this lack of clarity is especially problematic when addressing the subject of mobile device use outside work hours by non-exempt employees.

(To make matters worse, Pennsylvania courts have not even recognized a de minimis exception under the Pennsylvania Minimum Wage Act.  Thus, liability for unpaid overtime may exist in Pennsylvania even if employees spend a very small amount of time accessing work-related materials outside of work hours.)

A DOL spokesperson confirmed that the DOL intends to issue a request for public information on this subject by the end of August, setting the stage for possible new regulations sometime in 2016.

In the meantime, the risk of liability is real for employers who have a sizable number of non-exempt employees with remote off-hours access to work-related e-mail, text messages, and telephone calls.  Such employers should consider the following:

  1. Determine whether and to what extent the operational benefits offered by giving off-hours access to work e-mail and telephone systems by non-exempt employees exceed the potential costs of class-based claims for unpaid overtime.  This practice is not risk-free, and employers should give such access to employees only where the benefits exceed the potential risks.  This analysis may result in reducing the number of non-exempt employees who have such access, which would help avoid the issue altogether.  Even if it is determined that certain non-exempt employees need remote access at certain times (such as when on-call), the employer may want to consider blocking remote access by these employees at all other times, to help reduce the potential risks.
  2. Have in place a policy for non-exempt employees that addresses working remotely and outside of normal work hours.  The policy should require employees to report all time spent working and provide a procedure to do so.  Also, to the best extent possible, the policy should confirm for employees when they may (and may not) access their devices or otherwise work remotely.  The employer then must enforce the policy.
  3. Continue to monitor legal developments in this area, which hopefully will provide greater clarity regarding what is and isn’t compensable time worked.

The U.S. Department of Labor Wage and Hour Division recently released new guidance for businesses in an attempt to provide clarity and notice to organizations that may have individuals performing services for them who are improperly classified as independent contractors. The unsurprising summary? The DOL believes that the vast majority of such individuals performing services for employers are “employees” under the Fair Labor Standards Act (FLSA), and the DOL will pursue employers who it believes have misclassified “employees” by labeling them as “contractors.”

Per the guidance, the key question to ask when determining whether somebody is an employee under the FLSA is whether the individual is truly in business for himself/herself (a contractor) or if he/she is dependent upon the employer for work (an employee). Merely calling someone a “contractor,” having the individual sign an independent contractor agreement, and/or giving the individual a Form 1099 does not make the individual an independent contractor. In order to actually determine whether someone is an independent contractor or an employee under the FLSA, courts use a multi-factor “economic reality” test. While different courts have applied different permutations of these factors, courts generally ask:

  • Are the services being performed an integral part of the employer’s business? If you are operating a restaurant, your cooks and wait staff are going to be employees. The person who comes and fixes the oven a few times a year? That person probably may be properly classified as an independent contractor. DOL warns that those teleworking at home or utilizing a flexible work schedule can still be “integral” to the employer’s business and thus employees.
  • Does the individual’s managerial skill affect his/her opportunity for profit or loss? Can the individual lose money by performing services for you? If so, there is a good chance they are a contractor. Here courts will consider whether the individual can make decisions that impact how much profit or loss he/she realizes.
  • How does the individual’s relative investment compare to the employer’s investment? If the individual has not made any type of investment in the work (such as providing his/her own tools or workspace), then the individual is likely an employee. But just because individuals provide their own tools does not automatically make them an independent contractor.
  • Do the services performed require special skill or initiative? Does the individual demonstrate managerial and business skills indicative of an independent contractor? Does the individual market his/her own services, determine when to order materials, and determine when to fulfill orders or requests? If yes, the individual more likely could be properly classified as an independent contractor.
  • Is the relationship between the individual and the employer permanent or indefinite? Is the individual performing services on one small project or does the individual perform services continuously and repeatedly for the same employer? Does the relationship continue indefinitely until one party decides to end it? If yes, the individual is likely an employee. Part-time workers and temporary workers are still employees if hiring such individuals is an operational characteristic intrinsic to a particular industry.
  • What is the nature and degree of the employer’s control? Does the employer control the hours of work, manner of dress or how the individual performs a particular job or service?

In considering these questions, each factor is analyzed in relation to one another and no single factor is determinative. The factors should not be looked at as a “checklist” and are to be considered in their totality.

Properly classified independent contractors are typically not entitled to minimum wage, overtime, benefits, unemployment compensation, or workers’ compensation. We expect that the Plaintiff’s Bar will attempt to use the DOL memo as a basis to file more lawsuits on behalf of individuals allegedly improperly classified as “contractors” in an effort to recover unpaid wages and benefits. Keep in mind that the DOL believes that almost all those performing services for a business are employees rather than contractors, so in the event that the DOL comes knocking, you already know how they will view the relationship.

What can you do to ensure your independent contractors are truly “contractors” in the eyes of the law? We recommend that you audit your practices by considering the relationship you have with all contractors and reviewing the duties of those classified as such. Attorneys in the McNees Labor & Employment Group regularly conduct audits to make sure that such individuals are properly classified and that employers are complying with the requirements of the FLSA and applicable state wage and hour laws.

One year ago, the U.S. Supreme Court ruled in the case of Burwell v. Hobby Lobby Stores, Inc. et al, that for-profit closely held corporations must be permitted to opt out of the Affordable Care Act’s contraception mandate on religious grounds. As discussed in our July 7, 2014 blog post, the Hobby Lobby ruling left many key questions unanswered. In final regulations published on July 14, 2015, the regulating agencies addressed many of those questions.

Which “closely held corporations” may opt out of the ACA’s contraception mandate? A closely held corporation which properly adopts a resolution under applicable state corporation laws establishing that it objects to covering some or all forms of contraception on account of the owner’s sincerely held religious beliefs may opt out of the contraception mandate. The new final regulations define “closely held corporation” to mean an entity that:

  1. Is not a nonprofit entity;
  2. Has no publicly traded ownership interests; and
  3. Has more than 50% of the value of its ownership interest owned directly or indirectly by 5 or fewer individuals.

Such corporations must also either “self-certify” their status in a form developed by the Department of Labor or via a notice to the Department of Health and Human Services.

Do any ownership attribution rules apply? Yes. Ownership interests owned by a corporation, partnership, estate or trust are considered owned proportionately by the entity’s shareholders, partners or beneficiaries. An individual is considered to own the ownership interests owned, directly or indirectly, by or for his or her family. Family includes only brothers and sisters (including half-brothers and half-sisters), a spouse, ancestors and lineal descendants. If a person holds an option to purchase ownership interests, he or she is considered to be the owner of those interests.

What if a corporation is not certain whether it qualifies?  In these instances, a corporation may send a letter describing its corporate structure to the Department of Health and Human Services (“HHS”) seeking a determination of eligibility.  Interestingly, the regulations state that if the corporation does not receive a response from HHS within 60 calendar days, it will be considered to be eligible for the opt-out for as long as the corporate structure is maintained.

How do closely held corporations opt out of the mandate? A corporation offering self-insured health coverage may provide either a copy of its self-certification to its plan’s third party administrators or a notice to HHS advising that it is an eligible closely held corporation and of its religious objection to coverage of some or all of the mandated contraceptive services. Corporations offering insured health benefits may provide their self-certification to their insurers or to HHS.

Does opting out prevent covered employees from obtaining contraception benefits? No. The regulations place the burden on insurance companies and third-party administrators to ensure that all covered employees have access to free contraceptive coverage, albeit not through the objecting corporation’s health plan. Third-party administrators (“TPAs”) that administer self-insured health plans for closely held corporations that opt out are expected to provide contraception benefits to plan participants without imposing any charge to the objecting corporation. TPAs may do this by reimbursing participants for contraceptive services directly or through an arrangement with another party. Similarly, insurers that provide group health insurance to closely held corporations that opt out bear the sole responsibility of providing contraception benefits to plan participants independent of the objecting corporation’s health plan. The regulations indicate that costs associated with providing this coverage may be reimbursed through an adjustment to the federally-facilitated Exchange user fee.

If you have any questions regarding the new regulations or any aspect of the ACA, please contact any member of our Labor and Employment Law Practice Group.

On July 1, 2015, Governor Tom Wolf signed into law Act 15 (House Bill 1276), which amends Pennsylvania’s Child Protective Services Law (CPSL) to clarify the requirements of employers and volunteer-based organizations to provide for criminal background checks and child abuse clearances of their employees and volunteers who work directly with children.  Act 15 provides much-needed, and desired, clarification to a well-intentioned statute that had a very broad effect.

Prior to the passage of Act 15, the CPSL, among other things, required employees and volunteers who are responsible for a child’s welfare or “having direct contact with children” to complete three background checks:  (1) a state criminal history check; (2) a state child abuse clearance; and, (3) an FBI criminal background check.  For purposes of the CPSL, a “child” is an individual under age 18.  Individuals “having direct contact with children” were defined broadly and included those with “the care, supervision, guidance or control of children or routine interaction with children.”  The ambiguity of this definition, as well as other provisions of the statute, generated confusion for employers and volunteer-based organizations, which struggled to identify which employees and volunteers were be subject to the background check requirements.  There was also significant concern about the cost of complying with the requirements for employees and, especially, volunteers.

While the CPSL background check requirements were part of many measures passed in 2013 to help protect children and were well-intentioned, the ambiguity of the statute caused confusion and raised significant concerns for employers and volunteer-dependent organizations.  Recent amendments to the CPSL included numerous revisions that were designed to provide much-needed clarification and address many of the concerns raised by employers and volunteer-based organizations as well as entities that often, but not regularly, use volunteers in day-to-day operations such as school districts.  Most notably for employers, the amendments have clarified and narrowed the pool of employees and volunteers that will be considered to have “direct contact with children.”  As amended, the CPSL now clarifies that “routine interaction” with children is “regular and repeated contact that is integral to a person’s employment or volunteer responsibilities.”  The amendments also streamline definitions so the statute is written in furtherance of the intent of the bill.  Additionally, the amendments extended the obligation to renew the background checks from every three years to every five years.

Also significant is a welcome exemption for colleges and universities.  These institutions of higher education are now exempted from obtaining clearances for employees whose contact with children involves matriculated students who are enrolled with the institution or prospective students visiting the institution.  Additional exemptions include but are not limited to administrative employees who have no direct contact with children, minor employees between the ages of 14 through 17 with other qualifying conditions, as well as employees or volunteers with a J-1 visa and certain qualifying conditions.

In addition to narrowing the breadth of the background check requirements, Act 15 also includes provisions easing the financial burden related to these requirements.  Specifically, the amendments codified a waiver of certain background check fees announced by Governor Wolf in mid-June 2015.  Effective July 25, 2015, the fees for the state police criminal history and child abuse clearance checks will be waived for volunteers and reduced for all other applicants from $10 to $8 each.  Those needing background checks for employment-related reasons remain responsible for the cost. The fee waiver does not apply to the FBI background check, which is the most expensive of the three required checks.

While the requirement to complete these checks for new employees “having direct contact with children” has been in effect since January 1, 2015, the deadline for compliance with respect to new volunteer background checks is extended under these recent amendments to August 25, 2015.  Employees who were existing employees as of January 1, 2015, but who had not completed the required background checks within the past five years, must complete the checks by December 31, 2015.

Although Act 15 provides welcome clarification of who must comply with background check requirements, those employers, volunteer-based organizations,  and school districts affected by the law must take prompt and significant steps in order to meet their obligations under the law.  If you have questions about your obligations under the Child Protective Services Act and the effect of these recent amendments on your obligations, please contact any member of our Labor & Employment Practice Group or Kathleen Duffy Bruder in our Government Relations Group.

In late June, the Occupational Safety & Health Administration (OSHA) announced a major initiative that will intensify and expand the agency’s enforcement resources in the healthcare industry, with a focus on several common causes of workplace injuries in hospitals and nursing homes including workplace injuries related to patient or resident lifting, as well as workplace violence, bloodborne pathogens, tuberculosis, and slip and falls.  OSHA has cited to statistics in support of its new initiative. In Calendar Year 2013, the rate of workplace injury and illness in inpatient healthcare settings was nearly twice the rate for private industry workers, and approximately half of the reported injuries in healthcare were attributable to “overexertion-related incidents” which led to musculoskeletal disorders, or “MSDs,” from patient handling.

As part of its new focus, patient handling procedures previously issued by OSHA as guidance will now be enforced as if a regulation.  In addition, OSHA staff have been advised that all hospital and nursing home facility inspections (whether prompted by a complaint, referral, or severe injury report) are now to include review of potential hazards involving MSD-related to patient handling, bloodborne pathogens, workplace violence, tuberculosis, and slips, trips and falls.  These more focused, intensive reviews will include an initial determination regarding the extent of handling hazards and the manner in which they are (or are not) addressed.  It is expected that OSHA compliance officers will evaluate the healthcare employer’s safety program management, program implementation, and employee training. OSHA has provided specific guidance to compliance/investigating officers who will be conducting these evaluations.

Once the employer’s program has been evaluated, compliance officers will make a decision as to whether the ergonomic portion of the inspection will continue.  If there are issues that are not addressed or require further attention, the employer may receive an Ergonomic Hazard Alert Letter identifying deficiencies. OSHA will follow up with any employer receiving an Ergonomic Hazard Alert Letter to determine whether the deficiencies have been addressed and may conduct follow-up inspections as necessary.

The bottom line is that now, and for the foreseeable future, healthcare employers can expect to face more frequent, more focused, and more intensive safety compliance reviews and inspections as a result of this new OSHA initiative. The proactive employer will be in the best position to successfully navigate through an OSHA visit and reduce potential liabilities.  The unprepared healthcare employer will run the risk of significant and costly citations.

Contact any of the attorneys in Labor & Employment Practice Group if you have a question about this post or need assistance with OSHA compliance.

In another unemployment compensation case, the Commonwealth Court held that a substantial and unilateral change to a claimant’s pay and performance goals was enough to meet the burden of a necessitous and compelling cause to voluntarily quit employment.

Claimant was a vice president of sales for an insurance company for approximately 17 months. Shortly before the end of his employment, he was reassigned to a new supervisor. Claimant had experienced issues with his former supervisor, and filed a formal complaint with the human resources department subsequent to this new assignment. After an investigation, Claimant’s employer did not take any disciplinary action against his old supervisor and dismissed his complaints. Shortly thereafter, Claimant’s new supervisor changed the way Claimant’s bonuses would be calculated, resulting in a significant decrease in his annual pay, and further set forth what Claimant felt were “unachievable expectations.” Claimant met with both his former and current supervisors, but was told that there would be no changes to the new expectations. Claimant considered the changes to be retaliation for the complaint against his former supervisor, quit his job, and filed for unemployment compensation benefits.

In upholding the Unemployment Compensation Review Board’s decision and affirming Claimant’s eligibility to receive UC benefits, the Court opined that “necessitous and compelling cause” to quit one’s job may exist where a unilateral and unreasonable change has been made by an employer, and further, that a substantial reduction in pay may amount to such cause. The UCBR concluded, and the Court agreed, that the Claimant had established such cause for quitting his job, citing to the above events which all occurred within a four week period. The Court further agreed that it was not unreasonable for the Claimant to believe that these “unachievable expectations” were in retaliation for filing a formal complaint with his employer.

While the Court is careful to point out that “mere dissatisfaction with reasonable modifications” is not enough to establish a necessitous and compelling cause to quit one’s job, employers should be aware of making unilateral changes which may be viewed as unattainable or unachievable.

In a case of first impression, the Pennsylvania Commonwealth Court recently issued an opinion examining the standards applicable to a claimant’s behavior when the claimant is receiving workers’ compensation benefits and has filed for unemployment compensation.

By way of background, the claimant suffered a brain injury at work and received workers’ compensation benefits. Several months after her injury, her employer sent her for an IME. Although Claimant’s treating doctors had not released her to return to work, the IME physician did so with no restrictions. Upon receipt of the IME report, her employer offered her several jobs; however, her workers’ compensation attorney indicated that she was disputing the report. The employer subsequently filed a petition to terminate, modify or suspend her workers’ compensation benefits. During a deposition, Claimant stated that she believed she could return to a light duty job. Several weeks before her workers’ compensation claim ultimately settled, Claimant was terminated. She subsequently filed for unemployment compensation benefits, but was found ineligible due to willful misconduct for failing to make her employer aware she was able to return to work and failing to respond to the employer’s job offer. Claimant appealed, arguing that she did not fail to respond to a job offer, as the Employer never made one, and further, that her conduct did not amount to willful misconduct. In reversing the decision of the Unemployment Compensation Review Board, the Court applied Workers’ Compensation law and not UC law to analyze the Claimant’s behavior.

On the first issue, the Court found that no job offer had been made after Claimant’s deposition, wherein she indicated she could return to a light duty position. While the UCBR argued that Claimant failed to meet a reasonable expectation when she did not return to work immediately after her deposition, the Court disagreed for several reasons, opining that the IME doctor’s release was not relevant, that Claimant did in fact respond to earlier offers of employment, and that during said offers there was no indication about the nature (i.e., light duty or not) of the positions available.

The Court further found that the employer did not comply with its duty under the Workers’ Compensation Act when it failed to contact Claimant regarding light duty work after her deposition (wherein she opined that she was able to return to light duty work) and that Claimant had no duty to report to work immediately after the deposition. An employer must show that an employee violated some policy, work rule or reasonable expectation in order to establish willful misconduct. The Court opined that the Workers’ Compensation Act “governs the reasonable expectations of an employer with respect to an employee receiving workers’ compensation.” While the Act requires an employee receiving benefits to report wages within a specified time, it does not require an employee to report when he or she has recovered from the work injury. Rather, the Act imposes a duty on the employer to seek out such information. In this case, the Court found that there was no evidence that the employer sought out this information or gave Claimant the requisite amount of time to respond.

The Court further noted that if work is available, in line with any restrictions on a claimant, it must be offered. It is the employer’s burden to show that such work is actually available once it has information that a claimant can work in some capacity. Again, the Court found that there was no evidence that the employer ever offered light duty work or requested that Claimant return to work at all, and further found there was no reasonable expectation for Claimant to return to work or provide information to the employer which the employer already had. As such, the Court reversed the decision of the UCBR.

In a strongly worded dissent, the minority opined that the Court had “dramatically chang[ed] well-established precedent and impos[ed] upon employers newly created requirements.” The minority further opined that as the Claimant was seeking UC benefits, UC law controlled, and that a claimant who fails to act in a reasonable manner (i.e., to report to work once released to do so or at least communicate a reason for not returning) has engaged in willful misconduct.

Employers should carefully review the Court’s ruling and ensure that they understand the interplay between the Workers’ Compensation Act and the Unemployment Compensation Act.  Employers should further ensure that they are complying with the standards and requirements set forth under the Workers’ Compensation Act.

At long last, on Tuesday, June 30, the Department of Labor released its Notice of Proposed Rulemaking seeking public comment on proposed changes to the Fair Labor Standards Act’s  “white collar” overtime exemption regulations. The DOL’s proposal contained a few expected changes, along with a few surprises.

The Primary Proposed Change – Huge Increase in the Minimum Salary Requirement 

Most significantly, the DOL proposes to more than double the minimum salary required for the FLSA’s white-collar exemptions from the current $455 to an amount equal to the 40th percentile of weekly earnings for all full-time salaried workers.  The DOL projects that this minimum salary amount would be approximately $970 per week in 2016, when it expects to issue its final rule.  The DOL also proposes to automatically update the minimum salary requirement each year based on the 40th percentile calculation or inflation, such that the minimum salary requirement would change (and likely increase) every year.

We expected the DOL to propose a significant increase to the minimum salary requirement, and the DOL did not disappoint.  The DOL estimates that with the proposed increase in the minimum salary requirement, the number of salaried employees who qualify for the FLSA’s white-collar overtime exemptions would decrease by more than 50%.  Employees who earn less than $50,440 annually and currently are classified as exempt would become non-exempt on the effective date of the final regulations, regardless of their job duties.

What About Changes to the Duties Tests?

The minimum salary requirement is only one half of the FLSA’s white-collar overtime exemption tests.  To establish that an employee qualifies for the one of these exemptions, an employer typically must prove both that the employee meets the minimum salary requirement and that the employee’s job duties qualify for one of the exemption’s duties test.

Interestingly, the DOL did not make any specific proposals to change any of the exemptions’ duties tests.  Instead, the DOL sought comments on specific issues related to the duties tests including:

  1. What, if any, changes should be made to the duties tests?
  2. Should employees be required to spend a minimum amount of time performing work that is their primary duty in order to qualify for exemption?  If so, what should that minimum amount be?
  3. Should the Department look to the State of California’s law (requiring that 50% of an employee’s time be spent exclusively on work that is the employee’s primary duty) as a model?  Is some other threshold that is less than 50% of an employee’s time worked a better indicator of the realities of the workplace today?
  4. Does the single standard duties test for each exemption category appropriately distinguish between exempt and nonexempt employees?  Should the Department reconsider our decision to eliminate the long/short duties tests structure?
  5. Is the concurrent duties regulation for executive employees (allowing the performance of both exempt and nonexempt duties concurrently) working appropriately or does it need to be modified to avoid sweeping nonexempt employees into the exemption?  Alternatively, should there be a limitation on the amount of nonexempt work?  To what extent are exempt lower-level executive employees performing nonexempt work?

Some observers fear that with this unanticipated approach, the DOL will place sweeping changes to the duties tests in the final regulations, without ever having these changes subject to public notice and comment prior to their implementation. Should it do so, the DOL almost certainly will trigger legal challenges to the enforceability of such changes in the final regulations.

What Now?

It is important to remember that these are only proposed regulations.  The proposed regulations have not changed the existing law or regulations, and employers are not required to take any action now in response to proposed regulations.  Final regulations likely would not take effect until late 2015 or 2016.

Employers and other members of the public will be able to submit comments to the DOL regarding the proposed regulations for a 60-day period after the proposals are formally published in the Federal Register.

We do not know what the final regulations will contain.  However, the proposed regulations confirm that the DOL intends to make sweeping changes to the current regulatory requirements, limit the applicability of the FLSA white-collar exemptions, and make millions of currently exempt workers eligible for overtime compensation.  Employers should begin considering the impact that the proposed changes would have on the status of their exempt workforce and determine whether affected exempt employees may be covered by another FLSA exemption.  If not covered by another exemption, now is the time to start thinking about changes that may be required if/when the proposed changes become law.

Our very own Employee Benefits Attorney Sarah K. Ivy spoke to PennLive about the United States Supreme Court’s recent ruling making same-sex marriage legal nationwide. While many questions still exist about the meaning of the ruling, Sarah answered a number of questions about the case, including implications for employee benefit plans. Check out the article here!

If you have questions about the same-sex marriage decision or the recent Affordable Care Act decision, please contact Sarah or any member of our Labor & Employment Practice Group.