Category: Employment and Labor Law

Reopening Your Business Part II

Posted on by DAR Law

Practical Considerations For The Post-Shutdown Workplace

Now that your business is reopened, what happens if an employee contracts COVID-19? Are you required to grant an employee’s request for leave related to COVID-19? Are you still required to accommodate requests to telework?  In Reopening Your Business – Part II, we focus on preparing employers to properly respond to these novel issues, and avoid liability.

Investigating Whether COVID-19 Is Work-Related

An employee contracting COVID-19 does not necessarily mean there has been an OSHA violation. Understanding that COVID-19 can be acquired both inside and outside of the workplace, on May 26, 2020, OSHA issued enforcement guidance requiring employers with more than 10 employees (certain low-risk industries are exempted) to reasonably investigate whether COVID-19 infections are “work-related.”  A condition is “work-related” if an event or exposure in the work environment caused or contributed to the condition or significantly aggravated a pre-existing condition.

In accordance with OSHA’s recording requirements, a confirmed COVID-19 case that is work-related and results in death, days away from work, restricted work or job transfer, medical treatment beyond first aid or loss of consciousness, must be recorded by the employer in its OSHA Form 300 log.  Importantly, employers are also required to annually post a summary of the log. Employers with 250 or more employees and certain smaller employers in designated hazardous industries are further required to electronically file their summaries with OSHA each year. Failure to comply with these recording requirements may result in OSHA citations and financial penalties.

In order to properly complete the Form 300 log, employers are now required to conduct a reasonable investigation to determine whether a confirmed COVID-19 case is “work-related.”  This should include asking the employee his or her belief as to how the virus was contracted, discussing work and out-of-work activities that may have led to the illness (being cognizant of privacy concerns), and reviewing the work environment for potential exposures to the virus, such as evaluating whether appropriate mitigation measures were in place, and determining if other individuals also contracted COVID-19. Factors weighing in favor of or against a finding of “work-relatedness,” when there is no other alternative explanation, include, but are not limited to:

  • Infection develops among employees working closely together;
  • Contraction of the virus occurs shortly after prolonged exposure to customer/employee with a confirmed case;
  • Job duties require frequent close exposure to public in an area with on-going community transmission;
  • Employee associates with someone outside of work with COVID-19 during the infectious period; and
  • Evidence of causation provided by a medical provider or health authority, if any.

The final determination of work-relatedness must be based on information reasonably available to the employer at the time of the decision; however, if additional, relevant information is subsequently discovered, the determination must be supplemented. If after a reasonable and good faith investigation the employer cannot determine whether it is more likely than not that the exposure was work-related, the employer is not required to record the COVID-19 case in the Form 300 log. However, the employer must document and maintain records of the investigation to support its determination.

Granting Leave Related to COVID-19

When employees know they have a job to return to after taking leave for COVID-related reasons, they are more likely to report potential exposure and remove themselves from the workplace. OSHA’s new “Guidelines for Opening Up America” (June 2020) recognize this, advising employers to “evaluate existing policies and, if needed, consider new ones that facilitate appropriate use of…sick or other types of leave, and other options that help minimize worker’s exposure risks.”

Several state and federal leave laws support this goal. The FFCRA provides for paid leave to employees experiencing specific, identifiable COVID-19 issues.  If an employee’s request for leave under the FFCRA does not meet its specific requirements, or if such leave has been exhausted, employers may still be obligated to provide other leave related to COVID-19.

For instance, an employer with 50 or more employees would also need to consider whether an employee’s COVID-related leave request would qualify for leave under Michigan’s Paid Medical Leave Act or unpaid leave under FMLA based on the employee’s own serious medical condition or need to care for a family member.  An employer with 15 or more employees must also consider whether the employee would be entitled to unpaid leave as a reasonable accommodation for a disability of the employee under the ADA, absent undue hardship or direct threat. Finally, employers must consider whether they have leave policies beyond those required by law, such as a discretionary unpaid leave policy, that is applicable to the employee’s COVID-19-related situation, and if so, must apply such policies consistently to all eligible employees.

Teleworking Allows for Workplace Flexibility

Teleworking has also been shown to be an effective method of combating the spread of COVID-19 in the workplace. For this reason, in each Executive Order (EO) issued by Governor Whitmer regarding temporary workplace restrictions, employers have been ordered to use teleworking when in-person work is not necessary.  Thus, employers remain obligated to provide telework for their employees post-shutdown.

The OSHA Opening Guidelines, likewise, provide that telework should be considered at all phases of business recovery, and encourage employers to “consider additional policies that facilitate telework…to help minimize worker’s exposure risks.” Consistent with this direction, post-shutdown, employers will need to assess whether “in-person” work should remain an essential function of a particular job position: If an employee performed effectively while teleworking during the shutdown, why would telework no longer be offered post-shutdown?  If “in-person” work is no longer an essential function of a job position, employers may also need to consider telework as a reasonable accommodation for a disability. With that in mind, employers who utilize teleworking should have a teleworking policy that sets forth clear criteria regarding tracking of hours and supervisor monitoring to ensure performance standards are being met.

Reopening your business requires compliance with countless laws, administrative regulations, and state executive orders. Employers can mitigate their risk of potential penalties and liability by working with legal counsel to ensure compliance.

Janis L. Adams and Lindsay J. Raymond are experienced employment law attorneys and business owners. You can reach them at jadams@darlawyers.com and lraymond@darlawyers.com.

This article was featured in the July 2020 issue of the Traverse City Business News

Reopening Your Business

Posted on by DAR Law

Implementing Required COVID-19 Mitigation Measures

The northern Michigan regions are the first regions in Michigan to be granted broader permission to reopen businesses due to their low numbers of COVID-19 cases and deaths, as compared with other Michigan regions.

This welcome news for business owners and employees comes amidst several grim statistics: The U.S. recently surpassed 100,000 deaths; Michigan has 54,881 confirmed cases; and 5,240 Michiganders have lost their lives to COVID-19. Against this backdrop, employees returning to work may feel anxious and concerned about exposure to the virus in the workplace. By implementing required mitigation measures and establishing good channels of communication with their employees on issues of safety, employers will better position their business for a successful reopening.

Required Mitigation Measures

On May 7, 2020, Governor Whitmer released “MI Safe Start: A Plan to Re-Engage Michigan’s Economy.” The governor’s plan establishes a six-phase continuum of restrictions and mitigation measures that relax incrementally over time as COVID-19 infections decrease and treatments develop.

The final post-pandemic phase permits all businesses to open only after there is a “high uptake of an effective therapy or vaccine” while continuing to require certain safety guidance and procedures and social distancing rules. As a vaccine to COVID-19 may not be available until mid-2021 or later, employers cannot simply wait it out. Thus, businesses should move quickly and proactively with all mitigation measures as soon as they are permitted to reopen.

The Grand Traverse region and Upper Peninsula have entered phase 4 of the plan due to their declining COVID-19 numbers while the rest of Michigan remains in phase 3. Executive Order 2020-96 (EO-96) extended the general shelter-in-place order through May 28, 2020, but increased limited exceptions for certain critical infrastructure workers, workers performing minimum basic operations, and workers performing a subset of resumed activities.

Under Executive Order 2020-97 (EO-97), all businesses utilizing permitted in-person work under EO-96 are required to take specific measures to protect their employees and mitigate the spread of COVID-19. It is expected that any similar executive orders in the near future will require at least these same mitigation measures, which include but are not limited to:

  • Developing and maintaining an OSHA-compliant COVID-19 preparedness and response plan by June 1, 2020, or within two weeks of resuming in-person activities, whichever is later.
  • Designating supervisor(s) to implement, monitor, and report COVID-19 control strategies.
  • Providing COVID-19 training to employees.
  • Conducting a daily self-screening protocol for all employees entering the workplace, including at a minimum a questionnaire covering symptoms and suspected exposure.
  • Enforcing visible six-foot social distancing and requiring masks (provided by the employer) when such distance cannot be consistently maintained.
  • Increasing facility cleaning and disinfecting standards.
  • Making cleaning supplies available to employees upon entry and providing time to frequently wash hands or use hand sanitizer.
  • Implementing a plan for notification and action subsequent to identification of a confirmed case of COVID-19 in the workplace.
  • Promoting remote work to the fullest extent possible.

Under EO-97, an employer’s failure to comply with these mitigation measures constitutes a violation of Michigan’s OSHA under MCL 408.1011, subjecting the business to possible penalties. If found to be willful, the violation could constitute a misdemeanor under EO-96, potentially affecting a business’s continued operations. Failing to comply with mitigation measures could also result in workers’ compensation claims if employees become sick while at work and a decrease in employee productivity and morale.

Creative Mitigation Strategies

As each business is unique, mitigation strategies that work in one work environment will not necessarily work in another work environment. In deciding what additional mitigation measures may be necessary to achieve your primary goals of maintaining six-foot social distancing, ensuring effective cleaning and disinfecting, and conducting daily employee health screenings – all of which are designed to limit virus transmission – employers should consider:

  • Adopting a gradual plan for returning employees to work.
  • Implementing staggered employee work schedules for days and/or times worked.
  • Reorganizing cubicles and other work areas to accommodate six-foot social distancing.
  • Developing clear, visible six-foot markings on the floor and signage for social distancing.
  • For businesses with patrons, posting an entering office sign regarding required social distancing and/or wearing of masks.
  • Closing common areas to employee use, such as break rooms.
  • Implementing staggering of employee break times.
  • Replacing community-use glasses, coffee mugs, plates and silverware with disposable paper/plastic products.
  • Turning off water fountains.
  • Identifying high-touch surfaces with color-coded stickers.
  • Replacing door knobs with hook openers or removing doors.
  • Replacing trash receptacles requiring hand touch with no-touch foot pedals.
  • Planning for anticipated supply shortages of high demand items: no-touch thermometers, soap, disinfectant, paper towels, hand sanitizer, face masks, gloves, and other PPE.
  • Using stickers, hand-stamping or other visible markings to confirm employees’ completion of daily health screenings and hand-washing/sanitizing upon entry into work environment.

An employer’s social distancing, cleaning and disinfecting, and daily health screening policies will only be effective if they are uniformly applied to everyone in the work environment, including the owners and management, and are transparent to all employees. By taking a “we are all in this together” approach to safety in the workplace, employers can help alleviate their employees’ trepidation about possible exposure in the workplace. Through this shared confidence in the measures taken to ensure the safety of all during these difficult times, employers can better position their business for success upon reopening. We owe that to those no longer with us today.

*NOTE: We will have a second article appearing in the July edition of TCBN focusing on the issues faced by businesses during their first month of reopening. 

Janis L. Adams is an experienced employment law attorney and business owner. You can reach her at jadams@darlawyers.com.

This article was featured in the June 2020 issue of the Traverse City Business News

Employment Law Countdown

Posted on by DAR Law

Legal developments to consider ahead of 2020

The holiday season is a time to reflect on the past and plan for the future. However, making resolutions for your business can be overwhelming, especially with the ever-evolv- ing legal landscape of employment law. To make the process a bit easier, below is a count- down of a few developments to keep in mind as 2020 approaches.

1. Minimum Wage Increase

Effective Jan. 1, 2020, Michigan’s minimum wage will increase to $9.65/hour (up from the current $9.45/hour). Under Michigan’s Improved Workforce Opportunity Wage Act, incremental increases will take effect each year, reaching $12.05/hour by January 2030.

2. New DOT Drug and Alcohol Testing Database

Effective Jan. 6, 2020, the new Department of Transportation's Clearinghouse Database must be used by employers who are subject to DOT's drug and alcohol testing regulations via the rules of the Federal Motor Carrier Safety Administration (FMCSA). These regulations apply to employers who employ drivers who hold commercial driver’s licenses and drive commercial motor vehicles (CMV).

A CMV includes, but is not limited to, a vehicle with a gross weight rating of at least 26,001 pounds, one designed to transport 16 or more passengers, including the driver, or one that is used in the transportation of hazardous materials.

Under current rules, covered employers must make pre-employment requests to previous and current employers regarding each driver’s accident and drug and alcohol testing history. The new database must be used to supplement these information requests until Jan. 6, 2023, at which time the database will replace almost all such requests.

Additionally, covered employers must use the database to conduct annual queries on all covered drivers, and to report specific violations and return-to-duty/follow-up testing within three business days of the occurrences.

Covered employers should register with the database at https://clearinghouse.fmcsa.dot.gov and work with legal counsel to create or update their FMCSA Drug and Alcohol Testing Policy to ensure compliance.

3. FLSA Salary Threshold Increase

Effective Jan. 1, 2020, the federal Fair Labor Standards Act (FLSA) salary threshold for white-collar exemptions will increase from $455/week to $684/week, or an increase from $23,660/year to $35,568/year. Additionally, the salary threshold for highly compensated employees will increase from $100,000/year to $107,432/year. Certain non-discretionary bonuses and incentive payments, including commissions, are allowed to satisfy up to 10% of the threshold.

When workers are paid a salary at or above the salary threshold and meet certain duties tests, the employees are exempt from receiving overtime compensation for hours worked beyond 40 in a workweek. However, as of the New Year, if those employees are not being paid at the new salary threshold level, they will lose their exemption and become entitled to overtime compensation.

Employers still have time to work with legal counsel and evaluate their workforce to determine what changes, if any, are necessary. For those affected employees, employers should weigh the costs of increasing their salaries to preserve an exemption or reclassifying them as non-exempt and paying overtime. Position descriptions and budgets may need to be revised, and any reclassified employees will need to be trained on timekeeping policies and procedures.

In late October, Governor Gretchen Whitmer indicated that she did not believe the salary level set by the new federal rule was “good enough.” Thus, she directed the state labor department to consider an appropriate level and draft a proposal. Finalizing such a rule could take up to a year. However, if Michigan’s final rule increases the threshold beyond the FLSA threshold, employers would need to be ready to comply with the higher amount.

4. Employee Handbook Updates

Whether your employee handbook was updated 20 years ago or this past January, several developments in employment law in the last year would most likely impact current policies and procedures, including, but not limited to:

– Paid Medical Leave Act (PMLA): The PMLA applies to employers with 50 or more employees, and gives eligible employees up to 40 hours of paid leave for specified purposes. Subject to certain exceptions, generally non-exempt employees working an average of at least 25 hours per week each year are eligible for paid leave. The PMLA was effective in March this year, but many employers have not yet fully updated their policies to account for this change. Some common oversights include the requirement that eligible employees begin accruing paid leave on the first day of employment, that the waiting period for the use of such leave cannot be longer than 90 days, and that employees who accrue the leave (as opposed to being awarded it in one lump sum) must be able to carry over up to 40 hours of unused leave into the following year. Policies should be thoroughly reviewed for compliance.

– Legalization of marijuana:

In December 2018, the private recreational use and possession of limited amounts of marijuana and marijuana plants was legalized for persons at least 21 years of age. With a year under their belts, employers should consider the impact this legalization has had on their workforce and recruiting efforts, if any, and work with legal counsel to revise and/or refine their drug and alcohol policies to address any pressing needs, including, but not limited to, testing requirements and disciplinary actions, if not already mandated by other law.

By keeping these developments in mind and taking proactive steps to prepare, your business’ New Year will be looking merry and bright.

Lindsay Raymond specializes in employment law, represents employers in all aspects of employment-related matters, and defends employers in employment litigation matters. She can be reached at (231) 714-0161 or lraymond@darlawyers.com.

This article was featured in the December 2019 issues of the Traverse City Business News.

#MeToo: A New Perspective On Harassment Investigation

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In the wake of the #MeToo movement, there has been a surge in the number of sexual harassment charges filed with the Equal Employment Opportunity Commission (EEOC).

In October 2019, the EEOC reported its fiscal year 2018 statistics showing that sexual harassment charge filings increased by 13.6% over the previous year; reasonable cause findings increased by 23.6% to nearly 1,200; and the EEOC recovered nearly $70 million for the victims of sexual harassment through administrative enforcement and litigation, up from $47.5 million in 2017.

In connection with these statistics, the EEOC has ramped up its role as enforcer, educator and leader in preventing workplace harassment. Given the dramatic increase in sexual harassment filings – and the focused efforts of the EEOC – it is incumbent upon employers to create a workplace culture that encourages the reporting and investigation of sexual harassment complaints. By focusing on the identification and prevention of sexual harassment in the workplace, employers can reduce their exposure to liability, and foster a professional, safe and respectful workplace environment.

Embrace (don’t avoid) the sexual harassment investigation. 

When faced with a sexual harassment complaint, some employers make the mistake of failing to investigate or engaging in a perfunctory investigation, neither of which will protect the employer from liability. Under federal and state laws, certain affirmative defenses are available to employers who take reasonable steps to prevent and promptly correct sexual harassment in the workplace.

For instance, provided no adverse employment action has been taken against the complainant, the employer may assert such a defense if it conducts a prompt, thorough and impartial investigation of the sexual harassment complaint and takes appropriate remedial action, as necessary, to ensure that the complained-of conduct does not recur. Thus, depending on other factors, the investigation and the remedial action taken as a result of the investigation assists in forming a shield for the employer, which may ultimately insulate the employer from liability.

The investigation must be prompt, thorough and impartial. 

Employers who fail to properly conduct a prompt, thorough and impartial investigation may be prohibited from asserting such a defense. An investigation that is perfunctory in nature or a sham, i.e., “I’ll talk to Chuck (the accused) – I’m sure he didn’t mean anything by it,” will not meet the “thorough” and “impartial” requirement. One that is unnecessarily delayed for several weeks may not meet the “prompt” requirement. Additionally, certain situations compel the use of an independent investigator to ensure impartiality, such as when the accused is the company’s CEO and the complainant is his/her assistant. Other circumstances may also require an independent investigator, such as when multiple complainants are involved; when the allegations concern extremely egregious conduct, such as sexual assault; or when the conduct has gone unreported for long periods of time. Although there can be some variation in the investigation depending on the particular circumstances of the complaint, every investigation must be prompt, thorough and impartial.

What about the “troublemaker” employee? 

It is never acceptable for an employer to make a precursory, subjective determination that an employee alleging sexual harassment is lying or that such employee’s claim is otherwise unworthy of investigation. A common mistake made by employers is to determine, for example: “Bea has always been a troublemaker and complainer at TCorp. We didn’t investigate her complaint of sexual harassment because we knew it wasn’t true and didn’t want to waste company time and money.”

The employer may ultimately determine through investigation that Bea’s complaint was falsified or misconstrued, however, that determination should never be made prior to the investigation. On the other hand, the investigation could show that Bea was the third victim of the accused, a lower-level supervisor, who regularly grabbed the breasts of Bea and two other victims, rubbed his genitals against them as they worked, made sexually inappropriate comments and gestures to them on a daily basis, and threatened to terminate their employment if they reported his conduct.

In this scenario, assuming TCorp had no knowledge of the harassment prior to Bea’s complaint, by conducting a prompt, thorough and impartial investigation and taking appropriate remedial action (termination of the accused in this situation), TCorp may be able to avoid liability and limit damages if Bea were to file a lawsuit. Moreover, by investigating Bea’s complaint, TCorp demonstrates to employees that sexual harassment is not tolerated in the workplace, and fosters a workplace culture that encourages reporting and respect.

Alternatively, if TCorp does not investigate Bea’s complaint, and thereafter the accused harasses two additional employees, TCorp’s knowledge of Bea’s complaint combined with its failure to investigate could easily result in TCorp being found liable for the sexual harassment claims of all five victims, thereby potentially exposing it to a financially ruinous outcome.

But we only need to investigate claims that complainants want investigated, right? 

Other common mistakes made by employers include not investigating harassing behavior employers know of but has not been reported, and not investigating allegations of harassment based on the complainant’s desire to keep the matter confidential.

An employer is imputed with “knowledge” of harassment and is legally obligated to investigate it when a member of management observes the harassing conduct first hand or learns of it through a witness other than the complainant. Likewise, an employer is obligated to investigate if it receives a complaint of harassment but the complainant wants to keep it confidential and does not want an investigation. The defense of “we knew about it but she didn’t want us to investigate it” or “we saw it but no one ever reported it” does not relieve an employer from its legal obligation to protect employees from known harassment in the workplace.  Indeed, if employers were able to rely on such a defense and avoid liability, it would be completely contrary to an employer’s responsibility to create a harassment-free workplace that encourages reporting and investigation and fosters a workplace culture that supports a safe and respectful work environment.

Employers who fulfill these responsibilities can improve their workplace culture and reduce their potential risk of exposure to liability related to claims of sexual harassment.

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Janis L. Adams of Danbrook Adams Raymond PLC is an experienced employment law attorney and business owner. You can reach her at jadams@darlawyers.com

This article was featured in the November 2019 issue of the Traverse City Business News.

Background Check Compliance Check-Up:

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FCRA lawsuits against employers on the rise

The name of the Fair Credit Reporting Act (FCRA) elicits visions of “what’s your credit score” commercials and retail counter credit card pitches. In spite of its name, the FCRA governs the manner in which employers conduct certain background checks and make related adverse employment decisions. As a result of the misnomer, many employers overlook their FCRA compliance obligations and unwittingly subject themselves to potential liability each time they request a third party to conduct an employee or applicant background check.

Class-action lawsuits for noncompliance with the FCRA have been on the rise and companies are paying substantial sums as a result. In 2018, Petco and Frito-Lay Inc. both agreed to FCRA settlements totaling $1.2M and $2.4M, respectively. In February 2019, a federal court approved a $2.3 million settlement in an action brought against Delta Airlines by applicants who alleged that Delta did not properly disclose and obtain authorization for pre-employment background checks. Considering the above, it is important that employers understand their FCRA obligations when using employee or applicant background checks.

When does the FCRA apply?

The FCRA applies to employers using background checks or consumer reports from consumer reporting agencies to make employment decisions, including but not limited to hiring, retention, promotion, or reassignment. A consumer reporting agency is any third party company that is in the business of compiling background information. When compiled by such a company, employment background checks are generally consumer reports. Consumer reports can include information from a variety of sources, including, but not limited to, residential and employment history, and education and criminal records.

What does the FCRA require employers to do?

The FCRA requires employers to take certain steps before they obtain a consumer report, and before and after they take any adverse action based on that report. Before requesting a consumer report on an applicant or employee, the employer must do the following:

Disclosure: The employer must disclose to the individual in writing that the employer will procure a consumer report(s) and might use that information for employment-related decisions. This disclosure must be in stand-alone format and cannot be included in the employment application. The disclosure can include a brief description of the nature of the consumer report the employer will procure. Notwithstanding, the disclosure should not contain any other information that will detract from the disclosure, like release or waiver language. • Authorization: The employer must obtain written permission from the individual. The authorization form should clearly describe the type of consumer report being authorized and the frequency at which the report will be procured. For instance, if the employer will seek consumer reports throughout employment in advance of any promotion or reassignment, the authorization language should conspicuously state that. Otherwise, the employer will need to provide a disclosure and obtain authorization each time.

• Certification:

The employer is required to certify to the company who is preparing the report that the employer has complied with FCRA requirements, and that the employer will not discriminate or otherwise use the information in violation of applicable federal and state equal employment opportunity laws.

Before taking adverse action against an applicant or employee based on information in a consumer report (e.g. reject an application, terminate an employee, deny a promotion, etc.), the employer must provide a pre-adverse decision notice that explains what the adverse decision will be and includes:

• A copy of the consumer report relied upon to make the decision

• A copy of “A Summary of Your Rights Under the Fair Credit Reporting Act,” which the company furnishing the report should have provided to the employer or, if not, can be found on the Federal Trade Commission website (ftc.gov)

• An opportunity for the individual to review the report and correct any inaccuracies and/or explain information in the report.

Finally, if the employer ultimately takes adverse action against the individual based on information in the consumer report, the employer must provide an adverse decision notice that explains the decision and includes: The contact information (name, address, and phone number) of the company that provided the consumer report; an explanation of the individual’s rights to dispute the accuracy or completeness of the report and get an additional free report from the providing company within 60 days; and a statement that the company providing the report did not make the decision and cannot give specific reasons for it.

Employers who use investigative consumer reports that are based on personal interviews have additional obligations under the FCRA.

As evidenced above, failure to comply with the FCRA can be costly for employers. Noncompliance may result in actual damages, statutory damages, punitive damages, and attorney’s fees and costs. Thus, employers using background checks for applicants or employees should work with their legal counsel to assess current background check practices and, if need be, create compliant policies and documentation.

Lindsay Raymond represents employers in all aspects of employment-related matters and litigation.

This article was featured in the July 2019 issue of the Traverse City Business News.

 

DOL Proposes To Increase Salary Threshold For OT Exemption … Again

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In March 2019, the U.S. Department of Labor (DOL) issued a proposed rule that would increase the salary thresholds that “white collar” and “highly compensated” employees must be paid to qualify as exempt from overtime requirements under the Fair Labor Standards Act (FLSA). Sound familiar? The DOL previously attempted to modify the salary thresholds in 2016, but was ultimately blocked by a permanent injunction in 2017. After requesting information for a new rule in 2017, the DOL has decided to try again.

Under the current rules, workers who perform certain “white collar” duties and earn at least $455 a week (or $23,660 a year) are exempt from overtime requirements. Further, employees earning at least $100,000 a year, including at least a $455 weekly salary, may be considered exempt from overtime requirements as “highly compensated” employees without having to satisfy each element of the stringent white collar duties tests (i.e., they must primarily perform office or non-manual work and regularly perform at least one of the exempt duties of the other white collar exemptions.)

According to studies performed under the Obama administration, only 8 percent of full-time salaried workers fall below the current white collar salary threshold. Further, the current white collar salary threshold falls below the poverty threshold for a family of four.

The 2016 Attempt at Change

Early in 2014, President Obama directed the DOL to update the FLSA regulations defining which white collar workers are protected by minimum wage and overtime standards. In May 2016, the DOL issued a final rule that more than doubled the salary threshold for the white collar exemptions, increasing it from the current $455 a week (or $23,660 a year) to $913 a week (or $47,476 a year). Thus, it would have extended overtime entitlement to millions of previously exempted workers.

Additionally, the 2016 rule would have raised the salary threshold for the highly compensated employee exemption from $100,000 to $122,148.

In response, 21 states filed a lawsuit seeking to block the implementation of the initial rule, challenging the process by which it was promulgated. In November 2016, a federal court in Texas granted a nationwide temporary injunction, preventing the rule from taking effect. A permanent injunction was issued in August 2017.

The New 2019 Proposed Rule

The new proposed rule does not make any changes to the white collar duties tests. However, similar to its 2016 rule, the DOL’s newly proposed rule significantly increases the minimum salary threshold. This time, the proposed rule raises the threshold to $679 a week (or $35,308 a year). Thus, if implemented, workers earning a salary of less than $35,308 a year will be entitled to overtime regardless of whether they meet the duties tests. While this increase is not as drastic as the amount issued in 2016, it would still extend overtime entitlement to an estimated one million additional workers.

Further, the proposed rule substantially increases the salary threshold for the highly compensated employee exemption, raising it from $100,000 to $147,414. This threshold is significantly larger than the threshold proposed in the 2016 rule, and is the equivalent of the 90th percentile of full-time salaried workers nationwide. Thus, if implemented, employees making less than $147,414 a year, including at least a $679 weekly salary, will be required to also meet a white collar duties test in order to remain exempt from overtime requirements.

Additionally, under the new proposed rule, employers would be able to use certain non-discretionary bonuses and incentive payments, which are paid annually or on a more frequent basis, to satisfy up to 10 percent of the salary threshold.

What Happens Next?

The newly proposed rule will not take effect until a final rule is published, which the DOL currently anticipates will be in January 2020 at the earliest. In the meantime, the DOL is accepting public comment on the proposed rule until approximately mid-May 2019.

Employers should work with their legal counsel to evaluate their workforces and determine what changes, if any, may be necessary should the newly proposed rule become final. Job descriptions and employee classifications may need to be revised; positions may need to be restructured; budgets may need to be reevaluated to accommodate any increased costs; and policies clearly restricting overtime may need to be implemented.

Lindsay Raymond specializes in employment law, represents employers in all aspects of employment-related matters, and defends employers in employment litigation matters. She can be reached at (231) 714-0161 or lraymond@darlawyers.com.

This article was featured in the April 2019 issue of the Traverse City Business News.

Five Steps to Mitigate Employment-related Exposure

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Starting a business is like navigating a vessel through unfamiliar waters. It requires courage, vision and direction. While courage and vision may or may not be within one’s control, start-ups can most definitely secure solid direction by assembling – before launch – a core team of advisors (including its business, financial, and/or legal consultants) who can provide guidance throughout the process. This will help increase potential successes and mitigate risks.

In Michigan, employers with at least one employee are generally covered by numerous laws governing the workplace, including (but not limited to) laws regarding discrimination, disability accommodation, wages and benefits, occupational safety and health, unemployment compensation, and workers’ compensation. Additional laws apply as employee numbers grow. Thus, it is imperative that every start-up, regardless of size, understands and complies with its legal obligations from the very first day of operation.

The following is a list of five steps a startup can take to protect the business and minimize its risk of potential employment-related exposure:

1. Be Prepared For the Selection Process

Actions taken during the hiring process (even before a single employee is hired) may subsequently expose a startup to potential liability. For example, an applicant who is not selected could claim that the job posting, application, and/or interview process screened him/her out based on a protected classification, like race, sex, age, national origin, religion and disability. Thus, a start-up should ensure that its communications with applicants are nondiscriminatory and compliant with applicable laws.

Business owners should work with legal counsel to prepare job postings and descriptions that accurately and objectively describe the essential functions and requirements of their positions. (These documents are helpful down the road for performance management.) Further, the job application should be reviewed to ensure that it requests necessary information without unlawfully eliciting protected information that is irrelevant to the selection process (e.g., misdemeanor arrests not resulting in convictions, marital status, number of dependents, etc.). Finally, the interview and selection process should be vetted to ensure compliance.

2. Be Prepared for Onboarding

Start-ups should work with legal counsel to prepare offer letters that do not contractually bind the business in unintended ways (e.g., certain language can arguably alter the at-will employment status and require just cause to terminate, etc.). If background checks are utilized, offers should be conditional and proper releases should be obtained. Start-ups should also properly complete I-9 employment eligibility verification documentation for each employee within three business days of hire in accordance with federal law. Finally, all requisite postings and trainings, safety or otherwise, should be completed.

3. Properly Pay Employees

Failure to properly pay employees for time worked exposes a business to potential liability every time a paycheck is incorrect or deficient. Accordingly, violations can quickly accumulate if timekeeping and payroll practices are non-compliant. Thus, businesses should work with legal counsel to ensure that they a) comply with minimum wage requirements; b) correctly classify workers as employees or independent contractors; c) properly classify employee positions as exempt or nonexempt in order to determine eligibility for overtime compensation, and d) make all deductions in accordance with applicable law.

4. Develop An Employee Handbook

Start-ups should work with legal counsel to develop an employee handbook that contains all policies necessary to protect their businesses and comply with applicable law. As an added benefit, the policy preparation process helps business owners work through important issues that may otherwise be overlooked until it is too late. Once finalized, the handbook should be used as a reference to guide employee and management action. Employees and management should be trained on handbook policies and should consult the handbook regularly as issues arise.

5. Use Employment, Non-Disclosure, and Non-Compete Agreements When Necessary

Michigan is an at-will employment state,meaning that employees and employers can terminate their employment relationships at anytime, with or without notice, for any lawful reason. There may be situations, however, where businesses would prefer to have an increased level of certainty to protect their investment in key employees. Additionally, start-ups may have valuable trade secrets and confidential information to protect. Thus, where appropriate, businesses should work with legal counsel to prepare employment and/or non-competition agreements for key employees, as well as non- disclosure agreements applicable to the entire workforce.

By taking these actions, start-ups can set out confidently, knowing that smooth sailing lies ahead.

Our start-up experience (Cortney Danbrook, Janis Adams and Lindsay Raymond):

With our former law firm leaving the northern Michigan area, Danbrook Adams Raymond PLC was launched in a total span of approximately two weeks. Our rapid pace did not permit us to dwell on fears or fret about the unexpected. We had trust and a shared vision that enabled us to conquer our tasks without wavering or looking back. We were conscious of who we chose as our professional advisors and service providers, knowing that their knowledge and expertise was crucial to our success. We also knew our approach to the legal profession would set us apart, not only because we are all women, but because we have years of experience in highly focused areas of the law, and we are authentic, down-to-earth and approachable. It is said that it takes a village to do most things in life, and starting a business is certainly one of those things. We simply could not have done it without each other and our staff, business partners, clients and this community.

Advice for the new business owner:

Be sure to partner with people whom you respect, who are like-minded in their dedication to providing the highest quality services to clients, and who hold a similar vision for the organization.

 

Lindsay Raymond specializes in employment law, represents employers in all aspects of employment-related matters, and defends employers in employment litigation matters. She can be reached at (231) 714-0161 or lraymond@darlawyers.com.

This article was featured in the December 2018 issues of the Traverse City Business News.