Legislature Delays Marijuana Sales, But Employers Should Not Delay In Evaluating Existing Drug Policies

by Susan G. Fentin

How time flies when you’re having fun!  It was only four years ago that Massachusetts voters approved a referendum question that allowed individuals to obtain prescriptions for medical marijuana.  Then last November, voters approved the recreational use of marijuana.  Since December 15, 2016, individuals in Massachusetts have had the right to possess, grow, and use limited amounts of marijuana for recreational purposes.  And up until last week, we expected retail pot sales to begin by around January 1, 2018.

The initial law created a Cannabis Control Commission (CCC) to regulate retail sales of marijuana and required the state treasurer to appoint members of the new CCC by March 1, 2017, who would have until September 15, 2017 to issue regulations governing the retail sale of marijuana.  Hence, the expected retail “grand opening” date of January 1, 2018.

Last week, however, Governor Baker signed a bill that delays this timeline by six months – now, CCC members must be appointed by September 2017, and the deadline for the CCC to issue its regulations has been moved to March 15, 2018.  This means the new target date for the opening of retail marijuana establishments is July 1, 2018.

Despite this delay in the sale of recreational marijuana, employers in the Commonwealth are already faced with what to do with a workforce that could be legally using marijuana on a regular basis and how to handle the possible increase in positive drug tests for applicants.

Indeed, one of my clients called me a week ago concerned that her company’s pre-employment drug testing policies might result in increased difficulty filling vacant positions.   And that’s a legitimate fear.  After all, if individuals could test positive for their weekend use of alcohol, hardly anyone would pass a Monday morning test, especially during the holiday season.  So what does the recreational use of marijuana mean for Massachusetts employers?

Let’s start with a brief review of drug testing law in Massachusetts.  Massachusetts permits three circumstances when an employer can ask an individual to take a drug test:  pre-employment, reasonable suspicion, and random testing for safety-sensitive positions.  The restrictions on drug testing come from the courts’ efforts to ensure that employers don’t violate an individual’s privacy rights without good reason.  An individual has a high expectation of privacy in the contents of his/her bodily fluids, so in order to allow an employer to violate those privacy rights, either the employer has to have a really good reason, or the employee has to waive his/her expectation of privacy.   And Massachusetts has a privacy rights statute, Mass. Gen. L. Ch. 214, s. 1B, which protects individuals from unwarranted invasion of their privacy.  This statute could complicate an employer’s ability to drug test current employees if the employer doesn’t proceed carefully.

In the application context, individuals are not forced to apply for a job if they are told up front that a positive drug test will disqualify them from employment; they can just walk away.  So if they consent to the test, they are basically waiving their privacy rights.  In the case of drug testing current employees, if an employer has a reasonable suspicion that the employee is working under the influence, the employer’s interests in a safe and substance-free work environment will trump the individual’s privacy rights, so long as the suspicion is based on actual observation or specific information.

Another way to help avoid violating employees’ privacy rights is to lower their expectations of privacy by implementing a drug testing policy.  After all, if employees are told in advance that their use of drugs or alcohol could lead to a drug test, they are using those substances at their own risk.  Similarly, if employees work in a safety-sensitive position, such as working with dangerous equipment or driving a fork lift for example, the employer’s interest in ensuring employee safety will outweigh the employee’s privacy interests.  Indeed, safety-sensitive positions are the only way an employer can randomly drug test its employees.

So what options do employers have?

Employers that are truly concerned that drug testing applicants will lead to serious problems filling vacant positions can dispense with pre-employment drug testing for marijuana or eliminate pre-employment drug testing for all substances.  That doesn’t mean that employers will have to tolerate employees smoking (or otherwise consuming) weed on the job, whether for medicinal or recreational purposes (both statutes make that clear).  The recreational use law specifically provides that it “shall not require an employer to permit or accommodate conduct otherwise allowed by [the law] in the workplace,” and further, that it “shall not affect the authority of employers to enact and enforce workplace policies restricting the consumption of marijuana by employees.”  This means that employers who pre-screen job applicants for marijuana, have drug-free workplace policies that prohibit employees from working under the influence of drugs or alcohol, and who conduct other lawful drug tests of employees may continue their current practices, and need not accommodate an employee’s use of marijuana, whether for medicinal purposes or off-duty.

And it also doesn’t mean that employers will need to ignore someone who appears to be “high” on any substance, whether legal or illegal.  Testing is still permissible.  But experienced labor and employment attorneys recommend proceeding carefully.  The first step for employers who want to continue to test will be to ensure that they have a legally-compliant drug testing policy, maybe one that includes a last chance agreement for employees who test positive but who want to enter rehab.  And employers who want to test for reasonable suspicion are well-advised to have an observed behavior checklist that specifies the specific reasons why they think the employee is under the influence, such as slurred speech, stumbling, bloodshot eyes, or any other indication that the employee’s behavior could be affected by drug or alcohol use.  (Note: Repeated trips to the vending machines for Cheetos is probably not a reliable indicator!)   Employers who have safety-sensitive positions should arrange for a testing facility to manage the random nature of a random drug testing program:  It’s easier to avoid an accusation that the employer is targeting a particular individual if the selection for testing is managed by an independent third party.

What if the test comes back positive?

So far, employers who subject employees or applicants to drug screens are still permitted to terminate or refuse to hire if the individual tests positive for marijuana, even now that the drug is legal in Massachusetts.  So long as marijuana is still illegal under federal law, courts across the country, including Massachusetts, have ruled that employers who test employees for marijuana can take action against an employee who tests positive.  That being said, employers should be aware that the use of marijuana by employees may be increasing now that the growth, use and possession of marijuana has become legal. This means that employers may see a rise in employees “under the influence” at work, positive drug test results, and requests to tolerate off-site use of the drug as a reasonable accommodation for a disability.

Employers who drug test current and prospective employees for positions that are not safety-sensitive should also be aware that they run the risk of being sued for an invasion of privacy under a recent ruling by the Massachusetts Superior Court, Barbuto v. Advantage Sales & Marketing, Inc.  The decision is an outlier, has been appealed, and so far, there has been no actual finding that the drug test in that case invaded the employee’s privacy.  But even though the court dismissed the employee’s claims under the Medical Marijuana statute, the court allowed the employee’s privacy rights claim to go forward.  In Ms. Barbuto’s case, there was no reasonable suspicion that her use of medical marijuana impaired her ability to perform her job; she worked for a day without incident before her pre-employment drug test came back positive, resulting in her termination.  Unless the Appeals Court reverses the decision, the employee will have an opportunity to gather evidence and potentially even to present her case to a jury based on her claim that her termination for use of medical marijuana violated her privacy rights.

Of course, one problem for employers is that the operative chemical in marijuana, THC, stays in the employee’s system long after ingestion.  That means that a good employee or potential applicant can legally smoke a joint on a Saturday night and still test positive for THC on the following Monday.  As marijuana use becomes increasingly legal across the country, enterprising drug testing companies may come up with affordable tests that measure the amount of THC in an employee’s system, so employers could take action if an employee’s level of that chemical exceeds some reasonable standard.   There are other problems here, however:  One employee’s tolerance for marijuana may be significantly lower or higher than another employee’s tolerance, so measuring the level of THC in the employees’ systems might not be a reliable indicator of inebriation.  But so far, it’s legal to test and legal to terminate or refuse to hire, so long as the employer follows the rules. Employers with questions about implementing a drug testing policy for their company should consult with experienced labor and employment counsel.

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State Minimum Wage Increases Across the Country

by John S. Gannon

Raises are in order for lots of minimum wage workers in 2017. Nineteen states—including Massachusetts, Connecticut, New York, Maine and Vermont—along with dozens of cities across the country, will see minimum wage increases at the start of the new year. In Massachusetts, the minimum wage will increase from $10/hour to $11/hour (the state’s updated Wage and Hour Law poster can be found here). Only the District of Columbia has a higher minimum wage at $11.50/hour. The Connecticut minimum wage goes up to $10.10/hour on January 1, Vermont increases to $10/hour the same day, and Maine to $9.00/hour. New York’s increases vary depending on employer size and location.

The increase in Massachusetts is the last of three planned wage hikes dating back to 2015 (that link also includes useful information on minimum wage increases for tipped employees).  Similarly, the increase in Connecticut is the last of several consecutive hikes going back to 2014. Other than the increases effective January 1, 2017, there are no current plans to raise the state minimum wage in either Massachusetts or Connecticut—at least for now.  Across the country, many states will significantly increase minimum wage rates over the next few years. For example, New York will increase the state minimum wage to $15/hour in some regions by 2019. California will hit $15/hour by 2022. Will Massachusetts and Connecticut join these states as part of a fight for $15 initiative? Only time will tell.

Posted in Legislation, Massachusetts Wage Act, Uncategorized, Wage/Hour | Leave a comment

Caution: Your Commission Agreements May Violate the Wage Act

By Erica E. Flores

In Massachusetts, the Wage Act requires employers to pay all earned wages, including commissions, on the day the employee is discharged.  Companies who have employees who work on commission have frequently relied upon the language of their commission agreements to relieve them of the obligation to pay some commissions at the time of termination.  However, a recent decision from the Massachusetts Appeals Court may prevent employers from relying on those agreements.

In 2008, Hampden Engineering Corporation (“Hampden”) hired Matt Perry as a Regional Sales Manager.  Perry’s compensation included a $45,000 salary, plus a one-percent commission on all sales in his region, payable at the end of the calendar year.  Hampden modified its commission structure in 2010, creating a tiered commission structure: one percent on all sales up to $2 million, two percent on all sales above $2 million, and three percent on all sales above $3 million.  In 2011, Hampden revised their commission structure yet again, eliminating all commissions on the first $1 million in sales.  Hampden presented the new commission structure to Perry, but he refused to sign.  As a result, Hampden terminated Perry’s employment and paid him in full for all accrued salary and vacation time.  Hampden did not, however, pay Perry his commissions for sales he had completed during the first three months of 2011, because their commission structure specified that commissions were paid at the end of the calendar year and that the employee must still be employed on the date of payment.

Perry filed suit, alleging that Hampden violated the Wage Act by failing to pay him commissions he had “earned” prior to his termination.  The lower court found in Perry’s favor and ordered Hampden to pay him treble damages plus interest, attorneys’ fees, and costs.  Hampden appealed that decision to the Massachusetts Appeals Court.

Wage Act may be superior to employer commission policies

On appeal, Hampden conceded that Perry was its employee, and that the Wage Act would apply to any commissions he earned if the amount had been “definitely determined” and was “due and payable” when Perry was terminated.  However, Hampden argued that Perry’s requested commissions did not meet that standard, and therefore, were not “earned” at the time of his termination.

First, Hampden argued that the commissions were not “definitely determined” because Perry had not agreed to the 2011 commission payment structure.  The Appeals Court rejected this argument, noting that Hampden and Perry had stipulated the amount of commission payments to which he would have been entitled if he had been employed at the end of 2011.

Next, Hampden argued that the commissions were not “due and payable” when Perry was terminated because its commission structure only paid commissions at the end of the calendar year, and only if the employee was still employed by the company at that time.  The Appeals Court rejected this argument as well, concluding that the plain language of the Wage Act foreclosed such an argument.  As the court pointed out, Section 148 of Chapter 149 specifically requires employers to pay earned commissions that are “due and payable” in full on the day of discharge, and expressly states that an employee may not exempt himself from that requirement, even by an agreement with his employer.

Significantly, the Appeals Court also determined that a commission must be treated as “due and payable” at termination even if it is not yet “due and payable” under the employer’s commission agreements or policies.  In other words, the court concluded that Section 148 mandates that all earned commissions be paid at termination, even if they would not otherwise be “due and payable” under the employer’s own compensation arrangements.

Takeaways

The Perry decision is notable not only for its holding but also for its brevity, and perhaps this decision is an outlier:  Other court decisions have held that commissions are not considered “due and payable” if there are unmet contingencies that would prevent their payment, and we don’t have all the facts upon which the trial court ruled in Perry’s favor.  However, if you are planning to terminate an employee who is eligible for commissions, you might consider whether to pay any commissions that could be definitely determined as of the date of the termination, even if your policy would perhaps support an argument that they are not “due.”  Hampden was required to pay Perry treble damages and attorneys’ fees based on this decision, and it would have been cheaper to pay him the commissions that he had “earned” in the first three months of the year.  Check with your labor and employment counsel to be sure your decision regarding pay for commissions is defensible.

Posted in Massachusetts Wage Act, Wage/Hour | Leave a comment

As the Holidays Approach, EEOC Issues Resource Document on Rights of Employees and Applicants with Mental Health Conditions

by Amelia J. Holstrom

Millions of Americans suffer from mental health disorders. According to the National Alliance on Mental Illness, 18.5% of the adult population of the United States suffers from mental illness each year.   These illnesses include conditions such as anxiety, depression, Post Traumatic Stress Disorder (PTSD), and bipolar disorder.

The Americans with Disabilities Act and Massachusetts law prohibit employers from discriminating against an employee on the basis of his disability.  Under the laws, an employer must make reasonable accommodations if those accommodations will allow an employee with a disability to perform the essential functions of their job, unless doing so would be an undue hardship for the company.  The undue hardship standard is very high.  Mental illnesses qualify as disabilities under both the state and federal law.

Although employers address requests for reasonable accommodations for disabilities, including those for mental illnesses, all year, employers may see an increase in requests with the holidays approaching.  Many people experience increased stress and anxiety during the holidays, but those who already live with a mental health condition are particularly susceptible to such seasonal increases in anxiety and depression.

On December 12, 2016,  the Equal Employment Opportunity Commission (EEOC) released a new resource document entitled Depression, PTSD, & Other Mental Health Conditions in the Workplace: Your Legal Rights.  Although the document is directed toward employees suffering from mental health conditions, it may also be helpful to employers trying to navigate requests for accommodation or otherwise addressing mental health concerns in the workplace.  The materials address several major areas and questions, such as what to do if an employee’s mental health condition affects work performance, how to request a reasonable accommodation, and what employees should do if they think their rights have been violated.  Here’s some additional information that may help employers faced with employee mental health issues:

When can an employer request medical information regarding an employee’s condition?

Employers are limited as to when they may request specific information about any employee’s condition, but employers may do so, and should do so, when assessing an employee’s request for a reasonable accommodation. Additionally, if there is objective evidence that someone is unable to perform his job or that he may post a safety risk because of his condition, the employer is entitled to request medical documentation regarding the condition.

How are reasonable accommodations requested and assessed?

Some employers have written policies regarding reasonable accommodation requests.  Whether your company has such a policy or not, all employers should listen to what their employees are asking them for, whether it be verbally or through an informal or formal writing.   Employees may ask for an accommodation at any time, which is why it is important that managers understand what to listen for and report any request to human resources or the appropriate department or person at your company.

Once an employer receives an accommodation request, it may, and should, request medical documentation supporting the need for the requested accommodation from the employee.  If the employer has suggested accommodations, the employer may ask if those suggested accommodations would enable the employee to perform his job as well.

After receiving the documentation, the employer must determine whether it can grant the employee’s request or if there is another accommodation that would enable the employee to perform the essential functions of the position.  If there are two or more possible accommodations, the employer may choose which one to give the employee.  An employer may only decline to provide a reasonable accommodation altogether if all possible accommodations would cause an undue hardship in the form of significant difficulty or expense for the employer.  The burden is on the employer to show significant difficulty or expense, and, as mentioned before, the standard is very high.

When might a leave of absence be appropriate?

While the goal is to provide employees with reasonable accommodations that allow them to work and perform the functions of their job, sometimes that is just not possible.  In those situations, it might be appropriate to offer an employee a block leave of absence as a reasonable accommodation.  Again, employers are entitled to request medical documentation supporting the need for leave and a date certain by which the employee can return.  With that information, the employer can assess whether it can grant the block leave of absence or if it would pose an undue hardship.

Disability discrimination cases are on the rise.  In 2016, the EEOC resolved almost 5,000 charges of discrimination related to mental health disabilities alone, totaling more than $20 million. Therefore, employers should be careful when assessing requests for accommodations and should consult with employment counsel as appropriate.

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Churches Score Out-of-Court Victory Over MCAD

by Stefanie M. Renaud

As previously reported on our blog here, the Massachusetts Commission Against Discrimination (“MCAD”) issued guidance on September 1, 2016, implementing Massachusetts’ “transgender protection law,” which prohibits discrimination on the basis of gender identity in places of public accommodation.  As I noted in that post, the MCAD guidance included a statement indicating that churches could be liable for violating the law while acting as a place of public accommodation.  Only a few weeks later, on October 11, 2016, the Alliance Defending Freedom (“ADF”) sued the MCAD in federal court on behalf of four Massachusetts churches, claiming the law infringed on their First Amendment rights to free expression of their religious beliefs.

Now, the ADF has withdrawn its lawsuit in light of the MCAD’s revised guidance, issued on December 5, 2016.  The prior language stated that “[e]ven a church could be seen as a place of public accommodation if it holds a secular event, such as a spaghetti supper, that is open to the general public.”  The revised guidance reads:

The law does not apply to a religious organization if subjecting the organization to the law would violate the organization’s First Amendment rights.  See Donaldson v. Farrakhan, 436 Mass. 94 (2002).  However, a religious organization may be subject to the Commonwealth’s public accommodations law if it engages in or its facilities are used for a ‘public, secular function.’  Id.

Further, the old version of the guidance included a footnote indicating that “[a]ll charges, including those involving religious institutions or religious exemptions, are reviewed on a case-by-case basis.”  That footnote has been removed, and the substantive message has been incorporated into the body of the guidance.  The guidance now reads: “as required by statute, MCAD reviews each complaint of discrimination based on the particular factual circumstances presented.   See G.L. c. 151B, §5; Temple Emanuel of Newton v. MCAD, 463 Mass. 472 (2012).”

While the ADF has withdrawn its lawsuit in light of these revisions, it is clear that ADF will be keeping a close watch on any attempts by the state to enforce the law against religious organizations.  The ADF may file future lawsuits if it feels the law is interfering with such organizations’ constitutional rights.

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Legal Marijuana Just Days Away—Are you Modifying Your Drug Testing or Substance Abuse Policies?

by John S. Gannon

Recreational marijuana will become legal in Massachusetts this Thursday, December 15. Last month, Skoler Abbott attorney Erica Flores provided a detailed summary of the new law after it was approved by voters in the Commonwealth. Realistically, retail marijuana dispensaries (aka “pot shops”) will not be around for some time, but home cultivation will be possible right away. Employers are wondering whether and to what extent the new law will impact employment laws and HR policies.

As noted by Erica, the law specifically states that it does not affect the ability of employers to enact and enforce workplace policies restricting employee use of marijuana. Employees are probably unaware of this caveat. If they fail a drug test or show up to work impaired, employers can expect legal use excuses. Therefore, employers who remain committed to enforcing zero tolerance drug testing and/or substance abuse use policies should consider reminding employees—through an internal memo or handbook update—that a zero tolerance company policy still applies to marijuana use.

Now is also a good time to consider whether a zero tolerance policy makes the most sense for your organization. Marijuana use is certain to increase in the Commonwealth, especially when licensed pot shops open for business. Employers should consider whether continued enforcement of a zero tolerance policy will impact employee recruitment and retention efforts. Further, the intersection of medical marijuana and disability discrimination law provides a new avenue for individuals to sue if they are rejected for failing a pre-employment drug test or terminated for off-site medical marijuana use. Fortunately, most courts have ruled in favor of employers when this legal theory has been advanced by employees, as judges are quick to point out that marijuana use (medical or recreational) is still illegal under federal law. In fact, a state court in Massachusetts recently sided with an employer in a similar lawsuit and dismissed a medical marijuana user’s disability discrimination claim when she was rejected for failing a drug test. The employee argued that the employer should have accommodated her disability by turning a blind eye toward her off-site medical marijuana use. The court disagreed, but it did allow a separate invasion of privacy claim to go forward against the employer in that case. Employers should analyze whether their practices are susceptible to attack under an invasion of privacy type of claim. A similar lawsuit was recently filed in Connecticut against Amazon.com and a staffing services provider.

Next week, Erica Flores will be joining Mark Adams with the Employers Association of the NorthEast (EANE) for a webinar entitled Legalization of Marijuana in MA – Will it Impact Your Business? The webinar will take place on Wednesday, December 21, 2016 from 8:30 am to 9:30 am. Click here for more information on the event, including registration details.

Posted in Handicap Discrimination, Legislation, Reasonable Accommodation | Leave a comment

DOL Appeals Overtime Rule Injunction. Now What?

by John S. Gannon

Last Thursday, the U.S. Department of Labor (DOL) filed a notice of appeal—the first step in the appeals process—challenging the decision to temporarily block the new overtime regulations.   As we reported a couple weeks ago, the overtime rules were enjoined nationwide by a Texas federal Court, meaning they did not go into effect on December 1, 2016, as previously expected.  DOL also filed a motion seeking to expedite the appeals process.  Appeals like this can take several months to pan out, or even years.  DOL is looking for resolution much sooner, perhaps as early as March or April 2017.

Many employers are wondering what to do about yet-to-be-made planned compensation changes.  Others are wondering whether already-implemented changes should be scaled back or completely reversed.   Unfortunately, there is no easy answer.  Before getting into compensation changes, it’s important to understand how the rule might play out during the appeal process.  The appeal will be heard by the Fifth Circuit Court of Appeals, which sits in a conservative/pro-business jurisdiction.  Even if the Court of Appeals agrees to an expedited schedule, the Court will not reach a decision before President-elect Trump takes office.  Earlier this year, Mr. Trump reportedly said that he would attempt to delay or exempt small businesses from the overtime regulation, but he did not say whether his administration would try to repeal the entire regulation.  After Inauguration Day, Mr. Trump could direct DOL to forego the appeal process and instead focus on crafting more employer-friendly regulations.  He could also work with Congress to enact legislation that would define exempt criteria by statute, rather than by regulation, effectively eliminating DOL’s ability to modify exempt classifications via the rulemaking process.

Assuming the appeal proceeds unhindered by the Trump Administration, reversal by the Court of Appeals could have significant ramifications for employers who have not made planned compensation changes.  If the Court of Appeals rules the lower court got it wrong, it or other courts could decide that the effective date of the rule is still December 1, 2016, meaning employers would be liable for unpaid overtime liability for employees not making $913/week as of December 1 rather than the date of the appeal court’s decision. This issue is somewhat unresolved in the federal courts, but there is clear precedent for applying the law retroactively in this scenario.

Back in January 2015, a federal court vacated wage and hour regulations implemented by DOL involving exemptions for home care workers—similar to what the Texas federal Court did with the overtime rule.  However, the Court of Appeals in that case reversed the lower court’s decisions, triggering several lawsuits attacking employer compensation practices during the months that the decision was on appeal.  Some of the courts ruled there was no wage and hour liability while the rule was “in limbo,” while other courts, including a federal court in Connecticut, ruled that overtime compensation was due to these previously exempt workers retroactive to the original implementation date of the rule.  The Connecticut decision has been appealed to the Second Circuit Court of Appeals—we will keep you apprised of any updates in that case.

That leaves employers in a precarious position.  For businesses that have already made changes in response to the overtime rules, it likely makes sense to stay the course until the overtime rule gets completely sorted out.  Employers who have not made any changes are in a more challenging spot.  To the extent possible, those employers should limit overtime opportunities for employees making less than $913/week, as well as track their working time so that an accurate assessment of overtime exposure can be made if the Court of Appeals decides the rule is lawful.

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BREAKING: Court Blocks Implementation of DOL Overtime Rule

by Kimberly A. Klimczuk and John S. Gannon

In a surprising turn of events, a Texas federal Court put a hold on the controversial Department of Labor (DOL) overtime rule that would have made over 4 million more workers eligible for overtime starting December 1, 2016.  Yesterday evening, the Court issued an Order granting a preliminary injunction that was filed by 21 states across the country along with a coalition of business groups who were challenging the rule.  The Order effectively blocks the implementation of the rule nationwide, meaning the rules will not become effective on December 1, 2016 as previously expected.  The plaintiff states and business groups presented two main arguments: 1) that the Fair Labor Standards Act (FLSA), the law that provides for a federal minimum wage and federal overtime  requirements, is unconstitutional to the extent that it interferes with states’ independence to set their own minimum wage and overtime rules; and 2) Congress never intended to set any salary threshold for the overtime exemptions, and only allowed the government to issue rules related to the job duties of exempt executive, administrative, and professional employees.  The Court rejected the first argument but agreed with the second, finding that the DOL overstepped its authority when it issued the new salary requirements.

The Court based its reasoning on the fact that the language of the FLSA states that “any employee employed in a bona fide executive, administrative, or professional capacity…as such terms are defined and delimited from time to time by regulations of the Secretary [of Labor]” shall be exempt from the FLSA’s minimum wage and overtime requirements.  When Congress grants a federal agency authority to issue regulations implementing a law, as in the case with the DOL and the FLSA, the agency may interpret or provide clarification on ambiguous language in the law, but it cannot change the meaning of unambiguous language.  When a court is asked to review an agency’s interpretation of a law, the court looks to the original language of the statute to determine if the language is ambiguous and, if so, whether the agency’s interpretation is in accordance with Congress’ original intent.  If the congressional intent is unclear, then the court will defer to the agency’s interpretation unless the agency’s interpretation is “arbitrary, capricious, or manifestly contrary to the statute.”

In this case, the court found that the language of the FLSA that exempts “any employee employed in a bona fide executive, administrative, or professional capacity” from its minimum wage and overtime provisions, without any reference to salary, expressed a clear intent by Congress to exempt employees based on the types of duties they perform and not based on any salary test.  The Court held that the DOL’s ability to “define and delimit” the terms “executive, administrative or professional capacity” gave the DOL “significant leeway to establish the types of duties that might qualify an employee for the exemption, [but] nothing in the EAP exemption indicates that Congress intended to define and delimit with respect to a minimum salary level.”

Although that reasoning seems to suggest that the DOL has no authority to set any minimum salary level, including the existing $455/week requirement, the Court made clear in a footnote that it was not making a general statement on the lawfulness of the existing salary-level test.  The court also suggested that the lower salary level test could be valid as a threshold to screen out the “obviously nonexempt employees,” making the duties test unnecessary.  By contrast, the court reasoned that the much higher salary threshold in the new rule created what was, in effect, a “salary-only” test which would lead to situations in which employees who clearly perform executive, administrative and/or professional duties would not be exempt from the statute.  This, the court said, is in direct conflict with Congress’ clear intent to exempt from the FLSA employees “any employee employed in a bona fide executive, administrative or professional capacity.”

This decision was not a final decision on the merits of plaintiffs’ arguments but was rather a decision on whether plaintiffs were likely enough to succeed on the merits to warrant a preliminary injunction delaying implementation of the rule. Although a final decision on the merits is yet to come, the court’s analysis in last night’s opinion is a strong indicator of the court’s view on the issue.   The DOL could (and likely will)  appeal the decision, as well as any final decision on the merits, but with Republicans controlling both houses in Congress and the Trump Administration taking office in January, the future of the overtime rule is certainly in doubt.  For now, if you have questions about enforcement of the rule and/or scaling back changes already in place, we suggest contacting employment counsel to discuss how this decision will impact your overtime compliance obligations.

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IRS Will Impose No Penalties on Timely Affordable Care Act Filings, Even if Incomplete or Incorrect; Extends Deadline for Employee Notices

by Wendy L. Grabel

The IRS has just announced that it will continue its past policy of imposing no penalties on Employers who make good faith, timely efforts to meet their filing requirements under the the Affordable Care Act (ACA).

Right now, Employers subject to the ACA are scrambling to complete both the complex IRS filings, and the separate information statements that must be sent to employees.

On November 18, 2016, the IRS announced measures that will greatly ease the ACA’s reporting burdens for Employers:

  • For all ACA filings that are required to be made to the IRS in 2017 (regarding the 2016 calendar year), the IRS will generally impose no penalties for incomplete or inaccurate filings, so long as a good faith effort has been made to correctly complete the filings, and provided they are timely filed.
  • This no-penalties policy continues relief granted for filings made in 2016, and extends to all IRS filings and information statements sent to individuals, required under the ACA.
  • For ACA information statements required to be sent to employees regarding the 2016 year, the deadline is automatically extended from January 31, 2017 to March 2, 2017. This extension applies to both Forms 1095-B and 1095-C, sent to employees.
  • No further extensions are available, with regard to these information statements furnished to individuals.
  • As the ACA information statements sent to employees can now be delayed, affected individuals are permitted to file their own tax returns for the 2016 tax year, before these statements are issued. In preparing their own tax returns, employees may rely on information received from their Employers, in order to confirm that they have received Employer-provided minimum essential coverage during 2016.
  • A 30-day extension is available for ACA filings made to the IRS on Forms 1094-B, 1095-B, 1094-C, and 1095-C. Submitting Form 8809 to the IRS is required to receive this 30-day extension.
  • Without the extension, the deadline for ACA filings made to the IRS is February 28, 2017 (or March 31, 2017, if filing electronically).
  • The extension Form 8809 should be filed by these 2/28/2017 or 3/31/2017 due dates. If Form 8809 is being filed to secure extensions on more than one type of filing, the IRS suggests filing multiple Forms 8809.

The IRS announcement of ACA relief, Notice 2016-70, may be found here:  https://www.irs.gov/pub/irs-drop/n-16-70.pdf

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Court Permanently Blocks Dangerous DOL “Persuader Rule”

Since our firm’s founding in 1964, we have advised employers on how to lawfully remain union-free. That has involved not only helping our clients with their individual labor relations and employment issues, but also banding together with other similar firms to advocate for employers. In line with that effort, last March, Skoler Abbott, along with several other management-side law firms across the United States that are part of the Worklaw Network, sued the Department of Labor seeking to strike down a DOL rule that would have dramatically interfered with a law firm’s ability to help employers remain union-free. The so-called “persuader rule” required employers (both union and non-union) to publicly report when they use consultants (including lawyers) for labor relations advice given for the purpose of persuading employees not to unionize. We argued that, among other things, the rule invaded our duty to protect client confidentiality and respect the longstanding doctrine of attorney-client privilege. A similar lawsuit was filed in a Texas federal court by pro-business trade associations.

Yesterday, a judge in the Texas case issued a decision permanently enjoining DOL from enforcing the rule anywhere in the country. This means the rule has been stopped dead in its tracks. Citing an earlier decision in the Texas case, the judge agreed that the “persuader rule” undermines age-old principles essential to the practice of law, including the duty of confidentiality and the attorney-client privilege. DOL could appeal the decision to the appropriate federal Court of Appeals, but with a new administration heading to Washington in January, it is likely that the Trump Administration would not fight to defend the “persuader rule” and might, in fact, seek to scrap it.

This is good news for our clients and indeed for all employers across the country who seek to remain union-free. If you have any questions about this development, please feel free to contact any of the attorneys at Skoler, Abbott & Presser, P.C.

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