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First Up: DOL Expands Overtime Exemption for Commission-based Retail and Service Workers

We all know that retail has been hit hard by the pandemic. When retail employees paid on a commission basis do go back to work, fewer of them will qualify for overtime, thanks to a Department of Labor (DOL) rule promulgated on Monday, May 18, 2020. While this sounds like a bad deal for employees, there’s a silver lining: the DOL issued another rule just today that will make compensating employees for staggered shifts and fluctuating workweeks easier—practices that are likely going to be critical components of a safe COVID-19 return-to-work plan in retail.

Monday’s final rule withdraws 60-year-old interpretive rules that limited employers’ ability to invoke Section 7(i) of the FLSA, which exempts certain commission-based employees in “retail or service establishments” from overtime eligibility. To qualify for the exemption, a business needs to show: (i) it is a retail or service establishment, as defined by the regulations; (ii) the employee’s regular rate of pay exceeds one and one-half times the applicable minimum wage for every hour worked in a workweek in which overtime hours are worked; and (iii) more than half the employee’s total earnings in a representative period must consist of commissions.

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The Families First Coronavirus Response Act (“FFCRA”) is effective today, April 1. In honor of this undoubtedly daunting occasion for employers with less than 500 employees, we analyze the most significant provisions from the Department of Labor’s updated FAQs, which fill in gaping holes in the legislation that left employers (and counsel) puzzled.  For employers with fewer than 50 employees, we also examine recent DOL guidance on the “small business exemption” and identify the ways in which employers can qualify for this exemption.

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JOIN US: Tuesday, March 17, 2020 at 12:30 PM EST

Employers are in uncharted territory with the COVID-19 pandemic, which has created complicated employment issues that continue to evolve by the hour. Join Kelley Drye’s Labor and Employment co-chairs Barbara Hoey and Mark Konkel and senior associate Diana Hamar as they share practical advice for…

As federal, state and local governments continue to develop their responses to the COVID-19 outbreak, employers may find themselves in uncharted territory as to how to deal with emerging employee issues.

There are three overriding rules that all employers should remember:

  1. Think safety first. Keeping those employees who are infected or at risk of infection at home to ensure that the rest of the workforce is safe should be the number one priority.
  2. Think about how you can keep your business going.  Make sure your work-from-home policies and technology are up to date, and remind employees how to use them.
  3. Avoid stereotypes. Do not allow employees to assume that people of certain ethnicities are at a higher risk than others. If you become aware of any discrimination or harassment—stop it immediately.

Below are some general answers to questions our clients have been asking.  However, please be aware that this is a very fact-specific and complex topic; COVID-19 related employment issues are evolving by the hour. Employers are cautioned to stay abreast of federal, state, and local government advisories, and to consult legal counsel before making employment decisions or changing policy.

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With the arrival of 2019 novel coronavirus (“COVID-19”) to the United States, employers should begin thinking about strategies to mitigate business interruptions, ensure employee safety, and avoid unnecessary litigation.

Know Your Resources

Employers should continue to monitor reliable guidance provided by the U.S. Centers for Disease Control and Prevention (“CDC”) and local public health agencies. Understanding how COVID-19 is transmitted and what steps can be taken to protect diagnosed or exposed employees is essential to dispelling employee fears. Employers can educate employees on prevention and symptoms and should be prepared to answer employee concerns regarding workplace safety. The following are guides which may be helpful to employers:

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New York State and City have each passed new legislation addressing workplace sexual harassment and employer accommodations, which both have deadlines looming for New York employers.

Just in time – on October 1, the State DOL (finally) clarified – in a good way – a number of employer obligations under the State law. The State DOL also launched a website “Combating Sexual Harassment In the Workplace,” and an “Employer Toolkit,” with sample policies, complaint forms, and training materials. Easing sleepless nights for many employers, the DOL stated that training under the state law does not have to be completed until October 2019.

Because there can never be one without the other, effective October 15, 2018, the New York City Human Rights Law (“CHRL”) will now require covered employers to engage in or seek to engage in a “cooperative dialogue” with individuals who may be entitled to accommodations. This new law provides a separate cause of action against an employer for not engaging in a “cooperative dialogue” – but more on that later.…
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When Trump was a brand-new President (or force of nature, depending on how you look at it), we observed that the dawn of his administration would not necessarily augur wholesale changes to the overall landscape of legal concerns for employers.  Why?  Because, as with so many things in Trumpworld, there didn’t appear to be a coherent labor policy, or (given the inexperience of some of his closest team members) even policy competence.

In fairness, however, marauding Huns didn’t have to be particularly artful or finessed about the way they sacked whole cities, right?  In a transformative conquest, a blunt hammer probably works as well as a rapier with pinpoint accuracy.

And so it is with Trump.  With just about eight months of activity, we have seen the Presidential administration do what Trump is best at:  take direct aim at what Obama did and do the opposite.  Incremental changes to labor and employment law and regulation under Trump (and some related developments in the courts) have, one by one, almost entirely reversed course on many of the pet labor and employment initiatives the Obama administration championed, among them:

    • Limitations on class action waivers, which made it more difficult for large groups of plaintiffs to sue companies.
    • “Joint employer” standards that gave labor unions ammunition to argue that multiple franchisees (think McDonald’s), which in the past were treated as separate employers, are in fact joint employers.  Those standards, now reversed, gave unions one big fish for organizing instead of many little ones.
    • A DOL focus on policing the misclassification of employees as independent contractors by employers—a move sometimes made by employers to reduce tax and employee benefits liabilities.
    • Limitations on OSHA drug testing rules covering employees.
    • “Blacklisting” regulations that would require federal contractors to publish claims brought against them alleging labor and employment law violations.
    • Providing additional fiscal resources to the EEOC and OFCCP, instead merging these employment-related agencies into a single entity.
    • Expansions of the so-called “persuader rule,” which required employers to disclose paid relationships with individuals or firms helping employers fight union organizing campaigns.
    • New FLSA overtime regulations, which would have raised the “salary threshold” under which overtime must always be paid and expanded overtime pay entitlement to as many as four million American workers.
    • A National Labor Relations Board stocked with progressives who increased burdens on employers and decreased burdens on unions, in favor of an NLRB much more likely to roll back Obama-era changes.

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On February 15, 2017, just one day before his confirmation hearing, Andrew Puzder announced that he was withdrawing his nomination to serve as President Donald Trump’s Labor Secretary. Puzder is the CEO of CKE Restaurants, which operates fast-food restaurants Carl’s Jr. and Hardee’s.

Like many of President Trump’s Cabinet picks, Puzder faced fierce opposition from Democrats, as well as unions and worker advocacy groups. The opposition came as no surprise, as Puzder publicly opposed government regulation, a $15 minimum wage increase and the Affordable Care Act, and recently revealed that he hired an undocumented housekeeper. Puzder was also criticized for alleged labor law violations, including unpaid overtime, which occurred at CKE Restaurants under his leadership.

Shortly before announcing his withdrawal, it was reported that Senate Republicans encouraged the Trump administration to pull the nomination since a growing number of Republican senators were uncertain they would vote in favor of Puzder, which jeopardized his confirmation.

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NEW EXEMPT SALARY THRESHOLD – As the ball is dropping in Times Square, wage and hour regulations are changing for employers in New York.

The New York Department of Labor has made it clear that on December 31, 2016, at 12:01 am, – new DOL regulations that raise the salary threshold necessary for employees to be “exempt” from overtime pay requirements will rise significantly for most private employers in New York.

We previously covered in this blog the December decision by a Texas judge to enjoin the implementation of federal regulations which would have raised those salary thresholds for exempt employees. While that was unexpected good news for many employers, New York employers did not receive a similar holiday gift.  Our state DOL is going to implement its new salary thresholds, so New York employers must take note and adjust salaries if they wish to maintain the exempt status of their employees.

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As we continue to follow the progress of the injunction suspending the Department of Labor’s regulations raising the salary minimums for the ‘white collar exemption’, yesterday the DOL informed a Texas federal court that it will appeal that injunction.

It is a strange coincidence that the DOL announcement came on the same day – December 1 – that the new regulations would have gone into effect.

Judge Mazzant, the Texas judge who issued the injunction, had found that the states were likely to succeed in their challenge of the regulations and would be irreparably harmed if the rule went into effect.  The judge concluded that the DOL did not have the authority to set these salary minimums at all, stating in part:

“Congress defined the [white-collar] exemption with regard to duties, which does not include a minimum salary level.”  He concluded, “With the final rule, the department exceeds its delegated authority and ignores Congress’s intent by raising the minimum salary level such that it supplants the duties test.”

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