Wage and Hour Proposes New “Joint Employer” Rule

At a critical moment in the simmering battle over the definition of “joint employer,” the Department of Labor’s Wage and Hour Division has entered the fray with an emphatic statement.

W&H has issued a proposed new rule on the subject – its first since 1958 – which seeks to cut through a growing thicket of proposals and counter-proposals from a variety of sources, chiefly the NLRB.  The core principles of the new rule return the DOL’s definition to one that had been the dominant understanding for decades.  Under the new rule, joint employer status will be determined under a four-factor test.
 Who has the authority to:      

  • hire or fire the employee;
  • supervise and control the employee’s work schedules or conditions of employment;
  • determine the employee’s rate and method of payment; and
  • maintain the employee’s employment records.

Since the Obama Administration’s attack on the pre-existing rules by elevating factors such as “indirect control” or “reserved rights,” there has been a concerted effort by employer groups to clarify the criteria by which “join employer” decisions will be made.  W&H has provided precisely the sought-for clarity by “explaining that ability, power, or reserved contractual right to act in relation to the employee is not relevant for determining joint employer status” and noting, further, that analyses of additional factors may be used to determine joint employer status, but only if “they are indicative of whether the potential joint employer is exercising significant control over the terms and conditions of the employee’s work.”

DOL Proposes Change on Regular Rate

On March 28, 2019 the U.S. Department of Labor announced a proposed rule to clarify and update the Fair Labor Standards Act (FLSA) regulations governing regular rate requirements. Regular rate requirements define what forms of payment employers should include and exclude in the “time and one-half” calculation when determining workers’ overtime rates. The proposed rule focuses primarily on clarifying what kinds of perks, benefits, or other miscellaneous items must be included in the regular rate. Because these regulations have not been updated in decades, the proposal would better define the regular rate for today’s workplace practices.

The Department proposes clarifications to confirm that employers may exclude the following from an employee’s regular rate of pay:

  • The cost of providing wellness programs, onsite specialist treatment, gym access and fitness classes, and employee discounts on retail goods and services;
  • Payments for unused paid leave, including paid sick leave;
  • Reimbursed expenses, even if not incurred “solely” for the employer’s benefit;
  • Reimbursed travel expenses that do not exceed the maximum travel reimbursement under the Federal Travel Regulation System and that satisfy other regulatory requirements;
  • Discretionary bonuses, by providing additional examples and clarifying that the label given a bonus does not determine whether it is discretionary;
  • Benefit plans, including accident, unemployment, and legal services; and
  • Tuition programs, such as reimbursement programs or repayment of educational debt.

The proposed rule also includes additional clarification about other forms of compensation, including payment for meal periods, “call back” pay, and others.

The proposed rule was published in the March 29, 2019 Federal Register and comments are due on May 28, 2019.

Contact your FortneyScott attorney if you have any questions or would like to file a comment about the proposed rule.

Federal Judge Orders EEOC to Provide Update on Pay Data Collection by April 3

The EEO-1 Report Survey officially opened on Monday, March 18, 2019 allowing employers to only submit the race, gender, ethnicity of their employees by EEO category (Component 1). EEOC in a statement issued on Monday morning said that it was only seeking Component 1, but that it was “working diligently on next steps in the wake of the court’s order in National Women’s Law Center, et al., v. Office of Management and Budget, et al., Civil Action No. 17-cv-2458 (TSC), which vacated the OMB stay on collection of Component 2 EEO-1 pay data. The EEOC will provide further information as soon as possible.”

In response to EEOC’s failure to require employers to submit pay data, US District Court Judge Tanya S. Chutkan on Tuesday, March 19, 2019 ordered the agency to inform employers of its timeline for collecting Component 2 data by April 3, 2019.  By that date, the EEOC is to let employers know if the data will be required before the May 31, 2019 deadline and provide guidance on how to submit the information. Component 2 to the EEO-1 Report would collect W-2 pay data and hours worked from all employers with 100 or more employees in 12 pay bands by EEO Category.


OFCCP issues FAQs on Section 503 focused reviews

On Friday, March 8, OFCCP announced its Section 503 Focused Review Landing Page. The landing page includes information on the Section 503 regulations, the focused review directive, and resources on reasonable accommodations as well as best practices.

Also on that page, OFCCP published long-awaited FAQs on the agency’s Section 503 focused reviews. Three of the most interesting FAQs are:

4. The Section 503 focused review scheduling letter requests our Executive Order 11246 AAP as well. Will OFCCP review the Executive Order (EO) AAP during a 503 focused review?

No. OFCCP will not conduct a review of the Executive Order Affirmative Action Program (AAP) during a Section 503 focused review. While OFCCP will request the EO AAP as part of the Section 503 focused review, the EO AAP will only be used to help the OFCCP compliance officer get a clearer picture of the contractor’s organizational structure, confirm Section 503 job groups, and understand generally how the Section 503 compliance strategies fit with the contractor’s other affirmative efforts. OFCCP will not analyze data contained in the EO AAP to look for discrimination based on sex or race and ethnicity. If elements of the EO AAP document are missing or insufficient on their face, OFCCP will note those issues and take appropriate actions, beginning with technical assistance, to bring the contractor into compliance. For example, if the EO AAP job group analysis does not include a list of the job titles that comprise each job group, OFCCP will provide technical assistance and require the contractor to submit the missing information, which will then be noted in the closure notice.

9. Will OFCCP analyze personnel activity data during a Section 503 focused review?

OFCCP will not require the submission of personnel activity data other than the data described in 60‐741.44(k) at the onset of a Section 503 focused review. However, during the course of the review, OFCCP may request and review this information. OFCCP may request compensation and promotion data for individuals who identified as having a disability, are known to have a disability, and/or employees who requested a reasonable accommodation. Additionally, based on a review of data in response to 60‐741.44(k), OFCCP may request additional applicant flow data for job groups that had applicants with disabilities.

10. Will focused reviews take place at all contractor facilities?

The first round of Section 503 focused reviews will take place at contractors’ corporate headquarters locations. OFCCP will evaluate whether it wishes to schedule other establishments for focused reviews in the future.

Wrap Up

Now that OFCCP has provided its compliance assistance materials on Section 503 focused reviews, FortneyScott understands that the CSALs will be posted imminently.

If you have any questions, please contact your FortneyScott attorney.

U.S. Department of Labor Issues New Overtime Proposal

On Thursday, March 7, 2019 the U.S. Department of Labor (DOL) posted on its website a Notice of Proposed Rulemaking (NPRM) for its new overtime rule. The proposal would raise the salary threshold for employees to be exempt from overtime from the current $455 per week ($23,660 per year) to $679 per week ($35,308 per year).

Other key aspects of the proposal include:

  • Raising the highly compensated employee (HCE) test from $100,000 to $147,414 of which $679 must be paid weekly on a salary or fee basis
  • Inviting public notice and comment to consider updating the standard salary level and HCE total annual compensation threshold every four years through rulemaking
  • Allowing employers to satisfy up to 10 percent of the salary threshold amount of $35,308 by the payment of nondiscretionary bonuses, incentives, or commissions, paid annually or more frequently (although this will not apply to HCEs)

The salary threshold is substantially lower than the salary threshold of $47,476 proposed by the Obama Administration and enjoined by the federal district court in the Eastern District of Texas prior to its effective date. The new proposal would rescind the 2016 Overtime Rule. The proposal does not make any changes the “duties” test which many employers had hoped it would.

Comments will be due 60 days after the NPRM is published in the Federal Register. FortneyScott will keep you informed on any updates made by the DOL.  Contact your FortneyScott attorney if you have any questions or would like to file comments on the proposal.

Federal District Court Reinstates EEO-1 Pay Data Report

On Monday, February 4, 2019, the Federal District Court for the District of Columbia ordered that the EEOC’s EEO-1 pay data collection report be immediately reinstated.

The court ordered the Office of Management and Budget (OMB) to immediately lift its stay on the EEOC’s pay data collection report (known as Component 2), saying the decision to implement the stay was “arbitrary and capricious.”  The effect of this ruling is to permit the EEOC to begin collecting pay data at once.  It remains to be seen if this order is immediately carried out.

In a decision focused on the nuances of administrative law, Judge Tanya S. Chutkan sternly rejected OMB’s arguments that it was authorized to issue its stay on the grounds that changes in EEOC’s formatting requirement for the new pay report were burdensome on employers. Granting summary judgment for the plaintiffs, National Women’s Law Center and the Labor Council for Latin American Advancement, the court said that while there may be times when formatting changes could be considered burdensome, this situation was not it.

The ruling also rejected (1) OMB’s challenge to the plaintiffs’ standing to sue because they could not show the stay caused them any harm and (2) that the OMB’s decision to stay implementation was not reviewable because it was not a “final agency action.” The court found that the decision to stay the data collection was itself a harm and that it was reviewable.

The court concluded that because OMB’s action in staying EEOC’s collection of pay data “was arbitrary and capricious” and “totally lacked the reasoned explanation that the [Administrative Procedures Act] requires,” an immediate reinstatement was ordered.

Takeaways for employers: 

Although the court ordered the immediate implementation of EEOC’s Component 2 pay data collection, it is all but certain that OMB will appeal the decision and seek a stay of the court’s order pending resolution of the case.  In addition, once it has a quorum of Republican Commissioners, expect the EEOC to revise or eliminate the requirement to collect pay data. Janet Dhillon has been nominated as Chair and would be the second Republican on the EEOC; however, it is uncertain as to when the Senate will confirm her. Until she is confirmed, the EEOC does not have a quorum and cannot act.  This ruling may create an incentive for the Senate to act on her nomination promptly.

FortneyScott will keep you informed on how this issue will impact you.

Federal Judge Reinstates EEOC’s Pay Data Collection

On March 4, 2019 U. S. District Court of the District of Columbia ruled that the EEO-1 pay data collection known as Component 2 should go into effect immediately, saying the Office of Management and Budget’s stay of the pay data collection was “arbitrary and capricious.”

Click here for the DC District Court’s opinion.

FortneyScott will keep you informed with any developments to this story.



DOL & EEOC Nominees Nearing Confirmation

The Senate Committee on Health, Education, Labor & Pensions (HELP Committee) moved to send the nominations of Scott Mugno (OSHA), Cheryl Stanton (Wage & Hour), and Janet Dhillon (Chair, EEOC) to the Senate floor in a party line vote.  In the recent past, clearing this hurdle has not always led to quick approval by the Senate.

Nonetheless and depending on the Senate’s legislative schedule, political leaders in these important employment-related agencies may soon be in place. The HELP Committee’s action comes in the wake of growing criticism about the overall lack of confirmed political leadership at DOL and EEOC.

FortneyScott will continue to monitor any updates related to nominations at employment based agencies.

Rulings Establish Precedent, but Judges Aren’t Forever

In a surprisingly narrow (albeit witty) per curiam decision, the Supreme Court vacated a ruling of the 9th Circuit that held it was impermissible under the Equal Pay Act (EPA) to determine a salary differential solely on the basis of prior salary. Fresno County Superintendent of Schools v. Aileen Rizo.

In the original case, the District Court ruled that under the Equal Pay Act “a factor other than sex” included using prior salary to determine pay.  On appeal – and on re-hearing by an en banc panel of 11 judges – the 9th Circuit held that relying on such a factor could not be sustained under the EPA.  Although all the judges on the panel agreed that Rizo’s case should go forward, the court splintered in arriving at a rationale for the decision.  The only opinion that garnered as many as 5 votes held that reliance on prior pay was wrong because it perpetuated sex-based pay gaps when women change jobs.  However, that opinion was written and joined by the late Stephen Reinhardt, who died before the decision could be issued.

That unfortunate event gave the Supreme Court an opportunity to vacate the case without addressing the vexing issue of the meaning of the EPA – an issue that has split a number of appellate circuits and which seems ripe for Supreme Court review.  The grounds on which the Supreme Court’s ruling was based was simply that Judge Reinhardt could not be counted among those who support the 9th Circuit’s ruling because he died before the decision was issued.  This was an impermissible exercise of judicial power from beyond the grave.  As an unidentified wag on the High Court wrote: “federal judges are appointed for life, not for eternity.”

The 9th Circuit will likely appoint a new en banc panel and issue on new ruling, perhaps on similar grounds.  In the meantime, the Supreme Court can continue to evade an important ruling on the reach and meaning of the Equal Pay Act at a time when efforts to amend it are before the Congress – again.

OFCCP to Issue 2019 CSALs; Focused Reviews Are Announced

The OFCCP has just announced that they are, “on schedule to post its next Corporate Scheduling Announcement List (CSAL) in OFCCP’s FOIA Library in mid-to-late March 2019.”  As a result, OFCCP will soon be issuing notices to 3,500 federal contractors in the next month.  In the past, CSALs, which are alerts from OFCCP informing contractors that their establishment has been selected for an audit, were mailed directly to the contractor. Now the agency will post the CSALs on its website with contractors responsible for learning on their own if they are to be audited.

The Agency also announced that 500 of the CSALs would be for a new kind of targeted compliance evaluation – a focused review.  These focused reviews are aimed at ensuring compliance not only with Executive Order 11246 but particularly with Section 503 of the Rehabilitation Act and the Vietnam Era Veterans’ Readjustment Assistance Act (“VEVRAA”), that is, the laws designed, in large part, to protect individuals with disabilities.  The focused review will always include on-site interviews with compliance managers and protected employees, as well as reviewing recruiting, hiring, and accommodations data.  To view a copy of the scheduling letter that will be used for OFCCP’s focused reviews, click here.

Register here to join a complimentary FortneyScott “Lunch & Learn” webinar: Preparing for OFCCP Focused Reviews, to be presented on February 27, 2019 at 12 noon, EST.

There will also be changes to the traditional compliance review.  Once the scheduling letters are received, contractors will have 30 days in which to submit their Affirmative Action Plans (AAPs) and the other items required by the scheduling letter and itemized listing.  In order to facilitate a timely submission, the assigned compliance officer will contact the contractor within 15 days of the contractor’s receipt of the Scheduling Letter to offer technical assistance.

OFCCP will grant a one-time 30-day extension for submission of supporting data related to the EO 11246, VEVRAA and Section 503 AAPs, provided the contractor:

  1. Requests the extension prior to the initial 30-day due date for the AAPs; and
  2. Timely submits the basic EO 11246, Section 503 and VEVRAA AAPs within the 30-day period after receiving the Scheduling Letter and Itemized Listing.

Failure to submit AAPs and/or supporting data timely, with approved extensions, will result in an immediate Show Cause Notice.

Please contact your FortneyScott attorney or send an email to info@fortneyscott.com for more information on this new extension policy or for assistance in preparing AAPs and responses to Scheduling Letters.  As more information about the focused reviews becomes available, it will be posted on this site.