Wednesday, May 18, 2016

New Overtime Rule for Salaried Employees Announced

This morning, President Obama and the Department of Labor (DOL) announced publication of a final rule that will change the minimum monetary threshold required for employers to categorize employees as "salaried" under the federal Fair Labor Standards Act (FLSA). 

In order to legally classify an employee as "salaried" under the FLSA, an employer must prove that the employee meets two tests: the weekly salary test and a factual job-duties test. The most commonly utilized job-duties tests are the executive, administrative, and professional exemptions (also commonly known as the "white collar" exemptions). The DOL's newly announced rule does not make any changes to the factual job-duties portion of these exemptions. 

What will change (and in a big way) is the amount of weekly salary an employee who otherwise meets one or more of the factual job-duties tests must be paid in order to properly be classified as "salaried." Currently, an employer need only pay an employee a minimum of $455 per week in order to meet the weekly salary test. Under the DOL's new final rule, however, that minimum will be increased to $913 per week, or $47,476 a year. This new rule becomes effective on December 1, 2016.

This means that in 6 months, Employers who fall under the requirements of the FLSA will have to ensure that all of their "salaried" employees earn at least $913 a week in order to keep that classification. If any employee earns less than $913 a week come December 1, it does not matter what his or her job duties are—the employer cannot pay that employee on a "salaried basis." Rather, the employee must be paid as an hourly employee, which means the employer is then legally obligated to pay overtime at a rate of one-and-a-half times the regular rate of pay to that employee for all hours worked in excess of 40 a week, no matter what type of job the employee is performing. 

The DOL also announced that this new "wage floor" for salaried employees will be adjusted every three years, so that the minimum weekly salary will always be equivalent to the 40th percentile of weekly earnings for full-time salaried workers in the lowest-wage Census Region. These adjustments will be published by the DOL at least 5 months before their effective date and will be placed on the Wage and Hour Division website. The first automatic adjustment will occur on January 1, 2020.

For more details on the DOL's final overtime rule, click here. Employers should start performing self-audits of their salaried employees now and put a game plan in place to ensure that compliance with these new requirements is achieved before December 1. 

Tuesday, November 24, 2015

Did You Know That a "Temp" Can Also Be An "Employee?"

For all you employers out there who regularly rely on "temp" agencies to supply individuals to fill gaps your day-to-day operations and cover for exigencies that arise, a recent decision from the Third Circuit Court of Appeals should give you pause and (perhaps) yet another thing to worry about (yay, law!)

In Faush v. Tuesday Morning, Inc. (available here), the Third Circuit held that a "temp" worker assigned by a temp agency to work at Tuesday Morning, Inc., could be considered an "employee" of Tuesday Morning for claims of race discrimination under Title VII and the Pennsylvania Human Relations Act (PaHRA).

The factual scenario was rather unremarkable and probably familiar to most employers. Tuesday Morning (a home-goods retailer) was in the process of opening a new store in Pennsylvania. But because it didn't yet have a full complement of employees at the new store, it needed to bring in some "temp" workers as a "stopgap measure." So, Tuesday Morning contracted with Labor Ready, a temp staffing firm, for help. One of the individuals Labor Ready sent to work at Tuesday Morning was Matthew Faush. Faush was an employee of Labor Ready, and only worked at the Tuesday Morning store for a few days. He claimed that while there, he and other African-American "temp" employees were subjected to racial slurs and abuse by white workers and the manager of Tuesday Morning. Faush filed suit against Tuesday Morning under Title VII and the PaHRA, claiming he was an "employee" of Tuesday Morning and had suffered from unlawful race discrimination.

Tuesday Morning sought (and won) a legal ruling from the trial court dismissing Faush's case on the basis that Faush was not its employee.

The Third Circuit disagreed.

After examining all the facts, the Court held that while Labor Ready set Faush's pay rate, paid his wages, taxes, and social security, and maintained his workers' compensation insurance, those factors did not foreclose Tuesday Morning's classification as Faush's "employer." Specifically, the Court noted that Faush worked exclusively at Tuesday Morning's store and Tuesday Morning assigned Faush all of his job tasks, which were the same or similar to those Tuesday Morning assigned its regular employees. Tuesday Morning supplied Faush with all of the tools and materials he needed to complete his assignments, verified his working hours, directly supervised his tasks, and provided him with site-specific training. The Court also found that by because Tuesday Morning paid Labor Ready an hourly rate that was dependent upon the number of hours Faush worked (including any potential overtime), Tuesday Morning was really "indirectly pa[ying] [Faush's] wages, plus a fee to Labor Ready for its administrative services." The services contract between Labor Ready and Tuesday Morning also provided that Tuesday Morning retained ultimate control over whether Faush was permitted to work at its store, and could request a replacement employee for Faush at any time. The agreement even referred to Faush (and all of the other "temp" employees supplied by Labor Ready) as "Temporary Employees,"of Tuesday Morning, and required Tuesday Morning to maintain a workplace that was "free from discrimination and unfair labor practices," in compliance with "all applicable federal, state and local laws and regulations concerning employment," including Title VII. The Court thus held that it was ultimately up to a jury to determine whether, on these facts, Tuesday Morning was Faush's "employer."

This case serves as a stark reminder for employers that sometimes, employees can have two "masters" (or as the law refers to it, "joint employers.") Just because an employer brings on a worker from a temp agency on a short-term assignment and the worker gets his/her paycheck and W-2 from the temp agency, does not automatically mean the employer is immune from claims under the federal and state anti-discrimination laws.

So, the take-away practice tip for employers here is: make sure to treat your "temp" workers the same way you treat your regular employees, because at the end of the day, the law may already be doing so.

Tuesday, September 22, 2015

When Non-Competes are Non-Specific, Bad Things Happen

There are not many things in business as bad as a former employee setting himself or herself up in direct competition with his or her former employer. It's worse, however, when the former employee is permitted to do so in the face of a non-compete agreement that the employer originally thought was air-tight. 

Such was the scenario that Boyds clothing store recently found itself in, when it tried to prevent one of its former men's and women's footwear floor managers from opening up his own shoe store in Philadelphia. That former employee had previously signed a non-compete agreement with Boyds, which prevented him from:
"directly or indirectly, individually or as a partner or as an agent, employee or stockholder of any corporation or otherwise. . . [s]olicit or accept a job offer from another men's and or women's retail clothing company who engages in the sale of men's and/or women's clothing that is within a (50) mile radius,"
of any Boyds' store, following the end of his employment.

Pretty straightforward, no?

Not quite. 

The Pennsylvania Superior Court disagreed with Boyds' contention that the language above prevented the former employee from starting up his own shoe store. Distilled to its core, the Court held that by going into business for himself, the former employee had not "solicited" or "accepted" a job offer from a competitive retail clothing store. Not willing to accept form over substance, the Court rejected Boyds' argument that the former employee's own shoe store—a separate legally incorporated entity—had, in effect, "offered" him a "job," upon its creation, which the former employee then "accepted," placing him in violation of the non-compete agreement. Instead, the Court found that the plain language of the non-compete agreement simply did not prevent or preclude outright ownership of a competing business; rather, it prohibited only soliciting and accepting a job offer, not staring up one's own establishment. Those are two different things. 

The lesson of this case should be obvious; non-compete agreements (like all legal contracts, for that matter) should say what is meant and mean what is said. That maxim, unfortunately, is often elusive in the the world of highly-convoluted, grammar-strained legal writing, which attempts encompass all known scenarios and possible outcomes by employing broad, generic, and occasionally obtuse language. But it doesn't have to be that way. Just because a legal document—whether a non-compete agreement, employment contract, or independent contractor agreement—carries with it binding obligations and requirements under the law, doesn't mean that it needs to be written like dusty law textbook. Contracts such as these should employ simple, non-technical language that is capable of being both easily read and easily understood, and is not subject to questionable interpretations. Similarly, over-arching concepts and descriptive scenarios should be espoused in favor of plain-English statements of intent and direction. 

If Boyds had truly wanted to prevent its former employees from starting up their own clothing businesses down the block and siphoning away potential customers, it should have written its non-compete agreement to say exactly that. For example, "after termination of employment with Boyds, the employee agrees not to own, control, or manage any men's or women's retail clothing business located within 50 miles of any Boyds' store," is easy-to-understand language that could have accomplished Boyds' intent, protected its legitimate business interests, and avoided the exact scenario it now finds itself it. 

Oh, and it probably would have saved Boyds a lot of money in attorneys' fees, as well.