Fire captains whose primary duty was to serve as first responders in case of fires and other emergencies, were not exempt executives or administrators as alleged by their employer, and were entitled to overtime compensation under the FLSA, ruled the Fourth Circuit in the recent ruling in Morrison v. County of Fairfax, Virginia.
Under the FLSA’s so-called “white collar” exemptions, workers “employed in a bona fide executive, administrative, or professional capacity,” are exempt from the overtime protections afforded by the Act. However, such exemptions are to be narrowly construed against the employer.
First responder regulation. In 2004, DOL proposed changes to its “Part 541” regulations governing the white collar exemptions, generating concerns that first responders and manual laborers would become exempt employees and lose their right to overtime pay. In response, the DOL promulgated a new regulation, 29 C.F.R. Sec. 541.3, clarifying the scope of the exemptions as applied to blue collar workers and first responders. Subsection (b) of the “first responder regulation” provides in its first part that the Part 541 exemptions “do not apply to . . . fire fighters” and other first responders, “regardless of rank or pay level.”
Application of regulation. The responder regulation was put to the test in this case, in which over 100 current and former captains brought suit against the employer for the denial of overtime pay. Under the hierarchy of the Fairfax County Fire and Rescue Department, the fire captains were five ranks down from the fire chief, reporting directly to battalion chiefs. Fire captains, along with positions above that rank, were treated as exempt from the overtime pay requirements of the FLSA.
A federal district court held that all fire captains were exempt executives. It held the first responder regulation inapplicable to the captains, on the ground that it addresses only “blue collar” firefighters. On appeal, the employer took a different approach, arguing that some of the captains are exempt executives while others are exempt administrators.
Primary duty. While captains spend time on tasks that are distinct from their front-line responsibilities, such as completing annual evaluation reports on firefighters, they have no authority to administer discipline without the approval of a battalion or deputy chief. Similarly, captains do not write or disseminate station policies. Further, they do not set or control the budget, hire or fire employees, set minimum staffing levels, change employees’ work schedules, or approve overtime.
The Fourth Circuit began its analysis with the first responder regulation. Here, the employer did not dispute that the captains qualified under the first paragraph of Section 541.3(b) as “fire fighters” who “perform work such as preventing, controlling or extinguishing fires.” The appeals court concluded that the district court erred in conflating the first subsection of the regulation, addressing “blue collar” and manual laborers, with the second, covering first responders. The court found that there was no basis for treating the two subsections as overlapping. Rather, it noted that the separate subsections are clearly delineated, with the first providing that the exemptions in question do not apply to blue collar employees, and the second that the exemptions “also do not apply” to first responders. Thus, the first responder regulation applied to this case.
“Primary duty” standard. Nevertheless, the parties did agree that under the first responder regulation whether firefighters are exempt executives or administrators is governed by the “primary duty” standard, under which the captains are exempt if (and only if) their primary duty is “management,” or administrative work “directly related to . . . management.” Like the Second Circuit in Mullins v. City of New York, the Fourth Circuit deferred to the Secretary’s interpretation of his agency’s regulation. Thus, the court found that reading the first responder regulation to incorporate the well-established primary duty test did not render the regulation meaningless.
Clear and convincing evidence. Thereafter, the appeals court found that the record did not contain evidence from which a reasonable jury could find that the employer had met its burden of showing, by clear and convincing evidence, that the captains were covered by the Part 541 exemptions. Rather, taking full account of the character of the employees’ job as a whole, there was no showing that the captains’ primary job duty was anything other than emergency response. First, although captains had certain administrative duties, it was clear that fighting fires was the more important part of the job. The court pointed out that although the captains spent very little of their time responding to emergency calls, it was illogical to give much weight to how much time a captain devoted to answering emergency calls. The nature of the job was that a fire fighter’s day may consist of extended periods of boredom, punctuated by periods of urgency and moments of terror. At any rate, the employer produced no evidence of how much time the captains spend performing exempt management work. Accordingly, the captains were entitled to summary judgment on their claim for overtime compensation.
It’s not just about you—New Jersey public policy bars shortened limitations period for state discrimination claims
Although stressing that it was all for freedom to contract, the New Jersey Supreme Court came out forcefully June 15 in support of the “public imperative in eradicating discrimination” by not allowing a contractual provision in an employment application to shorten the otherwise two-year statute of limitations in the New Jersey Law Against Discrimination to six months.
The case involved a worker whose first language was not English and who took the application home to have a neighbor translate it before he could fill it out. He was hired as a helper, eventually promoted to driver, and a couple of years later, injured his knee on the job, which required surgery and physical therapy. Two days after he returned to work full-time, he was fired in what the company said was a reduction in force. Not believing that was the case because others with less seniority were retained, the worker sued seven months later, claiming disability discrimination. Both the trial and appellate courts held that the statement in his job application waiving the statute of limitations in favor of a six-month limitations period was clear and unambiguous and was neither unreasonable nor against public policy.
It’s not just about you. But the unanimous state supreme court wasn’t about to view this as a purely “private contractual agreement by which private parties contract to limit private claims by shortening the generally applicable statute of limitations.” Reversing, the court said that while the lawsuit was based on an employment relationship, “it is not a simple private claim.” Instead, the worker alleged an LAD violation—“a law designed for equal parts public and private purposes.”
It’s about a public interest. In fact, the court gave a little history lesson, pointing out that the LAD was first enacted in 1945; it was an express exercise of the state’s police powers; it recognized nothing less than a civil right; and it “declared abhorrence to discrimination.” Plus, the state legislature further found that “because of discrimination, people suffer personal hardships, and the State suffers a grievous harm.” Among other things, the court also pointed to the LAD’s “huge incentive for employers to thoroughly investigate and respond effectively to internal complaints in order to limit or avoid liability for workplace discrimination.” In fact, the court said that “responsible employers are partners in the public interest work of eradicating discrimination.”
While the court cited other reasons for its decision (23 years of a court-supplied two-year statute of limitations for LAD claims, which the legislature had not disturbed; the dual-forum procedure for bringing claims either to the Division of Civil Rights within six months or in court within two years; and that a shortened limitations period could either foreclose meritorious claims or force lawyers to bring inadequately investigated, potentially nonmeritorious claims too quickly), the thrust of the court’s decision was premised on the public interest.
Public and private interests “cannot be divorced.” Said the court, “a contractual limitation on an individual’s right to pursue and eradicate discrimination of any form prohibited under the LAD is not simply shortening a limitations period for a private matter. If allowed to shorten the time for filing plaintiff’s LAD action, this contractual provision would curtail a claim designed to also further a public interest. As to the LAD, there is a marriage of interests that cannot be divorced.”
A couple of other states (Kansas, California) have taken a similar public policy approach, but more have not, as cases from Kentucky, Michigan, New York, and Texas have found a six-month limitations period reasonable, and that’s all that was required. A federal district court in Utah went so far as to suggest that “protecting the integrity of the contractual process” provides a countervailing public policy. But to the unanimous New Jersey high court, which explicitly recognized that “there was no bargaining here” in an employment application that “plainly involved a contract of adhesion,” the public interest in eradicating discrimination was the far better policy to elevate.
The case is Rodriguez v. Raymours Furniture Co., Inc.
Even decades after the Family and Medical Leave Act was enacted, employers are still making basic mistakes, such as presuming that an employee who wants FMLA leave has to use the word “FMLA,” failing to properly calculate FMLA allotment or use, and disparaging those who take leave. Perhaps managers find some provisions unclear or simply need a refresher. Along those lines, here are 10 “takeaways” from recent court decisions over alleged FMLA mistakes.
1. When calculating FMLA entitlement, include overtime and “working lunches.” An employee’s actual workweek is the basis for determining FMLA leave entitlement. This means overtime and breaks that were spent working must be included when calculating an employee’s FMLA entitlement. In one recent case, the Eighth Circuit held that, although a tire manufacturing employee had the choice of whether to put his name down for certain overtime shifts, the overtime became mandatory once he did that and was selected for a shift, so the overtime should have been included in calculating his allotment of FMLA leave for the year. Given that his overtime hours varied from week to week, the employer should have calculated his leave in accordance with 29 C.F.R. §825.205(b)(3). Instead, the overtime hours were not considered at all. His FMLA interference claim would therefore go to trial.
In another case, a corrections department counselor claimed understaffing kept him from eating in the employee lunchroom and he had to eat where inmates congregated. This, ruled a federal court in Illinois, raised a question on whether his lunches were spent predominantly benefitting his employer and should have been included in calculating whether he met the 1,250-hour requirement. Also at issue was whether the employer knew of his working lunches: 29 C.F.R. §785.11 states that unrequested work is work time if the employer “suffer[s] or permit[s]” the work and “knows or has reason to believe” the employee is working.
2. In calculating amount of leave used—don’t include days an employee is not scheduled. Be careful in calculating how much FMLA leave has been used—FMLA leave may be taken in periods of weeks, days, hours, and sometimes less than an hour. The employer must allow employees to use FMLA leave in the smallest increment it allows for other forms of leave, as long as it is no more than one hour. When calculating the amount of leave used, exclude days an employee would not be working (e.g., weekends, temporary plant closures, holidays).
One employer faces trial for including weekends in calculating an employee’s FMLA usage (she worked Monday through Friday) and firing her when it thought her leave was used up. The company thought it was “simple math” that her periods of leave in 2013 totaled 12 weeks (84 days) as of December 15, but a federal court in Tennessee disagreed. Weekends were not to be counted, so the total was 60 days and she had not exhausted her FMLA leave by December 15. Also rejected was the employer’s argument that the plant closes for the holidays so she would have soon exhausted her leave anyway. “If the employee is not scheduled to report for work, the time period involved may not be counted as FMLA leave,” the court noted, quoting the DOL’s response in the Federal Register to a comment.
3. Neither a medical emergency nor a request using the word “FMLA” is required. One employee won summary judgment as to her employer’s liability for FMLA interference after a federal court in Pennsylvania rejected the employer’s argument that FMLA leave is limited to medical emergencies. The court found it undisputed her parents had a serious health condition and she was entitled to family care type leave to make arrangements for their transition in care. It also found that her need for leave was unforeseeable and she was only required to give notice as soon as practicable—it was enough that she said her “dad was ill, and she had to get the house ready for him to come home” from the “hospital.” If the employer wanted more information on her parents’ health, it could have asked.
As to notice of the employee’s own health condition and need for leave, if there is a known history and the employee shows symptoms at work, that could be enough under the FMLA. It is up to the employer to learn more. For example, an employee with a history of migraines avoided summary judgment after a federal court in Missouri found that a sick log stating she was absent for “headache” may have triggered the employer’s duty to investigate; instead, it fired her under its attendance policy. In another case, a truck driver receiving treatment for high blood pressure had chest pains and, believing he might be having a heart attack, asked a coworker to tell the manager he was leaving. He was considered a “voluntary quit” since he failed to notify the manager himself, but a federal court in Maryland found triable issues on whether he provided sufficient notice of the need for FMLA leave.
4. Give employees a chance to provide certification. Employers may require employees to provide a medical certification of the need for FMLA leave, but lawsuits often arise if the certification is found deficient. The Second Circuit recently revived an employee’s FMLA claims against an employer and an HR director responsible for a communication breakdown that led to the employee’s discharge. The employee provided certification that she needed to care for her son who was hospitalized with diabetes. After he broke his leg, she sent a new FMLA request for leave through July 9 and repeatedly asked if more information was needed. She heard nothing until she received a July 17 letter stating her paperwork did not justify her absences. She sent emails asking what “paperwork” was needed, but the HR director simply sent a DOL brochure and refused to let her return absent proper documentation. She was fired for job abandonment. To the appeals court, a jury could find the employee made good faith efforts and was thus relieved of her duty to provide certification.
In a case out of Illinois, a staffing agency was denied summary judgment on an FMLA interference claim because it fired the employee one day after requesting her medical certification. An employer may deny leave absent timely certification, explained the federal court, but 29 C.F.R. §825.305(b) defines timeliness to be 15 calendar days from the request for certification. It also requires the employer to warn the employee in writing of the consequences of failing to timely return a certification, and that was not done here.
5. Communicate with employees. As indicated by the HR director’s inadequate responses to an employee’s questions in the Second Circuit case above, it is important to keep a dialogue with employees who request information about their FMLA obligations. It is also important to communicate regarding their job status or what they can expect to change due to their absence. For example, a federal court in Arizona held an employer liable for liquidated damages under the FMLA because it failed to answer a pregnant sales rep’s questions about how her accounts and commissions would be handled during her maternity leave. By not responding to repeated inquiries over seven months, the company essentially forced her to guess as to the professional consequences she would suffer in terms of lost commissions and transferred accounts, reflecting a lack of good faith and willful indifference to the FMLA.
6. You can require the use of customary notice procedures for absences, but with caveats. Cases regularly crop up where employees have been denied leave or disciplined for not following call-in procedures for potentially FMLA-qualifying absences. Employers need to consider if the need for leave was unforeseeable. If it was unforeseeable, employees need only provide notice of the need for FMLA leave “as soon as practicable,” though employers may generally require them to follow normal call-in procedures. In one case, an employee’s bipolar medication interfered with sleep and she overslept, failing to call in an absence before her morning shift. In the opinion of a federal court in Kansas, a jury could find that calling in late was “as soon as practicable” and that the employer interfered with FMLA rights by firing her for tardiness and absences.
In other cases, where employees have no excuse for failing to follow call-in procedures, their FMLA claims usually fail. For example, a Michigan welder had his FMLA claim tossed because he had no good reason for not calling in his late arrival. The federal court found that his deposition testimony providing only “conjectural justifications” such as he was probably suffering an anxiety attack at the time, were not enough to avoid summary judgment. The result was the same for a Delta flight attendant based in Utah who was fired for violating airline policy by accepting an assignment and then canceling without sufficient notice.
7. Avoid derogatory remarks about those who take leave. If there’s one thing that’s going to make a plaintiff’s case easier in proving unlawful intent, it is a manager’s or decisionmaker’s derogatory remarks about a statutorily protected activity. In one case from a federal court in Indiana, an employee was previously disciplined for excessive absences and was subject to a last chance agreement, but he still survived summary judgment on his FMLA claims, which were supported by his supervisor’s disapproving remarks about his need for leave, including that he was on “thin ice” and was “burying himself.” In a federal case out of Illinois, a car salesman who was fired 13 days after returning from FMLA leave for heart surgery won an extra $308,240 in liquidated damages on his FMLA retaliation claim after the employer failed to show it acted in good faith. Significantly, his visible heart pack was treated with open disdain by his supervisor, and he was told “don’t die at the desk or I am going to drag you outside and throw you in the ditch.” He was also threatened with demotion.
8. Be consistent in your treatment of employees before and after leave. A change in the way an employee is treated after FMLA leave may be considered evidence that the leave was a negative factor in any disciplinary action. In one case, an employee claimed that as she took more FMLA leave, her new supervisor began to “watch her like a hawk,” then gave her warnings for allegedly violating attendance and personal phone usage policies, eventually placing her on two performance improvement plans and firing her. This was enough, ruled a federal court in Illinois, to state a plausible FMLA retaliation claim. In another case, a federal court in Michigan denied summary judgment based largely on evidence that an employee received a positive performance review before her FMLA leave, but afterwards was disciplined and terminated for poor performance, along with evidence that the employer skipped a step in its progressive discipline policy and created an after-the-fact paper trail documenting misconduct that purportedly occurred months earlier.
9. Adjust goals downward for employees who take FMLA leave. While it is important to be consistent in how you treat an employee before and after FMLA leave–and as compared to others, it is also important to adjust time-sensitive goals for those who take FMLA leave. For example, evidence offered by an account executive that her company didn’t adjust her sales targets to account for her intermittent FMLA absences and then fired her for failing to meet her goals raised an issue for trial on whether she was actually fired for taking FMLA leave, ruled a federal district court in New Hampshire. Similarly, a court in Tennessee denied summary judgment on FMLA claims by an employee who took intermittent leave to care for her daughter, based in part on evidence that the employer refused to let coworkers help her meet her goals, nitpicked her work, faulted her for missing goals when she took leave, and treated similarly situated employees who missed goals better than it treated the employee.
10. Not every deviation from what you expect of a seriously ill person suggests FMLA abuse. It’s one thing if an employee posts Facebook pictures of his vacation in St. Martin during FMLA leave—a federal court in Florida held that an employee who did just that failed to show he was fired for taking FMLA leave rather than for his conduct while on leave. Usually, though, suspected FMLA abuse isn’t so clear, so employers must tread carefully. In one case, a kitchen manager told his employer he was ill with blood in his stool and planned to go to the hospital or health department. Instead, he walked to a diner, had coffee, then drove home, contacting the health department the next day (he was diagnosed with colitis and diverticula and was treated for two years). Though he was fired for walking off the job, a federal court in Tennessee found triable questions on whether he gave notice of an FMLA-qualifying condition and triggered a retaliatory action. In a case out of Maine, a long-time employee approved for intermittent leave due to chronic anxiety told his employer he was taking the rest of the day off. He ran into a coworker and they had lunch. Coworkers notified HR, which had him watched. He was suspended for “possible FMLA fraud” and then fired. The federal court held that he stated a plausible FMLA retaliation claim.
Other recent developments of note. In terms of case law, a recent ADA case bears mentioning because it highlights the confusion experienced by some employers concerning the potential overlap in their obligations under the ADA and the FMLA when an employee requests medical leave as an accommodation. In particular, it is important to note that an employee who has exhausted his or her FMLA leave may still be entitled to medical leave under the ADA. As explained by a federal court in Florida, granting the full 12 weeks of FMLA leave may not satisfy an employer’s independent duty to accommodate an employee’s disability under the ADA, such as through additional (though not indefinite) medical leave. Thus, the FMLA does not supplant the ADA when it comes to granting medical leave as an accommodation.
Agency developments should also be noted, including the Department of Labor’s announcement of a new FMLA notice poster that employers will be required to post in their workplaces and a new employer guide designed to provide essential information on FMLA obligations. The DOL also recently issued a fact sheet on the joint employment relationship and the corresponding FMLA responsibilities of primary and secondary employers, including both an example and a chart to illustrate specific responsibilities. More information is available on the Department of Labor’s website, including posters; e-Tools; and fact sheets on employee notice requirements and how to calculate FMLA leave, rules for military family leave, and other topics.
OFCCP’s new sex discrimination regulations include compensation, pregnancy, caregiver, and gender identity provisions
Replacing its outdated sex discrimination guidelines from 1970, the OFCCP announced on June 14, 2016 a final rule on new sex discrimination regulations that the agency says align with current law and address the realities of today’s workplaces. Topics addressed in the final rule—which updates the provisions at 41 CFR Part 60-20 for the first time in more than four and a half decades— include compensation discrimination, harassment, accommodations for pregnant workers, gender identity bias, and family caregiving discrimination. The final rule was published in the Federal Register on June 15, 2016 (81 FR 39108-39169), and is scheduled to take effect on August 15, 2016.
The OFCCP website has a page regarding the final rule that contains frequently asked questions, a fact sheet, a chart comparing the final rule to the 1970 sex discrimination guidelines, and other resources.
“We have made progress as a country in opening career opportunities for women that were, for decades, the province of men. Yet, there is more work that lies ahead to eradicate sex discrimination. This is why it is important that we bring these old guidelines from the ‘Mad Men’ era to the modern era, and align them with the realities of today’s workplaces and legal landscape,” said OFCCP Director Patricia A. Shiu in the June 14, 2016 statement announcing the final rule.
The agency’s announcement of the rule was made in conjunction with the start of the White House Council on Women and Girls first “United State of Women” Summit.
“The rule adopted today will mean that long debunked stereotypes will not keep workers from getting a new job or a promotion,” said DOL Women’s Bureau Director Latifa Lyles. “This is an important reminder that there is no such thing as ‘women’s work’ or ‘men’s work,’ there is only work.”
Outdated guidelines. The guidance in Part 60-20 was first published in the Federal Register on June 9, 1970 (35 FR 8888) and became effective as reissued (43 FR 49258) on October 20, 1978. The new final rule marks the first update to Part 60-20 since it was first published. Since that time, the nature and extent of women’s participation in the labor force and employer policies and practices have changed significantly. In addition, extensive changes in the law regarding sex-based employment discrimination have taken place, the OFCCP points out, noting that Title VII has been amended twice. Indeed, some of the guidelines’ provisions deviate from well-established law, and the agency no longer enforces outdated provisions. Thus, the OFCCP published a Notice of Proposed Rulemaking (NPRM) in the Federal Register on January 30, 2015 (80 FR 5246–5279) designed to clarify contractors’ obligations under current law and remove conflicting regulatory provisions.
The original public comment deadline for the NPRM was March 31, 2015. However, on March 27, 2015, the OFCCP announced an extension of the deadline to April 14, 2015 to allow the public time to comment on the impact of the U.S. Supreme Court’s March 25, 2015 decision in Young v United Parcel Serv (98 EPD ¶45,276). A notice of this extension was published in the Federal Register on April 1, 2014 (80 FR 17373). In Young, the Court held that an individual pregnant worker who seeks to show disparate treatment under Title VII through indirect evidence may do so through application of the McDonnell Douglas framework, but such plaintiffs are not required to show that the employer’s policy rationale was intentionally biased; rather, the employee can satisfy her burden of showing pretext by demonstrating that the policy put a “significant burden” on pregnant employees, and that the employer’s reasoning was not sufficient to justify that burden. According to the OFCCP, it follows “Title VII principles” when enforcing Executive Order (EO) 11246.
The OFCCP received 553 comments on the proposed rule. It submitted the final rule to the Office of Budget and Management (OMB) for review on October 29, 2015. The OMB approved the final rule on June 13, 2016.
Overview. In the final rule, the OFCCP replaces in significant part the guidelines at Part 60-20 with new sex discrimination regulations, intended to align with existing law and policy, that set forth federal contractors’ obligations under EO 11246 in regard to promoting and ensuring equal opportunities for all persons employed or seeking employment with government contractors and subcontractors without regard to sex. This nondiscrimination requirement also applies to contractors and subcontractors performing under federally assisted construction contracts. The preamble to the final rule notes that, in addition to removing outdated provisions in the current guidelines, the final rule also adds, restates, reorganizes, and clarifies other provisions to incorporate legal developments that have arisen since 1970 and to address contemporary problems with implementation.
Under the final rule, the current title of Part 60-20 has been changed from “Sex Discrimination Guidelines” to “Discrimination on the Basis of Sex,” to make clear that the provisions in part 60-20 are regulations implementing EO 11246 with the full force and effect of law.
General provisions (Section 60-20.2). The final rule sets forth the general prohibition of sex discrimination, including discrimination on the bases of pregnancy, childbirth, or related medical conditions. It also describes employment practices that may unlawfully treat men and women disparately and describes employment practices (such as height or weight qualifications) that are unlawful if they have a disparate impact on the basis of sex and are not job-related and consistent with business necessity.
Of note, the final rule incorporates the Obama administration’s current legal interpretations that discrimination based on sex includes discrimination based on gender identity and transgender status. As such, the provisions of the final rule reflect the OFCCP’s view that adverse treatment of employees on the basis of failure to conform to particular gender norms and expectations about their appearance, attire, or behavior is unlawful sex discrimination. Accordingly, the rule requires contractors to allow workers to use bathrooms, changing rooms, showers, and similar facilities consistent with the gender with which the workers identify. On top of that, the preamble to the rule states that an explicit, categorical exclusion of coverage for all care related to gender dysphoria or gender transition is facially discriminatory because such an exclusion singles out services and treatments for individuals on the basis of their gender identity or transgender status.
BFOQ defense (Section 60-20.3). Consolidating in one provision the current references to the BFOQ defense available to employers and updating the language set forth in Title VII, the new Section 60-20.8 replaces the previous section entitled, “Job policies and practices” with “Sex as a bona fide occupational qualification.”
Compensation (Section 60-20.4). For purposes of evaluating compensation differences, the final rule states that the determination of similarly situated employees is case-specific. Relevant factors in determining similarity may include tasks performed, skills, effort, levels of responsibility, working conditions, job difficulty, minimum qualifications, and other objective factors. In some cases, employees are similarly situated where they are comparable on some of these factors, even if they are not similar on others, according to the OFCCP.
In addition, the rule explains that unlawful compensation discrimination can result from job segregation or classification on the basis of gender, not just unequal pay for equal work. It provides that contractors may not grant or deny opportunities for overtime work, training, apprenticeships, better pay, or higher-paying positions or opportunities that may lead to advancement to higher-paying positions because of a worker’s sex.
Notably, the final rule also includes a provision that states a contractor violates EO 11246 and these regulations “any time it pays wages, benefits, or other compensation that is the result in whole or in part of the application of any discriminatory compensation decision or other practice.is the result of discrimination, not only when the decision to discriminate is made” (Part 60-20.4(e)).
Pregnancy, childbirth, and related medical conditions (Section 60-20.5). The final rule requires that contractors provide workplace accommodations, such as extra bathroom breaks and light-duty assignments, to an employee who needs such accommodations because of pregnancy, childbirth, or related medical conditions, in certain circumstances where those contractors provide comparable accommodations to other workers, such as those with disabilities or occupational injuries. It also provides a non-exhaustive list of examples of unlawful pregnancy discrimination, including: refusing to hire pregnant applicants; firing an employee or requiring an employee to go on leave because the employee becomes pregnant; limiting a pregnant employee’s job duties based on pregnancy or requiring a doctor’s note in order for a pregnant employee to continue employment; providing employees with health insurance that does not cover hospitalization and other medical costs related to pregnancy, childbirth, or related medical conditions when hospitalization is provided for other medical conditions; and denying an alternative job assignment, modified duties or other accommodations to a pregnant employee when such accommodations are provided or are required to be provided by a contractor’s policy or by other relevant laws to other employees whose abilities or inabilities to work are similar.
Benefits (Section 60-20.6). Under the final rule, contractors must provide equal benefits and equal contributions for male and female employees participating in fringe-benefit plans, such as medical, hospital, accident, life insurance, and retirement benefits. The term “fringe benefits” also includes leave, profit-sharing and bonus plans, and other terms, conditions, and privileges of employment. The rule provides that the greater cost of providing a fringe benefit to members of one sex is not a defense to a contractor’s failure to provide benefits equally to members of both sexes.
Note that the final rule replaces the current Section 60-20.6, entitled, “Affirmative action” with the new section entitled “Other fringe benefits.” The previous section on affirmative action is unnecessary because the requirements related to affirmative action programs are set forth in parts 60-2 and 60-4, the OFCCP explained.
Sex-based stereotypes (Section 60-20.7). The final rule incorporates the Obama administration’s current legal interpretations that discrimination based on sex includes discrimination based on gender identity and transgender status. As such, it reflects the OFCCP’s view that adverse treatment of employees on the basis of failure to conform to particular gender norms and expectations about their appearance, attire, or behavior is unlawful sex discrimination.
The final rule also clarifies that adverse treatment of an employee because of gender-stereotyped assumptions relating to family caretaking responsibilities is discrimination, and that leave for childcare must be available to men on the same terms as it is available to women. For example, contractors may not deny mothers employment opportunities that are available to fathers based on the faulty assumption that mothers’ childcare responsibilities will conflict with their job performance. Along the same lines, contractors may not deny fathers flexible workplace arrangements that are available to mothers based on the faulty assumption that men do not have and do not assume childcare responsibilities.
Harassment (Section 60-20.8). Addressing both quid pro quo and hostile-environment sexual harassment, the final rule prohibits unwelcome sexual advances, requests for sexual favors, offensive remarks about a person’s sex, and other verbal or physical conduct of a sexual nature when such conduct unreasonably interferes with an individual’s work performance, becomes the basis for employment decisions, or creates a hostile working environment. The rule also clarifies that sexual harassment includes: (1) harassment based on gender identity or expression, (2) harassment based on pregnancy, childbirth, or related medical conditions, and (3) sex-based harassment that is not sexual in nature but that is because of sex or where one sex is targeted for the harassment.
Appendix offers best practices. An appendix to the final rule identifies best practices designed to help contractors develop and implement procedures to ensure an environment in which all employees feel safe and welcomed, are treated fairly, and are not harassed because of sex.
Religious exemptions. While there is no formal process for invoking the Religious Freedom Restoration Act (RFRA) as a basis for an exemption from EO 11246, the preamble to the final rule explains that insofar as the application of any requirement under this part would violate RFRA, such application shall not be required. Also, the OFCCP notes that EO 11246 specifically allows religiously affiliated contractors (religious corporations, associations, educational institutions, or societies) to favor individuals of a particular religion when making employment decisions. The agency also notes that it follows Supreme Court precedent recognizing that the First Amendment to the Constitution requires a “ministerial exception” from employment discrimination laws, which prohibits the government from interfering with the ability of a religious organization to make employment decisions about its “ministers,” a category that includes, but is not limited to, clergy.
The House Committee on Education and the Workforce, chaired by Rep. John Kline (R-Minn.), held a hearing on June 9 to examine the Labor Department’s controversial overtime rule, which among other things raises the weekly salary threshold below which overtime must be paid from $455 to $913 a week, or stated annually, from $23,660 to $47,476 a year. The Committee Majority has expressed concerns that the administration has failed to streamline existing overtime regulations and has finalized a rule that will lead to fewer jobs, less workplace flexibility, and fewer opportunities to climb the economic ladder. But one witness, whose testimony was not featured by the lawmakers in their press release, saw the rule much differently, notably as a vehicle for rolling back the trend of rising income equality that has been underscored by decades of stagnant wages for middle-class workers.
Compromise. It’s worth remembering that the proposed rule would have set a higher threshold of $470 a week or $50,440 annually, but it was reduced in the final rule. In addition, the proposed rule set this salary threshold at the 40th percentile of full-time salaried workers nationally, but the final rule sets it at the 40th percentile of full-time salaries in the lowest-wage Census Region, which is currently the South. This change was in response to concerns that the “one-size-fits-all” approach of the proposed rule did not take into account the lower salaries paid in some areas of the country, particularly in the South.
Negative impact on workers. The testimony highlighted by the Committee Majority underscored the perceived downside of the final overtime rule. Tina Sharby, chief human resources officer at Easter Seals New Hampshire, testifying on behalf of the Society for Human Resource Management (SHRM), said: “Easter Seals New Hampshire will need to reclassify 280 employees from salaried to nonexempt status … limiting career opportunities and reducing flexible work schedules that both attract our staff and enable us to provide certain services … The final rule will impact employees on a personal level … Many staff members have expressed feelings of being demoted.”
According to Seyfarth Shaw attorney Alexander Passantino: “Employees will work the same, they will earn the same, but they will lose the flexibility and be required to track their work in a way that they have not done previously … Teamwork, productivity, and morale will undoubtedly suffer,” and the rule will have “the perverse effect of forcing many employers to take away the benefits, job security, and opportunities for advancement for those employees who will lose exempt status.”
Michael Rounds, associate vice president for Human Resources Management at the University of Kansas, said: “A primary concern is that our centers will not be able to afford as many postdocs and will need to cut back on the number of research openings and opportunities that are available. A decrease in the number of postdocs may have a direct impact on the standing of the University of Kansas in the national higher education research community.”
Vulnerable populations. SHRM’s advocate also pointed to concerns about how the overtime rule will impact services to vulnerable populations, such as veterans and children with disabilities. “A program at significant risk is the Military and Veterans Services Coordination program,” she observed. “Services are provided around the clock to respond to emergency situations for our veterans and their families … Because of the potential cost for overtime, Easter Seals New Hampshire will be forced to limit the number of coverage hours for this already underfunded program, limiting our ability to provide around-the-clock care and lessening these lifesaving support services.” The Special Education School that provides services to over 80 children, will also be impacted, according to Sharby, who said “Easter Seals simply cannot afford to pay overtime and the children with disabilities that we serve are the ones who will suffer the most.”
Implications for students. Rounds also expressed concern about the impact of the final rule on students: “It is inevitable that there will be a significant reduction in the services currently being provided by the University of Kansas units to students as we transition employees from their current exempt to non-exempt status without the flexibility of working more than 40 hours per week regardless of mission demands.”
“It is probable … that tuition will ultimately be pushed higher in future years in order to address the enduring impacts of the new overtime rule,” according to Rounds. “There is simply no way for universities like the University of Kansas to absorb costs of this magnitude without an impact on our academic, research, and outreach missions that will be felt by the public we serve.”
Small businesses. Sharby observed that the final rule will not only directly impact the budgets of nonprofits, but also small businesses. “These employers will be unable to absorb such a massive increase in payroll and labor costs,” she predicted.
“Regulatory familiarization, adjustment, and managerial costs will be significant for all employers,” Passantino suggested. “Perversely, however, these costs may be more significant for those organizations that can least afford it, such as small businesses … These organizations have the least discretion in their budgets and, in many ways, they will need to be the most creative in developing solutions.”
What about the good news for workers? One witness, however, looking in a different direction with his observations, voiced the upside of the impact of the new overtime requirements on workers and their families. “I predict that this overtime rule change, implemented by the Obama administration and its Labor Department and broadly supported by congressional Democrats and the general public—60 percent of Americans backed the proposal in a recent poll—will come to be viewed as an important and positive intervention on behalf of middle-class families,” said Dr. Jared Bernstein, Senior Fellow, Center on Budget and Policy Priorities.
Income inequity up in face of eroding wage standards. Berstein observed that salary threshold in the FLSA regulations “was ignored for decades, other than a notch up in 2004.” He said that the new increase, although historically large, does not even bring the threshold back up to its historical peaks, but rather only partially restores its inflation-adjusted historical value.
In contrast, Berstein pointed to data showing the percent of national income going to the top 1 percent of households, which for decades hovered around 10 percent, at the same time that the FLSA overtime threshold “was regularly maintained at a real level of at or above $1,000 in today’s dollars.” Beginning in the 1980s, as inequality trends began to push up income concentration, Bernstein said labor standards like overtime and the minimum wage were permitted to erode.
Economic impact and worker well-being. Bernstein pointed to the DOL’s estimates that the new requirements will cost employers $1.5 billion a year ($1.2 billion in new overtime pay and $300 million in administrative expenses to implement the change), which amounts to about 0.03 percent of the United States’ $8 trillion total national wage bill. He noted also that “Goldman Sachs’ analysts found that ‘the new rules should have little effect on wages in the aggregate,’ arguing that the rule change is likely to raise average hourly earnings less than 0.1 percent.’”
“This tiny impact on the aggregate wage bill should not undermine our expectations that the rule will improve the well-being of millions of workers and push back to some degree on inequality,” Bernstein urged. “First, some of the higher pay for beneficiaries of the new rule will come from redistribution within the wage bill (from high- to middle- and lower-paid workers). Second, in cases where workers are no longer tapped to work unpaid overtime hours, they are clearly better off in terms of balancing work and family life. Though such a welfare-enhancing change does not show up in the national accounts, it is one of the very important benefits of the new rule.”
Policy win for middle-class families. Bernstein predicted that over time, as the new overtime rule takes effect, it will be recognized as a major policy win for middle-class families. “It will boost some paychecks, help parents balance work and family, and produce new straight-time jobs,” he said.
Moreover, the fact that the threshold will be automatically adjusted will militate against the deteriorating trends of rising income inequity and eroding wage standards, which will remind policymakers that “labor standards must be vigilantly maintained, protected, and updated,” according to Bernstein.
Seeing the big picture. “I’ve urged members of this committee to ignore knee-jerk antipathy to the new rule and instead to deal in substance, as the [Labor Department] did in reviews of tens of thousands of comments and listening carefully to stakeholders on all sides of this issue,” Bernstein pressed. “We see the results of such compromise in the use of the lowest regional threshold, the three-year deferral for certain non-profits, and the leaving of the duties test unchanged.”