Federal Court Permanently Enjoins DOL’s Persuader Rule

By Cheryl D. Orr and Ramon A. Miyar

A federal district court in Texas has issued a permanent injunction blocking implementation of the U.S. Department of Labor’s (“DOL”) controversial “Persuader Rule,” which was promulgated under the Labor Management Reporting and Disclosure Act of 1959 (“LMRDA”).[1]

The LMRDA imposes public reporting obligations on employers and consultants who enter into agreements to persuade or influence employees’ exercise of their collective bargaining rights.  For more than 50 years, the DOL interpreted the LMRDA’s “Advice Exemption” as exempting from the statute’s onerous reporting requirements indirect “persuader activities” by labor relations consultants, including attorneys. The DOL’s Persuader Rule, however, which took effect on April 25, 2016, removed indirect persuader activities from its definition of exempt advice, thus subjecting confidential attorney-client communications and agreements to the LMRDA’s public reporting requirements.

Following the publication of the Persuader Rule on March 26, 2016, businesses and states filed three lawsuits seeking to enjoin nationwide implementation of the rule.[2] On November 16, 2016, in National Federation of Independent Business v. Perez (Case No. 5:16-cv-00066), Judge Samuel R. Cummings of the United States District Court for the Northern District of Texas made permanent a preliminary injunction invalidating the Persuader Rule.  Absent a successful appeal to the Fifth Circuit Court of Appeals, the injunction relieves employers and their attorneys from the obligation to comply with the more onerous reporting requirements of the revised Persuader Rule, and leaves in place the previous, longstanding interpretation of the Advice Exemption.

Background

The DOL promulgated the Persuader Rule under Section 203 of the LMRDA.  The LMRDA requires employers and labor relations consultants, including attorneys, to publicly report details regarding agreements (and concomitant fee arrangements) where the purpose of the agreements (or fee arrangements) is “directly or indirectly to persuade employees concerning their rights to organize and bargain collectively.”  29 U.S.C. § 433(b).   Section 203(c) of the LMRDA, however, expressly exempts from its disclosure requirements activities that constitute giving “advice” to the employer or agreeing to represent an employer before any judicial or administrative tribunal, or in the course of collective bargaining negotiations. Id. § 433(c).

For over 50 years, the DOL has interpreted “advice” to exclude communications exclusively between the employer and labor relations consultants (including attorneys), provided: (1) the employer could review, revise, and/or reject the information from the labor relations consultant; and (2) the consultant did not directly communicate with or disseminate materials to employees.[3]  Thus, an attorney’s indirect persuading activities, including, for example, recommending policy changes or ghost-writing talking points or scripts intended for use by the employer for persuader activities, were deemed to fall outside the scope of the LMRDA’s reporting requirements.

Under the revised rule, which took effect on April 25, 2016, and applied to all consultant agreements and arrangements entered into after July 1, 2016, the DOL significantly narrowed the scope of the advice exemption, such that indirect persuader activities no longer fell within the exemption.  As a result, confidential communications occurring exclusively between attorney and client intended to assist the employer with persuasive activities were potentially rendered subject to the reporting requirements of the LMRDA.[4]

The Court’s Injunction

On June 27, 2016, the Perez Court issued an order granting plaintiffs’ request for a nationwide preliminary injunction precluding the DOL’s implementation of the Persuader Rule. As set forth in detail in our prior blog post regarding the preliminary injunction, the Court concluded that that there was a substantial likelihood that the DOL Persuader Rule was invalid on several grounds.  Specifically, it held that:

  • The Persuader Rule violates the Administrative Procedures Act insofar as the language of Section 203(c) of the LMRDA is clear and unambiguous, and the DOL’s interpretation of the LMRDA violates the basic canons of statutory interpretation.[5]
  • The DOL’s new interpretation of the Advice Exemption is arbitrary, capricious, and unreasonable because it sets aside, without adequate explanation or analysis, a longstanding (i.e., 50-year-old) interpretation of the Advice Exemption, and contains reporting requirements that “are inconsistent with and undermine the attorney-client relationship and the confidentiality of that relationship.”[6]
  • The Persuader Rule violates the First Amendment rights of employers by imposing, without a compelling government interest, content-based burdens on employers’ ability to obtain legal advice, and on lawyers’ ability to give legal advice.[7]
  • The Persuader Rule violates the Due Process Clause of the Fifth Amendment because it is unconstitutionally vague.[8]
  • The Persuader Rule violates the Regulatory Flexibility Act (RFA) because the DOL “artificially excluded important costs of its implementation from consideration,” including the significant reporting burdens imposed on consultants.[9]

In a brief order issued on November 16, 2016, pursuant to its authority under 5 U.S.C. § 706(2), the Court set aside as unlawful the Persuader Rule, and converted its preliminary injunction to a permanent injunction with nationwide effect. The Court based its holding on, and incorporated by reference, its detailed reasoning in the June 27, 2016, order granting Plaintiffs’ request for a preliminary injunction.

At present, the ultimate fate of the Persuader Rule is uncertain.  Although the Northern District of Texas’s preliminary injunction is currently on interlocutory appeal before the United States Court of Appeals for the Fifth Circuit (Nat’l Fed’n of Indep. Bus. v. Perez, No. 16-11315 (5th Cir. Aug. 29, 2016)),  the permanent injunction presumably mooted that appeal, making it unlikely the Fifth Circuit will hear the matter before the incoming Trump Administration assumes power in January 2017.  Observers will be watching closely to see whether the DOL takes steps to contest the ruling under the new administration.


[1] 81 Fed. Reg. 15,924 et seq.

[2] National Federation of Independent Business v. Perez (Case No. 5:16-cv-00066, N.D. Tex.); Associated Builders and Contractors of Arkansas v. Perez (Case No. 4:16-cv-169, D. Ark.); Labnet Inc. v. United States Dep’t of Labor, 2016 U.S. Dist. LEXIS 81884, at *20-*21, Case No. 16-CV-0844 (D. Minn. June 22, 2016).

[3] 81 Fed. Reg. at 15925.

[4] Indirect persuader activities commonly undertaken by attorneys that might have been subject to reporting under the new Persuader Rule included: (1) behind-the-scenes planning, directing, or coordinating of the persuasive activities of supervisors or managers; (2) drafting or providing persuader materials to employers to disseminate to workers; (3) providing “off-the-shelf” and pre-prepared materials to the employer for use in persuading employees with respect to their collective bargaining rights; (4) conducting union avoidance seminars, and (5) developing or implementing personnel policies calculated to influence collective bargaining or organizing activities.

[5] Nat’l Fed’n of Indep. Bus. v. Perez, No. 5:16-CV-00066-C, 2016 WL 3766121, at *28 (N.D. Tex. June 27, 2016).

[6] Id. at *30.

[7] Id. at  *34-35.

[8] Id. at *36.

[9] Id. at *37-39.

National Preliminary Injunction Blocks New FLSA Salary Test from Taking Effect on December 1, 2016

By Mark E. Terman and Gerald T. Hathaway

A federal court issued a national preliminary injunction prohibiting the Department of Labor’s new salary rule for Executive, Administrative, Professional, Outside Sales and Computer Employees from taking effect. The final rule, published on May 23, 2016 would have gone into effect on Dec. 1, 2016. We wrote about this previously and at this time, recommend that employers suspend, but not cancel their implementation plans.

The rule mandated that employees falling under the executive, administrative or professional exemptions must earn at least $913 per week ($47,476 annually), which would more than double the currently existing minimum salary level of $455 per week. In State of Nevada v. U.S. Dep’t of Labor, No. 4:16-cv-731 (E.D. Tex. filed November 22, 2016) District Court Judge Amos L. Mazzant III (appointed by President Obama) ruled that the Department of Labor cannot impose the new salary requirement as a condition of exempt status of executive, administrative or professional (“EAP”) employees because the plain language of the Fair Labor Standards Act focuses on the duties of exempt EAP employees, and not their level of pay.

The U.S. District Court for the Eastern District of Texas implemented a two-step process of evaluating the authority of the DOL to issue the new salary level, based on the Supreme Court’s 1984 decision in Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 834 (1984).  The court stated that under the Chevron standard, the court must first assess whether Congressional intent with respect to how exempt employees are to be defined was clear (if it was, a regulation cannot contradict that clear intent).  The second step of the Chevron standard applies only if the Congressional intent was not clear, in which case the court would defer to the agency’s regulation unless it were “arbitrary, capricious, or manifestly contrary to” the FLSA.  Slip op. at 9.

Regarding the first step of the Chevron analysis, the court noted that the central section of the FLSA that creates the exemption, Section 213(a)(1), “provides in relevant part, 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 the regulations of the [DOL]’ shall be exempt from minimum wage and overtime requirements.”  Slip op. at 9.  The court assessed the plain meanings of the words, “executive,” “administrative,” and “professional,” as those terms were understood when the FLSA was originally passed, and cited the 1933 edition of the Oxford English Dictionary.  Slip op. at 10-11.  The court did not see a salary reference in those definitions, and noted that the use of the words “bona fide” as a qualifier to the terms “executive, administrative, or professional capacity” applied to the tasks actually performed by those exempt employees.  Slip op. at 11.  Thus the court concluded that “Congress intended the EAP exemption to depend on an employee’s duties rather than an employee’s salary.”  Slip op. at 12.

Over the DOL’s arguments to the contrary, the court held that “nothing in the EAP exemption indicates that Congress intended the Department to define and delimit with respect to a minimum salary level.”  Slip op. at 12.

The court at footnote 2 of its decision said it was “not making a general statement on the lawfulness” of the existing salary tests, but “is evaluating only the salary-level test as amended under the Department’s Final Rule.”  Slip op. at 12 n.2.  While the court made this limitation, surely this court’s ruling will find its way in the defense of the hundreds of FLSA cases currently pending.

As of now, employers need not implement the new salary requirements, or convert exempt employees to non-exempt status on December 1.  Surely, emergency appeals will follow, and the 5th U.S. Circuit Court of Appeals may weigh in on the matter soon.

In his injunction decision, Judge Mazzant also noted that he considered briefs already filed on an expedited motion for summary judgment led by the U.S. Chamber of Commerce.  Odds seem good that his ruling on that motion, which is still pending, will be consistent with his injunction decision.

We will keep you posted as further developments occur.

 

DOL Issues Final Rule Establishing Paid Sick Leave for Federal Contractors

By Alexa E. Miller

On September 29, 2016, the Department of Labor (“DOL”) issued a Final Rule implementing Executive Order 13706, which requires federal contractors and subcontractors performing work on or in connection with certain contracts to provide employees with up to 56 hours (7 days) of paid sick leave per year beginning on January 1, 2017. However, because this rule became final relatively recently, the Final Rule implementing EO 13706 could be rescinded by exercise of the Congressional Review Act (5 U.S.C. §§ 801-808), which is not subject to filibuster.

Applicability of the Final Rule

The Final Rule applies to certain new contracts and replacement contracts for expiring contracts with the federal government requiring performance in whole or in part within the United States that result from solicitations issued on or after January 1, 2017 (or that are awarded outside the solicitation process on or after January 1, 2017).

The Final Rule does not apply to all federal contractors; it only applies to the following types of contracts with federal government:

  1. Procurement contracts for services or construction covered by the Davis-Bacon Act (“DBA”): The DBA applies to contracts to which the federal government is a party, for the construction, alteration, or repair (including painting and decorating of public buildings and public works) of the federal government and that require or involve the employment of mechanics or laborers;
  2. Service contracts covered by the McNamara-O’Hara Service Contract Act (“SCA”): The SCA applies to any contract entered into by the United States that has as its principal purpose the furnishing of services in the United States through the use of service employees;
  3. Concession contracts: a contract under which the federal government grants a right to use federal property including land or facilities, for furnishing services; and
  4. Contracts in connection with federal property or lands and related to offering services for federal employees, their dependents, or the general public.

The Final Rule implementing paid sick leave for federal contractors does not apply to: construction contracts excluded from the DBA (and those valued at less than $2,000); service contracts exempted from SCA coverage by statute or regulation (and those valued at less than $2,500); grants; contracts or agreements with and grants to Indian Tribes; work performed outside of the United States; and contracts for manufacturing or furnishing of materials, supplies, articles or equipment to the federal government including those subject to the Walsh Healy Public Contracts Act.

Reasons For Sick Leave

The permissible reasons for using paid sick leave under the Final Rule are much broader than under the Family Medical Leave Act (“FMLA”) or many state mandated paid sick leave laws. Under the Final Rule, covered employees may use paid sick leave for themselves or their family members, including:

  1. For a physical or mental illness, injury, or medical condition;
  2. When obtaining diagnosis, care, or preventative care from a health care provider;
  3. When caring for a child, parent, spouse, domestic partner, or any other individual related by blood or affinity whose association with the employee is the “equivalent of a family relationship,” who has need for diagnosis, care, or preventative care, or is otherwise in need of care; or
  4. For domestic violence, sexual assault, or stalking situations.

Notably, the Final Rule allows employees to use paid sick leave to care for a person who is the “equivalent of a family relationship,” meaning no biological or legal relationship to the employee is necessary.

Accrual of Paid Sick Leave

Employees working on or in connection with a covered contract accrue one (1) hour of paid sick leave for every 30 hours worked, up to a maximum of 56 hours per year. Contractors must allow employees to carryover up to 56 hours of accrued but unused sick time from one accrual year to the next. Contractors may cap the amount of paid sick leave employees can accrue to 56 hours each year and can prohibit an employee from having more than 56 hours of paid sick leave available for use at any point in time under the accrual method. Therefore, accrual may be limited to less than 56 hours depending on how much unused sick leave was carried over from the previous accrual year and how much sick leave is used by the employee in the current year.

Alternatively, the Final Rule allows employers to frontload paid sick leave (grant the full allotment of leave) at the beginning of the benefit year. Significantly, any unused paid sick leave (including frontloaded leave) must be carried over from year to year, but the maximum amount that a worker can carryover is 56 hours. Because frontloading leave at the beginning of each benefit year does not eliminate a contractor’s obligation to allow employees to carryover unused sick time, an employee may have more than 56 hours of paid sick leave available for use at one time under the frontloading approach. However, an employee will not receive more than 56 additional hours in any one year (56 hours frontloaded plus 56 unused hours carried over from the prior benefit year, which equals a total of 112 hours).

Integration with Existing PTO Policies and Collective Bargaining Agreements

A contractor’s existing Paid Time Off (“PTO”) policy can fulfill the paid sick leave obligations under EO 13706 as long as it provides employees with at least the same rights and benefits as the Final Rule. The DOL’s guidance explains that if a contractor provides employees with at least 56 hours (7 days) of paid time off that can be used for any purpose and meets the requirements of the Final Rule, then the contractor does not have to provide separate paid sick leave, even if an employee uses all of the time for vacation.

There is also a temporary delay in application of the Final Rule for employees whose covered work is governed by a collective bargaining agreement (“CBA”) that was ratified before September 30, 2016, and that provides at least 56 hours of paid sick leave (or paid time off that may be used for sickness/health care reasons) per year.  In such circumstances, the requirements of the Final Rule will not apply until the date the agreement terminates or January 1, 2020, whichever occurs earlier. If the CBA provides less than 56 hours of paid time off that may be used for sickness/health care reasons, then the contractor must provide employees with the difference between 56 hours and the amount of sick time/PTO provided under the existing CBA that is consistent with either the Final Rule or the terms and conditions of the governing CBA.

Penalties for Non-Compliance

All covered contracts and subcontracts entered into on or after January 1, 2017, must contain a mandatory contract clause, which directs, as a condition of payment, that contractors shall provide paid sick leave to all employees performing work on or in connection with a covered contract. The DOL’s Wage and Hour Division is charged with investigating potential violations of and obtaining compliance with the Final Rule. Failure to comply with the paid sick leave obligations can lead to significant penalties including, but not limited to, the contracting agency withholding payments due on the contract as necessary to pay workers lost pay and/or benefits for any violation of the requirements of the Final Rule.

Takeaways to Consider

Here are some key points for federal government contractors and subcontractors to consider:

  1. The Final Rule takes effect on January 1, 2017, regardless of the change in administration, but the incoming Congress may set it aside after it takes effect;
  2. Determine the expiration date of existing contracts with the federal government and identify covered contracts that may be renewed or awarded on or after January 1, 2017;
  3. Keep in mind administrative considerations, such as segregating covered work from non-covered work, tracking hours worked on or in connection with a covered contract, using an accrual method or frontload method (carryover requirements apply under both methods), tracking usage of leave, maintaining records of written denials, providing notice of available sick leave, etc.;
  4. Review and update existing PTO policies to ensure compliance with the Final Rule;
  5. Coordinate with Human Resources and/or union representatives if unionized employees have collective bargaining agreements before implementing any benefit or policy changes;
  6. When considering leave requests, keep in mind the expansive permissible uses of paid sick leave including care for an employee’s own illness, care for a family member or “the equivalent of a family relationship,” and domestic violence, stalking or sexual assault;
  7. Review attendance policies to ensure that employees are not disciplined for using paid sick leave;
  8. Post notice of Workers Rights Under Executive Order 13706 provided by the Department of Labor in a prominent and accessible place in the workplace;
  9. Maintain records of requests for leave, approvals and written denials, and sick leave usage, and provide notice of available paid sick leave on pay stubs or itemized wage statements; and
  10. Ensure that the mandatory contract clause in Appendix A to the Final Rule, which is a condition of payment, is contained in all new covered contracts and subcontracts with the federal government.

2016 Presidential Election Aftermath: What Can be Expected in the Labor & Employment Law Space

By Gerald T. Hathaway

We continue to analyze and assess what the 2016 election results mean in the Labor & Employment Law space, and what we can expect from a GOP White House, House and Senate.  The last two times that this GOP alignment was present were 1929 and 2007 (let’s hope that the financial events that followed those two occasions – the Great Depression and the Great Recession – do not repeat themselves this time around).

It is difficult to predict what President Donald J. Trump’s actual agenda will be, because his campaign was long on broad concepts and very short on serious, detailed policy presentation. While Candidate Trump said many things, including contradictory things, about many topics, some themes can be discerned from pre-election and post-election comments.  Also, some issues have been on the GOP wish list for some time, but until they could have the alignment of White House and Congress that will be in place in January, those wish list items, as a practical matter, were just wishes.  Here are our impressions about what changes will occur.

NEAR TERM

  • Affordable Care Act (Obamacare)

There will be a change, but it is not clear as to what the extent of the change will be, nor is the timing. Candidate Trump promised repealing and replacing the entire law.  But President Elect Trump has indicated that he wants to maintain coverage for dependents up to age 26, and to continue the mandate that previously existing conditions be covered.  If the statements of President Elect Trump are the desired results, the altering of the ACA then becomes quite complicated, because fundamental rules of underwriting will have to be respected (because the mandate for coverage was put into place to offset the costs of insuring pre-existing conditions, by having many healthy people in the pool of the insured).  This may be the subject of negotiation, but it will be within the GOP, to the exclusion of the Democratic Party (who may want nothing to do with any amendment, anyway).

There likely will be a push to allow insurance companies regulated in one state to offer insurance to residents of a different state, without being subject to regulation by the other state whose residents are being insured. Under that scheme, states desiring tax revenues from hosting insurance companies will lower their regulatory schemes, and the least regulated companies will be offering the insurance. (The Democratic Party may try and filibuster this particular issue).

  • Public Works: Possible Repeal or Major Modification of the Davis-Bacon Act

In his victory speech, President-Elect Trump made the following statement, which is similar to statements he made during the campaign:

We are going to fix our inner cities and rebuild our highways, bridges, tunnels, airports, schools, hospitals. We’re going to rebuild our infrastructure, which will become, by the way, second to none. And we will put millions of our people to work as we rebuild it.

We think that this initiative would invigorate the U.S. economy, particularly if there is a mandate for the use of materials made in the USA.  This initiative, however, may be opposed by the party he joined to run his Presidential campaign. We think that if they conclude that they must go along with this initiative, the GOP will realize that they may be in a place to do what was not so long ago unthinkable, and that is the repeal of the Davis-Bacon Act (or a substantial modification of it).  The Davis-Bacon Act requires “prevailing wages” to be paid for federal construction projects – which as a practical matter means union wages, which almost always results in the public projects being built by union contractors.  Prevailing wages are typically in the range of $50-$60 per hour, for wages and benefits.  If that requirement is removed, and non-union market wages are paid, the cost of constructing the new projects would be drastically reduced.  We think it likely that the GOP will make that trade, and the obvious benefit of spending so much money on local economies may well deter a Senate filibuster.  Given the drastic drop in union membership over the last few decades, it seems unlikely that the AFL-CIO has the muscle anymore to stop this.

  • New EEO-1 Form

Every year, the EEOC requires employers having 100 or more employees (50 if a government contractor) to file an EEO-1 form, which is a numerical census of the work force broken down by types of jobs, and the sex and race characteristics of those who hold them. Over the last year or so, the EEOC has been preparing a much more detailed form, which would require employers not only to give information about types of jobs, but salary bands of workers, broken down by sex and race.  Management interests have widely criticized the new form, both because of the magnitude of the task of collecting the data, and the low value of the data collected.  If the White House exercises its influence over the EEOC, which we expect it will, President-Elect Trump will likely direct that this new form be killed.

  • Increase in Race, Sex and Religious Discrimination Cases

Many were surprised by the rhetoric of the campaign, which included incendiary racial commentary that would be actionable if the commentary were tethered to workplace speech. Indeed the Trump campaign was openly supported by the KKK and other racial hate groups.  Since the election results were announced, both the FBI and the Southern Poverty Law Center have announced that hate crimes are being committed at new levels of frequency, and there is fairly widespread open and notorious anti-racial speech.  In this environment, one can expect open racial, sexual and religious hostility to reveal itself in the workplace, which will result in an increase of claims in response to that hostility, which may well include pattern and practice claims, and the return of race class actions.  Harassment training is the best answer for this problem, but the trainers had better be prepared for open push-back against notions of diversity.

  • Arbitration of Employment Claims and Class Action Waivers

There has been over the last three decades much back and forth as to what kind of employment claims can be forced into private arbitration, and whether there can be waivers of class action claims. The Congress can address this without fear of veto, and as a consequence there may be a legislative initiative to strengthen the Federal Arbitration Act with respect to employment and wage & hour claims, as well as some legislation permitting class action waivers.

  • Federal Regulations Review

Congress has had the power for twenty years to engage in filibuster-proof review of recently implemented federal regulations. Under the technical provisions of the Congressional Review Act (“CRA”) (enacted as part of Newt Gindrich’s “Contract with America” that followed the mid-term elections that occurred during President Bill Clinton’s first term), any regulation published as “final” after May 30, 2016 can be subject to review.  This date is estimated to be the cut-off date based on Congressional schedules currently in effect, and the actual cut-off date is subject to change.  An explanation of that the complicated process for determining the cut-off date for CRA review is here.

Rarely used in the past, because the President would likely veto any attempt to set aside a regulation put into effect by that President’s administration, the CRA likely will be used to set aside the August “blacklisting” rule applicable to government contractors, which requires federal contractors and bidders to disclose their labor violations to the government, as well as the sick-leave mandates applicable to federal contractors.

On the other hand, and apart from action on the part of federal courts, the new DOL Regulations elevating the salary levels for exempt, white-collar employees will remain in effect.  Since they were published as final on May 23, 2016, it currently appears that they will not be subject to the Congressional Review Act when the next Session of Congress takes place.  There is some wide-spread litigation seeking to block those regulations, and an update on that litigation is here.  As of November 23, 2016, a federal court injunction is in place blocking the implementation of the rule.

  • No Anti-Bullying Legislation

Despite the incoming First Lady’s recently announced campaign against cyber bullying, we are of the view that contemplated federal anti-bullying legislation will not happen.  This website likely will disappear: https://www.stopbullying.gov/laws/.  Many states will fill in the gap, likely led by California.

  • E-Verify

Employers must obtain I-9 forms from new employees to ensure that they are eligible to work in the United States. A streamlined way to verify the information given on an I-9 is E-Verify, the use of which is required for certain federal contractors.  It may well be that the requirements to use E-Verify will be expanded to include almost all employers.

MEDIUM TERM

In 2018, 33 senators will be up for re-election, but only eight of them are Republicans, and seven of those eight are in states that have long histories of voting the Republican slate. The other 25 senators are Democrats, or caucus with Democrats.  Many of those are from states that have been traditionally “blue,” but went “red” in 2016, among them:

Florida
Indiana
Missouri
Montana
North Dakota
Ohio
Pennsylvania
West Virginia
Wisconsin

So it is possible that in 2019, the Republican President will have a filibuster-proof Senate. If that happens, deregulation and repeal of a lot of labor & employment legislation will occur.  It is too early to tell which laws will be targeted.

In the meantime, states that have been deeply and historically blue will be passing laws to give protections that the federal government rolls back. While federal laws are generally pre-emptive, in the labor & employment space most laws are exempt from pre-emption, allowing states to provide greater benefits than the protections that are available under federal law.  The laws that are pre-empted relate to unionization and union affairs, and to ERISA pension & welfare benefits.

LONG TERM

If there is indeed a filibuster-proof GOP Senate, and there is a roll-back of labor & employment laws, we can expect employees to return to unionization, seeking protections from unions in the absence of protective federal laws.

We will update this list as our review of issues continues.

Ruling Postponed on Whether the DOL Exemption Rules will be Enjoined Before December 1, 2016

By Mark E. Terman and Gerald T. Hathaway

Since our November 10 Post, Will the DOL Exemption Rules Be Enjoined Before December 1, 2016?, federal District Court Judge Amos L. Mazzant, III heard nearly 3.5 hours of argument today on the Emergency Motion for Preliminary Injunction to stop nationwide implementation of the Department of Labor’s May 16, 2016 Final Rule Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees.  If not enjoined, this Final Rule will require that, by December 1, 2016, employees be paid a weekly salary of at least $913 (annually, $47,476) to maintain “white collar” exemption from overtime and other federal Fair Labor Standards Act requirements, as long as the employees’ duties satisfy the exemption rules too.

The Court took the matter under advisement, projected that a ruling will be issued Tuesday, November 22, and if the motion is denied, a further hearing will be set on November 28 (the same day a motion for summary judgment, led by the US Chamber of Commerce, is also set in the action).

This really is coming down to the wire for employers who should be prepared to implement changes to comply with the Final Rule if it is not enjoined.

The action is, State of Nevada, et al. v. DOL (USDC, Eastern District of Texas, case No., 4:16-cv-00731-ALM).  The Court’s Minute Entry today is here.

The EEOC’s 2017-2021 Strategic Enforcement Plan – Targeting the “Gig Economy” and Independent Contractor Misclassification

By Gregory W. Homer and Dennis M. Mulgrew

The EEOC has issued its new Strategic Enforcement Plan for the fiscal years 2017 to 2021, which outlines the areas in which the EEOC will focus its litigation and investigation resources in the next four years.  The Plan is notable for its emphasis on the “gig” workforce – that is, the short-term, temporary, or freelance workers (often working for companies like Uber, Lyft, AirBnb, or Taskrabbit) who are typically classified as independent contractors rather than employees.

In the Plan, the EEOC identified the rise of the “gig” economy as an “emerging and developing issue” warranting increased focus, particularly with regard to “clarifying the employment relationship and the application of workplace civil rights protections in light of the increasing complexity of employment relationships and structures, including temporary workers, staffing agencies, independent contractor relationships, and the on-demand economy . . .”

Essentially, the Plan evidences the EEOC’s intent to crack down on companies seeking to avoid liability under the employment laws by misclassifying workers as independent contractors rather than employees.  The EEOC’s designation of misclassification as an enforcement priority is not entirely surprising, as it is in line with other recent statutory and regulatory developments in this area.  For example, as we noted here, last month California enacted AB 1897, which provides that employers using labor contractors, such as staffing agencies, will now “share with the labor contractor all civil legal responsibility and civil liability for all workers” supplied to company.  Similarly, both the DOL and the NLRB have issued guidance expanding the definition of a “joint employer,” making it more likely companies using contract labor will be considered an “employer” for the purposes of the employment laws, regardless of whether they label the work relationships as ones with “independent contractors.”

In light of these developments, companies may wish to evaluate their use of individual independent contractor relationships, to determine the extent to which an individual may properly be considered an employee rather than a contractor per the guidance above, and the attendant risk.  Similarly, companies indirectly using independent contractors, such as through staffing or “temp” agencies, would be well-served by evaluating their agreements with these agencies to ensure that they contain appropriate safeguards (including guarantees of wage and hour compliance, and perhaps indemnification agreements) to protect against the potential risk of a finding of “joint employer” status.