Preparing for the Future of the Overtime Eligibility Rule

By Mark Foley and Matthew Fontana

One of the most significant wage and hour actions of the Obama administration—promulgating a new rule on overtime eligibility—remains frozen in legal limbo as the Trump administration decides whether to repeal and replace it or propose an alternative solution. With such uncertainty, what should employers do to ensure they are in compliance when the Trump administration finally takes action?

First, employers need to understand why the new overtime rule is not in effect. A federal district judge in Texas stayed the rule’s implementation on November 22, 2016, just nine days before it would have become effective nationwide. The judge held that the Department of Labor exceeded its regulatory authority by establishing a salary threshold under which employees were automatically overtime eligible regardless of their job duties. The Department of Justice appealed that decision, and the Texas AFL-CIO filed a pending motion to intervene in the event the Trump administration decides not to challenge the judge’s decision in the appeal’s court. After obtaining two filing extensions, the DOJ has until May 1 to file a brief stating its position on the appeal.

Second, employers should be aware of the Trump administration’s potential options. Its first decision is whether to defend the rule at the appellate level, first to the Court of Appeals for the Fifth Circuit, and then potentially to the U.S. Supreme Court. While that decision will not be publically announced until the May 1 filing, signs are suggesting that the DOJ will not defend the rule and will instead argue that the federal district judge’s opinion should stand.

The current administration’s second decision is whether the DOL should rescind the new overtime rule or promulgate a revised rule. Central to that decision is the perspective of the new proposed labor secretary nominee, Alexander Acosta. While it is unclear exactly what Mr. Acosta favors, multiple reports suggest a likely scenario that would involve the withdrawal of the current rule and the promulgation of a more modest proposed overtime rule with a reduced salary threshold. For example, some Republicans have discussed a new overtime salary threshold of $35,000 rather than $47,476. Because the new overtime rule is not effective, repeal and replacement of it can be accomplished by a notice published in the federal register rescinding the current proposed rule and providing a period of notice and comment for the administration’s new overtime rule.

Employers should continue to prepare for some type of increase in the overtime salary threshold. While it is unlikely that the Obama administration’s $47,476 overtime threshold will survive the current administration, it is probable that there will be a modest increase in the overtime threshold from its current $23,600. As a result, employers should be prepared to update plans to alter compensation and job duties of employees who could be implicated by an increase in the overtime threshold. The good news is that a more modest increase will likely affect fewer employees and cause employers less disruption. lowering employers’ compliance costs.

Drinker Biddle and Reath’s labor and employment attorneys will continue to monitor these developments and provide updates.

Yes, Your March Madness Office Bracket is Technically Illegal

By Mark Terman and Dennis Mulgrew

March Madness has arrived!  The 2017 NCAA Basketball Tournaments tip-off tonight (March 15) and continue through the Women’s and Men’s National Championship Games on April 2 and 3 respectively.  With this, comes the American tradition of companies and their employees betting on tournament outcomes through office bracket pools.      

As lawyers, we have to point out that your company’s March Madness pool is very likely illegal under at least three federal gambling laws (the Professional and Amateur Sports Protection Act, the Interstate Wire Act of 1961, and the Uniform Internet Gambling Enforcement Act) and many state laws.  And we would be remiss to not mention that there is a parade of horribles that could happen from permitting such workplace wagering.   

With that said, the more practical reality is that office pools have become a widely-practiced and culturally accepted form of gambling, law enforcement authorities seem to have little interest in enforcing laws that technically prohibit them, and many employers view these office pools as a workplace morale booster.

For those employers – seemingly, most all of them – who will not shut down this popular practice, here are some best practices to help mitigate legal issues when sponsoring or allowing office pools:

  • Make sure that all entry fees are distributed solely to the winner or winners of the pool.  An employer, or employees organizing a pool, should never take a “cut” of entry fees.  Under various anti-gambling laws, profiting from the pool in this way raises a host of issues.
  • Limit pools to offices within a particular state.  Doing so may prevent the pool from violating federal laws, as they generally require the transmission of money or communications across state lines to be applicable.
  • Make participation completely voluntary and limit entry fees to nominal amounts.  Expensive or compelled buy-ins may encourage the predilections of employees who are problem gamblers, and expensive buy-ins may tempt those employees responsible for collecting and distributing entry fees to surreptitiously take a “cut.”  Compelled buy-ins could implicate wage and hour and religious anti-discrimination laws.  Following these guidelines helps ensure that an office pool is low-stakes and simply intended to promote friendly rivalry.
  • Do not retaliate against or single-out employees who may complain to the pools.   There are plaintiff’s lawyers out there who will try to tether an internal complaint of unlawful activity to later adverse action against the complainer.
  • Prohibit employees from gambling in other pools on company time or through company equipment.  Apart from a workplace pool, employees may choose to participate in other pools with non-employees, and there are many options to do so online (including through company-issued or owned computers).  These other pools can raise additional concerns about potential violations of the law, to the extent they involve large wagers, are structured to profit the organizer, or involve interstate communications.  Consequently, for reasons of both legality and ensuring employee productivity, employers are best served by a policy that prohibits employee gambling in other pools on company time or company equipment.    
  • Consider sponsoring a free pool that provides a non-monetary award.  Although employees may not find it as interesting, an employer concerned about the legality of its office pool may consider sponsoring a pool that is free to enter, with a non-monetary award (a gift card or some other prize) for the winners.  The lack of an exchange of money in such a pool may avoid the reach of potentially applicable anti-gambling laws.    

Putting legality aside, it is well-established that employee productivity takes a hit during March Madness, particularly since it is now possible to watch games online through work computers or personal mobile devices, and permitting an office pool could encourage distraction.

To accommodate employee interest in the tournaments while reducing productivity loss employers should consider airing the games in a breakroom or lunchroom. At the same time, add sports broadcasts and websites to blocked sites on company systems that monitor and limit Internet use on company-owned computers, systems and devices (certainly, gambling and unlawful activity websites should be blocked year-round).  And if productivity becomes a problem, communicate policies addressing these concerns to employees, including policies restricting viewing to non-break times or reminding employees (including those tempted to duck out early to catch a game) of applicable attendance and punctuality policies.

As March Madness begins, we wish you the home court advantage.

Part I of “The Restricting Covenant” Series: Psychologists and Psychiatrists

By Lawrence J. Del Rossi

Restrictive covenants are private agreements that restrict an individual’s business activities within a specific geographic area for a period of time, in return for wages, access to information, or some other type of tangible benefit. Like the spots of a leopard, they come in all shapes and sizes.  Their enforceability varies from state to state, from occupation to occupation, and from industry to industry.  Many states have quirky or arcane rules or regulations tailored to specific occupations.  Some industries have specific rules and practices that dictate the parties’ course of dealing and determine the “reasonableness” of the restrictions.  Some employers prefer non-competes, while others prefer non-solicitations or non-disclosures, or some combination of each.  In any event, before agreeing to be restricted, or before asking someone to be restricted, this legal landscape should be explored and understood because litigation in this area of the law can be financially and emotionally draining.  This article discusses restrictive covenants and psychologists and psychiatrists.[1]

An Offer You Can’t Refuse  

As anyone who has watched the HBO series The Sopranos observed, Dr. Jennifer Melfi, a psychiatrist, occupied a unique position of trust and confidence with her patient, Tony Soprano.  Dr. Melfi was a sole practitioner with no other partners, so she probably did not have to worry about non-competes.  But what if she had just graduated from medical school, found a dream job with a well-established psychiatry practice in her home state of New Jersey, and was asked to sign an employment agreement that contained “non-compete” and “non-solicitation” provisions that restricted her from engaging in psychiatry, or from having any contact with patients, within twenty miles of her office, for two years after she left that practice?  What are Dr. Melfi’s options?  Should she accept, reject or negotiate a new deal?  What would be the financial and ethical impact to her and the patients?

New Jersey Regulations Prohibit Non-Competes for Licensed Psychologists

There is good news for Dr. Melfi, at least if she decides to stay in New Jersey.  She does not have to walk away from the deal.  Her post-employment restrictions most likely would not be enforceable because of New Jersey Administrative Code Section 13:42–10.16, a provision of the rules adopted by the State Board of Psychological Examiners, which reads:  “A licensee shall not enter into any business agreement that interferes with or restricts the ability of a client to see or continue to see his or her therapist of choice.”

In 2005, a New Jersey Appellate Court, in Comprehensive Psychology System, P.C. v. Prince, held that the State Board of Psychological Examiners adopted a regulation that restricted licensed psychologists from entering into non-competes.  In addition to this regulation, the court found that “the nature of the practice of psychology” and “the uniquely personal patient-psychologist relationship forbid any restrictions which might interfere with an ongoing course of treatment.”  The court did not elaborate on the particulars of this “unique personal relationship”, or compare or contrast it to a patient’s relationship with other types of doctors, social workers or therapists.  And interestingly, if the State Board of Psychological Examiners had not adopted this specific regulation, New Jersey courts, following the Supreme Court’s decisions in Community Hosp. Grp., Inc. v. Moore (2005), and Pierson v. Medical Health Ctrs., PA (2005), might have enforced some or all (New Jersey is a “blue-pencil” state) of Dr. Prince’s restrictions if they were otherwise found reasonable to protect a legitimate business interest of her employer (e.g., training, customer relationships, confidential information), not injurious to the public, and did not impose an undue hardship on her.  Future articles in this Series will address restrictive covenants and health care providers in other fields of medicine.

One issue that frequently arises when doctors leave a practice is whether they can contact patients to notify them of their departure and new whereabouts. Often times, the employment agreement will not address this issue directly.  The court in Comprehensive Psychology System, P.C. explained that, “a psychologist who changes his office location, voluntarily or involuntarily, has a duty to inform patients of the change and the new location and phone number.”  Otherwise, in the court’s view, the psychologist would “abandon” his obligations to the patient.  The plaintiff argued that it could have informed “its” patients of Dr. Prince’s departure, and the geographic restrictions were reasonable because Dr. Prince could have treated his patients outside of the restricted area.  However, the court was not persuaded by these arguments and leaned heavily on the “critical patient-psychologist and . . . the right of the patient to continued treatment from that psychologist.”

Other Jurisdictions Might or Might Not Enforce Non-Competes for Psychologists or Psychiatrists  

Dr. Melfi would likely fare the same if her job offer were from a practice in California, Colorado, Delaware, Massachusetts or Tennessee, where either the state legislatures or the courts in those states have prohibited, or significantly curtailed, restrictive covenants in physician employment contracts.  These states find persuasive the American Medical Association Council on Ethical and Judicial Affairs, Op. E-9.02 (1998), which provides: “Covenants-not-to-compete restrict competition, disrupt continuity of care, and potentially deprive the public of medical services.  The Council of Ethical and Judicial Affairs discourages any agreement which restricts the right of a physician to practice medicine for a specified period of time or in a specified area upon termination of an employment, partnership, or corporate agreement.  Restrictive covenants are unethical if they are excessive in geographic scope or duration in the circumstances presented, or if they fail to make reasonable accommodation of patients’ choice of physician.”

However, if Dr. Melfi’s job offer was from a psychiatry practice located just across the Hudson River in “Johnny Sack” territory, her restrictions might be enforced completely or in part.  For example, in Metropolitan Medical Group, P.C. v. Eaton (1989), a corporation that provided medical, psychiatric and psychological treatment for private patients sued Dr. Eaton, a licensed psychologist, for violating a one-year non-compete that prohibited her from rendering clinical or psychological services within 20 miles of Regent Hospital in New York County.  Although the employer did not successfully obtain a preliminary injunction (because it failed to show irreparable harm), the court nevertheless allowed the employer to proceed with the case against Dr. Eaton for monetary damages.  The court appeared to strike a balance between a patient’s right to choose his or her own psychologist and an employer’s right to protect and recoup its legitimate business interests in training Dr. Eaton and providing him with access to patients.

The difference in approach to restrictive covenants between New Jersey and New York highlights that there is no “one size fits all” rule.  Each state’s laws, rules, regulations, and judicial decisions must be consulted to determine applicability and enforceability.

This is the first article in a continuing series entitled, “The Restricting Covenant.”  The goal of this Series is to provide a brief overview and some interesting insights and practical pointers when dealing with unique issues or special circumstances that might arise in the context of restrictive covenants and a particular occupation or industry.  It is not intended to provide and should not be construed as providing legal advice.  Each situation is different and if legal advice is needed, you should seek the services of a qualified attorney who is knowledgeable and experienced in this area of the law to address your specific issues or needs.  Stay tuned for future articles in this Series, which will discuss the restrictive covenant landscape for other occupations and industries, including accountants, actors, agents, attorneys, and more.  And that’s just the “A’s.”

Click here to view all posts in “The Restricting Covenant” series.


[1] Future articles in this Series will discuss how similar restrictions might or might not apply to other mental health professionals such as social workers and therapists.