The DOL Announces Final Rule for the Obama Administration’s 2014 Pay Transparency Executive Order

As we’ve previously covered here, on April 8, 2014 President Obama signed Executive Order 13665 (“Non-Retaliation for Disclosure of Compensation Information), at an event commemorating National Equal Pay Day, an annual public awareness event that aims to draw attention to the gender wage gap. On September 10, 2015, the Department of Labor’s Office of Federal Contract Compliance Programs (“OFCCP”) announced the Final Rule implementing the Order, which will take effect on January 11, 2016.

In its press release announcing the Final Rule, the DOL highlighted its intent to specifically address the gender pay gap, stating that “a culture of secrecy keeps women from knowing that they are underpaid, and makes it difficult to enforce equal pay laws. Prohibiting pay secrecy policies and promoting pay transparency helps address the persistent pay gap for women . . .”

The Final Rule seeks to promote pay transparency by, among other things:

  1. Revising the Equal Opportunity Clause included in covered federal contracts to include a provision prohibiting employers from discriminating against employees or job applicants for discussing or disclosing their or their co-workers’ compensation;
  2. Requiring covered contractors to notify employees and applicants of these nondiscrimination protections in existing policies;
  3. Enabling employees and job applicants who believe they have been discriminated against for discussing or inquiring about pay to file discrimination complaints with the OFCCP.

The Final Rule outlines two defenses that a contractor may assert where a violation of the nondiscrimination requirement is alleged. The first is a “general defense” that the contractor “disciplined the employee for violation of a consistently and uniformly applied company policy . . . [which] does not prohibit, or tend to prohibit, employees or applicants from discussing or disclosing their compensation or the compensation of other employees or applicants.” The second is the “essential job functions” defense, which essentially permits a contractor to take action against an employee (such as a Human Resources Director) whose job duties and functions necessarily entail access to compensation information, and who discloses such information other than in response to a formal complaint, charge, investigation, or proceeding.

The Obama administration has in the past few years issued multiple orders or memoranda to accelerate change in employment-related areas it believes are within the authority of the Executive Branch, without the need for legislation. As described in more detail here, there is an often lengthy rule-making process required for these mandates to become effective law, but the DOL is close to (or has) announced Final Rules on many of the administration’s proposals. Accordingly, employers should be aware that many of the prospective regulatory changes discussed in the past few years are, in the near future, set to become reality.

CA Paid Sick Leave: DLSE Opinion Letter Not a Cure-all

Last week, on August 7, 2015, the DLSE issued its first opinion letter interpreting the Healthy Workplaces, Healthy Families Act of 2014 (“Paid Sick Leave Law”), which is codified at California Labor Code section 245 et. seq. and which was recently amended by AB 304, effective July 13, 2015.

As most California employers should now be aware, the Paid Sick Leave Law generally requires employers to provide three days or 24 hours of paid sick leave to an employee who works at least 30 days within a year in California, including part-time, per diem, and temporary employees. Employers may either grant the paid leave up front or, alternatively, allow employees to accrue the paid time off. The question presented to DLSE was how to address the sick leave requirement for an employee who regularly works a ten-hour shift where the employer has opted to follow the front-loading method. Does the employer have to front load thirty hours (the equivalent of that employee’s three days)? Or, rather, does the employer have to front load 24 hours (as referenced in the statute, and because a “day” is typically eight hours)?

The DLSE responded in a three page letter, in which it opined that the Paid Sick Leave Law requires an employer to front load thirty hours in this ten-hour a day scenario. The DLSE reasoned that the Paid Sick Leave Law establishes minimum standards for paid sick leave, and defines “paid sick days” as “time that is compensated at the same wage as the employee normally earns during regular work hours.” (emphasis in original). In order to give effect to this minimum labor standard for all employees, including those that may work more or less than eight hours per day, the language necessarily must be interpreted to require 24 hours or three days, “whichever is more for an employee.” (emphasis in original).

So, with respect to an employee who regularly works a ten hour day, a paid sick day would be the normal full day and the employer with a ten hour per day employee must therefore front load thirty hours in the beginning of the 12 month period. However, an employee who regularly works a six hour day would also be entitled to the minimum amount of leave required under the Paid Sick Leave Law, which for him or her would be 24 hours (e.g., the greater of 24 hours or three days).

The DLSE also clarified that the same analysis would apply when the employer elects to proceed under an accrual system. Under the Paid Sick Leave Law, an employer must allow the employee to accrue up to six days or 48 hours, though the employer may limit the time off to three days or 24 hours. However, in the case of an employee who regularly works a ten hour day, if an employee has accrued 30 hours in his or her sick leave bank, then the employee must be able to use and be paid for the full three days at 10 hours per day. Similarly, the employee who works six hours per day must be permitted to take a minimum of 24 hours of paid sick leave, not only three part-time days.

So far so good, but what happens when the employee normally earns daily or weekly overtime? For example, employers who have not adopted an alternative work week schedule may normally pay overtime to employees who work over eight hours in a day. Some employers may regularly schedule employees for six-day work weeks and pay overtime on the sixth day. If the employee is to be paid “at the same wage as the employee normally earns during regular work hours,” does that include overtime wages? What happens when some employers adjust the shift schedules of employees during their busy season (assume 3 months out of the year) from a regular 8 hour day to a 9 or 10 hour day? How much paid sick leave should the employer provide to such employees if, for instance, the employer has implemented the front load method?  We expect more DLSE answers in the weeks and months to come as DLSE is revising their FAQ section of their website. Please check with us for further updates.

Right to Marry But Not to Work? Pennsylvania Catholic School Terminates Gay Married Teacher

Last month, Waldron Mercy Academy, a K-8 Catholic school located in Merion, Pennsylvania, fired Margie Winters from her position as Director of Religious Education, a job she had held for 8 years. According to Ms. Winters, her employment contract was not renewed because she is gay and married to her partner. A few days later, the United States Supreme Court issued its landmark opinion in Obergefell v. Hodges, in which it held that same-sex couples may exercise the fundamental right to marry. The majority opinion in Obergefell stated that religious believers may continue to “advocate” and “teach” their views of marriage, but did not however, address or reverse the precedent established by the Supreme Court in Hosanna-Tabor Evangelical Lutheran Church and School v. Equal Employment Opportunity Commission, in which the Supreme Court held, in an unrelated context, that churches have the right to make employment decisions free from government interference, including compliance with anti-discrimination laws.

Indeed, in an e-mail to parents, the principal of Waldron Mercy Academy advised that Ms. Winters was no longer working at the school, and reiterated the school’s dedication to Catholicism, stating: “Many of us accept life choices that contradict current church teachings . . . but to continue as a Catholic school, Waldron Mercy must comply with those teachings.”

Based on the 2012 precedent established in Hosanna, it is not clear that Ms. Winter has any valid legal challenge to Waldron Mercy’s termination decision, which would violate the laws of many states, if a non-religious organization were involved. Currently, twenty-one states and the District of Columbia have laws prohibiting employment discrimination based on sexual orientation, and 18 states and D.C. also prohibit discrimination based on gender identity. And, Lower Merion Township, the home of Waldron Mercy Academy, also has a local antidiscrimination ordinance which provides that it is the public policy of Lower Merion Township to foster the employment of all individuals in accordance with their fullest capacities regardless of a person’s sexual orientation, gender identity or gender expression. The ordinance further provides, however, that it is not unlawful for religious institutions that are “not supported in whole or in part by governmental appropriations” to refuse to hire or employ an individual on the basis of actual or perceived sexual orientation, gender identity or gender expression.

In Hosanna, still the leading case on the application of anti-discrimination laws to religious organizations, the Court barred the Plaintiff from bringing an employment discrimination suit against the school. The plaintiff had been promoted to a “called” teacher at the “Christ-centered education” school, but had taken leave after being diagnosed with narcolepsy. After her leave, school officials refused to hire her back. Plaintiff argued that she was fired from the school in violation of the ADA and Michigan state law. The Supreme Court found that the First Amendment’s “ministerial exception,” (which exempts religious organization from anti-discrimination laws) applied because the school held the Plaintiff out as a minister, and because her job duties reflected a role in conveying the church’s message and carrying out its religious mission.

Thus, even with the passing of numerous state and local ordinances and the Supreme Court’s landmark decision in Obergefell v. Hodges, it appears for the moment that religious institutions will continue to be exempt from statutes prohibiting employment discrimination on the basis of sexual orientation and/or gender identity and that certain employees of such religious institutions may be barred from bringing suit against the organizations. In Hosanna, the Supreme Court stated that the “ministerial exception” should apply to any employee “who leads a religious organization, conducts worship services or important religious ceremonies or rituals, or serves as a messenger or teacher of its faith.” The recent termination at Waldron Mercy and the Obergefell decision are a reminder to employers operating religious institutions that significant questions may remain about the scope and proper application of the ministerial exception.



Amendments to California’s New Paid Sick Leave Law

As California employers, and those non-California employers with employees in California, know by now, as of July 1, 2015, such employers were required to provide paid sick leave to any employee who works 30 days or more within a year under the Healthy Workplaces, Healthy Families Act of 2014 (the “HWHFA”).

The HWHFA provides, among other things, that eligible employees are entitled to paid sick days for prescribed purposes to be accrued at a rate of no less than one hour for every 30 hours worked, or alternatively, be provided at least 3 days or 24 hours on a lump sum method. The accrual rate method imposed by the HWHFA created several challenges for employers who were already providing paid sick leave, albeit under a different accrual method, such as per pay period, per month, per week etc. To provide some flexibility to employers in complying with the HWHFA and provide further clarifications to the HWHFA, on July 13, 2015, Governor Brown signed into law AB 304 to amend the HWHFA. The amendments are effective immediately and a summary of its key provisions are as follows:

1.   An employer is now able to provide for employee sick leave accrual on a basis other than one hour for each 30 hours worked, provided that the accrual is on a regular basis and the employee will have 24 hours of accrued sick leave available by the 120th calendar day of employment, each calendar year, or each 12-month period. This means that employers no longer have the obligation to track actual hours worked (i.e., one hour for each 30 hours worked), on the condition that the employee accrues 24 hours of leave within the first 4 months of employment.

2.  An employer is able to keep their pre-January 1, 2015 paid sick leave and/or paid time off (PTO) policies as long as:

a.  these policies existed prior to January 1, 2015;

 b.  these policies provide for time off for the same purposes as specified in the HWHFA (including carry-over and use requirements);

c.  these policies continue to provide an employee paid sick leave and/or PTO on an accrual and on a regular basis so that an employee, (including an employee hired into that class after January 1, 2015):

(i)  has no less than one day (or 8 hours) of accrued paid sick leave or PTO within 3 months of each year of employment of each calendar year, or each 12-month period; and

(ii) was eligible to earn at least 3 days (or 24 hours) of paid sick leave or PTO within 9 months of each year of employment.

3.  If an employer modifies the accrual method used in the policy it had in place prior to January 1, 2015, the employer must comply with the one hour for each 30 hours worked accrual method, or alternatively, provide for the lump sum method.

4. The amendments provide for a new method for calculating the rate of pay:

a.   For non-exempt employees with different hourly rates, an employer now has an option on how to pay sick days. Paid sick time for nonexempt employees shall be calculated using either of the following two options:

(i) in the same manner as the regular rate of pay for the workweek in which the employee uses paid sick time, whether or not the employee actually works overtime in that workweek; or

(ii) by dividing the employee’s total wages, not including overtime premium pay, by the employee’s total hours worked in the full pay periods of the prior 90 days of employment.

b.  For exempt employees, paid sick time must be calculated in the same manner as the employer calculates wages for other forms of paid leave time.

5.  An employee must work for the same employer for at least 30 days in California in order to qualify for paid sick leave.

6. Employers who provide unlimited sick leave to their employees can satisfy notice requirements by indicating “unlimited” on the employee’s itemized wage statement.

7.  The provisions of the original text of the HWHFA required an employer to reinstate accrued paid sick days to returning employees within one year of termination, resignation, or separation from employment. This requirement is unchanged by the amendments. However, if an employer paid out accrued PTO to an employee upon termination, resignation, or separation from employment, an employer is not required to reinstate accrued PTO if the employee is rehired within one year.

8.  An employer no longer has the obligation to inquire into or record the purposes for which an employee uses sick leave or paid time off. However, as provided under the original text of the HWHFA, an employer is still required to keep records for three years documenting the hours worked and paid sick days accrued and used by an employee and to make those records available to the Labor Commissioner upon request.

9.  The original text of the HWHFA contained an exemption for employees in the construction industry covered by a valid collective bargaining agreement (which met certain requirements). The HWHFA previously defined “employee in the construction” to mean an employee performing onsite work associated with construction, including work involving alteration, demolition, building, excavation, renovation, remodeling, maintenance, improvement, repair work …”. (Emphasis added). The amendments removed the term “onsite”, which now broadens the exemption for employees in the construction industry because the focus is no longer on where the work is performed but rather on the work that employee is assigned to perform.

10.  For employers governed by Wage Orders 11 (Broadcasting Industry) and 12 (Motion Picture Industry), the amendments delay to January 21, 2016 the requirements that these covered employers provide to their employees written notice setting forth the amount of paid sick leave and/or PTO available on each wage statement or other document on each pay date.

While most of the provisions of the amendments are welcomed news to employers because the amendments provide some flexibility and much needed clarifications, the amendments may perhaps be a little too late especially for those employers who expended significant resources to modify their PTO policies to be compliant as of July 1, 2015.

Non-compliance with the HWHFA and its amendments carry significant liabilities, and as such, employers should consult with legal counsel to ensure their paid sick leave and/or PTO policies are compliant.


An Employer’s Obligation to Follow up after Receiving a Medical Certification: Greater Than You Might Think

If an employee seeks FMLA leave, she typically needs to ask for it. Likewise, it goes without saying that if an employee is asked to provide a medical certification in support of her request (something employers are free to seek) and fails to provide that information – or worse provides a certification indicating that she does not qualify for FMLA leave – the employer has no obligation to provide that leave. Or does it?

In Hansler v. Lehigh Valley Hospital Network, the plaintiff, Ms. Hansler, asked for a two-day per week, one-month leave of absence to deal with certain medical issues, a condition that was diagnosed after her separation as diabetes. In support of her request, Ms. Hansler submitted a medical certification that referred to the length of the requested leave, but did not describe the nature or duration of her condition. The hospital network, instead of asking for clarification of the certification, terminated Ms. Hansler’s employment after she took several days off, contending that because Ms. Hansler was requesting only limited time off, her condition did not qualify as a “serious health condition” under the FMLA and entitle her to leave.

Ms. Hansler thereafter brought suit claiming that the hospital network interfered with her FMLA rights by terminating her employment and retaliated against her for requesting the leave, claims that the trial court dismissed on the ground that Ms. Hansler’s medical certification indicated on its face (by virtue the duration of leave requested) that Ms. Hansler did not qualify for FMLA leave. On appeal, the Third Circuit Court of Appeals reversed. The Court, in a 2-1 decision, held that the hospital network, rather than just acting on the information in the certification, should have asked Ms. Hansler for additional information, even though on its face the information indicated that Ms. Hansler did not qualify for FMLA leave.

In one sense the decision is predictable and understandable. After all, the hospital network with its sophisticated HR capabilities could easily have reached out to Ms. Hansler and asked her for additional information via an updated certification and Ms. Hansler, for her part, was later diagnosed with diabetes, a condition that does qualify as a “serious health condition.” Yet, the decision is not without concern. FMLA regulations provide that an employer “shall advise an employee whenever the employer finds a certification incomplete or insufficient, and shall state in writing what additional information is necessary to make the certification complete and sufficient.” But FMLA case law also holds that, where the certification indicates that the employee does not have a serious health condition, the employer need not follow up further with the employee about her need for leave. And, here, there was at least a decent argument that that was the case given the limited leave requested by Ms. Hansler.

So what is an employer to do when faced with an incomplete FMLA certification? If the certification clearly indicates that no leave is needed or that the employee otherwise clearly is not entitled to leave, it seems fair to say that the employer can rely on the certification and deny the leave request. If, however, the certification indicates that a leave of any length is needed, the employer would be wise to follow up with the employee and provide her an opportunity to submit additional information within the seven-day period contemplated in the FMLA regulations.

FMLA’s New Definition of “Spouse” Halted in Four States

The Department of Labor’s revised definition of “spouse” under the FMLA was recently struck down in Texas. On March 26, 2015, in Texas v. United States, the United States District Court for the Northern District of Texas granted a request made by the states of Texas, Arkansas, Louisiana, and Nebraska for a preliminary injunction with respect to the Department of Labor’s Final Rule that revised the regulatory definition of “spouse” to include same-sex partners under the Federal Family and Medical Leave Act (“FMLA”).

After the Supreme Court struck down Section 3 of the Defense of Marriage Act (“DOMA”) in United States v. Windsor, which defined spouse under federal law, as a person of the opposite sex, President Obama called for a review of all relevant federal statutes to implement the decision. Under the then-existing FMLA regulation defining spouse, eligible employees in same-sex marriages recognized in their “state of residence” could take FMLA leave to care for a same-sex spouse with a serious health condition. However, this definition did not allow an eligible employee to take FMLA leave on the basis of the employee’s legal same-sex marriage if the employee lived in a state that did not recognize same-sex marriage.

On February 25, 2015, in order to provide FMLA rights to all legally married same-sex couples consistent with the Windsor decision, the Department of Labor issued a Final Rule revising the definition of spouse under the FMLA. Essentially, the Rule provided that any eligible employee who is in a legal same-sex marriage can take FMLA leave to care for his or her spouse, regardless of the state in which that employee resides. To determine who could be considered a spouse, the revised definition looks to the law in the “state of celebration,” that is, the jurisdiction in which the marriage was entered into, instead of the law of the state in which the employee resides. The Rule was to be effective March 27, 2015.

On March 18, 2015, the State of Texas filed a Complaint for Declaratory and Injunctive Relief and Application for Temporary Restraining Order, arguing that the Final Rule should be enjoined because Texas law does not recognize same-sex marriages. On March 25, 2015, Texas amended its Complaint to add Arkansas, Louisiana and Nebraska as plaintiffs. The other plaintiff states have similar restrictions on state recognition of same-sex marriages. The court granted the plaintiffs’ request for a preliminary injunction, holding that Congress intended to preserve a state’s ability to define marriage without being obligated under the laws of another jurisdiction which may define it differently. The court concluded that the DOL exceeded its authority in changing the definition because it forced employers to choose between complying with the FMLA and with other certain state laws prohibiting the recognition of same-sex marriages.

The DOL’s Final Rule has been temporarily stayed in Texas, Arkansas, Louisiana and Nebraska. While the preliminary injunction remains in effect, the DOL cannot take any action to enforce the “state of celebration” rule in those four states.

What is the bottom line for employers? Employers outside of Texas, Arkansas, Louisiana and Nebraska should review their FMLA policy to ensure that it includes the new definition of “spouse.” Employers should also make sure that human resources personnel, supervisors and managers are aware of the new definition and its impact on employees requesting leave under the FMLA. Employers doing business in Texas, Arkansas, Louisiana and Nebraska should monitor the developments in Texas v. United States to determine if the new definition of spouse will be implemented in those states.




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