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New Year, New Laws for Employers to Consider

January 27, 2016

What do marijuana, the Patient Protection and Affordable Care Act (ACA), the Fair Labor Standards Act (FLSA) white collar exemptions, paid sick leave, marriage equality, independent contractors, and minimum wage increases have in common? Every one of these issues is a hot-button item in the ever-expanding world of employment law compliance. As we move into 2016, employers should be aware of these as well as other issues so they stay ahead of the curve and remain compliant in the ever-changing employment law landscape.

Marijuana and the Workplace

Presently there are four states-Alaska, Colorado, Oregon and Washington; a few cities in Maine and Michigan; and the District of Columbia-where recreational and medicinal marijuana have been entirely legalized. At least 12 states have medical marijuana and decriminalization laws; 10 states have legalized medical marijuana and three states have decriminalized possession laws. Medical marijuana is not legalized in Pennsylvania at this time, although there is a bill working its way through the House.

Some of the medical marijuana laws provide accommodation requirements as well as limitations of adverse actions for employees using medical marijuana. At present, the following states have varying employee protection laws: Arizona, Connecticut, Delaware, the District of Columbia, Illinois, Maine, Minnesota, Nevada, New Hampshire, New York and Rhode Island.

Employers located in jurisdictions that have passed marijuana legislation should make certain that their workplace policies are compliant with existing marijuana laws. This is an area of law that is evolving. Additional states will likely pass marijuana legislation in 2016. Accordingly, even employers located in jurisdictions where marijuana is presently illegal should pay attention to state marijuana legislation in order to remain compliant.

FLSA White-Collar Exemption Changes

In July 2015, the United States Department of Labor (DOL) issued proposed rules changing the salary level for employees to qualify for the "white-collar" exemption from the FLSA's overtime requirements. At present, in order to qualify for the white-collar exemptions, the employer must pay the exempt employees on a salary basis of not less than $455 per week ($23,660 per year). The DOL's proposed amendment would set the salary requirement at the 40th percentile of weekly earnings for full-time salaried workers. Based on the 2013 data, this would amount to a minimum salary of $970 per week ($50,440 per year). The employee must also meet the "duties test" for executive, administrative, professional, outside sales or computer professional. The duties tests were not changed by the proposed rules, but the DOL did request comments on whether it should revise the "duty" test for the administrative white-collar exemption. The proposal also suggested changes to the total annual compensation requirements for highly compensated employees (from $100,000 to $122,148) and the establishment of a mechanism for automatically updating the minimum salary and compensation levels for these exemptions going forward. The DOL announced that the final rule will issue in July, but various DOL employees have stated that the final rule could issue as early as March.

These changes could impact as many as five million workers throughout the United States. Employers who classify employees as exempt under the white-collar exemptions should pay attention to developments. Employers should also proactively evaluate their employee population now and create an action plan to either raise salaries to meet the new minimum salary thresholds or to reclassify employees from exempt to non-exempt when the new rules are issued. It is recommended that employers consult counsel as they evaluate their options and implement changes to make sure they remain compliant with wage and hour laws.

Employee Classifications

On July 15, 2015 the DOL Wage and Hour Division issued a new interpretive guidance on proper classification of employees as independent contractors. The DOL takes the position that the "economics realities test" governs the determination of employment status. Under that test, the ultimate question is whether the worker is economically dependent on the employer or truly in business for himself. The DOL asserts that most workers are employees and not independent contractors. The independent contractor relationship is clearly under fire by state and federal governments and is the subject of countless lawsuits filed throughout the country. This will remain a hot-button item in 2016. The employer faces significant potential liability for misclassifying an employee as an independent contractor. Employers are advised to consult with counsel and review any independent contractor relationships that they have.

Marriage Equality/EEOC Focus on LGBT Issues

As of June 26, 2015 same-sex marriage is legally recognized in all 50 states. Employers who offer insurance benefits to spouses must now do so for all spouses. Additionally, while courts have held that Title VII does not prohibit discrimination based upon sexual orientation or gender identity, the EEOC has moved lesbian, gay, bisexual and transgender claims to the "front burner." In several administrative cases, the EEOC has held that LGBT discrimination is a form of sex discrimination prohibited by Title VII. Courts have not gone so far, but have found that LGBT employees can raise a claim for "sexual stereotyping." The federal government prohibits discrimination on the basis of a person's sexual orientation or gender identity by federal contractors or subcontractors whose contracts exceed $10,000. Additionally, various state and local laws prohibit LGBT discrimination.

While the Pennsylvania Human Relations Act does not specifically prohibit LGBT discrimination, the Philadelphia Human Relations Act does contain such protections. Employers are encouraged to check their state and local laws to determine if they prohibit LGBT discrimination and to educate their workforce regarding the issue. Employers should consult counsel to ascertain whether their harassment and discrimination policies are up to date.

Ban the Box Movement

The fast spreading Ban the Box movement removes criminal history questions from job applications and delays such inquiries until later in the hiring process. As of December 2015 more than 100 cities and 18 states have Ban the Box restrictions in place. While Pennsylvania has not yet joined the Ban the Box movement, Philadelphia has. Employers should make sure they are aware of the status of Ban the Box legislation in all jurisdictions where they hire. Additionally, employers should review their job applications in all jurisdictions to verify they are compliant with all federal, state and local laws.

NLRB Guidance Handbook Policies

The National Labor Relations Act (NLRA) applies even to employers who do not have a unionized workforce. In March 2015 the General Counsel for the National Labor Relations Board issued a general counsel memorandum giving guidance on the legality of various employee handbook policies under the NLRA. In addition, the board has held that a wide array of employer handbook policies, including prohibitions on recording conversations at work and discussing confidential investigations, violate the NLRA.

The Board and the General Counsel argue that Section 8(a)(1) of the act provides that the maintenance of a rule that might have a chilling effect on an employee's Section 7 activity is unlawful. Section 7 permits employees to engage in protected concerted activities to improve wages, benefits and working conditions, regardless of whether they are unionized or not. Thus, the board and the general counsel have pronounced that they will consider handbook policies unlawful if employees could construe the employee policy to restrict Section 7 activity, even if the employer did not intend the policy to restrict employees' Section 7 rights.

The board's decisions and general counsel's guidance contain a number of examples of lawful and unlawful handbook policies and are must reads for employers. As a rule of thumb, handbook policies should be written clearly and with specificity, and contain examples and explanations to avoid any assumptions that the policy is intended to limit protected activity.

Employers are encouraged to thoroughly review their employee policies in light of this guidance and to consult with counsel to make sure their handbooks are compliant.

Affordable Care Act Employer Update

The Patient Protection and Affordable Care Act (ACA) survived a major legal challenge in June 2015 when the Supreme Court upheld the use of subsidies for qualifying individual coverage obtained in insurance marketplaces established by the federal government. Accordingly, the ACA continues to require close scrutiny and compliance. For employers, certain transition relief expires in 2016. The ACA considers an employer with 50 or more full-time (or full-time equivalent) employees an "applicable large employer." Large employers must offer qualifying health insurance coverage to at least 95 percent of its full-time employees and their eligible dependents or face potentially stiff penalties. In addition, new tax reporting regarding employer-provided group health coverage starts in 2016. Insurance companies and certain employers providing self-insured health benefit coverage must report information about employee health benefits to the IRS and the employees on Forms 1094 and 1095. These reports were initially due in February 2016. Recognizing the confusion and questions these new, complex reporting rules are generating, the IRS recently extended the due dates for filing these reports as follows:

  • Form 1095-B and Form 1095-C reports for full-time employees and others enrolled in coverage is extended from February 1, 2016 to March 31, 2016; and
  • Form 1094-B and Form 1094-C reports required to be filed with the IRS is extended to May 31, if not filing electronically or to June 30, if filing electronically.

Finally, the spending bill passed by Congress in December 2015 delayed the effective date of the ACA "Cadillac tax" from 2018 until 2020. The "Cadillac tax" imposes a 40 percent excise tax on the value of employer-provided group health benefits that exceed a specified benchmark (currently $10,200 for employee-only coverage and $27,500 for family coverage). While the delay of the "Cadillac tax" was met with praise by both employers and unions, employers should still focus on evaluating and implementing better accountability, cost containment and employee education with respect to health benefits.

National Labor Relations Act

The National Labor Relations Board's new election rules have put a lot of pressure on employers who face union organizing campaigns. The "ambush" election rules cut the time it takes to hold a union representation election by limiting pre-election procedures, limiting pre­election hearings and post-hearing briefs, limiting the right to appeal the regional director's decisions to the full board, making board review of post-election objections discretionary and discontinuing the board's 25-day election rule.

Under the new rules, the median number of days between the filing of the election petition and the election fell from 38 days to 24 days. During the first four months of the rules, there were 31 more elections resolved when compared to the same period in 2014. Unions won a greater share of the elections, 72 percent, than they did in the same period in 2014, 69 percent. Because the new rules limit the time an employer can campaign between the filing of the petition and the election, employers should prepare for potential campaigns so that if they do face one, they are at the ready.

Other recent developments, including the board's interpretation of the "joint employer relationship," a ruling that employees may use company email to help organize or engage in other Section 7 activity and micro units, affect how employers organize and manage their workforce. Employers should make it a point to review service contracts with labor supply companies with an eye toward the joint-employer issue, limit employees who may use the company email system and evaluate all policies to make certain they are compliant.

Incivility, Bullying and Workplace Violence

Other than the Occupation Safety and Health Act's general provision requiring employers to provide a safe workplace, there is no federal standard that requires workplace violence protections, although several states have enacted legislation or regulations aimed at preventing workplace violence. There is an alarming increase in violence in the United States, and the December 2 San Bernardino holiday party shooting cast the spotlight on workplace violence and the need for employers to evaluate their anti-violence policies.

Employers should implement a workplace violence plan. The plan should include the development of a policy prohibiting workplace violence as well as procedures for addressing threats and threatening behavior. Employers should consider conducting a security survey and assessment of the premises, organizing and training an incident-response team, coordinating with local law enforcement and other first responders, and training management and supervisors on what to do if a violent incident takes place.

New Employment Laws

Every year brings with it new laws and changes to existing ones. An employer's compliance landscape is ever changing. While it is impossible to predict everything that 2016 has in store in the world of employment law, employers should also be on the lookout for the implementation and enforcement of mandatory paid sick leave laws (Philadelphia enacted mandatory paid sick leave in 2015), minimum wage increases, along with continued focus on background checks and privacy. Employers should make certain to pay attention to guidances published by the DOL, EEOC and NLRB, along with the passage of legislation in all jurisdictions where they employ workers. When in doubt, an employer should consult with counsel to make certain that its policies and practices are in compliance with federal, state and local employment laws.


This article has been reprinted with permission from the January 26, 2016 issue of Pennsylvania Law Weekly. © 2016 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.

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