NYC Passes the "Freelance Isn't Free Act"
New York City recently passed the "Freelance Isn't Free Act," a law which extends various new protections to independent contractors working in New York City. For example, as of the Act's May 15, 2017 effective date, New York City independent contractors will be statutorily guaranteed a written contract where the value of the contemplated work – either on its own or when aggregated with all agreements between the parties during the preceding 120 days – is $800 or more. The Act also features provisions ensuring timely and full payment of the contractor's fees. In preparing for the Act's effective date, employers should, among other steps, (i) update their independent contractor agreements to ensure their compliance with the Act's requirements, and (ii) conduct a thorough review to ensure that their independent contractors are properly classified as such.
FLSA's Impending New Rules
The new FLSA regulations raise the salary threshold for would-be exempt "white collar" employees from $455 to $913 per week, or $23,660 to $47,476 per year. The New York State Department of Labor, however, has proposed amendments to New York state law which, for certain employers, would raise the salary exemption threshold for white collar workers to a level even higher than that called for by the FLSA's new regulations. Under these proposed amendments, the applicable salary thresholds would differ based on an employer's size and geographic location within New York State. Further, the new regulations would be phased in incrementally over a number of years, with employers in New York City with 11 or more employees expected to phase in the changes the most quickly, reaching a threshold of $1,125 per week ($58,500 per year) by the end of 2018. These potential changes, along with the FLSA's impending new rules, remind employers of the importance of regularly assessing the exempt status of their employees.
FLSA "White Collar" Overtime Exemptions
Despite the recent filing of two, now-pending federal court challenges, the effective date of the Department of Labor's revisions to the FLSA's "white collar" and "highly-compensated" overtime exemptions remains December 1, 2016. As detailed in prior briefings, the new regulations more than double – from $455 to $913 per week, i.e., from $23,660 to $47,476 annually – the salary threshold necessary to consider whether a white collar employee may be exempt from earning overtime. This new threshold will automatically update every three years beginning in 2020, thus requiring employers to consistently reassess the exempt/non-exempt status of their employees. While the above-noted lawsuits presently seek a postponement of the regulations' effective date, employers must continue to plan for the substantial changes they may bring.
FLSA's Overtime Exemptions
As you know, the Department of Labor's revisions to the FLSA's "white collar" and "highly compensated" overtime exemptions take effect on December 1, 2016. While these changes may require substantial revisions to employers' compensation-related practices, employers must also consider the ways in which the new rules will affect their employee benefit plans. For example:
- If a retirement, health, or life insurance plan provides differing benefits to non-exempt and exempt employees, reclassifying such employees in response to the DOL's new rules may simultaneously impact the plan's ability to pass applicable non-discrimination tests.
- In order to defray the potentially-increased costs arising from the DOL's new rules, certain employers may consider reducing the employer's share of health-plan premiums and increasing the employees' share. This adjustment may cause the benefits to become "unaffordable" for certain employees, thus triggering higher employer penalties under the Affordable Care Act.
- Employers who eliminate matching 401(k) plan contributions as a means of defraying the cost associated with the new rules could simultaneously imperil the plan's "safe harbor" status, potentially causing the plan to fail non-discrimination testing.
The bottom line: In making adjustments in order to deal with – or minimize the impact of – the new FLSA exemption rules, employers must carefully consider whether such "solutions" would, in fact, introduce new, benefits-related problems. At the very least, benefits-related cost-saving measures like those mentioned above will typically require advance, written plan amendments, as well as updates to other documents that describe employee benefit entitlements.
Inquiries About Applicant's Wage History
Currently pending before the New York City Council is legislation that would amend the New York City Human Rights Law to prohibit employers from inquiring into an applicant's wage history during the hiring process. A stated purpose of the bill is addressing the issue of pay inequity between male and female workers. At present, Massachusetts is the only state that prohibits wage history inquiries during the hiring process. While the New York City law has yet to be formally adopted, in the event of its passage, it would require reexamination of certain "standard" steps in the hiring process, as well as companies' "neutral reference" policies and separation agreement provisions.
Unionizing "Temp" Workers
On July 11, 2016, the National Labor Relations Board once again up-ended a previously-held, Bush-era decision, now making it easier for "temp" workers to unionize. Under previous Board doctrine, temp workers could only be included in a bargaining unit alongside permanent employees if the employer consented to such an arrangement. With the Board's new decision, a union may represent such a "mixed unit" without employer consent. This decision follows other milestone rulings similarly paving the way for simpler and broader unionization, including last year's decision expanding the scope of the joint employer standard. These decisions serve as stark reminder to both unionized and non-unionized employers to carefully consider the details of their employment-related arrangements, so as not to unwittingly expose themselves to new or expanded bargaining obligations.
Vacation Time Upon Termination of Employment
With the arrival of summer, vacation time is on the mind of many employees. It should also be in the thoughts of savvy employers, who must be aware of often state-specific obligations for paying out employees for their accrued but unused vacation time at the conclusion of employment. For example, in states like Massachusetts, employers who afford vacation time to their employees must pay for earned but unused vacation time upon the termination of employment. In New York, on the other hand, employers with explicit policies making clear that they will not pay employees for unused vacation time upon the conclusion of employment need not pay for such time. In contrast, Connecticut employers lacking explicit policies are not automatically required to pay their employees for such time. Employers must be mindful of these distinctions and nuances so as to avoid inadvertent violations.
Hours Worked and Other Potentially-Compensable Time
In determining the hours worked by their employees, companies often focus exclusively on time actually spent performing assigned tasks, thus overlooking other potentially-compensable time. One example is time spent changing in and out of certain work clothing and protective equipment before or after the employee's technical workday. In certain instances, namely if such activities are "integral and indispensable" to the employee's principal duties, time spent changing into clothing that is required either by law or the nature of the employee's work may, in fact, be compensable. On the other hand, time spent changing into "everyday" clothes, changing clothing at home, or changing into optional clothing, typically does not count towards compensable time.
Social Media Policies
Companies' social media policies have become an ever-increasing focus of the NLRB's attention. A recent ruling against Chipotle underscores the extent of the NLRB's enforcement, and the pitfalls that employers must be mindful to avoid. In the Chipotle case, an employee was asked to take down tweets regarding wages and working conditions that were deemed by Chipotle to be "disparaging and false" and thus violative of Chipotle's social media policy. Under the NLRA, however, blanket prohibitions against "false" statements may be impermissible. As explained by the NLRB, an employer can only prohibit false statements made with malicious motive (i.e., statements made with knowledge of their falsity or with reckless disregard for their truth or falsity). Similarly, a bare prohibition on spreading confidential, inaccurate, or disparaging information also violates the NLRA. The NLRB further held that boilerplate clauses stating that a policy will be construed in a manner that is "consistent with applicable law" may be insufficient to remedy a violative policy. Employers are thus strongly urged to avoid overbroad and sweeping language in their social media policies, and to provide precise definitions and examples to sufficiently narrow the scope of their policies.
FLSA Overtime Exemption Update
Although the Department of Labor's final revisions to the FLSA's overtime exemptions were not expected until later in the year, recent indicators point to an earlier-than-anticipated, Spring 2016 release. Indeed, on March 14, the DOL submitted its final revisions to the White House Office of Management and Budget for approval, a process that typically takes only 1 to 2 months. Thus, the final revisions may arrive in April or May 2016, with an effective date in June or July. Employers who have not yet begun preparations should take action promptly, as the expected revisions will dramatically impact employers' ability to treat certain employees as exempt from receiving overtime premium pay. Employers may consider (i) raising salaries that fall below the expected $970/week threshold, (ii) implementing scheduling changes to limit overtime costs, and (iii) assessing time and recordkeeping procedures.
Drug Testing Policies
Employers in states that permit unannounced, random drug testing are nonetheless encouraged to maintain a written, uniform drug testing policy, rather than conducting spur-of-the-moment testing without express guidelines. Such policies should be distributed to, and acknowledged by, all employees, and can be issued as stand-alone guidelines or incorporated into employee handbooks. Providing adequate notice of the policy's effective date is also recommended. The policy itself should, among other provisions (i) describe the circumstances that could lead to drug testing (including the possibility that such testing may simply be random), (ii) note the procedures for testing, and (iii) provide a mechanism for contesting positive results. Employers must also be cognizant of disability discrimination issues prior to taking action against employees based on positive drug test results.
Transgender Employee Rights
Consistent with New York City's laws against discrimination on the basis of gender identity or expression, the New York City Commission on Human Rights recently issued guidance regarding the rights of transgender employees in the workplace. In particular, the Commission's guidance provides specific examples of conduct that would constitute unlawful discrimination against such individuals. These examples include: (i) intentionally refusing to use the employee's preferred gender pronoun or title, such as Mr. or Ms., (ii) preventing the employee from using the restroom consistent with his or her gender identity, and (iii) maintaining a dress code mandating that employees of each gender wear specific types of uniforms unique to that gender, such as requiring men to wear ties, while requiring women to wear skirts. Employers are advised to review and update their employment policies and procedures in order to account for these guidelines, and to train managers and supervisors to handle matters bearing upon these issues.