DOL Issues Clarification on Treating Hourly Workers as Salaried Employees

The U.S. Department of Labor (DOL) issued an opinion letter on Nov. 8 as to when a worker who is paid “on an hourly, daily, or shift basis” may qualify as a salaried employee under the Fair Labor Standards Act (FLSA).

As a reminder to employers, an employee in most circumstances must be compensated on a “salary basis” in order to qualify as an exempt executive, administrative, or professional employee. However, an exempt employee’s earnings can be computed on an hourly, daily, or shift basis, if the following conditions are met:

The employment arrangement must include a guarantee of at least the minimum weekly required amount paid on a salary basis regardless of the number of hours, days or shifts worked; and,

1. A reasonable relationship exists between the guaranteed amount and the amount actually earned.

In the opinion letter, DOL provided some guidelines regarding when it is acceptable for hourly employees to be classified as exempt.

1. A ratio of 1.5-to-1 between an employee’s usual weekly earnings and the weekly guarantee is acceptable;
2. A ratio that exceeds 1.5-to-1 but is less than 1.8-to-1 is vulnerable to challenge; and,
3. A ratio of 1.8-to-1 or more is likely not acceptable.

The takeaway for employers is that when an employee is compensated on an hourly, daily, or shift basis, in order for that employee to be classified as exempt, there needs to be a “reasonable relationship” between the amount guaranteed the employee and the amount earned.

Federal Appeal Court Rejects White House Attempt to End DACA

On Nov. 12, a three-judge panel for the Ninth Circuit Court of Appeals in California upheld a temporary injunction preventing the Trump Administration from ending the Deferred Action for Childhood Arrivals (DACA) program, which prevents individuals who came to the U.S. illegally as children from being deported. It is the first appeals court to rule on the program after U.S. district courts in New York and California issued nationwide injunctions preventing the Trump Administration from ending the program.

In its 99-page decision, the judges rejected the argument by the U.S. Attorney General’s office and the Department of Homeland Security (DHS) that the DACA rescission order was beyond judicial review. The panel also disagreed with the government’s assertion that the Obama Administration’s Executive Order was arbitrary and capricious and therefore unconstitutional. 

The Supreme Court is expected to accept a challenge to the DACA program in Spring 2019. DHS will continue to accept DACA renewal applications for now, and DACA beneficiaries can continue working legally provided they have the proper employment authorization documents.

White House Proposes Expanding Use of HRAs to Individual Plans

The Trump Administration has issued a proposal that would expand the use of health reimbursement arrangements (HRAs) allowing employers to use the tax-advantaged accounts to purchase coverage for their employees in the individual market. Under current law, employers can only use HRAs to reimburse workers for out-of-pocket medical expenses.

Small- and medium-sized business would be helped the most under the proposal. According to the Department of Labor, 81 percent of small employers (fewer than 200 employers) offering health benefits only provide a single coverage option for their employees.

The Treasury Department estimates that once employers and employees have fully adjusted to the new rule, approximately 800,000 employers are expected to provide HRAs to pay for individual health insurance coverage to over 10 million employees.

Written comments to DOL must be submitted by Dec. 28. If changes are made to HRA regulations, they would take effect for plans beginning on Jan. 1, 2020.

NLRB Extends Comment Period on Joint Employer Rule

The National Labor Relations Board (NLRB) has announced that it is extending the time for submitting comments regarding its proposed rulemaking concerning the standard for determining joint-employer status under the National Labor Relations Act. The comment deadline is now Dec. 13, 2018. BSCAI plans to join coalition comments in support of the rulemaking.

Under the proposed rule, an employer may be found to be a joint-employer of another employer’s employees only if it possesses and exercises substantial, direct and immediate control over the essential terms and conditions of employment and has done so in a manner that is not limited and routine. Indirect influence and contractual reservations of authority would no longer be sufficient to establish a joint-employer relationship.

Deviating from the long-held standard for joint employer liability, in 2015, the NLRB under President Barack Obama broadened the definition of what constitutes a joint employment relationship. In the case involving Browning-Ferris Industries (Browning-Ferris), the Board decided that a joint employment relationship could exist even when companies have “indirect or unexercised control” over workers.

OSHA Launches Program to Target High Injury and Illness Rates

The Occupational Safety and Health Administration (OSHA) is initiating the Site-Specific Targeting 2016 (SST-16) Program using injury and illness information electronically submitted by employers for calendar year (CY) 2016. The program targets high injury rate establishments in both the manufacturing and non-manufacturing sectors for inspection.

Under this program, the agency will perform inspections of employers the agency believes should have provided 300A data, but did not for the CY 2016 injury and illness data collection. For CY 2016, OSHA required employers with over 250 employees to electronically submit Form 300A data by Dec. 15, 2017. The CY 2017 deadline was July 1, 2018; however, employers may still provide this information to the database.

BSCAI Midterm Election Analysis

The midterm elections went largely as expected last week as Democrats won control of the House of Representatives and Republicans added to their majority in the Senate. At present, Democrats have picked up 36 House seats and Republicans picked up 3 seats—a net pickup of 33 seats for Democrats. Eight races remain undecided. It is expected that Democrats will pick up a net of approximately 40 seats once all the races have been decided.

As for the Senate, Republicans have picked up a net of two seats. The Senate for 2019 sits at 51 Republicans and 47 Democrats with two races still outstanding. In Florida, a hand recount is underway in the race where Gov. Rick Scott (R) leads Sen. Bill Nelson by less than 13,000 votes. In addition, a runoff election is being held in Mississippi on Nov. 27, where Sen. Cindy Hyde-Smith (R) is running against for former Rep. Mike Espy (D).

The change in party control in the House of Representatives will mean more congressional oversight of the White House. House Democratic leaders have said the first piece of legislation they plan to introduce next year will strengthen the Voting Rights Act and establish automatic voter registration. There may be some select opportunities for the Trump Administration to work with Congress on its top priorities in 2019 as attention begins to turn to the 2020 presidential election.

Select Committee Proposes Two-Year Budgets

The 16-member Joint Select Committee on Budget and Appropriations Process Reform has released a proposal that would have Congress move from the current annual budget process to a biennial budget process. The goal of the bill is to streamline how Congress addresses budgets and the 12 annual spending bills.

A bipartisan panel of eight Republicans and eight Democrats has until November 30 to adopt recommendations that must be agreed to by a majority of the select committee.  The panel was established last year as part of an agreement that set discretionary budget caps for Fiscal Years 2018 and 2019.