As interest rates rise and the threat of a recession looms, many employers are beginning to struggle with balancing the cost of maintaining their workforce with an expected decrease in profits. The frequent result of such a balancing act is a mass layoff. While a reduction in workforce may be inevitable, below are options that employers can consider to try to avoid that outcome. For all of these alternatives, employers should apply any changes consistently across the workforce to avoid claims of inequity or discrimination.
Federal District Court Strikes Down DOL Joint Employer Rule
A New York federal district court judge has struck down significant portions of the U.S. Department of Labor’s (“DOL”) joint employer rule, which went into effect earlier this year. As a result of this ruling, certain companies may be more likely to be deemed joint employers and exposed to liability for wage and hour violations under the Fair Labor Standards Act (“FLSA”).
As we described here, in March 2020, a final rule issued by DOL went into effect implementing a four-factor test for determining whether more than one entity may be considered an individual’s employer under the FLSA. The new test shifted the existing rule’s focus on the “economic realities” of the alleged employer/employee relationship to a narrower inquiry regarding whether the alleged employer actually exercised control over the alleged employment relationship.
The District Court for the Southern District of New York has now held that DOL’s final joint employer rule violated the Administrative Procedures Act for two reasons. First, the court found that the rule contradicted the text of the FLSA because it ignored relevant concepts defined in the statute, such as the definitions of “employ” and “employee,” and that DOL had erroneously applied different standards for “primary” and “joint” employment when no such distinction exists in the FLSA itself. Second, the court found that DOL’s reasoning for the rule change was arbitrary, capricious, and not supported by adequate evidence.
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Ten Ways to Avoid Layoffs During the COVID-19 Pandemic
As the COVID-19 public health crisis continues, businesses are dealing with unprecedented disruptions to operations and workforce stability. Most employers undoubtedly want to assist their employees during this uncertain time, but they are struggling to balance the cost of maintaining their workforce with shrinking profits. The frequent result of such a balancing act is a mass layoff. While such a reduction in workforce may be inevitable, below are options that employers can consider to try to avoid that outcome. For all of these alternatives, employers should be careful to apply any changes consistently across the workforce to avoid claims of inequity or discrimination.
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DOL Publishes Final Rule Expanding Overtime Protections
The U.S. Department of Labor (DOL) has announced a final rule that will increase access to overtime pay under the Fair Labor Standards Act (FLSA) for approximately 1.3 million workers. The final rule, which comes six months after DOL published a proposed rule in March, is the latest development in a years-long process by DOL, spanning the Obama Administration and the Trump Administration, to modify FLSA overtime regulations. The new rule takes effect on January 1, 2020, giving employers just a narrow window to assess the rule’s impact on their operations. The final rule is available here. DOL has also published a fact sheet that provides an overview of the final rule, available here.
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DOL Publishes Proposal to Expand Overtime Protections
Following two years of anticipation, after a similar but more aggressive rule was proposed by President Obama’s administration and then squashed by federal courts in Texas, the Department of Labor (DOL) has issued the long-awaited Notice of Proposed Rulemaking that, if enacted, would expand access to overtime pay for certain employees under the Fair Labor Standards Act (FLSA). DOL estimates that this change could expand overtime eligibility for over one million American workers, about 3.7 million fewer than would have been impacted under the Obama proposal. The proposed rule is available here.
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SCOTUS Upholds Employee Class Action Waivers in Epic Systems
The Supreme Court put to rest years of uncertainty regarding the enforceability of class action waivers for employees when it decided Epic Systems Corp. v. Lewis, 582 U.S. ___ (2018) on May 21. In a 5-4 decision, the majority held that employers do not violate the National Labor Relations Act (NLRA) or the Federal Arbitration Act (FAA) by requiring employees to sign arbitration agreements that waive their rights to bring class action suits. While the Supreme Court’s decision focused on class action waivers in the context of arbitration agreements, its holding could be extrapolated to uphold employee class action waivers included in any agreement between an employer and employee.
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No Tax Deductions for Sexual Harassment Settlements with Non-Disclosure Agreements
Part of Our Series on the Tax Cuts and Jobs Act of 2017
The Tax Cuts & Jobs Act of 2017 adds a new provision to the Code, section 162(q), that eliminates deductions for settlement payments related to sexual harassment or sexual abuse “if such settlement or payment is subject to a nondisclosure requirement.”
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Labor Department Scraps Unpaid Intern Test and Adopts More Flexible Approach
The U.S. Department of Labor (DOL) recently announced that it will apply a new, more flexible test for determining whether interns working for “for-profit” companies are entitled to minimum wage and overtime protection under the federal Fair Labor Standards Act (FLSA). The new test is set forth in DOL Fact Sheet #71 (updated January 2018).
The FLSA requires employers to pay “employees” minimum wage and overtime. It has long been recognized, however, that certain categories of workers are not “employees” for purposes of the FLSA. This includes unpaid interns. Prior to this announcement, the DOL applied a strict test that required private employers to establish six different factors to demonstrate that workers were appropriately classified as unpaid interns. In the past few years, as litigation over the use of unpaid interns increased, that test had been rejected by courts, including the United States Courts of Appeals for the Second and Ninth Circuits. Decisions issued by those courts favored a more flexible test that holistically examines the relationship between an intern and employer to determine who is the “primary beneficiary” of the relationship.
The announcement by DOL is intended to align its enforcement policies with this more recent case law and provide DOL investigators with greater flexibility in analyzing issues involving unpaid interns on a case-by-case basis.
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