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Insight & Impact: Labor & Employment Regulatory Update

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General L&E Pay Equity
Benefits OSHA
Immigration Before the Supreme Court Now...

General L&E

ISSUE: Department of Labor Wage and Hour Division Sets Forth 2018 Regulatory Agenda

As part of the Trump Administration’s Spring 2018 unified regulatory agenda, the Wage and Hour Division of the Department of Labor ("DOL") unveiled its regulatory priorities for the balance of the year. Here are a few of the most notable initiatives from the Wage and Hour Division affecting employers:

Revisiting the Salary Basis for the White Collar Exemptions

As previously reported, last year the Department of Labor published a Request for Information relating to the Obama-era overtime rule that would have significantly increased the minimum salary threshold for exempt employees from $455 per week to $913 per week (or $23,660 to $47,476 per year).

The DOL has announced that it intends to issue a Notice of Proposed Rulemaking in January 2019 to determine what the salary level should be for the “white collar” exemptions (covering executive, administrative, and professional employees). Secretary Acosta has indicated that the salary threshold test will be raised to about $33,000 per year and may also contain an automatic annual increase of the salary threshold for white collar exemptions.

Tip Pooling Regulations

The FLSA provides in part that an employer may take a partial tip credit against its minimum wage payment obligation to a tipped employee based on tips received and retained by the employee. Congress recently amended the text of the FLSA with respect to tips such that an employer “may not keep tips received by its employees for any purposes, including allowing managers or supervisors to keep any portion of employees’ tips, regardless of whether or not the employer takes a tip credit.” This amendment also expressly rescinds DOL regulations prohibiting employers from requiring tipped employees to share their tips with traditionally “non-tipped” employees. As a result, tipped and non-tipped employees may now share tips, as long as the employer does not take a tip credit.

The DOL intends to issue a Notice of Proposed Rulemaking to align its regulations with this recent statutory amendment in August 2018.

Regular Rate Under the Fair Labor Standards Act

Another notable item on the unified agenda is the DOL’s intent to issue a Notice of Proposed Rulemaking to “clarify, update, and define” the regular rate of pay, which is used to identify which payments qualify as the compensation to an employee for purposes of determining overtime pay. An employee’s regular rate customarily includes an employee’s hourly rate of pay, but may also include other types of compensation, such as commissions or bonuses, although it is not always clear which types of compensation must be included when calculating the regular rate and how it should be calculated. The DOL intends to issue a Notice of Proposed Rulemaking to provide much needed clarity to this calculation in September 2018.

IMPACT: Employers will want to stay tuned as the DOL continues to make progress on these and other regulatory priorities this year.

For additional information on these proposed changes, please contact Otto Immel at [email protected] / 239-213-5449, Ashley Sykes at [email protected] / 239-659-5049, or your Quarles & Brady attorney.


Immigration

ISSUE: Trump Administration's Changes to Work Visa Programs

The Director of U.S. Citizenship & Immigration Services ("USCIS"), L. Francis Cissna, recently announced several changes in how the agency is administering foreign work visa programs. The changes impact the following four areas:

1. Increased Worksite Visits for H-1B and L-1 Employees

USCIS enforces employer compliance with the H-1B and L-1 regulations through its internal Fraud Detection and National Security ("FDNS") unit, which has been operating since 2010 and is funded by immigration petition fees. With an increase in unannounced FDNS visits at U.S. worksites, USCIS hopes to identify and combat the fraudulent use of H-1B and L-1B programs. Statistics regarding the extent of purported fraud involving these programs has not been made publicly available recently, although FDNS statistics from prior years has shown only negligible incidence of fraud and abuse.

Now, more than ever, it is imperative to ensure the accurate completion and retention of H-1B Public Access Files to avoid potential fines and civil penalties. It is also important to notify USCIS of any material changes in H-1B or L-1 employment, via a timely filed amendment petition. If a required amendment is not submitted, FDNS could make a finding that the new employment arrangement was not authorized by USCIS, thus initiating the process to revoke the visa petition and find the employee out of status or, worse, unlawfully present.

2. Narrowing Scope of TN Economist Profession

The 1994 North America Free Trade Agreement ("NAFTA") created the TN work visa for citizens of Canada and Mexico. NAFTA carves out 61 specific qualifying professional categories for the TN visa. To qualify for a TN visa, it must be demonstrated that the TN candidate's job fits into one of these 61 professions. While NAFTA delineates the education and experience requirements for TN professions, there is no guidance regarding the job duties that make up these professions. In the absence of such guidance, USCIS now looks to its own interpretation of the Department of Labor's Occupational Outlook Handbook ("OOH"). In doing so, USCIS has concluded that jobs such as Financial Analyst and Market Research Analyst, which have long been accepted as belonging to the Economist profession under NAFTA, will no longer qualify and therefore are likely not eligible for a TN visa.

USCIS scrutiny over TN petitions involving the Economist category is likely to increase. For example, USCIS may question whether a Bachelor's level position qualifies for a TN visa in the Economist category because the OOH states most Economists have advanced degrees. It is important to note that such a reading of the OOH would be inconsistent with Appendix 1603.D.1 of NAFTA, which states that to qualify for the TN category of Economist, the beneficiary need only have a baccalaureate or a licenciatura degree.

3: No Longer Deferring To Previous USCIS Decisions

When reviewing a request to extend an already authorized H-1B or L-1 visa status, USCIS has historically limited its review to instances where there is a substantial change in jobs, new information has emerged that would have an effect on eligibility, or evidence indicates that the earlier approval contained a material government error. In other words, to conserve resources USCIS typically would not re-adjudicate an H-1B or L-1 petition each time it comes up for a simple extension unless there were the type of extenuating circumstances outlined above. However, the Trump Administration has announced, via memo, that USCIS adjudicators should now disregard any previous USCIS approval and dedicate resources to a thorough review of petition extensions.

The increased scrutiny by USCIS means that each petition, whether a first-time filing or an extension that has been renewed multiple times in the past, must be reviewed by an experienced immigration attorney to ensure its approvability. On a practical level, the increased focus at USCIS on all petitions is likely to result in longer processing times as well as increased questions in the form of requests for additional evidence.

4: Proposed Rescission of H-4 Employment Authorization

In 2015, the Department of Homeland Security ("DHS'') amended its regulations to provide work authorization eligibility for certain H-4 dependent spouses of H-1B employees. This employment authorization eligibility is limited to H-4 dependent spouses waiting to complete the last step to transition from nonimmigrant to green card status. A Notice of Proposed Rulemaking (“NPRM”) to rescind this employment authorization for H-4 dependent spouses is expected this summer. After a formal notice of the proposed rule in the Federal Register, organizations and individuals will have an opportunity to provide feedback during a public comment period of 30-60 days.

U.S. organizations with employees on an H-4 EAD should be mindful of the upcoming termination of this program and, if appropriate, file for H-4 EAD renewals as early as possible while also exploring alternative employment authorization options. The government has three probable options if they move forward with the plan to end work authorization for H-4 dependent spouses waiting to become green card holders: immediately cancel issued and pending H-4 EADs, invalidate issued and pending H-4 EADs on a future date, or prohibit the adjudication of pending H-4 EADs while issued H-4 EADs remain valid.

IMPACT: Employers should follow developments to determine how these changes impact their foreign work visa programs.

For more information, please contact Eric Ledbetter at [email protected] / 312-715-5018, Nneka Umeh at [email protected] / 312-715-5124, or your Quarles & Brady attorney.


Pay Equity

ISSUE: Pay History Bans and Pay Equity Requirements Grow. Is Your Company Ready?

The national discussion about inequality in the workplace between men and women is not just limited to harassment. It also extends to pay equality. As of June 1, 2018, laws banning private employers from asking candidates about their pay history exist in Albany County New York, California, Connecticut, Delaware, Massachusetts, New York City, Oregon, Puerto Rico, San Francisco, and Vermont. Philadelphia also has a pay history ban law, but it is on hold due to a lawsuit.

The idea behind banning pay history is that it prohibits employers from using pay history as a basis for setting pay when women are often paid less than men. As stated by Connecticut Governor Malloy: "Among other causes, this inequity is perpetuated by the practice of asking prospective employees for their salary history before an offer of employment is put on the table, which disproportionately ensures that women who were underpaid at their first job continue to be underpaid throughout their careers, creating a cycle and causing harm.” As of May 2018, 26 states were considering bills that would prohibit using salary history in the hiring process, according to the American Association of University Women, which advocates for pay equity for women. In April, the U.S. Court of Appeals for the Ninth Circuit said an employer's pay structure that factors employee salary history in setting pay violates a federal law intended to reduce the gender pay gap. Rizo v. Yovino, No. 16-15372 (9th Cir. April 9, 2018). This decision aligns with the new state laws, but contradicts or is in tension with other appellate court holdings.

Along with this movement is the effort in states and local governments to address pay equity.

As of June 1, 2018, more robust pay equity laws exist in Massachusetts, Oregon, Washington, and New Jersey. The potential for class action litigation in state courts increases as states take up the mantle of pay equity. Of course, employers may choose to bypass the courts and to require that employment litigation, including class actions, be resolved through a mandatory arbitration program, but doing so has its own workplace culture consequences. Arbitration programs are often perceived negatively by employees and as hindering transparency.

IMPACT: The ban on pay history and focus on pay equity impact employers on at least two levels. First, from a practical perspective, all employers with worksites in locations with laws prohibiting pay history need to determine the deadline for compliance, if it's not already passed, and how to modify their pre-employment applications to comply with the law. Some prominent employers are no longer seeking salary history, which is one way to become compliant. Another option is to have the application tailored for each state.

Second, on a higher and strategic level, employers need to consider how they set employee pay. Best practice is to align employee pay with market levels and to set pay level based on market experience and other factors that do not correlate with sex. Doing so, however, must apply at all stages of the compensation process, including setting the level of the offer. It is common for the determining factor to be current and prior pay. Employers should rationalize their pay company-wide based on position duties and responsibilities to eliminate or at least minimize pay differences due to varying pay negotiations and perhaps pay history. While there are costs to doing so now, employers who delay will end up paying more later in defense costs, attorney's fees, and compensation design changes and fixes. This is especially important for federal contractors, which must annually assess their pay equity and whose pay is subject to audit by the Office of Federal Contract Compliance Programs.

Employers should do a compensation analysis, preferably under the shield of attorney-client privilege so the company does not have to turn it over to the next plaintiff. Having a consultant send the report to the company's counsel will not protect the report from the next plaintiff. The company's counsel must be involved in providing legal advice to the company on pay equity.

For more information, please contact Pamela Ploor at 414-277-5661 / [email protected] or your Quarles & Brady attorney.


Benefits

ISSUE: Federal Agencies Issue Additional Guidance and Signal Stepped-Up Enforcement of Mental Health Parity Rules

In April 2018, the Department of Labor ("DOL"), Department of Health and Human Services ("HHS"), and the Internal Revenue Service (collectively, the "Agencies") issued a package of resources relating to compliance with the Mental Health Parity and Addiction Equity Act of 2008 ("MHPAEA"). The MHPAEA is a federal law requiring group health plans and health insurers that offer mental health and substance use disorder benefits to make the treatment limitations and financial requirements for such benefits no more restrictive than those applied to medical and surgical benefits offered under the plan. It generally applies to employers with 50 or more employees.

The Agencies' April 2018 compliance package included the following:

  • proposed FAQ guidance providing clarifications regarding non-quantitative treatment limitations (e.g., restrictions based on facility type) and ERISA disclosures;
  • self-compliance tool for plan sponsors and carriers;
  • draft MHPAEA disclosure template that plan participants can use to request documentation from a health plan or insurer regarding treatment limitations;
  • HHS Action Plan for Enhanced Enforcement of MHPAEA;
  • DOL Report to Congress summarizing the DOL's 2017 enforcement activities and its plan for future enforcement; and
  • MHPAEA 2017 Enforcement Fact Sheet.

IMPACT: The new guidance offers a "roadmap" for plan participants (and their lawyers) to seek additional information from health plans. Many plans may not be prepared to provide the information which would be requested. Yet the plans would generally only have 30 days to provide what may be voluminous information. And the information goes beyond just providing a simple summary plan description -- it can include provider reimbursement rates and other details which are not normally requested by plan participants.

The Enforcement Fact Sheet disclosed that in 2017, the DOL closed 187 investigations involving health plans subject to the MHPAEA, of which 92 were found to have violated the MHPAEA. The HHS Action Plan and DOL Report also indicate that these agencies plan to increase investigations and enforcement activities related to MHPAEA compliance.

As such, plan sponsors, especially those with self-insured plans, should review their health plans in the context of the recent guidance and self-compliance tool to ensure that their plans do not violate MHPAEA rules.

For more information or assistance with your health plan's compliance requirements, please contact John Barlament at 414-277-5727 / [email protected], Abigail Darwin at 608-283-2490 / [email protected], or your Quarles & Brady attorney.


OSHA

ISSUE: Trump Administration Proposes Changes to Several Obama-Era OSHA Regulations

Several proposals in recent weeks suggest the Trump Administration may be focusing on rolling back certain Obama-era workplace safety initiatives.

  • In an April 9, 2018 report to a federal district court, attorneys from the Labor Department indicated that the Occupational Safety and Health Administration ("OSHA") intends to withdraw the requirement that worksites with 250 or more employees submit both OSHA form 300 (a log of work-related injuries and illnesses) and OSHA form 301 (an annual report which provides information on each case). OSHA is currently not accepting submissions on its website of OSHA forms 300 and 301 while the rule’s future remains uncertain. There was no mention, however, of withdrawing the rule’s directive that employers submit a third document, OSHA form 300A, which requires a summary of work-related injuries and illnesses by July 1, 2018.

  • On May 23, 2018, OSHA submitted to the White House proposed changes to its workplace injury and illness recordkeeping rule. While OSHA did not disclose its proposed changes, the agency has at least hinted in prior public documents that some requirements may be cut from the recordkeeping rule.

  • On May 31, 2018, OSHA proposed to delay the compliance date for parts of its beryllium standard to December 12, 2018. The requirements that would be delayed are part of what is known as the ancillary provisions of the regulation. However, the primary focus of the rule -- a lower limit at which employers can expose workers to beryllium -- is not being changed.

The Trump Administration’s workplace safety initiatives have also met some recent resistance.

  • On May 25, 2018, the Department of Labor’s Office of Inspector General announced that it was initiating an audit of OSHA’s “process for issuing and managing regulations.” The audit includes a review of how OSHA issues guidance documents that supplement its regulations. The announcement comes on the heels of the request from five Democratic senators and Independent Bernie Sanders (VT) that the Inspector General’s office review the Labor Department’s decision to delay implementation of its silica and beryllium rules.

IMPACT: While these changes to OSHA regulations have not yet formally materialized, they nonetheless serve as a strong indication that the Trump Administration is focusing its attention and cutbacks on Obama-era regulations and change may be on the horizon. We will continue to monitor the proposed changes and provide updates of any major developments.

For more information, please contact Fred Gants at (608) 283-2618 / [email protected], Tyler Roth at (414) 277-5765 / [email protected], or your Quarles & Brady attorney.


Before the Supreme Court Now...

The Supreme Court’s decision in Masterpiece Cakeshop Ltd. v. Colorado, which was poised to be one of the first definitive decisions addressing the intersection between religious liberty, freedom of expression, and sexual orientation discrimination, failed to delineate any clear guidance regarding business owners’ rights to refuse service to members of the LGBT community on religious or moral grounds; focusing instead on anti-religious bias by the state agency that investigated the claim.

Justice Kennedy’s decision was careful not to tread on religious liberty while preserving the message that members of the LGBT community must “not be treated as outcasts.” In doing so, the decision focuses on narrow, factual issues, largely punting on the central legal issues of the case.

Moving forward, we can expect to see more cases implicating religious liberties and LGBT rights—possibly sooner rather than later. On June 7, 2018, the Court met to consider the petition for review of the Washington Supreme Court’s decision in Arlene’s Flowers v. State of Washington finding that a florist violated a state civil rights law when she refused to provide a floral arrangement for a customer’s same-sex wedding. If the Court grants the petition for review, Arlene’s Flowers may provide an opportunity for the Court to provide more conclusive guidance on this developing area of law.