For months, employers have been preparing for the U.S. Department of Labor’s (DOL) new Fair Labor Standards Act “white-collar” overtime exemption regulations, which were to take effect on December 1, 2016. Now, in a surprising decision issued on November 22, 2016, a Texas federal court issued a nationwide preliminary injunction blocking the regulations. The Court’s decision means that employers no longer have to comply with the new regulations by December 1.
What happens next remains to be seen — The injunction, which has not yet been appealed by the DOL, creates uncertainty as to the future of the regulations, particularly in light of the new incoming presidential administration. Should the DOL choose not to appeal the decision, or should the injunction be held up on appeal, the injunction could forecast the demise of the regulations.
What does this mean for employers? The answer depends on how far down the path employers have gone to comply with the proposed December 1 changes. To the extent that employers have not already increased exempt employees’ salaries or converted them to non-exempt positions, the injunction will at the very least allow employers to postpone those changes. And, depending on the final outcome of this legal battle, it is possible employers may never need to implement them.
Employers who have already implemented changes in anticipation of the new rules or that informed employees that they will receive salary increases or will be converted to non-exempt status effective December 1, 2016, are placed in a difficult situation with managing employee expectations and the changed legal landscape. Whether employers can or should reverse salary increases they have already implemented should be discussed carefully with your legal counsel.
For any questions on the status of the enjoined FLSA regulations or for legal guidance as to how to communicate with employees that those announced changes will not go into effect on December 1, 2016, please contact Amanda Lavis at ALavis@Rhoads-Sinon.com
You may recall previous blog posts surrounding lawsuits over some unpaid interns in film. (Don’t worry, this isn’t the kind of sequel where you need to have seen the previous installments). Essentially, a group of interns who worked on the Fox Searchlight Pictures’ “Black Swan” sued Fox Searchlight on the grounds that they should have been paid at least minimum wage under the Fair Labor Standards Act. Back in 2013, the plaintiff’s won. The crux of the suit provided that if employers maintain an unpaid internship program, those interns must be provided training as if in an “educational environment” and, perhaps more importantly, the intern must provide no material benefit to the employer. In other words, in order to remain unpaid, the intern cannot practically function as an assistant to company employees by getting coffee, making copies, and running errands. In our sequel, we reported that in 2015, the United States Court of Appeals for the Second Circuit vacated the “Black Swan” decision, holding that the lower court erred in focusing too much on the above criteria in determining whether an internship can be unpaid and that the current criteria is adopted from old legal precedent and “too rigid.” In our most recent installment, we introduce some new characters. Aulistar Mark worked at Gawker, a New York City based online media company and blog network (famous for blogs such as Lifehacker, Deadspin, and Jezebel), for three months in 2010. Hudson also worked at Gawker, back in 2008. Mark and Hudson, along with two other plaintiffs who have since dropped out of the suit, sued Gawker and its founder Nick Denton in June 2013. According to the complaint, their work included researching and writing stories, which was “central to Gawker’s business model as an Internet publisher.” Plaintiffs, like the Black Swan interns, argued that they should have been paid at least minimum wage under the FLSA. Recently, a New York federal judge Alison J. Nathan ruled in favor of Gawker. First, Hudson’s (and other similar plaintiffs who sought class-action certification) claims were dismissed as time-barred. More importantly, however, Mark’s claims were dismissed. “Mark’s time with [Gawker blog] Kotaku was a bona fide internship in which Mark traded his labor for significant vocational and educational benefits, and these benefits outweighed those received by defendants in the form of Mark’s work and the ability to evaluate him for future employment,” Judge Nathan wrote. Essentially, Mark benefitted from the program at least as much as Gawker. Moreover, Judge Nathan determined that while Mark did similar work done by paid employees, he failed to provide any evidence Gawker used the interns to displace paid employees or that it would’ve hired more paid employees had there been no interns. Further, Mark received credits associated with his work at Gawker. Ultimately, Marks had obtained sufficient benefits to be properly classified as an “intern,” not an “employee,” and was therefore not owed FLSA-based compensation. So what does this mean for employers? Although this case is one small step in the right direction, we nevertheless suggest you tread lightly when it comes to unpaid interns. Particularly if they are not receiving college credit. If you choose to retain unpaid interns, make sure that the interns glean some benefit from the program, and that that benefit is at least as much as yours from their work. That means acting more like an employee, and less like a coffee-courier.
Overtime Overdrive: President Obama Signs Memorandum Telling Labor Department To Explore Expanding Employee Overtime Eligibility
On March 13, 2014, President Barack Obama issued a memorandum directing the Department of Labor (“DOL”) to streamline overtime regulations and potentially make more workers eligible under federal law. The memorandum is part of an concentrated effort by the Obama administration to address the nation’s income gap through higher wages. President Obama is also pressing Congress to increase the federal minimum wage from $7.25 per hour to $10.10 per hour.
In the memorandum, President Obama directed DOL Secretary Thomas Perez to consider how the administrative and executive exemptions adopted by the DOL under the Fair Labor Standards Act (“FLSA”) could be simplified and updated to address the changing nature of the American workplace. In signing the memorandum, President Obama stated that he wants “to restore the commonsense principle behind overtime–if you go above and beyond to help your employer and your economy succeed, then you should share a little bit in that success.”
This memorandum is the start of what will be a long process under the steps required by the Administrative Procedures Act. Next, the DOL will propose revisions and rules, which will be subject to public comment. Already, the memorandum is drawing ire from the business industry, so the public comment period is expected to be controversial and contentious.
A copy of the memorandum can be found here.