DOL proposes employer-friendly rules for regular pay rate definition, joint employer liability
The Department of Labor recently went on a rulemaking frenzy, making proposed changes to wage and hour laws that hadn’t been touched in more than 50 years. Why now?
The DOL has been very active in the past couple of weeks. Last month, the DOL issued proposed rules that would raise the minimum salary level for white collar exemptions. Last week, for the first time in more than 50 years, the DOL made a proposal to change the definition of the regular rate of pay. This week, after more than 60 years without any meaningful revisions, the DOL has proposed a new four-factor test for determining joint employment liability. It appears that the DOL is hurrying to complete its regulatory agenda before the next election season. The two most recent proposed rules are employer-friendly.
One of the proposed changes affects the way the regular rate of pay is calculated for non-exempt employees. How so?
The regular rate of pay is the basis on which employers calculate overtime rates for non-exempt employees. Some forms of payment must be included in the regular rate of pay, while other forms of payment can be excluded. The existing rules are somewhat vague and have the effect of discouraging employers from offering more perks to their employees, as those perks may be required to be included in the employee’s regular rate of pay. Under the new proposed rule, the following benefits and payments may be excluded from an employee's regular rate of pay: the cost of providing wellness programs, on-site specialist treatment, gym access and fitness classes, and employee discounts on retail goods and services; payments for unused paid leave, including paid sick leave; reimbursed expenses, even if not incurred "solely" for the employer's benefit; reimbursed travel expenses that do not exceed the maximum travel reimbursement under the Federal Travel Regulation System and that satisfy other regulatory requirements; discretionary bonuses (the proposal provides additional examples of discretionary bonuses and clarifies that the label given a bonus by an employer does not determine whether it is discretionary); benefit plans, including accident, unemployment, and legal services; and tuition programs, such as reimbursement programs or repayment of educational debt.
Joint employer liability is an issue that’s been argued in the courts a lot recently. Do the proposed regs provide sufficient clarity as to when a joint employer relationship exists?
The Fair Labor Standards Act imposes joint employer liability when an employer and another company (a joint employer) are jointly responsible for an employee's wages. The proposed rule is intended to help employers and joint employers more clearly understand their legal obligations under the FLSA. The DOL has proposed a clear, four-factor test — based on well-established case law — that would consider whether the potential employer actually exercises the power to: hire or fire the employee; supervise and control the employee's work schedules or conditions of employment; determine the employee's rate and method of payment; and and maintain the employee's employment records. In addition to the four-factor test, the DOL has explicitly stated that certain factors, such as economic dependence, opportunity for profit or loss, or investment in equipment, are not to be considered in the joint employer analysis. Importantly, the proposed rule also includes several examples of when joint employment will exist. While this guidance provide substantial clarity for purposes of the FLSA, employers should remember that this new test does not apply to other laws such the National Labor Relations Act, Title VII of the Civil Rights Act, or other anti-discrimination laws.
What should employers be doing now?
Employers should remember that these proposed rules are not in final form. There is always the possibility of substantial changes before the final rules are implemented. While employers should not make any changes to their policies just now, they should continue to monitor these proposed rules and, as necessary, seek the assistance of legal counsel to see if changes to their policies, practices or arrangements will be necessary in the future.
Paula Burkes, Business writer
Published The Oklahoman, April 5, 2019