As we previously reported, 21 states filed a lawsuit on September 20 against the U.S. Department of Labor in the U.S. District Court for the Eastern District of Texas, challenging the USDOL’s revisions to the white collar exemptions under the Fair Labor Standards Act. On that same day, several business groups filed their own lawsuit in the same Court, also challenging the USDOL's white collar exemption regulations. As we quickly approach the effective date of the new regulations (December 1), many employers are wondering: what is the status of those lawsuits and how do those lawsuits affect our plans to communicate with our employees about changes that will be made? The short answer to the first question -- the status of the lawsuits -- is that the Court has not issued a decision yet. On October 12, the 21 states filed a motion for a preliminary injunction, and on October 14, the business groups filed a motion for summary judgment. On October 19, because of the similarities in the allegations and the common underlying purpose of the two complaints, the Court consolidated the two cases. This morning, November 16, the court held oral argument with respect to the states' motion for a preliminary injunction. The U.S. District Judge, Amos L. Mazzant, III, stated at the end of oral argument that the Court hopes that a ruling on the motion for a preliminary injunction will be issued on Tuesday, November 22. The USDOL's deadline to file a response to the business groups' motion for summary judgment is November 18, and the business groups will have until November 21 to file a reply. So, a decision on the motion for summary judgment is also not expected at least until November 22 at the earliest. The answer to the second question -- what effect the lawsuits will have on a New York employer's plans to communicate changes to its employees -- is that it may not be feasible for employers to wait and see whether the Court issues an injunction before communicating with their employees. Employers will need to comply with the new regulations (assuming there is no injunction) effective at the beginning of the work week that encompasses December 1. For employers that have Monday through Sunday work weeks, that date will be Monday, November 28 -- right after Thanksgiving weekend. Therefore, employers that want to provide their employees with as much advance notice as possible may find it difficult to wait and see whether the Court issues a decision on November 22 before letting their employees know that they will be converted from exempt to non-exempt status effective November 28. Employers may want to consider including some language in their communications to employees to let them know that the changes in classification will occur unless there are developments prior to the effective date of the changes that either delay or prevent the new regulations from being implemented. However, even in the absence of such language, nothing would preclude an employer from restoring the status quo if a preliminary injunction is issued by the Court.
You read that right -- not to be outdone by its federal counterpart -- the New York Department of Labor recently proposed significant changes to the salary threshold applicable to exempt executive and administrative employees in New York State -- changes all New York employers should be aware of. As you know, both state and federal law regulate exempt status and, to be exempt, an employee must satisfy the requisite tests under both. While employers are preparing for changes at the federal level that will go into effect on December 1st -- raising the salary threshold for most executive, administrative and professional employees to $913.00 per week -- the New York State Department of Labor has taken the opportunity to propose significant increases to New York's salary threshold. Currently, the salary threshold for executive and administrative employees (NY law does not set a salary threshold for professional employees) is set at $675.00 per week -- 75 times the current minimum wage of $9.00 per hour. With the minimum wage set to gradually increase in coming years (at different rates depending on geography), the Department of Labor has proposed corresponding increases in the applicable salary threshold. As a result of these proposed increases, New York's salary threshold will overtake the federal threshold in coming years. (Note: because the $913.00 per week federal salary threshold will be indexed, it will be adjusted every three years with the first such adjustment occurring in 2020.) Specifically, the Department of Labor has proposed the following increases to New York's salary threshold for the executive and administrative exemptions: Employers Outside of New York City, Nassau, Suffolk, and Westchester Counties
$727.50 per week on and after 12/31/16;
$780.00 per week on and after 12/31/17;
$832.00 per week on and after 12/31/18;
$885.00 per week on and after 12/31/19;
$937.50 per week on and after 12/31/20
Employers in New York City"Large" employers (11 or more employees)
$825.00 per week on and after 12/31/16;
$975.00 per week on and after 12/31/17;
$1,125.00 per week on and after 12/31/18;
"Small" employers (10 or fewer employees)
$787.50 per week on and after 12/31/16;
$900.00 per week on and after 12/31/17;
$1,012.50 per week on and after 12/31/18;
$1,125.00 per week on and after 12/31/19;
Employers in Nassau, Suffolk, and Westchester Counties
$750.00 per week on and after 12/31/16;
$825.00 per week on and after 12/31/17;
$900.00 per week on and after 12/31/18;
$975.00 per week on and after 12/31/19;
$1,050.00 per week on and after 12/31/20;
$1,125.00 per week on and after 12/31/21;
After a 45-day public comment period, the Department of Labor will likely move toward finalizing these proposed changes. As if business owners, executives, and human resource professionals did not have enough to deal with.
On September 20, 21 states filed a lawsuit against the U.S. Department of Labor in the U.S. District Court for the Eastern District of Texas, challenging the USDOL's revisions to the white collar exemptions under the Fair Labor Standards Act. In the lawsuit, the states are seeking a declaratory judgment that the USDOL violated the Administrative Procedure Act and the Tenth Amendment to the U.S. Constitution by promulgating the new regulations, and an injunction preventing the USDOL from implementing the new regulations. The first claim for relief is that the application of the new regulations to state employers violates the Tenth Amendment to the U.S. Constitution. The Tenth Amendment provides that "[t]he powers not delegated to the United States by the Constitution, nor prohibited by it to the states, are reserved to the states respectively, or the people." According to the complaint, enforcing the new regulations against the states "infringes upon state sovereignty and federalism by dictating the wage that states must pay to those whom they employ in order to carry out their governmental functions, what hours those persons will work, and what compensation will be provided where these employees may be called upon to work overtime." The states allege that they will be forced to eliminate or alter employment relationships and cut or reduce services and programs as a result of the increased cost associated with compliance with the new regulations. Although the first claim for relief appears to relate only to the application of the new regulations to state employers, the other claims for relief under the Administrative Procedure Act are asserted not only on behalf of state employers, but also on behalf of private employers. The second claim for relief is that the issuance of the new regulations exceeds the USDOL's statutory jurisdiction and authority under the FLSA, because Congress intended that an employee's duties -- not salary -- be determinative of exempt status and because there is no Congressional authorization for automatic increases to the minimum salary level every three years. The third claim for relief is that the USDOL circumvented the required rulemaking procedures by mandating automatic increases every three years instead of going through the appropriate notice and comment procedures each time the salary level will be increased. The fourth claim for relief is that the USDOL's issuance of the new regulations was arbitrary and capricious, and the fifth claim for relief is that the USDOL's issuance of the new regulations was an improper delegation of legislative power. As of now, employers should continue to plan as if the new regulations will become effective on December 1. Many employers will have significant decisions to make about whether to increase certain employees' salaries to retain the employees' exempt status and whether to reclassify certain employees from exempt to non-exempt. Those decisions should be made soon, and employers should plan on moving forward with those decisions beginning with the pay period that encompasses December 1. If an injunction is issued between now and late November that delays or prohibits the implementation of the new regulations, employers can always put their plans on hold pending a final outcome of the lawsuit.
Employers in New York are familiar with the requirement, imposed by the Wage Theft Prevention Act, that every new hire must be provided with notice of their rate of pay (including overtime rate of pay if applicable), how the employee will be paid (i.e., by the hour, shift, day, etc.), the regular payday, and information regarding the employer. Employers are obligated to provide an additional written notice anytime that information changes, unless the employee's wage rate is increased and the next pay stub reflects the increase. Each time notice is given, the employer is required to obtain a signed acknowledgment from the employee, and must keep that signed acknowledgement on record for six years. Upcoming changes to the white collar exemptions under the Fair Labor Standards Act may implicate a need to issue new notices if employees are reclassified from exempt to non-exempt. As the law currently stands, employees must earn a minimum salary of $455.00 per week ($23,660 per year) to qualify for one of the white collar exemptions (administrative, executive, or professional) under the FLSA. New York currently has a higher salary threshold of $675.00 per week ($35,100 per year) for an employee to qualify for the administrative or executive exemptions. The current threshold for employees to meet the "highly compensated employee" exemption under the FLSA is $100,000 per year. Starting on December 1, 2016, however, these thresholds will rise substantially. The increased salary threshold for the administrative, professional, and executive exemptions will be $913.00 per week ($47,476 per year). The new threshold for the highly compensated employee exception will be $134,004 per year. These thresholds are set to increase every three years after that, with the first increase taking effect on January 1, 2020. This change will force many employers to reclassify employees who are currently exempt, but do not meet the new salary threshold, as non-exempt. Any such reclassification will affect the rates those employees are paid, how they are paid, and their eligibility for overtime pay. Given this impact, what legal obligation will the reclassification trigger? You guessed it -- the WTPA’s notice requirement. Accordingly, employers should be mindful of this notice requirement when reclassifying employees in order to comply with the updated regulations, or when making any other changes to employee’s rates or method of payment. Although the "pay stub exemption" may apply in some limited instances, the best practice is to provide employees with formal written notice that complies with the WTPA when making any such changes.
After a nearly eight-month delay, the New York State Department of Labor once again published draft Regulations governing the payment of employee wages via payroll debit cards, direct deposit, and other means. As we previously reported, these proposed Regulations would impose several new requirements for New York employers, even for those who merely pay employees by direct deposit. These proposed Regulations – now NYSDOL’s third version – are currently open for public comment.The most recent version is almost identical to the version last proposed in October 2015, with NYSDOL making only two substantive changes: (1) the newly-proposed Regulations make clear that the requirement to provide employees with a “list of locations” -- where they can access and withdraw their wages -- only applies to the use of payroll debit cards; and (2) the newly-proposed Regulations remove language included in the October 2015 version, which provided that, when paid by check, employees must have at least one means of no-cost local access to the full amount of wages through check cashing or deposit of a check at a financial institution (but NYSDOL nevertheless stated that employers must still “ensure that employees are able to access their wages in order for payment to be effective in accordance with the requirements of Section 191 of the Labor Law”). Notably, NYSDOL reiterated that the proposed Regulations will not be effective until six months after they are published and adopted in final form.The reason for the eight-month delay on the part of the NYSDOL in issuing these revised draft Regulations is unclear, but it is expected that final rule-making will now proceed in a timely manner.
The U.S. Department of Labor recently issued its final regulations revising the white collar exemptions under the Fair Labor Standards Act. Although the final regulations significantly raise the salary threshold for the administrative, professional, executive, and computer employee exemptions, employers can take some solace in the fact that the increase is actually lower than the one proposed by the USDOL last summer. In addition, employers who still have extensive work to do in order to prepare for the implementation of the final regulations will have more time to do so than expected. The final regulations will not become effective until December 1, 2016, which gives employers more than six months to make decisions regarding whether to increase salaries to retain the exemptions or reclassify formerly exempt employees as non-exempt. The USDOL's proposed regulations issued last summer set the minimum salary to qualify for the white collar exemptions at the salary level equal to the 40th percentile of earnings for full-time salaried workers in the United States. The final regulations set the minimum salary to qualify for the white collar exemptions at the salary level equal to the 40th percentile of earnings for full-time salaried workers in the lowest-wage Census Region of the United States. So, instead of the salary threshold increasing to approximately $970.00 per week as anticipated, the salary threshold for the administrative, professional, executive, and computer employee exemptions will increase to $913.00 per week (which amounts to $47,476 per year) effective December 1, 2016. Although this salary increase is slightly more palatable to employers than the proposed salary increase, it is still a significant increase from the current federal minimum salary level of $455.00 per week to qualify for the white collar exemptions and the current New York minimum salary level of $675.00 per week to qualify for the administrative and executive exemptions. Teachers, lawyers, and doctors will continue to not be subject to this minimum salary requirement. The USDOL's proposed regulations set the minimum salary to qualify for the highly compensated employee exemption at the salary level equal to the 90th percentile of earnings for full-time salaried workers in the United States. This did not change in the final regulations. Effective December 1, 2016, the minimum salary to qualify for the highly compensated employee exemption will be increased from $100,000 per year to $134,004 per year. The USDOL's proposed regulations included a provision that would have automatically raised the minimum salary levels to qualify for the white collar exemptions from year to year without further rulemaking. The USDOL's final regulations still provide for automatic increases, but instead of occurring every year, these automatic increases will occur every three years beginning on January 1, 2020. The automatic increases will continue to be based on the 40th percentile of earnings for full-time salaried workers in the lowest-wage Census Region of the United States to qualify for the executive, administrative, professional, and computer employee exemptions, and the 90th percentile of earnings for full-time salaried workers in the entire United States to qualify for the highly compensated employee exemption. Although this will still force employers to evaluate their exempt workforces on a periodic basis to determine whether to reclassify employees as non-exempt, going through this process every three years instead of every single year will ease this burden slightly. Currently, employers are not permitted to count commissions, bonuses, and other forms of incentive compensation toward the minimum weekly salary for an employee to qualify for the executive, administrative, professional, and computer employee exemptions. However, the USDOL's final regulations allow employers to satisfy up to 10% of the new salary threshold by the payment of non-discretionary bonuses, incentives, and commissions that are paid quarterly or more frequently. Employers should take this into consideration when deciding how to restructure the compensation of exempt employees in order to retain the white collar exemptions. The final rule does not include any revisions to the outside sales exemption, so employees who are engaged in the primary duty of making sales outside the workplace will continue to not be subject to a minimum salary requirement to qualify for the exemption. In addition, although the USDOL solicited comments about whether revisions should be made to the duties tests for the white collar exemptions, the final rule leaves the duties requirements untouched. Employers should keep in mind that they have many options when evaluating compliance with the new white collar exemption regulations. One of those options is to convert salaried exempt employees to hourly non-exempt employees and do so at an hourly rate that will not raise the total personnel expense for their business. Of course, that means that the hourly rate will need to be set low enough to account for straight time pay for the first 40 hours per work week and overtime pay for hours worked in excess of 40 hours per work week, without raising an employee’s total average weekly earnings above the current salary. In other words, many of the 4.2 million employees who will potentially now be eligible for overtime pay may find that they will not earn any more than they did when they were exempt employees who were ineligible for overtime pay.
On April 4, 2016, Governor Cuomo signed legislation, as part of the 2016-2017 state budget, enacting a $15.00 minimum wage plan and a 12-week paid family leave benefit.
Minimum Wage Increase
The legislation includes a historic increase in the minimum wage (currently $9.00 per hour) that will ultimately reach $15.00 per hour for all workers in New York State. The increases vary based on employer size and geographic location as follows:
For large employers (11 or more employees) whose employees work in New York City, the state minimum wage will increase to $11.00 per hour on December 31, 2016, $13.00 per hour on December 31, 2017, and $15.00 per hour on December 31, 2018.
For small employers (10 or fewer employees) whose employees work in New York City, the state minimum wage will increase to $10.50 per hour on December 31, 2016, $12.00 per hour on December 31, 2017, $13.50 per hour on December 31, 2018, and $15.00 per hour on December 31, 2019.
For employers with employees working in Nassau, Suffolk, and Westchester Counties, the state minimum wage will increase to $10.00 per hour on December 31, 2016, $11.00 per hour on December 31, 2017, $12.00 per hour on December 31, 2018, $13.00 per hour on December 31, 2019, $14.00 per hour on December 31, 2020, and $15.00 per hour on December 31, 2021.
For all employers with employees working outside of New York City and Nassau, Suffolk, and Westchester counties, the state minimum wage will increase to $9.70 per hour on December 31, 2016, $10.40 per hour on December 31, 2017, $11.10 per hour on December 31, 2018, $11.80 per hour on December 31, 2019, and $12.50 per hour on December 31, 2020. The minimum wage will continue to increase to $15.00 thereafter on an indexed schedule to be set by the Director of the Budget in consultation with the Commissioner of the Department of Labor. These increases will be published on or before October 1st of each year.
The legislation also includes a safety measure allowing the Division of Budget, beginning in 2019, to conduct an annual analysis to determine whether there should be a temporary suspension or delay in any scheduled increases. These minimum wage increases do not affect the timing and amounts of the minimum wage increases for fast food workers that were incorporated into the Hospitality Industry Wage Order effective December 31, 2015.
Paid Family Leave
In addition to a gradual increase in the minimum wage, a paid family leave program was enacted that will eventually result in eligible employees being entitled to up to 12 weeks of paid family leave when they are out of work for the following qualifying reasons: (1) to care for a family member with a serious health condition; (2) to bond with a child during the first 12 months following birth or placement for adoption or foster care; or (3) because of a qualifying exigency arising out of the fact that the employee’s spouse, domestic partner, child, or parent is on active duty (or has been notified of an impending call or order to active duty) in the armed forces.
In order to be eligible for paid family leave, employees must work for a covered employer – as defined under the New York Disability Law – for 26 or more consecutive weeks. Family leave benefits will be phased in as follows:
Beginning on January 1, 2018, eligible employees will receive up to 8 weeks of paid family leave in a 52-week calendar period at 50% of the employee’s average weekly wage, capped at 50% of the state average weekly wage;
Beginning on January 1, 2019, eligible employees will receive up to 10 weeks of paid family leave in a 52-week calendar period at 50% of the employee’s average weekly wage, capped at 50% of the state average weekly wage;
Beginning on January 1, 2020, eligible employees will receive up to 10 weeks of paid family leave in a 52-week calendar period at 60% of the employee’s average weekly wage, capped at 60% of the state average weekly wage; and
Beginning on January 1, 2021 and each year thereafter, eligible employees will receive up to 12 weeks of paid family leave in a 52-week calendar period at 67% of the employee’s average weekly wage, capped at 67% of the state average weekly wage.
Like with the minimum wage increase, the legislation includes a safety measure whereby the Superintendent of Financial Services has the discretion to delay the scheduled increases listed above.
Family leave benefits may be payable to employees for family leave taken intermittently or for less than a full workweek in increments of one full day or one-fifth of the weekly benefit. Significantly, employers are not required to fund any portion of this benefit. Rather, the program is funded entirely through a nominal employee payroll deduction. The maximum employee contribution will be set by the Superintendent of Financial Services on June 1, 2017 and annually thereafter.
Entitlement to paid family leave is also subject to certain medical certification and notification requirements. Paid family leave benefits must be used concurrently with leave under the Family and Medical Leave Act. In addition, employees are prohibited from collecting disability and paid family leave benefits concurrently.
In addition to paid leave, this legislation contains a provision for the continuation of health benefits which provides as follows: “In accordance with the Family and Medical Leave Act (29 U.S.C. §§ 2601-2654), during any period of family leave the employer shall maintain any existing health benefits of the employee in force for the duration of such leave as if the employee had continued to work from the date he or she commenced family leave until the date he or she returns to employment.”
Lastly, employees who take paid family leave must be restored to their current position or to a comparable position with equivalent pay, benefits, and other terms and conditions of employment.
Clearly, there are a lot of questions that remain unanswered regarding the paid family leave program. However, covered employers should begin to prepare for the implementation of this legislation.
Ever since President Obama on March 13, 2014 signed a Presidential Memorandum directing the United States Department of Labor to update the overtime exemption regulations under the FLSA, it has probably been the most talked about employment law issue over the last two years. This is not surprising, as the FLSA applies in both the private and public sector and generally does not distinguish between for-profits and non-profits.
Given the significant potential implications, the process of revising the overtime exemption rules moved along gradually. It took over a year for the DOL to even publish proposed changes, which it did on July 6, 2015 in the Federal Register. Despite numerous requests by various entities to extend the September 4, 2015 public comment period, including from approximately twenty members of Congress, the DOL declined to do so.
On March 14, 2016, the DOL took the final step necessary before implementation of the proposed changes by sending the controversial rules to expand overtime protection to the White House’s Office of Management and Budget (“OMB”). OMB can review the rules for a maximum period of 90 days. There is no minimum amount of time required for OMB review. We believe, given the heightened level of public scrutiny of the rules and collateral issues like the Presidential election coming up in November, that OMB should be prepared to do a relatively prompt review within 30 to 45 days. If so, and assuming there is a 60-day grace period between issuance of the final rules and implementation of the final rules, this would mean an effective date of the final rules in late July or early August.
Perhaps the most important question still remains though -- will the final rules contain any significant changes to the “duties” tests for the white collar exemptions despite the absence of any specific changes in the proposed rules? Even if not, litigation over the final rules seems inevitable. If so, the screams of foul play from employers will be deafening.
As we reported previously, the New York State Department of Labor (“NYSDOL”) proposed a series of new regulations earlier this year. These proposals included new regulations raising the minimum wage and reducing the maximum available “tip credit” for certain workers in the hospitality industry, and new regulations implementing the recommendation of Governor Cuomo’s Fast Food Wage Board to raise the minimum wage for fast food workers to $15.00 per hour. Today, both sets of regulations were formally adopted and published in the New York State Register.
These new regulations are effective on December 31, 2015, and contain no changes from what NYSDOL originally proposed earlier this year. For more information about these regulations, readers can access our prior blog article. Among other things, as of December 31, 2015, certain tipped workers who fall under New York’s Hospitality Industry Wage Order must be paid at least $7.50 per hour and may only receive a maximum “tip credit” of $1.50 per hour. Also, as of this same date, covered fast food workers must be paid at least $9.75 per hour if they are employed outside of New York City or at least $10.50 per hour if they are employed inside of New York City. These minimum wages for covered fast food workers are set to automatically increase annually, eventually reaching $15.00 per hour on December 31, 2018 in New York City and on July 1, 2021 in all other areas of New York.
There may be legal challenges to these recently-adopted regulations, in particular the regulations impacting employers in the fast food industry. We will continue to report any noteworthy developments here.
As we have previously reported on this blog, and as most of you are well aware, the U.S. Department of Labor has published its highly-anticipated proposed revisions to the “white collar” exemptions under the Fair Labor Standards Act (“FLSA”). The proposed rule would increase the required salary level for exempt employees to a projected $50,440 per year in 2016 and establish a procedure for automatically updating the minimum salary levels on an annual basis going forward without further rulemaking. The proposed rule also significantly increases the salary threshold to qualify for the “highly compensated employee” exemption to the annualized value of the 90th percentile of weekly earnings of full-time salaried workers ($122,148 annually). According to the USDOL, nearly 5 million employees currently classified as exempt will immediately become eligible for overtime pay should the proposed rule be adopted as the final rule.
Current best estimates are that we could see the final rule published next year. In the meantime, there are steps employers can take now to start preparing for compliance, beginning with identifying those current exempt positions with salaries that would fall below the Department’s proposed $50,440 per year (or $970 per week) threshold or the increased salary threshold for highly compensated employees. These employees will either need to receive a bump in salary to put them over the minimum threshold or be reclassified as non-exempt. For those likely to be reclassified, employers should start trying to estimate future compensation costs by looking at how many hours per week these employees are currently working.
Employers should also start thinking about whether they will need to hire additional full-time, part-time or seasonal employees or whether they will need to compensate newly reclassified employees at a lower hourly rate (as compared to their current weekly salary divided by 40) to offset the potential increase in overtime costs. In determining hourly rates for newly reclassified employees, keep in mind that the minimum wage in New York increases to $9.00 on December 31, 2015. In the Hospitality Industry, tipped workers and fast food workers in New York may also be in line for wage rate increases on December 31, 2015, pursuant to proposed regulations issued by the New York State Department of Labor.
Finally, employers should start thinking about how these changes will be communicated to their employees. An effective communications strategy will be an important part of managing the uncertainty and anxiety surrounding the potential reclassification of an unprecedented number of positions in the workplace.
October saw a flurry of activity from workplace regulators in New York, and employers should take note of several recent legal developments.
First, Governor Andrew Cuomo recently signed legislation extending a so-called “sunset” provision in prior amendments to New York’s wage deduction statute – Section 193 of the New York Labor Law. Those amendments, enacted in 2012, broadened the scope of permissible wage deductions under state law, including deductions for certain overpayments and advances. Absent legislative action, the amendments were set to expire this month, which would have caused Section 193 to revert to its prior, more restrictive form. These amendments will now be extended for another 3-year period. Notably, this recent legislative action serves to concurrently extend existing deduction-related regulations promulgated by the New York State Department of Labor (“NYSDOL”). Among other things, the regulations set forth detailed requirements which employers must follow in order to lawfully deduct to recover overpayments and advances.
Second, the NYSDOL proposed revised regulations on October 28, 2015, governing the payment of employee wages via payroll debit cards, direct deposit, and other means. These revised regulations – which are not yet final or effective – would impose a number of new requirements regarding how employers pay their covered employees. As we reported on this blog, the NYSDOL initially proposed regulations on this same subject earlier this year, which were open for an extended public comment period. The recently-issued revised regulations contain several changes from what NYSDOL originally proposed, ostensibly in response to feedback it received during the prior public comment period. On balance, the newly-revised version provides better clarity on certain requirements and may also render implementation of payroll debit card programs more feasible for employers. As additional good news for employers, NYSDOL has indicated that there will be a six-month delay in the effective date once the revised regulations are adopted and published in final form. The specific requirements proposed in the revised regulations can be accessed here, and are open for another 30-day public comment period.
Third, the NYSDOL published proposed regulations on October 21, 2015, which would implement the recommendation of Governor Cuomo’s Fast Food Wage Board to raise the minimum wage for fast food workers to $15 per hour. NYSDOL’s Commissioner subsequently adopted this recommendation, which will now proceed through New York’s rulemaking process. The proposed regulations are presently open for a 45-day public comment period. Businesses and their advocates in New York have opposed this drastic change and have questioned the NYSDOL’s authority to enact such an industry-specific raise without legislative action. It is expected that there will continue to be considerable opposition to this proposal, that there will be significant public commentary provided through the rulemaking process, and that opponents will, if necessary, assert a legal challenge to the proposed change.
And fourth, the NYSDOL has proposed additional regulations which would – effective on and after December 31, 2015 – raise the minimum wage and reduce the maximum available “tip credit” for certain workers who fall under the existing Hospitality Industry Wage Order. Specifically, the proposed regulations would raise the applicable minimum wage for covered “service employees” and “food service workers” to $7.50 per hour (from $5.65 and $5.00, respectively). Concurrently, the maximum available “tip credit” for these workers would be reduced to $1.50 per hour (from $3.35 and $4.00, respectively). The proposed regulations also contain similar changes for covered “service employees” working in resort hotels, and would also include new language governing the calculation of hourly tip rates. These proposed regulations are currently open for a 45-day public comment period, which began on October 7, 2015.
As a reminder, the NYSDOL proposed regulations referenced above remain pending and are not yet effective. There is no specific timetable for further action on the part of NYSDOL. Even so, it is conceivable that the regulations will be issued in final form and adopted at or near the end of this year.
New York employers take notice: an amendment to New York’s equal pay law (S.1/A.6075) was signed by Governor Cuomo on October 21, 2015. The law amends Labor Law Section 194, which prohibits pay differentials based on gender in jobs requiring “equal skill, effort and responsibility” which are “performed under similar working conditions.” The bill was passed by the Assembly in April, and by the Senate in January, and the changes are significant.
The amendment to Labor Law Section 194 is one of eight laws aimed at gender equality issues that Cuomo signed last week. Of interest to employers, several of the other laws also touch on employment issues. Those other laws:
Extend the prohibition on sexual harassment to all employers, including those with less than four employees (S.2 / A.5360);
Allow employees to obtain attorneys’ fees when they prevail in sex discrimination lawsuits (S.3 / A.7189);
Add “familial status” to the list of protected traits under the New York State Human Rights Law (S.4 / A.7317); and
Add a requirement to the Human Rights Law that employers must provide reasonable accommodations to all pregnant employees, not just those with a pregnancy-related disability (S.8 / A.4272).
The laws are slated to take effect on Tuesday, January 19, 2016.
The premise of the pay equity amendment is simple and appealing: the same day’s pay for the same day’s work. At first glance, this is not big news. The state labor law and federal law already require equal pay without regard to gender. However, this law tightens and strengthens Section 194 in ways that will undoubtedly impact many New York workplaces.
First, under existing law, an employer can defend a pay discrimination claim by showing that the difference in pay is justified by a seniority system, a merit system, a system measuring earnings based on quantity or quality of work, or “any other factor other than sex.” This catch-all was viewed by many as a loophole and hindered the success of many pay discrimination claims. The new law replaces the “any other” defense with the following: "a bona fide factor other than sex, such as education, training, or experience." This bona fide factor must be job-related and consistent with business necessity. Notably, the burden is on the employer to prove the existence of this bona fide factor; it is not on the complaining employee to prove discriminatory motive (as in other types of employment discrimination litigation).
As any employer can attest, many factors other than sex go into compensation decisions. Under the old law (and still under federal law), these other factors typically held up to the test of “any other factor other than sex.” It is not clear which factors will hold up under the new law. For example, are market forces still a defense? In a competitive market for talent, an employer might pay a new hire more than employees currently performing the same job simply because the market demands it. Perhaps the candidate has an offer from a competitor that the employer must match to attract the candidate. Often, internal compensation lags behind external market. Whether market forces will be considered “a bona fide factor other than sex, such as education, training, or experience” remains to be seen.
Moreover, even if an employer establishes a “bona fide factor” to justify a gender pay difference, an employee can still prevail under the new law by showing that: (a) the bona fide factor has a disparate impact on one sex; (b) alternative employment practices exist that would serve the same business purpose and not produce the pay differential; and (c) the employer refused to adopt the alternative practice. The lack of clarity over what will be considered a “bona fide factor” will undoubtedly result in a wave of litigation.
Second, the Pay Equity Act gives employees the right to openly inquire about, disclose and discuss their wages. Employers cannot prohibit these conversations. Rather, the employer may only establish and distribute a written policy containing “reasonable workplace and workday limitations on the time, place and manner” for pay discussions. The law states that an example of a reasonable limitation would be a rule that an employee may not disclose a co-worker’s pay without the co-worker’s permission. The law contains some recognition that certain employees must still maintain confidentiality of pay information: an employer may prohibit an employee with access to other employees’ pay information as part of their job from disseminating that information to others who do not have the same access.
This right to openly discuss pay is new to New York law, but it is consistent with the National Labor Relations Board’s position that an employee’s right to openly discuss wages is protected by the National Labor Relations Act.
Third, the law contains dramatically higher penalties than other state employment discrimination and wage/hour laws. Employers who are found to have willfully violated the Equal Pay Act are subject to liquidated damages in the amount of 300% of the wages owed. In other words, in addition to making the employee whole for any unlawful difference in pay, there is an additional potential penalty of three times those wages. Other provisions of the New York Labor Law provide for liquidated damages of “only” 100%.
As stated above, the law takes effect on January 19, 2016. Therefore, employers should act quickly to evaluate any potential exposure. Now is the time to review pay rates to ensure any gender differences can be justified based on the factors in the statute. Consider whether these factors are job-related and consistent with business necessity. Additionally, employers should review their written policies, particularly confidentiality policies, to ensure they do not contain restrictions on the right to share or discuss compensation information, and revise as necessary. Similarly, supervisors should be made aware that they may not prohibit conversations about pay. Finally, consider the pros and cons of adopting a new policy setting reasonable limits on the time, place and manner of pay discussions.
