Regulations, Executive Orders & Court Rulings: Part 1

Election years often bring a flurry of legislative and regulatory activity. And this year is no different. The first of this two-part series will describe some key changes in federal regulations that could potentially make it harder, costlier and less efficient for employers to run their organizations.

White-Collar Exemption

In May, the United States Department of Labor (DOL) announced a final rule that updated overtime regulations. The new rule, which takes effect on December 1, 2016, will automatically extend overtime pay protections to more than 4 million workers within the first year of implementation alone. Under the previous regulations, certain salaried workers who made $23,660 per year were entitled to overtime.

The new rule nearly doubles that amount. Starting December 1, 2016, most salaried workers who earn less than $47,476 annually must be paid overtime when they work more than 40 hours in a work week. Every 3 years, the pay levels will automatically update, beginning January 1, 2020.

The Federal Contractor Blacklisting Rule

In July 2014, President Obama issued Executive Order 13673, named the Fair Pay and Safe Workplaces Act. The order applies to the procurement under federal contracts of more than $500,000.

It requires federal contracting agencies to collect information about potential prime contractor’s 3-year history of violations of 12 federal labor, employment, wage payment and safety laws, including the Fair Labor Standards Act; the Occupational Safety and Health Act of 1970; the National Labor Relations Act; the Americans with Disabilities Act of 1990; and the Family and Medical Leave Act. Dubbed the “federal contractor blacklisting rule,” the final rule was scheduled to be implemented in August.

In May 2015, the Federal Acquisition Regulatory Council published a proposed rule to implement the order. At the same time, the DOL also published its own guidance. In order to be eligible for contracts worth more than half a million dollars, contractors will have to self-report their own records of compliance. At some undetermined point in the future, they will also need to self-report the compliance records of their subcontractors.

Joint Employer

Employers who work closely with secondary companies and franchisers should be paying close attention to recent decisions by the National Labor Relations Board. In cases involving Browning-Ferris Industries and McDonald’s, the NLRB has greatly changed the amount of control a company needs to have over the employees of another company in order to qualify as a joint employer. According to the Labor Department, “Joint employment exists when an employee is employed by two (or more) employers such that the employers are responsible, both individually and jointly, to the employee for compliance with a statute.”

In July 2014, the NLRB’s Office of the General Counsel announced the results of investigations into 181 charges of violations of employee rights against McDonald’s franchisees and the parent company, McDonald’s USA LLC. While finding some of the charges without merit and others still under investigation, General Counsel Richard F. Griffin Jr. found merit in 43 of the charges. He then took the ruling even further, finding that both franchisees and franchisors could be potentially liable for the violations. In February 2015, the NLRB filed more complaints against McDonald’s for back pay and to reinstate workers who had been fired. The agency also wanted McDonald’s to pledge to change working conditions. In March, the NLRB took McDonald’s to court.

In another, equally significant 2015 ruling, the NLRB found that Browning-Ferris and Leadpoint, the staffing agency that provided workers to Browning-Ferris, were joint employers. The NLRB ruled that current standards for joint employers were failing to keep up with changing economic practices involving the relationships of temporary employment agencies. Under the new joint-employer test, the NLRB looks at the right of a company to exercise control over another company’s employees, regardless of whether the company ever actually exercises that control and whether the company has the right to directly exercise that control. Based on the way the NLRB articulated the right-to-control factor, it will be almost impossible for an employer who utilizes contract labor not to be a joint employer with its contracted staffing company. In January, Browning-Ferris launched its own legal challenge against the ruling.

Wellness Programs

In May, the U.S. Equal Employment Opportunity Commission (EEOC) issued its final rules for wellness programs under the Americans with Disabilities Act (ADA) and Genetic Information Nondiscrimination Act (GINA). The rules, which apply for plan years starting on and after January 1, provide some guidance for companies looking to develop wellness programs that comply with federal laws. Under the new rules, employers must make sure that their wellness programs are reasonably designed; and the information collected must be used to target specific conditions that have been identified. That means programs cannot put too much of a burden on employees, involve procedures that are too intrusive and lead to any illegal discrimination under the ADA, GINA or any other laws. They also cannot require employees to pay significant costs for medical treatment.

Employee wellness programs must also be “voluntary.” Among other things, that means employers cannot retaliate against any employees who choose not to participate in the program. The EEOC has also ruled that incentives, such as gift cards, gym memberships and discounts on health care premiums, cannot be more than 30 percent of the cost of self-only coverage. That percentage is less than the maximum amount permitted under the Health Insurance Portability and Accountability Act. The rules also clarify that there is no distinction between wellness programs that are part of or outside of a group health plan. The new rules apply to all wellness programs that involve obtaining medical information from employees. The EEOC also stressed that employers must keep all medical information they receive through wellness programs completely confidential.

OSHA Electronic Recordkeeping

In May, the Occupational Safety and Health Administration (OSHA) published a final rule on electronic reporting of workplace injuries and illnesses. While the agency said the rule was designed to “nudge” employers, others are referring to it as a “name-and-shame” approach.

Starting August 10, 2016, employers in high-hazard industries must send OSHA injury and illness data that will be posted on the agency’s website. According to OSHA, the rule will modernize injury data collection to better inform workers, employers, the public and OSHA about workplace hazards.

Under the new rule, organizations with 250 or more employees in industries covered by the recordkeeping regulation must electronically submit to OSHA injury and illness information from OSHA Forms 300, 300A and 301. Companies with 20-249 employees in certain industries must electronically submit information from OSHA Form 300A only.

As overwhelming as these new regulations seem, there are even more to come. It is important for employers to stay up to date on all the changes that may affect their businesses. By being proactive in reviewing all policies affected by these changes, employers can hopefully avoid committing violations and the costs they incur. This article is the first in a two-part series in which Richard Alaniz provides essential information about new federal regulations and what they mean for your company’s business operations. Part 2 of the series will explore court rulings and state-level legislation. Read it here.