DOL & NLRB Reverse Positions Seen As Anti-Employer

The change in administrations has brought a series of reversals of the Obama era’s less than employer-friendly positions by the U. S. Department of Labor (DOL) and the National Labor Relations Board (NLRB or Board). This article highlights some of the favorable recent developments from these agencies that may be a harbinger of better things to come in 2018.

DOL REINSTATES 17 FAVORABLE OPINION LETTERS WITHDRAWN BY THE PRIOR ADMINISTRATION

For many, many years, the DOL issued official written Opinion Letters in direct response to employer questions regarding the interpretation and implementation of federal labor laws. Although they do not create law, Opinion Letters set forth the DOL’s position on how the Fair Labor Standards Act (FLSA) and other laws apply to very specific circumstances presented by employers seeking the DOL’s guidance. Under the FLSA, an employer who relies in good faith upon an Opinion Letter issued by the DOL is shielded from liability for violations of the minimum wage and overtime requirements of the FLSA, so long as the facts pattern surrounding challenged practice is identical to that contained in the relied-upon Opinion Letter.

In a departure from that prior practice, in March of 2009 the Obama administration withdrew various DOL Opinion Letters issued in the waning days of the Bush administration “for further consideration by the Wage and Hour Division” of the DOL. In addition, the DOL opted to issue “Administrator Interpretations” rather than formal Opinion Letters. Administrative Interpretations are more general interpretations that will not shield an employer from liability if relied upon. In June 2017 the Trump administration DOL announced that it would revive the practice of issuing Opinion Letters, and on January 5, 2018, reinstated 17 DOL Wage and Hour Division (WHD) Opinion Letters addressing various issues under the FLSA. The return to Opinion Letters as opposed to Administrator Interpretations is a favorable development for employers.

The 17 re-issued Opinion Letters cover a wide range of topics under the FLSA, and many are industry specific with little or no application to most employers. (Click here for a complete list of the re-issued Opinion Letters).   Among those that have a broader application to all employer include:

• FLSA 2018-5, FLSA 2018-9 and FLSA 2018-11, addressing whether a salaried exempt employee who is absent for one or more full days but does not have time in his/her PTO bank to cover the absences, may be subject to a deduction of the full day’s absence from the employee’s pay by the employer. These revived Opinion Letters deemed such a practice permissible under the FLSA.
• FLSA 2018-9 and FLSA 2018-11, addressing whether non-discretionary bonuses or other payments must be included in an employee’s regular rate of pay under the FLSA.

However, employers should keep in mind that he reissued opinions do not offer anything new, but simply revive prior opinions that had been put on hold by the prior administration.
While this is a positive development for employers, a word of caution: before relying upon a DOL Letter Opinion to support a wage or other workplace practice, employers must review the situation carefully to ensure that the facts at issue are virtually identical to the facts underpinning the DOL’s guidance. Absent such conformity, the employer will unable to invoke the affirmative defense of reliance upon the DOL’s interpretive guidance, and if the practice violates the FLSA (or other law) the employer faces significant liability.

DOL DISPENSES WITH INFLEXIBLE SIX-FACTOR TEST IN FAVOR OF “PRIMARY BENEFICIARY’ TEST TO ASSESS THE LEGITIMACY OF UNPAID INTERNSHIPS UNDER THE FLSA

On January 5, 2017 the DOL announced that it was ditching its inflexible six-factor test previously used to determine if unpaid interns working for for-profit entities qualified as employees under the Fair Labor Standards Act (FLSA), in favor of a more flexible approach that may make unpaid internships more appealable to employers.

The DOL’s old six-factor test was an all-or-nothing approach, where interns were presumed to be employees entitled to minimum wage and overtime payments under the FLSA unless the employer could meet each one of the test’s six factors. Included among the factors was consideration of whether the employer derived any immediate advantage from the intern’s activities; if so, the test was not satisfied and the intern was deemed an employee entitled to minimum wage and overtime payments. The test was so stringent that many employers shied away from internship opportunities, depriving unskilled students the opportunity to gain valuable work experience to add to their resumes.

Unlike the old six-factor test, not all of the seven factors of the new “primary beneficiary test’ need to be satisfied to qualify as a legitimate unpaid internship. In addition, the seven factors are not exhaustive, and courts are free to consider other relevant factors when assisting the relationship. Under this new balanced approach, a business can fail to meet some of the factors but still meet the overall requirements. Moreover, while many factors of the new test are similar to those of the old DOL test, the primary beneficiary test dispensed with the previously disqualifying factor that considered whether the employer received any benefit from the employee’s services. Now, employers can receive benefits from an unpaid intern’s services, so long as the factors of the test establish that the primary beneficiary of the relationship is the intern.

The seven factors of the “primary beneficiary test” identified by the DOL are:

1. The extent to which the intern and the employer understand that there will be no compensation, express or implied, for the services.
2. The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including clinical and other hands on training provided by educational institutions.
3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or academic credit.
4. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
5. The extent to which the internship’s duration is limited to the period in which the internship provided the intern with beneficial learning.
6. The extent to which the intern’s work complements rather than displaces the work of paid employees, while providing significant educational benefits to the intern.
7. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

The DOL emphasized that no single factor is determinative, and the decision of whether an intern is an employee under the FLSA will be determined on a case-by-case basis. However, on balance the employer must show that the intern, not the employer, is the primary beneficiary of the relationship.

The DOL’s shift to the “primary beneficiary test” is by no means a green light for employers to avoid minimum wage and overtime requirements by characterizing employees as unpaid interns, but it may pave the way for more unpaid internship programs that are highly beneficial students and employers. Employers must still carefully evaluate each of the factors to determine if the “primary beneficiary test” is met, and should consult with employment counsel before deciding to initiate an unpaid internship program.

NLRB CHANGES COURSE ON RECENT ANTI-EMPLOYER DECISIONS

Under the Obama administration, the NLRB issued numerous decisions that sparked considerable controversy among employers. Thankfully, last week the newly-constituted Board issued a series of opinions aimed at invalidating certain anti-employer decisions that were at the heart of the controversy, some of which are discussed below.

Browning-Ferris Joint Employer Test Abandoned. In a previous newsletter, we expressed concern about the Board’s decision in Browning-Ferris, which created a new “joint employer” test that greatly expanded the potential for a joint employer finding. Under Browning-Ferris, two or more business entities could be conferred joint employer status if they reserved potential joint control, indirect or limited, over the other employer’s workers, even if that control was never actually exercised. That 2015 ruling departed from the previous Board standard that was in effect for over 30 years.

In Hy-Brand Industrial Contractors, 365 NLRB No 156 (2017), the Board reverted to the pre-Browning-Ferris standard, declaring that joint employer status requires proof that i) the putative joint employer actually exercised joint control; ii) the control was direct and immediate rather than indirect; and iii) the control exercised was not “limited and routine” control. The Board emphasized that return to its prior test “provided certainty and predictability” to long-standing third-party business relationships that include subcontracting, outsourcing and temporary staffing that were being jeopardized by the discarded Browning-Ferris test.

In light of this decision, it remains to be seen whether the Senate will move forward with pending legislation already passed by the House of Representatives aimed at negating the Browning-Ferris holding.

Lutheran Heritage Standard for Assessing Legality of Employer Handbooks Abandoned. In its 2004 decision in Lutheran Heritage Village-Livonia, the Board announced a new standard for determining whether an employer’s facially-neutral rules, handbooks or policies addressing workplace conduct unlawfully restricted employees’ Section 7 rights under the National Labor Relations Act (NLRA) to engage in protected concerted activity. Under the Lutheran Heritage standard, even facially-neutral employer policies were deemed illegal if the Board determined that employees could “reasonably construe” them to “chill” employees’ free exercise of Section 7 rights. As addressed is several of our previous newsletters, in recent years even the most innocuous employer policies were subject to the Board’s contorted analysis that found nearly every effort to control employee conduct (e.g., policies restricting recording devices, speaking to the media, civility rules, social medial policies) were unlawful, without regard for the employer’s rationale for the policy.

Thankfully, in The Boeing Company, 365 NLRB No. 154 (2017) the newly-constituted Board recognized that the Lutheran Heritage standard did not give adequate weight to the employer’s interests and eliminated the standard in favor of a more balanced approach. Under the new standard, when analyzing a facially-neutral rule, policy or handbook that had the potential to interfere with Section 7 rights, the following two factors must be considered: i) the nature and extent of the potential impact on employees’ NLRA rights; and ii) the employer’s legitimate justifications associated with the rule. The Board also laid out the following three categories by which it will classify employer rules:

Category 1: Rules that cannot be reasonably construed to interfere with Section 7 rights, or any potential interference is outweighed by the business justification for the rule. Examples of category 1 rules include those requiring “harmonious interactions and relationships,” and other rules requiring employees to observe basic standards of civility in the workplace.

Category 2: Rules where the Board determines that maintenance of the rule is unlawful after conducting individualized scrutiny in its adverse impact on Section 7 rights that is not outweighed by any of the employer’s business justifications.

Category 3: Rules that limit Section 7 rights in such a way that they will be unlawful in all cases. An example of a Category 3 rule is one prohibiting employees from freely discussing wages or benefits with each other.

In light of The Boeing Company ruling, employers may want to revisit those workplace rules and handbooks that were likely revised to comply with the Lutheran Heritage standard and the Obama administration’s vigorous attack upon handbooks under this discarded precedent.

Specialty Healthcare Abandoned. In 2011 the Board departed from decades of precedent and announced a new standard for determining whether a bargaining unit proposed by a union was appropriate. The ruling ditched the traditional “community of interests” standard for one that made it easier for unions to target a smaller number of employees to creating multiple “micro-units” that employers would have to negotiate with. Employers claimed the new standard opened the door for gerrymandering larger workforces to create smaller units that were more likely to succeed in an organization drive.

In its December 15, 2017 decision in PCC Structurals, Inc., the Board announced that it was abandoning the Specialty Healthcare standard and returning to the prior “community of interests” standard for determining the proper scope of a bargaining unit, a standard that will diminish the number of units employers will have to deal with during organization.

Call for Comment on the “Quickie Election” Rule: In 2004 the Board adopted what is commonly referred to as “the quickie election” rule that accelerated the timeline for union elections, and significantly reduced the time period historically available to employers to campaign against unionization.

On December 11, 2017 the Board asked for public comment on whether the rule should be i) rescinded; ii) retained without change; or iii) modified, and if so, what modifications should be made. In addition, the Board seeks the public’s comments on whether, if rescinded, the Board should return to the election rules previously in place; or whether those rules should be modified.

Bottom Line: Both the DOL and the Board’s previous eight years saw many changes in long-established agency precedents, actions that were accompanied by vigorous opposition in the business community. The DOL’s and Board’s return to their respective prior standards certainly signals a more employer-friendly environment going forward, but only future actions by the DOL and the Board will show whether such optimism was justified.