Labor & Employment Insights

By now, most employers had already implemented or were posed to implement the United States Department of Labor’s (DOL) new overtime rules aimed at swelling the ranks of employees eligible for overtime payments. The rule increased the salary threshold to qualify for the executive, administrative or professional overtime exemptions from $23,660 to $47,476 per year. As a consequence, employers were faced with the prospect of many employees who were previously exempt from overtime requirements being overtime eligible when the rule were scheduled to go into effect on December 1, 2016.

However, in a surprise 11th hour development last Tuesday, a Judge in the U.S. District Court, Eastern District of Texas issued a national preliminary injunction staying implementation of the new DOL rules. The injunction is not a permanent injunction, but merely preserves the status quo until the court can review the merits of arguments by the challenging parties that the DOL overstepped its authority in raising the salary basis test for exemption. Pending a further decision from the Eastern District or an appellate court, employers need not comply with the new salary requirements. While employers generally champion the ruling, the DOL is expected to file an appeal.

What’s an employer to do? For those employers who had yet to take final steps aimed at meeting the new overtime requirements, further action should be delayed until this issue winds its way through the courts. Unfortunately, in anticipation of the regulations many employers notified salaried staff that going forward they would be paid on an hourly basis and be overtime eligible, or alternatively, bumped up the salary of key employees to meet the increased salary basis and preserve the overtime exemption, actions that may not be readily reversed by the employer. Employers should consult with employment law counsel for further guidance on this new development. In all cases, employers cannot assume that the new overtime rules are permanently shelved, and should have a compliance plan in place should the new regulations be revived.

Earlier this month, the New Jersey State Assembly reviewed Assembly Bill 4119 (“A-4119”), which would amend the New Jersey Law Against Discrimination to prohibit employers from seeking compensation history from prospective employees. The purpose of A-4119 is “to strengthen protections against employment discrimination and thereby promote equal pay for women[.]”

Specifically, A-4119 provides that an employer may not seek the salary history of a prospective employee until an offer of employment is extended to the candidate. The Bill further prohibits an employer from requiring an employee to disclose information about either his or her own wages, including benefits and other compensation, as well as the wages of any other employee. Additionally, A-4119 provides that an employer may not require that a prospective employee’s wage or salary history meet any minimum or maximum criteria as a condition of being interviewed or as a condition of being considered for an offer of employment. Under A-4199, an employer is prohibited from taking any retaliatory action against an employee or candidate based upon compensation history or any employee’s opposition to a request for salary information.

The Bill, however, does not prohibit prospective employees from volunteering compensation history provided that the disclosure is not coerced by the employer. An employer may only confirm or permit a candidate to confirm compensation history after making an offer of employment.

The federal Fair Labor Standards Act (FLSA) mandates that employees be paid one and one-half times their standard hourly rate of pay for all hours worked in excess of 40 hours in a given workweek. There are several exceptions to that overtime requirement, including an exemption for “white collar workers” – – those classified as Executive, Administrative and Professional employees. Pursuant to its rulemaking authority, the United States Department of Labor (DOL) adopted a two- part test that must be met before an employee can be properly categorized as Executive, Administrative and Professional employee exempt from overtime requirements. . Under the test, the employee must meet both a “duties test” and a “salary basis test” to satisfy one of the white collar exemptions. On May 16, 2016 the DOL finally issued long-anticipated new regulations that substantially increase the salary basis requirement to meet the white collar exemptions, resulting in many employees being stripped of their previously exempt status and now making them eligible for overtime compensation.

In the 1970s the DOL adopted regulations mandating that all Executive, Administrative and Professional employees had to earn a minimum of $455 per week, or $23,660, per year to satisfy the salary basis test for a white collar exemption, a salary level that remained untouched for decades. However, under the new regulations that will take effect on December 1, 2016, the salary basis test has been essentially doubled to $913 per week, or $47,476 per year. Regardless of whether the employee can satisfy the duties test for a white collar exemption, if the employee’s compensation falls below this increased salary basis, the exemption from overtime requirements is not met.

Another target of the new regulations is the Highly Compensated Employee exemption. Presently, certain highly-compensated employees were exempt from the overtime requirements so long as they were paid at least $100,000 and satisfied a less-stringent duties test. Under the new regulations, the minimum salary basis test for that exemption has been substantially increased to $134,004.

In light a recent decision of the New Jersey Superior Court, Appellate Division, in Sheridan v. Egg Harbor Township Board of Education, it certainly is.

The Facts: Barbara Sheridan, an obese individual, was employed for eight years as a custodian by Egg Harbor Township Board of Education (the “Board”). After observing Ms. Sheridan breathing heavily and turning red while performing her custodial job duties, her supervisor became concerned that she might be unable to climb ladders, would have trouble climbing stairs, and could injure herself or others while attempting to complete her job duties. In response to these concerns, the Board required Ms. Sheridan to undergo a fitness for duty examination (“FDE”) administered by an independent physician. In conducting the FDE, the physician relied upon a job description provided by the Board detailing the physical tasks required of all custodians in the district, including a requirement to lift and carry 75 pound objects a distance of 50 yards. Ms. Sheridan failed several portions of the FDE, prompting the Board to conclude that she was physically incapable of performing the duties of school custodian and terminated her employment. Ms. Sheridan filed suit alleging she was discriminated against because of her obesity in violation of the New Jersey Law Against Discrimination, N.J.S.A. 10:5-1 et seq. The trial court concluded that the Board was justified in relying upon the results of the FDE in reaching its termination decision and dismissed the case. Ms. Sheridan appealed.

The Appeals Court’s Decision: In reversing the favorable decision for the Board and sending the case back for trial, the Appellate Division concluded that while an FDE could provide a legitimate, non-discriminatory basis for the Board’s termination decision, the FDE had to be based upon a “fair and realistic” job description for the position in question. In this case, the court held that “reasonable jurors could conclude that the more strenuous exercise of lifting seventy-five pounds for fifty yards, as was tested in the FDE here, is not a fair or realistic physical expectation to have for a school custodian.” In addition, the Board’s principal witness testified that the only time she could recall custodians lifting 75 pounds was twice a year to lift paper deliveries, which were then loaded directly onto carts. Finally, while the Board pointed to concerns about Ms. Sheridan’s ability to climb ladders, the FDE did not assess her ability to do so. The Appellate Division reasoned that when an employer chooses to rely upon an FDE as a legitimate reason for terminating an employee, the job description used to conduct the FDE must accurately correspond to the day-to-day job duties and physical demands of the position, factors the court found lacking in this case. Moreover, the FDE must also assess the physical requirements relied upon by the employer as a basis for its termination decision.

In a recent published decision, the New Jersey Appellate Division clarified the circumstances under which an employer’s directive that an employee submit to a psychological for fitness-for-duty examination serves a “legitimate, job-related business purpose” as required under the Americans With Disabilities Act (ADA) and the EEOC’s Enforcement. The case, In re Paul Williams, Township of Lakewood, involved a Township of Lakewood truck driver who was sent for a psychological fitness-for-duty examination eight months after the Township received an anonymous letter from an alleged co-worker complaining that the employee was mentally unstable and a threat to other co-workers. Without the employee’s consent, the Township scheduled the psychological examination and a follow-up meeting, and threatened the employee that if he failed to attend both appointments he would be disciplined. The employee refused to comply, claiming that the examination was not job-related or a business necessity and thus was in violation of his rights under the ADA. Following a hearing, the Township terminated the employee.

The employee appealed to the Office of Administrative Law (“OAL”), which reinstated the employee to his former position because the evidence showed that: (1) the employee’s work performance was satisfactory; (2) the truth of the allegations in the anonymous letter could not be verified; and (3) the Township’s demand for a psychological fitness-for-duty exam was not related to his work performance or to any specific allegation of psychologically disruptive behavior. Following an additional appeal, the matter ultimately ended up before the New Jersey Appellate Division, which affirmed the OAL and held that, under the ADA, an employer cannot require an employee to undergo medical tests unless they are job-related and consistent with legitimate business necessity. Here, the Appellate Court faulted the Township for ordering the employee to undergo a psychiatric examination based solely upon information contained in an anonymous letter, precisely the kind of “innuendo and rumor that the EEOC has advised employers is insufficient to support a mandatory evaluation.” The Williams holding makes clear that employers must be careful and judicious in demanding that employees submit to fitness-for-duty examinations. Such examinations may only be required when the employer has a reasonable belief, either through direct observation or reliable information from credible sources, that the employee’s mental state or physical condition will either affect his or her ability to perform essential job functions or pose a direct threat to others. Employers must engage in a complete and objective assessment, untainted by general assumptions about the employee’s medical condition, prior to requiring the psychological examination.

In an era of increasing workplace violence, this decision places employers in a difficult position. However, employers who receive anonymous tips or other information suggesting that an employee is not mentally stable must resist knee-jerk reactions and secure the necessary observations and information that will justify requiring the employee to undergo an medical examination. Moreover, employers are encouraged to consult legal counsel for guidance on whether the examination will pass muster under the ADA.

To escape the economic and administrative burdens of the employer-employee relationship, employers increasingly turn to “shared employee” arrangements with Professional Employee Organizations (PEOs), staffing agencies, independent contractors and other third party vendors to supply temporary workers. In doing so, employers typically assume that the third-party provider is the “employer” of the temporary worker, and therefore the obligations arising under wage and hour, family/medical leave, discrimination and other employment laws will be borne solely by the third-party provider. Such assumptions may prove costly, as courts and administrative agencies often look past efforts to alienate the employer-employee relationship to find both businesses are the employer with joint responsibility for compliance with employment laws.

In two prior posts we discussed the respective tests adopted by the NLRB and the Third Circuit for determining when two or more entities can be deemed “joint employers” equally liable for violations of employment laws. You can read about the Third Circuit’s Darden Test here and the NLRB’s “joint employer” standard here. Now the United States Department of Labor (DOL) has issued new guidance on when a joint employer relationship – with attendant joint responsibilities – exists under the Fair Labor Standards Act (FLSA) and the Family and Medical Leave Act (FMLA). These recent pronouncements are the latest efforts by governmental agencies and the courts to grapple with the shared worker trend in the modern workplace.

THE DOL’s INTERPRETIVE GUIDANCE ON JOINT EMPLOYER STATUS UNDER THE FLSA