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USDOL seeks to overturn two proposed FLSA rules: Independent Contractor Rule and Joint Employer Rule

USDOL header employee classification graphicBy Byrona J. Maule and Phoebe B. Mitchell

In January, the United States Department of Labor (DOL) issued a notice of proposed rulemaking regarding the classification of independent contractors. Now, just months into President Biden’s term, his administration seeks to overturn both this proposed rule and the DOL’s final rule regarding joint employers.

Independent Contractor

The proposed independent contractor rule, discussed at length here, significantly changed the legal analysis involved for employers deciding how to classify their employees. In stating its intention to rescind the new independent contractor rule, the DOL stated that the new “economic reality test,” which is not used by courts or the department, is not supported by longstanding case law or the text of the Fair Labor Standards Act (FLSA). Further, the DOL commented that the new rule minimizes the traditional factors utilized by courts in classifying workers, making it less likely to establish that a worker is an employee under the FLSA. Worker classification is an important issue for employers as it determines which workers are entitled to benefits and the overtime protections under the FLSA.

The DOL did not provide guidance on a replacement for the proposed rule. President Biden has stated his support for a uniform independent contractor test modeled after California’s “ABC” test. The “ABC” test considers a worker to be an employee unless their employer establishes all three of the following:

  1. The worker is free from control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of such work and in fact;
  2. The worker performs work that is outside of the “usual course” of the hiring entity’s business; and
  3. The worker is customarily engaged in an independently established trade, occupation or business of the same nature as the type of work performed for the company.

Joint Employer

The DOL’s joint employer rule clarified an employee’s joint employer status, such as when an employee performs work for his or her employer that simultaneously benefits another individual or entity. The rule, which took effect on March 16, 2020, was subsequently challenged by 17 states and the District of Columbia in a lawsuit filed in the Southern District of New York. The lawsuit claimed that the new joint employer rule violated the Administrative Procedure Act. The Southern District of New York agreed, holding that the new rule was contrary to the FLSA.

The March 16, 2020 final rule included several elements that were not consistent with the DOL’s prior joint employer rule, including:

  • a four-factor balancing test to determine when a person is acting directly or indirectly in the interest of an employer in relation to the employee;
  • a provision that an employee’s economic dependence on a potential joint employer does not determine whether it is a joint employer; and
  • a provision that an employer’s franchisor, brand and supply, or similar business model and certain contractual agreements or business practices do not make joint employer status under the FSLA more or less likely.

Jessica Looman, the DOL Wage and Hour Division Principal Deputy Administrator stated that “The Wage and Hour Division’s mission is to protect and respect the rights of workers. Rescinding these rules would strengthen protections for workers, including essential front-line workers who have done so much during these challenging times.”

The DOL is seeking public input until April 12, 2021 on its proposal to rescind these two rules.

Phillips Murrah’s labor and employment attorneys continue to monitor developments to provide up-to-date advice to our clients regarding the DOL’s new rules.


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For more information on this Employment Alert and its impact on your business, please call 405.552.2453 or email me.

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COVID-19 Update: Okla. Gov. Stitt issues new restrictions, U.S. DOL updates face mask FAQs

By Phoebe Mitchell and Martin Lopez III

COVID-19 Update: Oklahoma Governor Kevin Stitt Issues New Restrictions

Against the backdrop of surging numbers of COVID-19 cases in Oklahoma, Governor Stitt recently announced the Seventh Amended Executive Order 2020-20. In addition to the protective measures afforded by the previous iterations of the Executive Order, this newest version adds restrictions to restaurants and bars and institutes a mask mandate for those in government-owned buildings.

Face Coverings at WorkEffective November 17, 2020, restaurants and bars across the state of Oklahoma are required to institute proper social distancing measures. Specifically, restaurants and bars are now required to ensure a minimum of six (6) feet of separation between parties or groups at different tables, booths, or bar tops, unless the tables are separated by properly sanitized glass or plexiglass. In addition, Effective November 19, 2020, food or beverages of any kind shall not be sold, dispensed, or served for on-premises consumption after 11:00 p.m. daily. This new restriction does not affect a restaurant’s ability to operate via drive-thru windows or by curbside pickup after the 11:00 p.m. cutoff. Sales and service of food and non-alcoholic beverages may resume at 5:00 a.m. the next day, and the sale and service of alcoholic beverages for on-premises consumption may resume at 8:00am.

Effective November 17, 2020, all persons on property owned or leased by the State of Oklahoma—including both state employees and visitors to the property—are required to wear a mask or similar facial covering. Notable exceptions to this mask mandate are children under the age of ten (10), when a person is alone in an enclosed space, when an individual has a bona fide religious objections to wearing a mask or facial covering, and when an individual is eating or drinking.

U.S. Department of Labor Updates Frequently Asked Questions Regarding Cloth Face Coverings at Work

On the heels of the Centers for Disease Control and Prevention’s (CDC) recently issued scientific brief regarding the use of cloth masks to control the spread of COVID-19, the United States Department of Labor (DOL) updated its Frequently Asked Questions regarding the same issue.

The CDC’s scientific brief states that masks are principally intended to reduce the spread of the virus from asymptomatic or presymptomatic infected wearers who may not know they can infect others with COVID-19. This type of protection is called “source control.” Additionally, masks help to reduce inhalation of the virus by the wearer, protection dubbed “filtration for personal protection.” Thus, based on these findings, the CDC recommends community use of non-valved multi-layer cloth masks.

Even still, the Occupational Safety and Health Administration (OSHA) stated that “not enough information is available to determine whether a particular cloth face covering provides sufficient protection from the hazard of COVID-19 to be personal protective equipment (PPE) under OSHA’s standard.” Thus, at this time, OSHA does not consider cloth face coverings to be PPE. OSHA’s update is consistent with the CDC’s scientific brief, which states more research is needed to ascertain the exact protective effects of cloth masks.

OSHA still strongly encourages employees to wear face coverings at work, especially when in close contact with others, in order to reduce the spread of COVID-19.


For more information on this alert and its impact on your business, please call:

Phoebe Mitchell is an Associate in the Oklahoma City office of the firm. (click name for profile page) Contact her by phone, 405.606.4711, or by email.

Martin Lopez III is an Associate in the Oklahoma City office of the firm. (click name for profile page) Contact him by phone, 4405.552.2418, or by email.

Phillips Murrah’s labor and employment attorneys continue to monitor developments to provide up-to-date advice to our clients during the current COVID-19 pandemic. Keep up with our ongoing COVID-19 resources, guidance and updates at our RESOURCE CENTER.

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Teleworking and an Employer’s Woes of Record Keeping

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In this era of Covid-19, many employees who have never had the opportunity to telework are now, out of necessity, teleworking.  This creates many challenges for employers – and none is more important than the employer’s obligation to exercise reasonable diligence in tracking teleworking employees’ hours of work.

The Wage and Hour Division of the United States Department of Labor (WHD) issued Field Assistance Bulletin 2020-5 (FAB 2020-5) today on the employer’s obligation to track a teleworking employee’s hours of work pursuant to the Fair Labor Standards Act (FLSA).

FAB 2020-5 acknowledges the employers’ obligation to pay its employees for all hours worked – even if the work was not requested, if the employer “suffered or permitted” the employee to work.  This includes work performed at home.  If an employer knows or has reason to believe that an employee is performing work, the employer must count those hours as hours worked.  An employers’ knowledge may be either actual or constructive.

Employers may exercise reasonable diligence in tracking an employee’s teleworking hours by having a reasonable reporting procedure for unscheduled time and then compensating employees’ for all reported hours.  An employer may not prevent or discourage employees to accurately report all hours the employee works. If the employee fails to use the reasonable procedure “the employer is not required to undergo impractical efforts to investigate further to uncover unreported hours of work and provide compensation for those hours.”  If an employee fails to report unscheduled hours worked through the employer’s established procedure, the employer is generally not required to investigate further to uncover unreported hours worked.

FAB 2020-5 explores when an employer has “reason to believe that an employee is performing work.”  An employer has actual knowledge of the employees’ regularly scheduled hours, and an employer may have actual knowledge of hours worked, through employee reports or other notifications.  An employer has constructive knowledge if the employer should have acquired knowledge of such hours through reasonable diligence.  Reasonable diligence is defined as what the employer should have known – NOT what the employer could have known.  “Though an employer may have access to non-payroll records of employees’ activities, such as records showing employees accessing their work-issued electronic devices outside of reported hours, reasonable diligence generally does not require the employer to undertake impractical efforts such as sorting through this information to determine whether its employees worked hours beyond what they reported.”  Examples given of impractical efforts included in FAB 2020-5 included sifting through CAD records and phone records to determine if an employee was working unreported hours. However, Bulletin 2020-5 does not give a definitive rule that an employer never has to consult records outside of timekeeping records, noting it depends on the circumstances, and there may be instances where an employer’s non-timekeeping records may be relevant to issue of constructive knowledge of an employee’s unreported work hours.

In order for an employer to leverage the most protection from an employee seeking wages for unreported hours, an employer should:

  1. Have a reasonable policy/procedure setting forth clearly that an employee is to report all hours worked, whether scheduled or unscheduled.
  2. The employer should not discourage an employee from utilizing the procedure.
  3. The employer should train on the policy, or otherwise assure that employees are aware of the procedure, and when to use the procedure.

If an employer undertakes these steps, and an employee fails to utilize the procedure to report unscheduled hours worked, the employer’s failure to pay for the unreported hours worked should not be a violation of the FLSA.


For more information on this alert and its impact on your business, please call 405.552.2453 or email me.

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How to Survive a Labor Law Investigation: USDOL offers free compliance assistance seminars for employers

Published on August 15, 2017

The United States Department of Labor (USDOL) is offering free seminars to educate employers about the Wage and Hour Division, its enforcement of federal labor laws, and common violations to avoid.

The USDOL encourages employers and representatives from all industries to attend. This training is provided at no cost to participants.

The seminars will cover issues regarding the Fair Labor Standards Act including minimum wage, overtime, record keeping, youth employment, exemptions, deductions, common violations, and bonuses and other payments.

Participants will be trained on the Family Medical Leave Act and issues regarding coverage, employee eligibility, qualifying conditions, employer/employee rights and responsibilities, maintenance of benefits, and notification and records requirements.

For more information and to register, follow these links:

On-site registration will begin at 12:30 PM for each seminar. Seating will be limited.

Disclaimer: This website post is intended for informational purposes only and does not constitute legal advice. Readers should not rely upon this information as a substitute for personal legal advice. If you have a legal concern, you should seek legal advice from an attorney.

Department of Labor files overtime exemption brief with Fifth Circuit

In a brief filed with the Fifth Circuit of the Federal Court of Appeals, USDOL seeks to preserve salary level in determining overtime exemption status.

 

On Friday, June 30, the United States Department of Labor filed a brief with the Fifth U.S. Circuit Court of Appeals in New Orleans seeking to preserve a minimum salary requirement as a part of a three-part test to determine which workers are exempt from Fair Labor Standards Act (FLSA) minimum wage and overtime pay protections.

The three-part test, referred to as EAP, (executive, administrative, professional) relates to whether a worker is:

  1. Paid on a salary basis
  2. Earns a specified salary level
  3. Satisfies a duties test

The brief filed Friday concerns the second part.

The brief was filed in the case of Nevada v. DOL , 5th Cir., No. 16-41606 by the State of Oklahoma and 20 other states questioning whether the DOL under President Obama had the authority to set the annual salary threshold at $47,476, just over double the amount previously set in 2004 by the Bush Administration.

The Trump Administration brief asks the court to uphold DOL’s legal authority to set the salary threshold, but does not address the appropriate salary level, stating that the court should “simply lift the cloud” created by litigation questioning the Department’s authority to establish any salary level test.

“Instead, the department soon will publish a request for information seeking public input on several questions that will aid in the development of a proposal,” the agency stated it its brief.

To view the brief, click this link.

 


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