February 4, 2016

A new year has begun and, once again, change is upon us. Last year, several federal government agencies foreshadowed that they will be keeping a close eye on employers in 2016, and it appears that they will be making good on their promises. To head off potential exposure, employers would be wise to familiarize themselves with these issues, audit their own practices before they fall under government scrutiny, and make changes in a careful, deliberate manner and with the guidance of trusted advisors.

The United States Department of Labor (USDOL) was quite busy in 2015 preparing for this year.  The following are just two examples: 

Changes to Federal Overtime Exemptions

As we advised you last July, the USDOL announced plans to significantly modify wage and hour regulations under the federal Fair Labor Standards Act (FLSA). If the USDOL’s amendments proceed as expected, they will more than double the salary threshold (from $23,660 per year as of this publication date to more than $50,000 per year) for certain employees to continue to be considered “exempt” from federal overtime requirements. The anticipated amendments also will increase the salary threshold for exempt “highly compensated employees” from $100,000 per year as of this publication date to more than $122,000 per year. 

The USDOL also may modify the requirements concerning duties an employee must perform regularly in order to qualify as exempt under the FLSA. These changes — expected to go into effect in 2016 — have the potential to be staggering for employers nationwide, particularly businesses that employ mid-tier managers with annual salaries in the range of $30,000 to $40,000.

Renewed Attention to Misclassification of Employees as Contractors

Last summer, the USDOL published a new Administrator’s Interpretation that makes clear its intention to ferret out and curtail misclassification of employees as independent contractors. While the “economic realities” test examined by the USDOL is nothing new, the agency clarified its view that most workers are employees, not contractors. 

The USDOL’s essay of more than 41,000 words can be distilled down to this declaration: 

“The ultimate inquiry under the FLSA is whether the worker is economically dependent on the employer or truly in business for him or herself. If the worker is economically dependent on the employer, then the worker is an employee. If the worker is in business for him or herself (i.e., economically independent from the employer), then the worker is an independent contractor.”

If an employer’s classification of a contractor is improper, the employer may face exposure for unpaid wages (including overtime pay), double damages, interest, penalties, and attorneys’ fees.

At a minimum, the USDOL’s activities will continue to receive publicity that may heighten the awareness of employees (and plaintiffs’ attorneys) to these important issues.  

The NLRB’s Continued Attempts to Expand the Scope of the NLRA 

The National Labor Relations Board (NLRB) also continues to be busy laying the groundwork for a possible increase in unfair labor practice charges. It is a common misconception that the National Labor Relations Act (NLRA) protects only union employees. Recent history should be instructive for employers with this misunderstanding, as the NLRB has made the scope of its perceived authority abundantly clear. 

In a 2015 report sent to key leadership and staff, the NLRB launched an attack on customary workplace policies and rules, including those regarding protection of an employer’s confidential information; employees’ conduct toward their employer, supervisors, and fellow employees; communications with outside parties; protection of an employer’s intellectual property; restrictions on use of recording devices in the workplace; avoiding conflicts of interest; and use of social media. Such basic workplace conduct rules will continue to be vulnerable in the face of the NLRB’s concerns that such policies stifle employees’ rights to engage in “protected concerted activity.” Indeed, the NLRB has gone so far as to declare that employers must allow employees to use company e-mail to engage in union organizing activities (provided that such activities are during non-working time). It appears that no employer and no policy will be immune from the NLRB’s scrutiny.

Life. Liberty. Cannabis.

Finally, legislation regarding lawful use of cannabis likely will require employers to change their perceptions of longstanding drug policies and practices.

Legalized medical cannabis is a reality in Illinois, and dispensaries are open for business. As we advised you in October, and as of this publication date, employers are not required to allow patients to use medical cannabis in the workplace, there is no legal authority (at least not yet) requiring employers to allow permission to use medical cannabis as a “reasonable accommodation” under federal or state disabilities laws, and employers are not required to tolerate medical cannabis use by employees in safety-sensitive positions. 

That said, challenges by medical cannabis patients concerning their employers’ practices are sure to arise. And employers with multi-state operations must take into account potentially divergent laws of the states in which they operate. Because we are embarking on relatively uncharted waters, it would be prudent for employers to tread carefully and refrain from making hasty decisions that can lead to the time, expense, distraction, and potentially unflattering publicity resulting from litigation.

In summary, there are many changes in store for employers in 2016 and beyond. For more information about how these and other developments may affect your business, please contact your Much Shelist attorney.

This article contains material of general interest and should not be construed as legal advice or a legal opinion on any specific facts or circumstances. Under applicable rules of professional conduct, this content may be regarded as attorney advertising.