Last week, the Department of Labor announced a final rule that will extend Fair Labor Standards Act (FLSA) minimum wage and overtime coverage to home health care workers. The rule will have far-reaching impacts – but not until January 1, 2015, when it takes effect.

Home health workers “employed by an employer or agency other than the family or household using their services” are currently classified as exempt from FLSA’s minimum wage and overtime requirements under the “companionship services” exception. 29 C.F.R. § 552.109(a). “Companionship services” are defined as “those services which provide fellowship, care, and protection for a person who, because of advanced age or physical or mental infirmity, cannot care for his or her own needs.” 29 C.F.R. § 552.6. The regulation goes on to cite household work, meal preparation and washing clothes as examples of “companionship services.”

Therefore, the current FLSA exemption is premised on two things:

1. employment by a third party (ie: not the person or household receiving care) and
2. provision of companionship services. The new rule modifies both components.

First, it removes the third party employment component. Now, any worker employed by a third party to provide companionship services is entitled to minimum wage and overtime. By contrast, workers employed directly by the person receiving services or that person’s family will continue to be exempt from minimum wage and overtime.

Second, the rule clarifies and significantly limits what constitutes “companionship services.” The debate over the proper classification of home health workers has long been the nature of the services the home health care worker performed. For example, is dispensing medication or ensuring adherence to strict dietary standards “companionship services” or is it something more? The final rule clarifies that workers who perform medically-related services for which training is typically a prerequisite are not providing “companionship services” and therefore are not exempt from minimum wage and overtime requirements.

The change has been (and still is) a long-time coming. The DOL proposed the rule change in December 2011. In response, it received 26,000 public comments, many of which were opposed to the proposed rule. In addition, the rule will not take effect until January 1, 2015. Many regulations take effect within 60 days after passage. The additional time will give families, agencies and Medicaid programs time to prepare for the change.

The rule change is expected to affect nearly two million home health care workers, the vast majority of whom are currently employed by home care agencies.

“Non-compete agreements aren’t really enforceable, are they?” This is a question I’ve been asked many times, usually by someone who already signed an agreement they didn’t fully understand. Non-compete agreements, also commonly referred to as restrictive covenants, are a confusing area of the law. Let’s clear up a few of the common misconceptions.

All non-compete agreements are created equal. Fiction. Although commonly lumped into the single term “non-compete agreement,” restrictive covenants cover a variety of topics, such as non-disclosure agreements, customer non-solicitation agreements and employee non-solicitation agreements. It is common for a single agreement to include many, if not all, of these restrictions.

Where an employer is located and where the employee works affects enforcement of non-compete agreements. Fact. Non-compete agreements are interpreted in accordance with state law, and the law varies from state-to-state. Some states, California for example, consider non-compete agreements contrary to its public policy and refuse to enforce them except in limited circumstances. Other states, Missouri and Illinois included, allow employers much greater protections. Many agreements include a “choice of law provision,” to provide some clarity.

An employee’s job duties don’t affect enforcement of non-compete agreements. Fiction. Courts are much more willing to protect an employer’s existing customers than to simply preclude someone from accepting employment. The more contact an employee has with those customers, the more likely a court will enforce a customer non-solicitation agreement. However, courts possess the authority to limit enforcement of a customer non-solicitation agreement to those customers with whom the employee had actual contact (as opposed to all of the employer’s customers), and a court may allow an employee to work for a competitor, so long as the employee avoid contacting customers with whom he dealt while employed by his last employer.

Non-compete agreements must have a specific geographic restriction and a specific time restriction to be enforceable. Fact (sort of). Most states allow a customer restriction to substitute for a geographic restriction, but a non-compete agreement should have one or the other. Non-disclosure restrictions can be perpetual (so long as the information remains confidential), but other restrictions must be contain a reasonable time restriction.

If an employer fails to enforce a non-compete agreement against one employee, it cannot later enforce a non-compete agreement against another employee. Fiction (sort of). An employer’s failure to previously enforce a non-compete agreement does not preclude subsequent enforcement against a different (or the same) employee. However, the court may consider the employer’s prior inaction in deciding whether to enforce the non-compete agreement.

Because of uncertainty surrounding enforcement, non-compete agreements don’t provide employers any real protections. Fiction. Non-compete agreements provide employers protection both through enforcement and through their prophylactic effects. In many cases, non-compete agreements are enforceable. Employees often err on the side of caution to avoid incurring the cost of defending a lawsuit. Prospective employers often avoid employees subject to non-compete agreements in order to avoid potential litigation.

Without question, the subject of non-compete agreements is a fluid and often difficult area of the law to navigate. That said, these agreements provide valuable protections for employers and create uncertain risks for employees and prospective employers. The correct answers often lie in the specific language of the agreement and in the specific facts of a particular case. In both Missouri and Illinois, however, non-compete agreements are generally considered enforceable—in the right circumstances.

Job dislocations, mass layoffs, plant closings. News of these events has become more and more prevalent in recent years, leaving many employers grappling with how to handle complicated PR and legal issues in today’s changing job market.

One issue often overlooked by employers is whether they must “WARN” affected employees in such situations. The failure to consider this question or the failure to reach the “right” conclusion can have devastating consequences for an employer – particularly when an affected employee opts to file a class action challenging the employer’s decision.

Where Does the Notice Obligation Come From?

The primary notice obligation is found in the federal Worker Adjustment and Retraining Notification Act (“WARN”), which requires employers to provide 60 days of notice to employees affected by a mass layoff or plant closing.

Several states such as Illinois, Iowa, and New York have also adopted their own “mini” WARN Acts, which can impose more stringent requirements than the federal WARN Act. For this reason, both the federal WARN Act and all applicable state WARN Acts should be carefully reviewed to determine if they apply to the mass layoff or plant closing being considered. This post is limited to addressing the federal WARN Act.

Which Employers Are Covered by WARN?

WARN only applies to employers with 100 or more full-time employees OR 100 or more full and part-time employees who in the aggregate work at least 4,000 hours per week. In other words, smaller employers will frequently be excluded from WARN’s requirements.

However, it is important to remember that WARN obligations have been recognized in situations where entities have common ownership or management, and are therefore considered to be a “single employer” for purposes of WARN. For this reason, employers should carefully analyze whether affiliates, subsidiaries, or other related entities may result in a determination that the employer is subject to WARN’s requirements.

When is WARN Triggered?

WARN is triggered and notice is required when a covered employer engages in either a “mass layoff” or a “plant closing”:

• Mass Lay-Off: a reduction in force that results in an employment loss for at least 50 full-time employees and at least 33% of employees at a single site of employment; or results in an employment loss for at least 500 full-time and part-time employees;

• Plant Closing: the closing of a single site of employment during any 30-day period that affects 50 or more full-time employees.

WARN regulations define an “employment loss” as a: 1) termination of employment other than a discharge for cause, voluntary departure, or retirement; 2) a layoff that is longer than six months; or 3) a reduction in hours of more than 50 percent during each month of any six-month period.

Once WARN is triggered, an employer is required to provide employees with at least 60 days written notice of the plant closing or layoff. This notice is required to contain certain information, including but not limited to the expected date of the layoff or closing and the expected date when the individual’s employment will be separated. In addition, advance notice must be provided to the state dislocated worker unit, the elected official of the local government where the layoff or closing is to occur, and any applicable union(s).

An employer who fails to provide required notice under WARN is liable to each affected employee for up to 60 days of back wages and benefits and attorney’s fees. In addition, employers who fail to provide notice to a local government unit may be subject to significant civil penalties – up to $500 for each day of the violation. That’s steep!

The Rise of the WARN Class Action

To be sure, not every layoff or plant closure triggers WARN’s notice requirements. However, interpretation of these requirements and the manner in which they are applied is anything but uniform in the courts. This lack of uniformity has led to significant confusion on the part of employers as to whether or not WARN may apply to a particular employment decision – resulting in increased litigation and substantial settlements.

For this reason, a careful analysis which considers the factors frequently applied by the courts in cases claiming WARN violations is critical. Such an analysis will better equip an employer not only to assess whether WARN applies in the first place, but to defend against private litigation or government challenges that may stem from this decision. To conduct this analysis, employers are well advised to consult an attorney familiar with the intricacies and nuances of the WARN Act, any applicable mini-WARN Acts, and regulations and case law interpreting these laws.

A recent report released by the Treasury Inspector General For Taxpayer Administration (“TIGTA”) titled “Employers Do Not Always Follow Internal Revenue Service Worker Determination Rulings” serves as a reminder to employers that in addition to the United States Department of Labor’s continuing interest in employer misclassification of employees as independent contractors, the Internal Revenue Service is stepping up enforcement efforts as well.

The report resulted from an audit of the IRS Determination of Worker Status Program, known as the SS-8 Program. The SS-8 Program allows for employers or workers to request the IRS to make a determination of whether a worker is an employee or independent contractor. 

It comes as no surprise that, according to the report, 90% of SS-8 requests are made by workers. The SS-8 Form, which can be downloaded at the IRS website, www.irs.gov, asks a series of detailed questions centering around the areas of behavioral control, financial control, and the relationship between the worker and the business.

The audit found that the SS-8 Program has grown in terms of the number of cases over the last several years, resulting in lengthy processing times. The audit also found that employer adherence to the SS-8 determinations has been limited. As a result of the audit findings, the TIGTA made recommendations to the IRS regarding improvement of processing times and to implement a task force to improve enforcement of the determinations.

The IRS does have a Voluntary Classification Settlement Program for employers who qualify. In order to qualify, an employer must be treating workers as independent contractors and have consistently so treated the workers, including using 1099s. The employer cannot currently be subject to an IRS audit on payroll tax issues, or under audit by the DOL or any state agency for misclassification of workers. The employer cannot currently be subject to a court action contesting classification of workers. Under the Settlement Program, the employer files a Form 8952 with the IRS at least 60 days before starting to treat workers as employees, and must pay the IRS the equivalent of approximately 1% of affected workers’ pay over the past year.

Bottom line, if you have not done so already, you should take a careful look at any independent contractor relationships your company has or wants to enter into, and carefully evaluate whether the independent contractor should really be an employee. Because, if it looks like a duck, swims like a duck, and quacks like a duck, the IRS will say it’s a duck!

“But for,” “motivating factor,” “contributing factor…” Aren’t they all just different legal phrases that ultimately make an employer liable for discriminatory conduct? Absolutely not—and in its first significant employment decision of this term, the United States Supreme Court, by replacing “motivating factor” with “but for,” has made it more difficult for plaintiffs to prove retaliation under Title VII of the Civil Rights Act of 1964 (“Title VII”).

For those of us who practice employment law in Missouri, it remains all too fresh in our minds that the difference in these standards can be monumental.

The 2007 Daugherty v. City of Maryland Heights opinion represented a blow to employers across the state. Since the Missouri Supreme Court issued this en banc decision, plaintiffs alleging violations of the Missouri Human Rights Act (“MHRA”) no longer have to prove that their protected traits were motivating factors in the adverse employments at issue; rather, they simply must prove that a protected trait was a contributing factor. As the plaintiffs’ bar continues to emphasize, a contributing factor could, arguably, be comprised of as little as a fleeting thought. That is a world of difference from proving that an employment decision was motivated by an illegal consideration.

Recently, in UT Southwestern v. Nassar, the United States Supreme Court changed the standard for retaliation cases filed under Title VII to an even higher standard. Now, instead of proving that a plaintiff’s participation in a protected activity was a motivating factor in an employer’s employment decision, a plaintiff must prove that the adverse employment action would not have occurred but for the participation in protected conduct. In other words, instead of showing that engaging in a protected activity (such as complaining about discriminatory conduct) encouraged the employer’s decision, plaintiffs must prove that the decision would not have occurred if the plaintiff had not engaged in the protected activity at issue.

Perhaps more significant than the fact that succeeding on a Title VII retaliation claim will be difficult to prove at the trial level is the fact that courts should be much more inclined to decide these cases on the pleadings (i.e., motions for summary judgment). When a plaintiff must satisfy such a high burden of proof, it is much less likely that issues of fact will prevent summary judgment.

While the Nassar decision may not change your day-to-day employment decisions, it is a long-awaited step in the right direction for employers.

If you’re reading this blog, then it’s probably safe to assume that you heard about the Supreme Court’s decision that the Defense of Marriage Act (“DOMA”) is unconstitutional. And it’s probably also safe to assume that you’ve had friends and acquaintances weighing in with their thoughts on the decision on Facebook, LinkedIn and in other venues. Getting lost in the debate, however, is the impact this decision has on how employee benefits are administered.

Take FMLA leave, for example. Eligible employees are allowed to take leave to care for a family member, including a spouse. A spouse is defined as “a husband or wife as defined or recognized under State law for purposes of marriage…” While the text of the regulation suggests that applicable state law would govern the determination of who is a spouse, the Department of Labor followed DOMA before it was stricken, meaning that only opposite-sex spouses were recognized for FMLA purposes. With the fall of DOMA, same-sex spouses will now be able to take FMLA leave to care for one another if they live in a state that recognizes same-sex marriages. Interestingly, for same-sex spouses, the ability to use this federally mandated benefit will depend on where they live. We expect that the Department of Labor will issue guidance on this issue—stay tuned.

FMLA is just the tip of the iceberg, however. Benefit plan sponsors now face the issue of how to administer benefits for same-sex spouses. For instance, how should a plan administrator handle a same-sex couple who were married in a state that recognizes same-sex marriages, but live in a state that does not? Likewise, similar questions remain with respect to automatic beneficiary rights under benefit and retirement plans. Benefit plan administrators need to review their state laws, their own plan documents and ask the following questions:

• Do we need to collect information about same-sex couples?

• Do we need to send COBRA notices to same-sex couples?

• For cafeteria plans, do we need to notify employees of family status change and special enrollment rights?

• Should we suggest that participants review beneficiary designations?

• Should we stop imputing income for health benefits and premium payments for same-sex couples?

We will be following these issues closely and updating you as the Department of Labor and other impacted agencies (such as the Internal Revenue Service) issue guidance on the questions discussed above. In the meantime, no matter your personal and political beliefs, the Court’s ruling will have a long-lasting impact on all HR and ERISA professionals.

Last month the United States Supreme Court refused to resolve the circuit split that has evolved over the issue of whether there is an affirmative duty under the Americans with Disabilities Act (“ADA”) to accommodate a disabled individual through reassignment to another vacant job, without regard to whether there is a more qualified applicant for the same job. (The ADA prohibits employers with 15 or more employees from discriminating against individuals with disabilities and requires employers to engage in an interactive process with employees and applicants to determine whether there is a reasonable accommodation that will enable an employee to perform the job held or desired.)

Just in case you haven’t been following this issue, here is a quick recap:

Last September the United States Court of Appeals for the Seventh Circuit Court reversed its prior precedent in EEOC v. Humiston Keeling, 227 F.3d 1024 (7th Cir. 2000) and held that an employer must reassign a disabled employee to a vacant position for which the employee is “minimally qualified” regardless of whether there are other, more qualified applicants. E.E.O.C. v. United Airlines, 693 F.3d 760 (7th Cir. 2012). In the case, the EEOC challenged United Airlines’ reassignment policy, which afforded disabled employees who became unable to do their job preferential treatment to apply to transfer to another vacant position within the company. While the policy guaranteed an interview, it did not guarantee that the disabled individual would be selected for the job, but rather stated that the selection process would be competitive. (Notably this policy went beyond what the Seventh Circuit case law required at the time. By being proactive, United Airlines actually exposed itself to risk and gained the attention of the EEOC.) Relying on the U.S. Supreme Court decision, U.S. Airways, Inc. v. Barnett, 535 U.S. 391 (2002), the Seventh Circuit ruled that the ADA mandates that an employer appoint minimally qualified employees with disabilities to vacant positions, unless the accommodation would present an undue hardship to the employer. The Seventh Circuit explained that under the two-prong test developed in Barnett, the employee must demonstrate that the accommodation in question would normally be reasonable, and then the burden shifts to the employer to show special circumstances, which demonstrate that providing the accommodation would constitute an “undue hardship.” In Barnett, the Supreme Court recognized that a seniority system may give rise to these special circumstances. Ultimately, the Seventh Circuit remanded the case, for the District Court to conduct an undue hardship analysis for which the U.S. Supreme Court and Seventh Circuit have given virtually no guidance.

In denying certiorari last month, the U.S. Supreme Court refused to resolve a split among the circuits as to whether an employer must give preference to minimally qualified applicants as a reasonable accommodation and therefore left employers guessing as to their obligations. In addition to the Seventh Circuit, the Third, Tenth and D.C. Circuits have held that employers have a duty to give preference to minimally qualified disabled applicants. See Mengine v. Runyon, 114 F.3d 415, 420 (3d Cir. 1997); Smith v. Midland Brake Inc., 180 F.3d 1154 (10th Cir. 1999); Aka v. Washington Hospital Center, 156 F.3d 1284 (D.C.Cir. 1998). While the Second, Fifth, Sixth, Eighth and Eleventh Circuits do not currently require employers to waive legitimate, non-discriminatory employment policies or displace other employees’ rights in order to accommodate a disabled employee, many of these decisions were based upon the Seventh Circuit’s prior law. See Shannon v. New York City Transit Authority, 332 F.3d 95, 104 (2d Cir. 2003); Toronka v. Continental Airlines, Inc., 411 Fed. Appx. 719, 726 n. 7 (5th Cir. 2011); Hendrick v. W. Reserve Care Sys., 355 F.3d 444, 457 (6th Cir. 2004); Huber v. Wal-Mart Stores, Inc., 486 F.3d 480, 483 (8th Cir. 2007); Terrell v. USAir, 132 F.3d 621, 627 (11th Cir. 1998). The First, Fourth and Ninth Circuits do not appear to have addressed the issue, although the District of Arizona has held that an employer must give a minimally disqualified applicant preference over non-disabled applicants. See Coleman v. City of Tucson, 2008 WL 5134346, at *2 (D. Ariz. 2008) (same).

Accordingly, regardless of the above decisions employers need to tread carefully in this area and consider whether a request for reassignment poses an undue hardship due to “special circumstances.” Undue hardship has been defined as an “action requiring significant difficulty or expense” when considered in light of a number of factors. The factors include the nature and cost of the accommodation in relation to the size, resources, nature, and structure of the employer’s business operation. Undue hardship is determined on a case-by-case basis, but generally, a larger employer with greater resources will be expected to make accommodations requiring greater effort or expense than would be required of a smaller employer with fewer resources. Where the company making the accommodation is part of a larger entity, the structure and overall resources of the larger organization will be considered, as well as the financial and administrative relationship of the facility to the larger organization. Exactly what will be sufficient to constitute “special circumstances” remains to be seen.

While the confusion surrounding reassignment as a vacant position is very real, there are trends emerging from the existing case law that can help make compliance a little less daunting, including the following:

1. Make sure your job descriptions and job advertisements expressly state that consistent, reliable attendance and punctuality are essential job functions. Most circuits, including the Seventh, have reached the conclusion that regular, reliable attendance, is an essential function of most jobs. See e.g. Samper v. Providence St. Vincent Medical Center, 2012 U.S. App. LEXIS 7278, (9th Cir. 2012) (holding that regular attendance was an essential function of a neo-natal nursing position), Fisher v. Visioncore, Inc., 2011 U.S. App. LEXIS 14908 (7th Cir. 2011) (same), Rask v. Fresenius Medical Care North America, 509 F.3d 466 (8th Cir. 2007) (same). Reviewing job descriptions and advertisements to ensure that they highlight the attendance needs for all positions will help place some boundaries on the employer’s obligation to reassign employees to other, vacant job because all jobs will have that same, baseline requirement. Of course, employers should not forego the interactive process if a request for reassignment is received but rather should keep the essential job function of attendance in mind in determining what accommodations they are able to provide.

2. Remember that reassignment is the accommodation of last resort. Explore every other opportunity to keep an employee in his or her own job before moving on to the uncertain world of reassignment. Just because an employee requests reassignment to another job does not mean that you have to offer that particular accommodation.

3. Establish a formal process for requesting reassignment to a vacant position as an accommodation. Publish the process for employees so employees know exactly what the process requires. Otherwise, vague statements by employees about their desire to remain employed may be viewed as enough to give rise to an obligation to reassign an employee.

4. Establish a specific timeframe in which employees must identifying vacant jobs for which they are qualified when reassignment is sought. Of course, your process should be flexible to encompass the situation where a vacant position for which the employee is minimally qualified becomes available right after the deadline expires.

5. Ensure that vacant jobs are posted and available to be identified by employees. If employees have no way of knowing what vacant jobs are available, your efforts to shift the burden to employees to identify a vacant position for which they are qualified will fail.

6. Review other benefit plans, programs and obligations, such as those arising under short-term and long-term disability plans and union contracts to determine the length of time that an employee remains “employed” under those particular plans and consider these timelines before filling jobs. For example, if your company’s disability plan provides that an employee will remain employed for one year while receiving disability benefits, you should consider this fact before filling a job. Otherwise, you will find yourself in the position of having to find the employee a new job if he or she is able to return to work within the one-year window but his or her job has already been filled.

7. Remember to engage in the interactive process. Although we can all agree that the process can be frustrating, be sure that your correspondence to employees does not reflect your frustration. Otherwise, all of you interactive dialogue will go out the window.

8. Remember to communicate within your own organization! Now more than ever ADA accommodation issues are spanning several different departments and also potentially several vendors. It is critical that all parts of your multi-faceted organization be on the same page.

9. Remember to consider the disability and leave laws in your state. Just because your company may be in a circuit where federal interpretations of the ADA law are favorable does not mean that the state law counterparts will follow suit.

In today’s economy, employers are receiving orders to garnish employee wages on an increasingly frequent basis. Causing even bigger headaches are situations in which multiple garnishments are received for the same employee. For example, it is not unusual for an employee to be subject to both a defaulted student loan and a child support order at the same time. And, if a garnishment order is ignored or interpreted incorrectly, your Company could be liable for your employee’s debt, in addition to legal fees and sometimes penalties! On the other hand, you could be obligated to repay your employee if you withhold too much!

So what’s an employer to do to minimize liability and ensure compliance? 

Due to the complicated nature of federal and state garnishment law, and the frequent interplay of tax and bankruptcy issues, the best practice is to develop consistent payroll procedures for handling garnishment orders and work with an attorney to resolve any uncertainties.

The following are some topics that are particularly important when evaluating a garnishment order:

Withholding Limits:

Federal law limits the amount you may withhold from your employee’s wages to repay a creditor debt. Specifically, you can withhold the lesser of:

• 25% of disposable earnings (gross earnings minus required deductions)

• The amount by which disposable earnings are greater than 30 times the federal minimum hourly wage.

States also impose withholding limits, some of which are lower than the federal limits. For example, while Missouri sets a general withholding limit of 25% to repay creditor debt, this limit is decreased to 10% if the employee is a head of household under Missouri law.

Priority:

Employers sometimes make the mistake of assuming that the first garnishment received takes priority over later garnishments. This is not necessarily the case. For example, child support orders generally take priority over other garnishments, even if received at a later time. Determining priority becomes particularly important when an employee’s disposable earnings are not sufficient to satisfy all applicable garnishments.

Termination and Discipline:

Federal law protects employees from being discharged by their employers because their wages have been garnished for one debt, but does not protect an employee from discharge if the employee’s earnings have been subject to a second debt. It is important to consult applicable state law to determine if any additional employee protections apply.

Scenario:

Missouri employee Martha has disposable earnings of $300 per week, and is not a head of household. Missouri employer ABC Corp. receives a creditor garnishment in July 2013 to withhold 10% of disposable earnings and another creditor garnishment in August 2013 to withhold 15% of disposable earnings. In September 2013, ABC Corp. receives a child support order for Martha, requiring withholdings of $60 per pay period. What should ABC Corp. do upon receiving the child support order?

Even though the child support order was received after the creditor garnishments, child support orders take priority over creditor garnishments. ABC should therefore first garnish $60 per pay period pursuant to the child support order. Because Martha is not a head of household, an aggregate of 25% of disposable earnings (or $75 per pay period) can be garnished. Therefore, at this time, ABC Corp. should garnish only $15 per pay period under the first creditor garnishment received, and should not garnish any wages under the second creditor garnishment.

Sound complicated? It can be. But taking the time to carefully keep track of each garnishment received, calculate the proper amount to be withheld, and promptly consult a professional with any questions will avoid a much bigger headache later on.