It’s no secret that President Obama’s use of executive orders to transform workplace laws was unprecedented. But perhaps even more unprecedented is how quickly those efforts have been derailed by the Trump administration. From NLRB appointments, to safety standards, to persuader-disclosure and joint-employment rules—to name a few—the White House has been systematically reversing workplace rules that President Obama implemented through executive orders, rather than through Congress.

Now, add two more hits to the list.

Obama-Era Overtime Rule Takes Final Hit.

The first hit was the final blow to President Obama’s  controversial overtime rule, which sought to expand the number of workers eligible for overtime compensation. In November 2016, a Texas federal district court preliminarily enjoined the rule just before it was due to take effect. The Department of Justice (DOJ) subsequently appealed that decision to the Fifth Circuit Court of Appeals.

On  August 31, 2017, with the Fifth Circuit appeal pending, the district court made its final determination that the rule was invalid. Specifically the court held, as it had opined in November, that the overtime rule exceeded the Department of Labor’s (DOL’s) rulemaking authority because it focused too heavily on employees’ salary levels—rather than the nature of their job duties—in determining overtime eligibility. The court found that this was contrary to the intent of the Fair Labor Standards Act and granted summary judgment to the plaintiffs.

On September 5, 2017, at the Direction of President Trump and Attorney General Sessions, the DOJ asked the Fifth Circuit to dismiss its appeal of the preliminary injunction. The Court granted the request on September 6 and dismissed the appeal, thus leaving the overtime rule all but permanently invalidated. As a result, the minimum salary for exempt status under the FLSA remains at $23,600.

So what’s next?

Technically, the DOL still has until September 30, 2017 to appeal the district court’s August 31 decision. An appeal is highly unlikely. What is more likely is that the DOL will go back to the drawing board to develop and issue a new revised overtime rule. Current Secretary of Labor Alex Acosta previously stated that he believes the salary threshold should be raised to $33,600 (substantially lower than the Obama overtime rule’s roughly $47,000 threshold), and in July 2017, the DOL issued a request for public comment on potential revisions to the Obama overtime rule. The deadline to submit comments is September 25, 2017, with a revised rule expected to issue thereafter. Employers should stay tuned for further updates.

Obama-Era Revisions to EEO-1 Form Abandoned

The second recent hit  to President Obama’s workplace-law overhaul is the White House’s announcement suspending the Obama administration’s changes to the EEO-1 form. The revised EEO-1 form would have gone into effect March 31, 2018, and would have required employers with 100 or more employees and federal contractors with 50 or more workers to report W-2 wage information and total hours worked for all employees by race, ethnicity and sex within 12 proposed pay bands. The Obama administration had claimed that rewriting the form would help identify and reduce workplace wage discrimination. Opponents argued, on the other hand, that the new form was overly burdensome and would do little to accomplish its stated purpose, primarily because the aggregated pay data required for the form would not have compared people in the same job positions or controlled for the many other non-discriminatory variables that impact compensation. The time for reporting was also problematic, since it did not match the calendar year periods utilized by most HRIS programs.

On August 29, 2017,  the White House Office of Management and Budget agreed with the opponents and stated that the pay collection and reporting requirements “lack practical utility, are unnecessarily burdensome, and do not adequately address privacy and confidentiality issues.” The White House explained its reasoning in a letter to the Chair of the Equal Employment Opportunity Commission, Victoria Lipnic.

So what’s next?

As a result of the announcement, the EEOC must publish a notice in the Federal Register announcing the immediate stay of new compensation and hours worked reporting requirements contained in the revised EEO-1 form and “confirming that businesses may use the previously approved EEO-1 form in order to comply with their reporting obligations for FY 2017.” Additionally, employers will not need to submit 2017 data until March 31, 2018.

This decision is welcome news for employers who have been struggling with the practical and potentially expensive challenges of complying with the new EEO-1 Form, including how to merge systems and payroll data to accurately and efficiently collect and calculate the requisite information. Nevertheless, as we previously posted, pay equity is an increasingly scrutinized issue—with more and more states passing laws imposing pay transparency obligations and prohibiting salary history inquiries of applicants. As such, employers should continue to stay abreast of these changes and ensure that compensation determinations are adequately documented and made in compliance with applicable laws.

Employers in union settings know that they generally cannot make changes to their employees’ wages, hours and other terms and conditions of employment without first negotiating to impasse with the union. The exception to this rule has historically been that the employers could make changes, as long as they could show that their labor contract had a management rights clause that allowed certain changes to be made without bargaining. A recent decision from the National Labor Relations Board, however, will make it more difficult for employers to show that a management rights clause actually allows these types of changes to be made without bargaining.

The NLRB’s recent decision (Graymont, PA, Inc. and Local Lodge D92, 364 NLRB No. 37) involved a situation that is common in unionized workplaces. The employer and the union had a collective bargaining agreement in place with a management rights clause which provided that the employer:

[R]etains the sole and exclusive rights to manage; to direct its employees; . . . to evaluate performance, . . . to discipline and discharge for just cause, to adopt and enforce rules and regulations and policies and procedures; [and] to set and establish standards of performance for employees…

The employer relied on this clause to announce changes to the work rules and the attendance and progressive discipline policies. The union objected to this move and requested a meeting with the employer. The union also requested that the employer provide information about the changes. The employer met with the union, but took the position that it was not required to bargain over the changes (due to the management rights clause). The employer also took the position that it was not required to respond in any way to the request for information. After a single meeting with the union, the employer implemented the revised policies.

Click here to read the full client alert.

On July 13, 2016, the United States Equal Employment Opportunity Commission (“EEOC”) released a proposed revised Employer Information Report (EEO-1) (“Proposed Revision”). This slightly changes the original EEOC proposal to add compensation and hours worked data to the EEO-1 Report. An example of the proposed EEO-1 report can be found here. The EEOC has always required employers with more than 100 employees (more than 50 employees for federal contractors) to file EEO-1 Reports yearly identifying employees into 15 categories of race/ethnicity and sex and 10 job categories. Employers will now have to include employee hours worked and employee compensation information by pay band, utilizing the same twelve bands used by the Bureau of Labor Statistics in the Occupation Employment Statistics survey:

$19,239 and under;
$19,240 – $24,439;
$24,440 – $30,679;
$30,680 – $38,999;
$39,000 – $49,919;
$49,920 – $62,919;
$62,920 – $80,079;
$80,080 – $101,919;
$101,920 – $128,959;
$128,960 – $163,799;
$163,800 – $207,999; and
$208,000 and over.

Compared to the original proposal, the Proposed Revision changes the due date for the “new style” EEO-1 reports from September 30, 2017, to March 31, 2018, to allow employers to utilize calendar year W-2 pay reports. Hours for salaried employees will have to be reported, either by using actual hours worked, if tracked, or by assuming a 40-hour work week.

The Proposed Revision comes after an initial comment period from February 1, 2016, to April 1, 2016. In drafting the Proposed Revision, the EEOC considered oral and written comments from employers, individuals, trade groups, civil rights organizations, and labor unions. The Proposed Revision will only become final after another 30-day comment period. Individuals have until August 15, 2016, to submit written comments to the United States Office of Management and Budget for consideration. Written comments may be submitted to: Joseph B. Nye, Policy Analyst, Office of Information and Regulatory Affairs, Office of Management and Budget, 725 17th Street, NW, Washington, DC, 20503, e-mail oira_submission@omb.eop.gov. More information can be found in the Federal eRulemaking Portal here.

The United States Supreme Court held today that pharmaceutical sales representatives are exempt from overtime under the outside sales exemption of the Fair Labor Standards Act.  The significance of the decision for labor lawyers and employers is not necessarily in the result, but in the Court’s sharp criticism of the DOL’s interpretation of its regulations in advancing its position. 

 A copy of the opinion is attached here, Christopher et al v. Smithkline Beecham, 567 U.S. ___ (2012), Slip Opinion No. 11-204.

The DOL took the position in amicus briefs that pharmaceutical sales representatives were not shielded from overtime by the outside sales exemption, because they were not technically making sales.  Rather, pharmaceutical sales representatives, or “detailers,” were promoting drugs to physicians and obtaining a “non-binding commitment” to prescribe a drug.  The DOL argued that this was promotion, not sales. 

In a 5-4 decision, the United States Supreme Court disagreed, holding that a transfer of title need not occur in order for the transaction to constitute a sale.

In order to reach the decision, the Court had to rule that the DOL’s interpretations were not entitled to the deference normally afforded to an agency interpretation.  Instead, the Court held that the DOL’s position was plainly erroneous, inconsistent with the regulations and not reflective of a “fair and considered judgment on the matter.” 

Of even more assistance to labor lawyers and employers is the language used by the Court in cautioning against the “unfair surprise” of imposing liability based on an the application of an interpretation made by an agency after the conduct occurred:

There are strong reasons for withholding Auer deference in this case.  Petitioners invoke the DOL’s interpretation to impose potentially massive liability on respondent for conduct that occurred well before the interpretation was announced.  To defer to the DOL’s interpretation would result in precisely the kind of “unfair surprise” against which the Court has long warned.

Syllabus at p. 3 (citations omitted).

We have recently asserted a similar argument on behalf of a client in an FLSA action involving a late DOL interpretation of the Motor Carrier Act exemption.  This case may prove helpful in reigning in broad interpretations asserted by the DOL in wage and hour matters. 

Ultimately, this decision hinges upon the principles of statutory construction and interpretation.