No later than September 30, 2019, employers with 100 or more employees must file EEO-1 Component 2 to report workforce pay data for the years 2017 and 2018.  In light of the approaching deadline, we want to update employers briefly on the status of the reporting obligation, offer some key tips for compliance, and finally, explain why this reporting obligation may be a one-time deal.

The Component-2 reporting requirement stems from an Obama-era rule that added the collection of pay data to the demographic data currently required by Form EEO-1 (Component-1).  In 2017, the U.S. Office of Management and Budget (OMB) stayed this requirement indefinitely, but earlier this year, a federal district court ruled that the stay was improper. The court ruled that the revised EEO-1 form  must take effect in 2019, and that the EEOC must collect the required pay data. OMB has appealed the district court’s decision, and some employers initially delayed compliance based on speculation that the appeal might void the reporting obligation. However,  briefing on the appeal is not scheduled to be completed until October 9, and so unfortunately, any relief from the appeal will not arrive  until after the reporting deadline has passed.

To help employers meet their Component-2 reporting obligation, we offer the following summary of key points:

  1. Employers must submit Component-2 pay data for one “workforce snapshot” period for 2017 and one workforce snapshot period for 2018. The data includes W-2 wage information and hours worked, broken out by gender, race/ethnicity, and job category.
  2. Employers are covered by the Component-2 reporting requirement if they employed 100 or more employees during the applicable workforce snapshot period for the  relevant reporting year. Thus, an employer could be required to submit Component-2 data for 2017 and 2018, for both years, or for neither year.
  3. The workforce snapshot period is any employer-selected pay period between October 1 and December 31 of the reporting year.  The snapshot period need not be same period as that chosen for the Component-1 data. Moreover, the snapshot periods for 2017 and 2018 need not match each other. In other words, if you employed fewer than 100 employees for any pay period during this timeframe (even if you employed more than 100 employees at other times during the year), then you are not required to submit Component-2 pay data for that  year.
  4. The employer should report pay data for employees who are employed during the respective snapshot period, and only those employees. This is true regardless of whether the employee worked the entire year or not, and also regardless of whether or not the employer employed different employees at different times during the year.
  5. The compensation data in the Component-2 report has two components: pay data and hours-worked data: The pay data that the employer should report is W-2 Box 1 income only. Again, this applies regardless of whether the employee worked the entire year. For example, if  an employee is hired at an annual salary of $100k but only works 6 months that year, the employer still must report total W-2 wages for the year (even though that number will not accurately reflect the employee’s annualized salary).
  6. Component 2 also requires reporting of hours-worked data. For each non-exempt employee employed in the snapshot period, the employer should report the hours the employee actually worked for the entire reporting year. For exempt employees, employers have the option to report actual hours worked or to  report a proxy of 40 hours per week for  each full-time employee (20 hours for part-time employees), multiplied by the number of workweeks for which the employee was employed during the reporting year. This rule applies unless the exempt employee was given a different standard workweek (e.g., employee was given a standard 30 hour workweek), in which case the employer may use that proxy number for that employee instead.  Additionally, please note that hours worked includes only hours actually worked, and does not include paid time off, such as vacation, sick leave, and holidays.
  7. Employers doing business at only one establishment in one location must complete a single Component 2 report. Multi-establishment employers must submit a report for their headquarters and all of their establishments, and they also must submit individual reports for each establishment with 50 or more employees. For establishments with fewer than 50 employees, the employer must file an establishment list or establishment report (similar to Component 1).

For additional instruction, the EEOC has developed helpful materials such an instruction booklet for filing, a user’s guide, sample form, and other reference documents. These materials can be accessed via this link:

Fortunately, the Component-2 reporting obligation may be short-lived. On September 11, 2019, the EEOC issued a statement declaring that it will not renew the Component-2 requirement next year. In the statement, the EEOC cited the “unproven utility [of the data collection] to its enforcement program” and the “burden imposed on employers” to comply (an estimated $53.5 million in each of 2017 and 2018). The EEOC concluded that further examination is needed before imposing further pay reporting obligations.

So, for those imaginary folks who are enjoying their Component-2 gathering experience, savor it while it lasts! For everyone else, remember to submit your reports by the September 30 deadline, and keep your fingers crossed that the obligation does not renew.

The Ohio Supreme Court today issued a knockout punch to public authorities seeking to enforce local-hiring requirements on public-construction projects.

In 2003, the Cleveland City Council enacted what is generally known as the “Fannie Lewis Law.” The much-disputed law required public-construction contracts valued at $100,000 or more to include a provision mandating that Cleveland residents perform 20 percent of total construction labor hours on the contract. Contractors awarded projects but who failed to comply would be subject to monetary penalties and, potentially, contract termination and disqualification from future public work.

In 2016, the Ohio General Assembly enacted Ohio Revised Code § 9.49 (later renumbered O.R.C. § 9.75) prohibiting public authorities from requiring contractors to employ a certain percentage of regional or local residents, or providing bid incentives or preferences to contractors who do.

The City of Cleveland challenged the state law, arguing that it violated home-rule authority (essentially, the city’s right to govern local matters). The Cuyahoga County Court of Common Pleas sided with the City of Cleveland, and Ohio’s 8th District Court of Appeals (covering Cuyahoga County) affirmed the Common Pleas Court’s injunction against state law – this set up the fight in the Ohio Supreme Court.

This dispute over the Fannie Lewis Law and local-hiring requirements pitted Article XVIII, Section 3 of the Ohio Constitution (the “Home Rule Amendment”) against Article II, Section 34 of the Ohio Constitution (allowing the Ohio General Assembly to pass laws for employees’ comfort and general welfare). The City of Cleveland, among other local governments, take the position that the Fannie Lewis Law (and the like) do not provide for residency requirements but rather address the terms on which local governments may contract for public improvements in the exercise of self-governments and how local governments spend their money. Proponents argue that the Home Rule Amendment authorizes local governments—not the State—to dictate such contractual terms. The Ohio General Assembly, on the other hand, recognizes the “inalienable and fundamental right of an individual to choose where to live.” The State argues that “it is a matter of statewide concern to generally allow the employees working on Ohio’s public improvement projects to choose where to live, and that it is necessary in order to provide for the comfort, health, safety, and general welfare of those employees to generally prohibit public authorities from requiring contractors, as a condition of accepting contracts for public improvement projects, to employ a certain number or percentage of individuals who reside in any specific area of the state.”

Ultimately, the Ohio Supreme Court held the broad constitutional authority granted the State to legislate for the general welfare trumps home-rule authority. The Court wrote, “Because every resident of a political subdivision is affected by the residency restrictions imposed by another political subdivision, the statute [R.C. § 9.75] provides for the comfort and general welfare of all Ohio construction employees and therefore supersedes conflicting local ordinances.”

Various justices joined in concurring and dissenting opinions raising concern over the breadth of the Court’s majority opinion and its reasoning. Unless the General Assembly changes the law or a future Ohio Supreme Court opinion reverses course, however, local-hiring requirements have seen their end in public contracts throughout Ohio.

Today, the Department of Labor (“DOL”) announced its final rule to increase overtime pay for salaried employees. The new rule lifts the annual salary threshold from $455 per week ($23,600 annually) to $684 per week ($35,568 annually). The rule also raises the annual compensation requirement for highly compensated employees (“HCE”) from $100,000 per year to $107,432 per year. This is a significant change from the proposed rule, which set the annual HCE compensation at $147,414. Although the rule changes the “compensation test” for overtime exemption, the “salaried test” and the “duties test” for the executive, administrative, professional, and HCE exemptions remain the same.

Additionally, the rule allows employers to use nondiscretionary bonuses and incentive payments to satisfy up to 10% of the salary threshold. The payments must be made on at least an annual basis in order for employers to credit such payments toward the salary threshold.

The final rule will take effect January 1, 2020, and the DOL estimates that the updated salary thresholds will make 1.3 million more American workers eligible for overtime pay. Accordingly, employers must begin preparing now to comply with the new regulations when they become effective in 2020. Although each workplace is different, consider implementing the following suggestions in the upcoming weeks:

  • Identify exempt positions that fall below the new minimum salary threshold. Consider which positions will receive a pay raise to maintain the exemption and which positions will be reclassified as non-exempt.
  • Consider whether your bonus and incentive pay arrangements qualify for meeting the salary threshold, or whether they could be tweaked to qualify.
  • Train reclassified non-exempt employees in accurate timekeeping and address expectations regarding responding to emails, text messages, and phone calls after work hours.
  • Review and update your overtime and timekeeping policies.
  • Communicate all policy changes to your employees.

The National Labor Relations Board (the “Board” or “NLRB”) has issued notice that it will propose a new rule establishing that students who perform any services for compensation, including, but not limited to, teaching or research, at a private college or university in connection with their studies are not “employees” within the meaning of Section 2(3) of the National Labor Relations Act (the “Act”). The Board’s decision has potential for significant impact on the status of graduate student unions currently recognized at multiple private universities, as well groups seeking to organize. The Board’s new rule hopes to bring stability to a particular approach that has been reversed three times since 2000, while seeking to clarify that the Act only extends to relationships which are primarily economic in nature, and does not cover relationships which are essentially educational.

Student collective bargaining rights have been heavily debated for the past two decades, continually changing with the tides of each presidential administration. In 2000, the Board initially granted student workers at private universities the right to collectively bargain, ruling that those students were “employees” for purposes of the Act. In 2004, the Bush Administration Board changed course, stripping private university student workers of that right, indicating that student workers were not employees. In 2016 the Board changed course once again, ruling that graduate research students did have the right the collectively bargain. The 2016 ruling gave rise to several graduate student unions at private universities across the country. The new proposed rule will change the Board’s stance once again, but will make yet another reversal more difficult, since rule making will be required, rather than a decision in a case.

It is unclear whether this might presage future developments in other areas, particularly in regards to student athletes. In the past few years the Northwestern Football team attempted to organize; however, the Board rejected their petition holding they are not employees for purposes of the Act. We will keep you posted of any significant developments during the rule making phase.

Under a new rule being advanced by the U.S. Department of Labor, applicants for unemployment benefits may soon have to pass a drug test in order to receive benefits. The rule, which has been a source of significant controversy, recently moved closer to becoming a reality when the DOL sent it to the federal budget oversight office for final approval.

President Trump has expressed support for the DOL’s proposed rule, which would allow states to deny unemployment benefits to applicants who test positive for the use of controlled substances. The rule would not apply to all applicants, but instead just to applicants whose only suitable work is in an occupation that regularly conducts drug testing.

Opponents of the rule cite privacy issues and argue that the rule is not necessary and will disproportionately impact historically disadvantaged groups. Opponents have promised to pursue legal challenges if the rule is implemented.

Last week, the Labor Department’s Office of Federal Contract Compliance Programs (OFCCP) published a proposed new rule broadening the religious exemption to its equal employment opportunity regulations. The proposed rule is based on OFCCP’s stated perception that religious organizations are “reluctant to participate as federal contractors because of uncertainty regarding the scope of the religious exemption.” LGBTQ advocates are lambasting the move by the Trump Administration as a deliberate attempt to engage in taxpayer-funded discrimination.

The rule proposes the following noteworthy “clarifications”:

  • The exemption will apply not just to churches, but to “employers that are organized for a religious purpose, hold themselves out to the public as carrying out a religious purpose, and engage in exercise of religion consistent with, and in furtherance of, a religious purpose;”
  • Federal contractor religious entities can “condition employment on acceptance of or adherence to religious tenets without sanction by the federal government, provided that they do not discriminate based on other protected bases”
  • In assessing discrimination claims alleged by OFCCP against religious organizations based on protected traits other than religion, OFCCP must find by “a preponderance of the evidence that a protected characteristic was a but-for cause of the adverse action”

The proposed rule, however, does not exempt federal contractors from adhering to affirmative action requirements or to state and local laws that: 1) specifically include gender identity and sexual orientation as protected characteristics; and 2) do not have equally broad religious exemptions.

This OFCCP directive is the latest in a series of actions taken by the Trump administration to expand “religious freedom.”  In October, the United States Supreme Court will hear oral arguments in three cases – Bostock v. Clayton County, Georgia; Altitude Express, Inc. v. Zarda; and R.G. & G.R. Harris Funeral Homes Inc. v. EEOC – that will address whether Title VII bans sexual orientation discrimination and discrimination based on gender identity. The Trump administration is arguing in these cases that federal civil rights laws do not prohibit employers from discriminating against LGBTQ workers.

The OFCCP will accept public comments on the rule for 30 days, until September 16, 2019.  Many LGBTQ advocates have said they expect a slew of legal challenges if the rule is enacted.

Recently, a Federal District Court in the Middle District of Tennessee held, in Marie Hastings v. First Community Mortgage, that a female former Human Resource Director’s claim of sex discrimination was not established simply by the fact that she had been excluded from a social group of male executives, even though she alleged in her complaint that company decisions were made at these social meetings without any input from females.

According to the plaintiff, male executives of the company attended luncheons and socialized amongst themselves without her. She further alleged in the complaint that company business was discussed during these meetings and that this “club” was referred to throughout the company by the name of a male anatomical part.

The Court held that not being invited to lunch with male managers might be “dispiriting and frustrating” to her, but that fact alone could not support a claim of sex discrimination. According to the Court, such action did not rise to the level of “adverse employment action” ‒ a necessary element to prove sex discrimination.

In supporting its decision to dismiss the ex-employee’s claim of sex discrimination, the Court noted that the club was not a formal club with attributes like membership and meetings and that it was not a sanctioned club by the employer. The Court also noted that the ex-employee testified that she did not know how the group got its crude name or whether the male executives actually used that name.  Importantly, the Court also found that the ex-employee did not know, in fact, whether company business was ever discussed at its “meetings”.

In recent years, claims of unconscious bias have become more prevalent. Unconscious bias can occur when people gravitate to those with whom they have similar traits, characteristics and/or interests. In the First Community Mortgage case, male executives may have socialized with other male executives to the exclusion of the female Human Resource Director because of unconscious bias. This can open up employers to claims, which are costly to defend. As the First Community Mortgage case highlights, however, unconscious bias by itself will not support claims of discrimination but rather an employee must still show with admissible evidence that such bias resulted in some real adverse employment action.

As previously reported in the Labor & Employment Law Navigator, the Wage and Hour Division (WHD) of the Department of Labor reinstituted its practice of issuing opinion letters in April of last year. Recently issued opinion letters continue to provide helpful guidance for employers on a number of wage and hour issues.

Certain Paralegals May Be Properly Classified As Exempt

In Opinion Letter FLSA 2019-8, the WHD addressed the issue of whether paralegals employed by a trade organization and paid an annual salary of more than $100,000 can be properly classified as exempt from the FLSA’s minimum wage and overtime requirements. The WHD determined that the paralegals were, in fact, exempt under the lesser-known “highly compensated” employee exemption. The exemption requires that:

  1. The employee earns total annual compensation of at least $100,000, which includes at least $455 per week paid on a salary basis
  2. The employee’s primary duty includes performing office or non-manual work
  3. The employee customarily and regularly performs any one or more of the exempt duties or responsibilities of an executive, administrative or professional employee (the so-called “white collar” exemptions).

29 C.F.R. § 541.601. The WHD explained that, unlike the other white-collar exemptions, the highly compensated worker exemption does not require as detailed of an analysis of an employee’s job duties, as their high level of compensation provides a “strong indicator” of exempt status.

Here, the WHD noted that the paralegals “customarily and regularly” performed at least one of the duties of an administrative exempt employee. Because the employees were highly compensated, however, they did not need to meet the administrative exemption’s more stringent duties test, requiring that an employee “primarily” perform such duties involving the exercise of discretion and independent judgment.

The Opinion Letter provides a helpful reminder for employers to consider the highly compensated worker exemption for all employees earning more than $100,000 annually.  Use of this exemption will allow the application of the relaxed duties test.

Permissible Rounding Practices For Hours Of Work

In Opinion Letter FLSA 2019-9, the WHD addressed a non-profit organization’s question regarding its payroll software’s rounding practices for nonexempt employees under the Service Contract Act, which follows the principles of the FLSA. The WHD explained that it is acceptable for employers to round employees’ hours, so long as calculations “will not result, over a period of time, in failure to compensate the employees properly for all the time they have actually worked.” In other words, an employer’s rounding practices cannot have the effect of working to the employer’s advantage financially or to the employees’ disadvantage (e.g., always rounding down).  The WHD noted that it has been its practice to allow rounding “as long as the rounding averages out so that the employees are compensated for all the time they actually worked.” In this instance, the WHD approved the employer’s computer rounding practice because it was neutral on its face, and effectively averaged out so that employees were paid for all the time that they worked.

The Opinion Letter provides important guidance for employers that round their non-exempt employees’ reported time.  Rounding practices should be reviewed to ensure that they are neutral and do not, over a period time, favor the employer. Unfair rounding practices that deprive employees of compensation expose employers to significant liability, whether through a DOL investigation or a collective/class action lawsuit.

Certain Time Spent By Truckers In Truck’s Sleeper Berth Not Compensable

In Opinion Letter FLSA 2019-10, the WHD addressed whether time spent by over-the-road truck drivers in their trucks’ sleeper berths constitutes compensable working time. In the example considered by the WHD, long-haul truck drivers spent considerable time over the course of multi-day trips in their trucks’ sleeper berths. The time spent in the sleeper berths did not, however, involve driving, inspecting, cleaning, fueling, completing paperwork, or other responsibilities of the drivers’ jobs.

In analyzing the issue, the WHD noted that its prior interpretations were “unnecessarily burdensome for employers” and complicated the issue. The WHD explained that it would adopt a “straightforward” approach, in which time that drivers are relieved of all duties and permitted to sleep in a berth is “presumptively” non-working time and not compensable. In finding the truckers’ time to be non-compensable here, the WHD focused upon the fact that they were relieved of all duties, even if the time was spent confined in the truck’s sleeper berth. The WHD noted that there could be a different result in situations where drivers are not completely off-duty and relieved of work responsibilities.

While the Opinion Letter addressed the working time of truck drivers, it provides guidance for determining hours worked for employees generally. In determining whether an employee’s time is compensable, employers must consider whether an employee is truly off-duty, and thus able to effectively use the time for his or her own purposes. If not, or if the employees perform tasks for the benefit of the employer, the time may be compensable. This issue can arise in many contexts, including when employees report to work early, spend their lunch breaks at their desks, or are required by the employer to be “on call.”

As many of our readers know, the employment realm is comprised of various state and federal laws, each with their own time limitations (or “statute of limitations”) within which a plaintiff must bring a claim. For many types of claims, however, the statute of limitations is not absolute: it can be shortened by a signed agreement from the employee, in an employment contract, an arbitration agreement, or even an employment application.

In a number of cases, employers have included in their employment applications language requiring employees to bring all claims arising out of the employment relationship within a certain time period—in some cases, as short as six months. Courts have repeatedly enforced these agreements. Thus, for example, while the statute of limitations for race and sex discrimination claims in Ohio is six years, employees who agree to bring such claims within six months may be barred from bringing certain discrimination lawsuits at a later time.

Notably, these contractual statute of limitations agreements are not enforceable as to all types of claims or in all jurisdictions. For example, courts generally have declined to enforce agreements to shorten limitations periods for claims under the Family and Medical Leave Act, the Fair Labor Standards Act, and the Equal Pay Act. Courts have also refused to shorten the 300-day period for filing EEOC charges. And outside of Ohio and the Sixth Circuit, some courts (such as the New Jersey Supreme Court) have refused on public policy grounds to enforce these agreements even as to discrimination claims.

Nevertheless, at least in Ohio, well-drafted agreements can provide employers with an important layer of added protection against many types of employment claims. To increase the likelihood of enforcement, these agreements should be written clearly and as simply as possible. They should also be placed in the applicable document in a conspicuous location. Finally, employers who operate in multiple jurisdictions should consider the extent to which the applicable courts would likely enforce the agreement.


Employers who pay for health benefits for their employees are painfully aware of the impact rising drug prices and drug utilization have on their plan costs. In May, the Trump Administration, through the Centers for Medicare and Medicaid Services (“CMS”), issued a new rule requiring drug companies, effective on July 9, 2019, to include wholesale or list prices in all ads for drugs where the monthly cost is likely to exceed $35.00. Although based upon the Medicare program, the rule would have affected all drug advertising, because it would have been impossible to avoid advertising to Medicare beneficiaries along with private plan participants. Thus, many employers looked favorably upon the rule as one step to rein in drug costs. Also supportive of the Trump Administration in this effort were the AARP, and Democrats in both Houses of Congress, along with many Republicans. Almost immediately, however, the rule was challenged by major drug companies, Amgen, Merck and Eli Lilly, plus the largest advertising association in the nation, the National Association of Advertisers.

The challenge was based on two major points: that the rule was an unconstitutional violation of the free speech rights of the advertisers; and that the rule was an unauthorized exercise of authority not delegated to CMS. On the eve of the rule’s effective date, Judge Amit Mehta of the D.C. Federal District Court blocked the rule, granting the plaintiffs an injunction. In doing so, he declined to use the constitutional issue as the basis for his ruling, instead finding that the Social Security Act had not given the administration the right to regulate television direct-to-consumer advertising. He pointed out that the rule might be a good one and might help control rising drug costs, but he could find nothing in the congressional delegation of authority that was broad enough to encompass mandating content in TV ads.

The department stated that it will be in consultation with the Justice Department as to next steps. For the immediate future, however, employers should not anticipate any additional transparency as to drug prices, and hence no optimism for knowledge-based reduction in demand for high-cost, minimally advantageous drugs from plan participants. Continued use of more blunt-force drug demand measures, such as use of formularies and pre-approvals will be necessary, even if they are not popular with plan participants. The other noteworthy upshot of this case is that, so far at least, bipartisan support of a Trump Administration initiative does not guarantee its survival in court. Judge Mehta’s reasoning seems consistent with both D.C Circuit and Supreme Court approaches to limits upon administrative agency authority. It remains to be seen whether Congress will be able to translate bipartisan support of the concept of mandated pricing advertising into legislation.