On Friday, January 5, 2018, the U.S. Department of Labor (“DOL”) posted a brief statement and updated its Fact Sheet on Internship Programs Under the Fair Labor Standards Act to clarify that going forward, it will use the “primary beneficiary” seven factor test for distinguishing bona fide interns from employees under the FLSA. The DOL’s approach is consistent with the test adopted by appellate courts such as the Second and Ninth Circuits.
Earlier this month, the U.S. Department of Labor’s Wage and Hour Division issued a Notice of Proposed Rulemaking (“NPRM”) seeking to repeal a 2011 rule that significantly impacted the compensation of hospitality workers. Specifically, the NPRM proposes to allow hospitality employers to control the distribution of the tips they pool assuming their employees are paid the full minimum wage. By way of background, the FLSA requires employers to pay employees a minimum wage (currently $7.25 per hour) plus overtime for all hours worked over 40 in a single workweek. Employees who “customarily and regularly receive tips” must still receive the minimum wage, but employers may elect to take a “tip credit” by counting up to $5.12 per hour of those employees’ tips toward the minimum wage, meaning employers may pay a reduced wage of $2.13 to tipped employees. Historically, employers that take the tip credit have been prohibited from sharing money from a tip-pooling system to employees who do not traditionally receive direct tips (cooks, dish washers, etc.). In 2011, the DOL extended the tip-pooling prohibition to apply to employers even if they do not take the tip credit and pay their employees the full federal minimum wage.
On August 31, 2017, a federal district court judge in Texas struck down the Department of Labor’s Obama-era controversial 2016 rule that raised the minimum salary threshold required to qualify for the Fair Labor Standards Act’s “white collar” exemption. Under the proposed regulations, the minimum salary threshold was raised to just over $47,000 per year, and increased the overtime eligibility threshold for highly compensated workers from $100,000 to about $134,000.
The U.S. Department of Labor continues to work towards dismantling the Obama administration’s overtime rule, saying that it intends to revise the controversial rule to lower the salary threshold under the Fair Labor Standards Act’s white-collar exemptions. The Obama administration’s rule sought to more than double the current salary requirement of $23,660 a year for white-collar exemptions. Though the rule was estimated to make 4 million additional workers eligible for overtime pay, it was also expected to cause employers significant financial and regulatory burdens.
On June 12, 2017, the Office of Labor Management Standards of the Department of Labor (DOL) published a Notice of Proposed Rulemaking that proposes to rescind the controversial “persuader rule” implemented by the DOL under the Obama administration. This rule sought to require disclosure of advice to employers from consultants and attorneys who engage in activities designed to persuade employees not to unionize. This announcement is on the heels of the DOL’s June 7, 2017, press release withdrawing two administrative interpretations issued by the DOL under the Obama administration concerning misclassification of independent contractors and joint employment, as discussed in a previous post. The recent flurry of activity by the DOL indicates that the Trump administration is following through with its promise to loosen many of the onerous restrictions placed on employers by the DOL in the Obama-era.
With an eye towards “increasingly unaffordable” higher education, President Trump signed an Executive Order on June 15, 2017, seeking to “provide more affordable pathways to secure, high paying jobs by promoting apprenticeships and effective workforce development programs, while easing the regulatory burden on such programs and reducing or eliminating taxpayer support for ineffective workforce development programs.” The Executive Order directs the Department of Labor (“DOL”) to propose regulations that “promote the development of apprenticeship programs by third parties,” including trade and industry groups, companies, non-profit organizations, unions, and joint labor-management organizations. The term “apprenticeship” means “an arrangement that includes a paid-work component and an educational or instructional component, wherein an individual obtains workplace-relevant knowledge and skills.” The Executive Order, in effect, seeks to expand the authority of employers and other third parties to design their own apprenticeship programs and tasks the DOL with implementing or rejecting and assessing such programs on an expedited basis.
One of the most controversial regulatory actions from the US Department of Labor during the Obama administration was the DOL’s regulation significantly increasing the salary level under the Fair Labor Standards Act’s white-collar exemptions. The regulation sought to more than double the current salary requirement of $23,660 per year, and it included an automatic updating requirement that would have accelerated future salary level increases at a rate well above the rate of inflation.
In a press release issued this morning, the Department of Labor has announced that it is withdrawing two administrative interpretations issued by the Department of Labor under the Obama administration in 2015 and 2016 relating to misclassification of independent contractors and joint employment. These two administrative interpretations sought to expand the definition of employee, thereby increasing the possibility of misclassification cases, and, as some argued, expanding the concept of joint employer under the Fair Labor Standards Act. While this is a welcomed announcement for employers, the Department emphasized in the release that the withdrawal “does not change the legal responsibilities of employers under the Fair Labor Standards Act.” This is the first effort by the Department of Labor under the Trump administration to dismantle some of the more controversial policies issued by the Department in the Obama-era. The decision to withdraw these administrative interpretations may also signal that the Department intends to return to the opinion letter writing process, making compliance much simpler for employers.
On May 23, 2017, the Department of Labor released its budget proposal for fiscal year 2018 (FY 2018). The budget contains several cost-cutting measures that reflect the new priorities of the Trump administration.
A notable aspect of the proposed budget is a request to merge the EEOC and OFCCP. The proposal aims for “full integration” of the two agencies by the end of FY 2018. To begin that transition, the proposal suggests sizable drops in the OFCCP’s current funding and staffing. The OFCCP’s budget is proposed to drop from $105,275,000 to $88,000,000 (a reduction of $17.3 million). The headcount is proposed to drop nearly 25%, from 571 full-time equivalent (FTE) employees to 440.
On November 22, a federal judge in the Eastern District of Texas preliminarily enjoined the Department of Labor’s final overtime rule, which would have expanded overtime eligibility to executive, administrative, and professional employees making less than $47,476 per year, who were previously exempt from the Fair Labor Standards Act’s requirements under its white collar exemption. The final rule was scheduled to go into effect on December 1, 2016.