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Federal Court Grants Injunction Blocking FLSA Overtime Rule

Late Tuesday afternoon, a federal district court judge in Texas granted a preliminary injunction to a number of plaintiffs who sued the United States Department of Labor, challenging the new overtime rules that were expected to take effect next Thursday, December 1.

The highly publicized rule would increase the salary threshold required for determining whether or not an individual is exempt from the Fair Labor Standards Act’s overtime rules. The new rule was applauded by the Obama administration and and workers’ rights groups, who cheered the fact that millions of workers would now be entitled to overtime compensation. The rules likewise was opposed by many business owners for the same reasons.

A number of states and private plaintiffs sued, claiming that the Department of Labor either had no authority to make salary a part of the exemption test or at least that the DOL exceeded whatever authority it did have. The court consolidated a number of the cases and recently considered a request to grant a preliminary injunction that would halt or delay the new rules until the court could consider the full merits of the case. The Court today granted the preliminary injunction, noting that delaying the implementation of the new rule while the case is pending would be wise, since it will be less disruptive than allowing the rule to go into effect and then potentially invalidating it after the fact.

The temporary delay places in jeopardy the final implementation of the rule, as it is expected that the final decision on the merits will not come until after January 20, 2017, when Donald Trump is sworn in as President. Some observers anticipate that President Trump and his new Labor Secretary will not defend the Obama Administration’s rule, allowing the overtime expansion to be invalidated.

We will continue to monitor this matter, but for now, it remains to be seen when, if or how these new overtime rules actually will take effect.

US Department of Labor Publishes Final Overtime Rule

Last year, the US Department of Labor published a proposed rule expanding overtime entitlement for millions of workers. The Department received a significant number of comments since then, both in favor of and opposed to the proposed rule, and today the Obama administration announced a final version of the overtime exemption rule.

The rule, which will go into effect December 1, 2016, will expand the class of people who will be eligible for overtime compensation. The Fair Labor Standards Act currently requires employers to pay employees one and one half times their regular rate for all hours worked in excess of 40 hours in a workweek. Some employees, however, are exempt from this requirement if they meet certain criteria. Specifically, in order to be exempt the employee must perform certain types of duties and must be paid a certain minimum salary. It is that minimum salary threshold that is altered by the new rule.

Under the current rule, in place since 2004, that minimum threshold has been $455 per week, or $23,660, per year. The new rule would double that, to $47,476, per year.

If an employer has any employee that currently is exempt, but who is paid less than $47,476, then starting December 1, the employer has several options if he or she wishes to maintain the exemption and avoid paying the overtime premium. For example, the employer can increase the employee’s salary to some amount above that threshold, to maintain the exemption. Of course, that is most feasible for those exempt employees who already are paid some amount close to that threshold.

What is more likely, however, is that many employers will reduce the number of hours worked, to limit the likelihood of overtime compensation. Alternatively, some employers may reduce the base pay for some employees, so that the same total compensation is paid after accounting for the new premium pay.

The new rule requires perhaps the most significant change in overtime rules in more than a decade, and employers now have about six months to plan and prepare.

Gov. Wolf Threatens Veto of Protect Excellent Teachers Act

This week, the Pennsylvania General Assembly passed legislation that would end the practice of basing teacher furloughs on seniority alone. Pennsylvania is one of only 6 states that bases such decisions on seniority alone, and the new law would allow schools to retain less senior teachers who have been rated satisfactory and instead furlough teachers who have been given poorer ratings. Seniority would still be used to break a tie in the event two teachers have been rated similarly in their performance.

Supporters of the new law, known as HB805, note examples in which Districts were forced to furlough distinguished teachers while keeping others that had been rated poorly, simply because they were not permitted to look at other factors than seniority. The new law recognizes that teachers, as professionals, are not all the same and that the student achievement and welfare should be of greater concern than seniority alone.

Governor Wolf, however, has threatened to veto the bill, which currently sits on his desk. Oddly, Governor Wolf claims this is a “local matter to be decided by districts,” yet he continued to threaten a veto of the bill that actually would give local districts the tools to make such a decision.

In addition, the new law would allow districts the ability to make furlough decisions on the basis of economic considerations, whereas now such decisions only can be made on the basis of specific reasons such as declining enrollment, program curtailment, and building or district consolidation.

Stay tuned to see whether the Governor actually provides local districts with these needed tools or follows through on his threat to veto.

EDIT: Governor Wolf in fact did veto the bill Wednesday, May 19, 2016, as threatened.

NLRB Expands Joint Employer Definition

In a decision upsetting to many employers, the National Labor Relations Board last week expanded the concept of what it means to be “joint employers” under the National Labor Relations Act.

In some cases, two different employers can be considered “joint employers” of the same employee, meaning that both employers share statutory obligations with respect to the employees’ rights guaranteed by the Act. Previously, for two employers to be considered “joint employers” it was necessary to find that they both had “direct operational and supervisory control” over the employees. Under the new standard, though, the Board will look at new factors, including even whether the other purported employer exerts control “indirectly.”

So why does this matter?

Franchisors and franchisees are worried that their relationship will be impacted, since each could be dragged into employer-employee disputes that traditionally would have belonged to the other one alone. In addition, if franchisors are going to be responsible for the treatment of franchisee’s employees, then the franchisees could face stricter control exerted by the franchisor over employment matters that traditionally had been left to the franchisee’s control.

Similarly, an employer that subcontracts functions to another company may be considered a joint employer of the employees servicing the contract, meaning that both employers could be responsible for labor law violations involving those employees. Clearly, then, the value of utilizing subcontractors may be impacted adversely as well.

Employment relationships, including subcontracting decisions, are complex and subject to numerous standards. Contact us to discuss how this or other issues could impact your business.

Photo by Annette Bernhardt [CC BY-SA 2.0], via Wikimedia Commons

School District Required to Provide Student Transportation to Homes of Both Parents

Wednesday afternoon, the Pennsylvania Supreme Court affirmed a decision of the Commonwealth Court, concluding that a student in the Manheim Township School District, who lived with each of his divorced parents on alternating weeks, was entitled to be provided with transportation to both homes.

The District previously did provide transportation to multiple locations for a number of students, whether to the separate homes of divorced parents or to before- and after-school programs, babysitters, etc. As part of a wholesale restructuring of its transportation program to save a significant amount of money, the District not only consolidated some routes but also ended its practice of providing split transportation. Each student would be provided with one bus stop to be used consistently.

The student’s father complained that the one bus stop for this student was too far from the father’s house, since it was the stop that was closer to the mother’s house. After pleading for separate bus stops, noting that the custody arrangement was 50/50, with the child spending just as much time in each home, the father sued the District. The trial court noted that the custody was evenly split, that there was a bus that did go near the father’s home and that had an empty seat on it, and ordered the split transportation arrangement. In other words, the trial court concluded that a child can have two residences for transportation purposes, but it explicitly limited its conclusion to situations like this one, in which the child truly lived in each place as much as the other and in which the District could accommodate the request easily, without needing to add another bus run or even another stop to an existing bus run.

The Commonwealth Court affirmed the decision, and the Supreme Court just affirmed it again in a split decision. The majority considered prior cases in which courts had found a child who lives in two different school districts while subject to a shared custody arrangement could be considered a resident of more than one district for purposes of determining entitlement for transportation services. In that case, the student was entitled to have either district provide transportation to a private school.

Here, then, the Court considered the situation in which both parents live in the same district and the student is looking for two bus stops. While acknowledging that the District was correct that the student could only have one residence for purposes of school attendance, the Court rejected the District’s claim that residency should be considered the same way for transportation purposes.

A concurring justice wrote that the decision was correct but, for similar reasons that caused one justice to dissent, should be limited to situations just like this one – in which the District did have an available seat on a passing bus and could have accommodated the request without financial hardship. Based on the majority’s rationale, though, in which the cost to the District explicitly was rejected as being a concern the legislature deemed relevant in drafting the transportation sections of the Code, I suspect any future cases to be decided the same way, regardless of financial impact.

Districts continue to struggle to deal with the complexities of modern families and living arrangements. Stay tuned, too, because almost certainly the next case will involve parents with something other than a pure 50/50 custody arrangement or a district that does not have an existing bus with a vacant seat that happens to be traveling past the proposed secondary stop.