Jun 23, 2019
by Neil Reichenberg
IPMA-HR Encourages DOL to Revise Updated Regular Rate Rule to Recognize Public Sector Realities
IPMA-HR on June 12 joined the International Municipal Lawyers Association and several other nonprofit public sector groups in suggesting a handful of revisions to the proposed update to the regular rate rule under the federal Fair Labor Standards Act (FLSA).
The regular rate is the hourly pay figure used to calculate overtime pay. A rule issued by the U.S. Department of Labor’s Wage and Hour Division specifies what to include and exclude when determining an employee’s regular rate.
The regular rate rule was last revised in the 1950s. Consequently, IPMA-HR and its fellow commenters agreed with DOL that “the workplace and the law have changed.” The associations also noted that public sector employers often provide complex compensation packages that include multiple types of specialty and incentive pay and that “inadvertent regular rate violations can create enormous unanticipated expenses for public agencies, which are ultimately borne by the taxpayer.”
To avoid such problems, the associations asked for clarifications on how to treat each of the following types of compensation:
- Payments Made in Lieu of Health Insurance—In 2016, the U.S. Court of Appeals for the Ninth Circuit ruled in Flores v. City of San Gabriel that in order to comply with U.S. Supreme Court’s “narrow construction doctrine,” cash payments made in lieu of receiving health insurance must be included in the regular rate. The Supreme Court in 2018 reversed itself on narrowly constructing the FLSA and endorsed a “fair interpretation” in the case of Encino Motorcars v. Navarro. The latter ruling calls into question the continuing validity of the Flores decision, leading the associations to recommend that DOL include cash payments made to employees pursuant to a bona fide medical cafeteria plan in the list of payments that are properly excluded from the regular rate. Another option would be to clarify that medical cash-in-lieu payments constitute other similar payments that are excluded from the regular rate.
- Holiday-in-Lieu Pay—Current regulations permit employers to exclude holiday-in-lieu pay (i.e., pay for unused holidays or vacation leave in addition to pay for the works worked) from the regular rate regardless of whether it is paid during the same period in which the leave is foregone or during a subsequent pay period. The associations urged DOL to clarify these regulations since courts have ruled that they are excludable. Specifically, the associations recommended providing an additional example involving set schedules of firefighters and other public employees who, due to the nature of their work, have a set schedule that does not grant holidays.
- Sick Leave Incentive Pay—The associations asked DOL to clarify and confirm the criteria for excluding leave-related cash-outs from the regular rate. For example, public agencies often agree to contractual provisions that incentivize employees not to abuse accrued paid leave. Some agencies offer annual buybacks of accumulated paid leave to employees who maintain a minimum leave balance. While such payments have been held to be excludable from the regular rate, payments under nearly identical programs that are limited to buybacks of accumulated sick leave have been deemed includable in the regular rate. Since there appears to be no meaningful distinction between the two types of programs, a clear determination is needed.
- Negotiability of Rates—A longstanding rule states that the an employee’s regular rate cannot be negotiated. The associations acknowledge that such a rule prevents employers from manipulating the regular rate in order to minimize overtime costs, but they also believe negotiating with highly compensated employees who are not at risk for falling behold the FLSA salary threshold for overtime eligibility should be an option. As they write, for employees earning in excess of $100,000 annually and receiving numerous perks and premiums, there should be “little federal interest in parsing the pay packages to ensure increased overtime pay.”
The full set of comments appear online here.
SCOTUS Limits Administrative Exhaustion Challenges to Title VII Claims
The U.S. Supreme Court ruled unanimously in Fort Bend v. Davis that an employer forfeits grounds for raising a failure to exhaust administrative remedies objection if it waits too long to do so. Federal appeals courts had ruled both ways on whether defendants in employment discrimination cases could insist at any time that plaintiffs go through the entire investigation and resolution process with the EEOC or an analogous state agency before filing a lawsuit. IPMA-HR joined an amici curiae in support of Fort Bend County.
In this case, Fort Bend County, Texas, waited years into litigation with its former employee to raise the administrative exhaustion issue. It did so in order to have a claim of alleged religious discrimination over being terminated for refusing to work on a Sunday that was never considered by the Texas Workforce Commission dismissed. The former employee had gone through the commission process for allegations of harassment and retaliation, but the religious discrimination matter was not raised until her lawsuit was already under way.
In light of this Supreme Court ruling, employers should demand administrative exhaustion when it first answers a Title VII claim or in its original motion for dismissal of a claim.
Revised W-4 Coming
After many workers unexpectedly received lower tax refunds or higher tax bills for 2018, the IRS announced plans to issue an updated Employees Withholding Certificate that clarifies how to select filing status, claim allowances and claim exemptions in order to avoid underpaying income taxes. A draft of the W-4 for 2020 appears on the IRS website.
Vote on Raising Federal Minimum Wage Expected This Summer
U.S. House leaders intend to bring the Raise the Wage Act (H.R. 582) to a floor vote by August. The bill calls for incrementally raising the federal minimum wage from $7.25/hour to $15/hour by 2024 and then indexing it to median wage growth. Congress last approved a minimum wage increase in 2009, and June 16, 2019, marked the longest period without an increase since the federal minimum wage was created in 1938.
Proposed Law Would Make Employees Earning Nearly $51K Eligible for Overtime
The Restoring Overtime Pay Act of 2019 (H.R. 3197/S. 1786) calls for setting the salary threshold for overtime eligibility at the 40th percentile of wages in the lowest wage census region. Reps. Bobby Scott (D-Va.) and Mark Takano (D-Calif.) introduced the House version of the bill, and Sens. Sherrod Brown (D-Ohio) and Patty Murray (D-Wash.) are sponsoring the Senate version. Proponents of the legislation say the change to overtime rules would affect about 4.6 million workers.
House Panel Moves to Strengthen Protections Against Age Discrimination in Employment
The U.S. House Committee on Education and Labor has voted to send the Protecting Older Workers Against Discrimination Act (H.R. 1230) to the full House. The bill was introduced to reverse the U.S. Supreme Court’s decision in Gross v. FBL Financial Services, where a 5-4 majority held that plaintiffs in cases brought under the Age Discrimination in Employment Act (ADEA) must prove that age was the sole motivating factor for an employer to take an adverse employment action. The legislative fix to the ADEA is seen as needed because plaintiffs in discrimination cases brought under Title VII of the Civil Rights Act of 1964 can succeed with a “mixed motive” argument that discriminatory intent was just one of the reasons for an adverse employment action.
For additional information, please contact IPMA-HR Executive Director Neil Reichenberg at firstname.lastname@example.org.