Department of Labor Plans to Revise White Collar Overtime
Exemptions Under the FLSA
By
Ashley M. Manfull, Esq.
The
Department of Labor ("DOL") has issued a proposed rule
which is intended to redefine the overtime compensation
exemptions for executive, administrative, professional,
outside sales, and computer employees (commonly referred
to as the "white collar" exemptions). Currently, such
employees are exempt from overtime only if their job
duties conform to either a "long test" or a "short test."
Employers have consistently found these alternative tests
to be vague, making it difficult to conclusively establish
that an employee is exempt from overtime compensation
under the test criteria.
Recognizing the need for more
comprehensible criteria, the DOL has proposed a rule which
would combine the "long" and "short" tests into one
straightforward test for each white collar exemption. The
proposed new test for each white collar occupation is as
follows:
Executive Employees:
1.
Employee must earn a salary of at least $425.00 per
week;
2.
Employee’s primary duty must consist of the
management of the enterprise or a recognized department or
subdivision;
3.
Employee must customarily and regularly direct the
work of two or more employees;
4.
Employee must have the authority to hire or fire
other employees, or make recommendations as to the hiring,
firing, promotion or other change of status of other
employees which are given particular weight.
Administrative
Employees:
1.
Employee must earn a salary of at least $425.00 per
week;
2.
Employee’s primary duty must consist of performing
office or non-manual work directly related to the
management or general business operations of the employer
or the employer’s customers;
3.
Employee must hold a "position of responsibility"
with the employer, defined as (a) performing work of
substantial importance or (b) performing work
requiring a high level of skill or training.
Professional
Employees:
1.
Employee must earn a salary of at least $425.00 per
week;
2.
Employee’s primary duty must consist of (a)
performing office or non-manual work requiring knowledge
of an advanced type in a field of science or learning
customarily acquired by a prolonged course of specialized
intellectual instruction, but which also may be acquired
by alternative means such as an equivalent combination of
intellectual instruction and work experience or (b)
performing work requiring invention, imagination,
originality or talent in a recognized field of artistic or
creative endeavor.
Computer Employees:
1.
Employee must earn (a) a salary of $425 per week
or (b) $27.63 per hour;
2.
Employee’s primary duty must consist of (a)
application of systems analysis techniques and procedures,
including consulting with users, to determine hardware,
software or system functional applications; or (b)
design, development, documentation, analysis, creation,
testing or modification of computer systems or programs,
including prototypes, based on and related to user or
system design; or (c) design, documentation,
testing, creation or modification of computer related
programs related to machine operating systems; or
(d) a combination of duties described in (a), (b), and
(c), the performance of which requires the same level of
skills.
3.
Employee must be employed as a computer systems
analyst, computer programmer, software engineer, or other
similarly skilled worker in the computer field.
Outside Sales
Employees:
1.
No minimum salary required;
2.
Employee’s primary duty must consist of (a) making
sales or (b) obtaining orders or contracts for
services or for the use of facilities for which a
consideration will be paid by the client or customer;
3.
Employee must customarily and regularly be engaged
away from the employer’s place or places of business.
While the proposed standard tests
make it easier for employers to assess whether an
employee’s job responsibilities meet the established
criteria, the DOL has estimated that more than 1.3 million
low-wage workers will likely gain overtime compensation as
a result of its proposed rule. Therefore, the new
rule, if adopted as proposed, may result in higher labor
costs for some employers. More information on the
proposed rule may be obtained by accessing the DOL’s
website at
www.dol.gov.
Ashley Manfull is an Associate attorney in
our Employment Law Practice Group. She can be reached at
amanfull@bdblaw.com
or 330.258.6437.
Ohio
Employers Now Required to Report Work by Some Independent
Contractors to the Ohio Department of Job & Family
Services
By
Jason M. Baasten, Esq.
Ohio law requires all employers to
report newly hired and rehired employees to a state
directory maintained by the Ohio Department of Job &
Family Services ("ODJFS") within twenty-one days of their
hire date. Recently, however, that obligation has been
expanded to include independent contractors as persons who
must be reported by employers as "new hires." In order to
determine who qualifies as an independent contractor
subject to the reporting requirement, employers must look
to the specific definition explaining who are employees
that employers are required to report.
Ohio Revised Code §3121.89 now
defines an "employee" as "an individual who is employed to
provide services for compensation to an employer and
includes an individual who provides services to an
employer under a contract as an independent contractor and
who is an individual, the sole shareholder of a
corporation, or the sole member of a limited liability
company." (Emphasis added) Companies acting as
independent contractors who do not meet the above
definition need not be reported by employers.
Ohio law does not distinguish between
the type or size of a job as it relates to the new hire
reporting requirement. Therefore, all independent
contractors meeting the new definition of "employee"
should be reported regardless of the amount of pay or the
length of work for which they are retained. When
reporting an independent contractor, employers should be
sure to indicate the new hire’s contractor status on the
submission. The information required to be reported is
the same for both employees and independent contractors:
a. employee name, address,
date of birth, social security number, date of hire,
rehire, or return to work, and state of hire; and
b. employer name, address,
and federal employer identification number.
The date that a contract for work is
signed should be the date used as the hire date for an
independent contractor, and independent contractors should
be reported to the ODJFS within twenty-one days of the
signing of the contract or agreement to do work.
An employer should report a
contractor each time that the employer enters into a new
contract with that contractor. If the employer does not
use a contract with an independent contractor, then the
employer should report the contractor as a new hire once
each year. The manner of reporting of independent
contractors and regular employees is the same for
employers. New forms have been created containing the
same information as the previous form, but include a new
box to designate whether the person being reported is an
independent contractor. A W-9 form can also be used to
report an independent contractor, though an employer must
be sure to include the independent contractor’s social
security number, date of birth, date of hire, and work
state, as well as the employer information on the form.
The change to the statutory language
for new hire reporting has already taken place and the new
law is now in effect. Employers should begin reporting
independent contractors as soon as possible. However,
employers need not report their existing independent
contractors until it is time to renew their contracts.
The same penalties that apply to an employer’s failure to
report newly hired employees apply to a failure to report
a newly hired independent contractor. An employer who
fails to make a new hire report can be fined up to $25.00
for each failure to report. In addition, if the failure
to report is a result of a conspiracy between the employer
and the employee/independent contractor not to report
appropriate information, the employer can be fined up to
$500.00 for each failure to report.
Finally, multi-state employers
who are registered to report all of their new
hires to the State of Ohio, must also report
independent contractors that they use from all
states in which they do business. More
information on these issues may be obtained
from the EEOC's website by accessing the following
link:
www.state.oh.us /odjfs.
Jason Baasten is an Associate attorney in
our Employment Law Practice Group. He can be contacted at
jbaasten@bdblaw.com
or 330.491.5231.
Courts
Continue to Evaluate the Enforceability of Pre-Dispute
Arbitration Agreements
By
Vincent J. Tersigni, Esq.
Federal courts in the U.S. continue
to evaluate the enforceability of pre-dispute arbitration
agreements under the Federal Arbitration Act, with
differing results. The Sixth Circuit Court of Appeals,
which covers federal courts in Ohio, recently held in the
case of McMullen v. Meijer, Inc., that a
pre-dispute arbitration agreement in the employment
context was not enforceable because it granted to the
employer unilateral control over the pool of potential
arbitrators.
In its decision, the court stated
that the dispute resolution program implemented by the
employer was "commendably fair" except in one important
aspect: it granted to the employer unilateral control
over the pool of potential arbitrators from which the
parties would select an arbitrator, instead of obtaining a
pool of arbitrators from a neutral service such as the
American Arbitration Association or the Federal Mediation
and Conciliation Service.
The court found that while the
plaintiff, who sought to bring her individual employment
discrimination claims in court, could not show any actual
prejudice or bias by any arbitrator, the employer’s
program lacked inherent fairness in the arbitration
selection process and prevented the employer’s program
from being an effective substitute for a judicial form
because it potentially lacked neutrality. A copy of the
Sixth Circuit’s decision may be obtained by accessing the
following link:
McMullen v. Meijer.
The U.S. Supreme Court this year also
added another case, Pacificare Health Systems, Inc. v.
Book, to its growing list of cases involving the
enforceability of pre-dispute arbitration agreements.
Pacificare involved a lawsuit by physicians against
certain managed healthcare organizations under the
Racketeer Influenced and Corrupt Organizations Act
(RICO). While the case did not arise out of the
employment context, its decision is instructive.
Pacificare involved a dispute
over the enforceability of ambiguous arbitration clauses
including provisions which limited the ability of an
arbitrator to award punitive or exemplary damages which
might otherwise be available under RICO. In the past, the
Supreme Court has held that pre-dispute arbitration
agreements must allow the grievant to obtain all of the
statutory remedies available under the statute at issue.
Interestingly, the Court found that the enforceability
issues concerning this particular pre-dispute arbitration
were "unusually abstract" and it deferred to the
arbitration process for resolution. In a unanimous
decision, the Court compelled the parties to arbitrate the
dispute and left to the arbitrator the task of construing
the contractual limitations on remedies and their effect
on the enforceability of the agreement. Depending on the
results of the arbitration, it is anticipated that a
follow-up legal battle will ensue over the enforceability
of the decision issued by the arbitrator. A copy of the
Court’s decision may be obtained by accessing the
following link:
Pacificare.
Vincent Tersigni is a Shareholder and the
Employment Law Practice Group Leader. He can be reached
at
vtersigni@bdblaw.com
or 330.258.6552.
U.S.
Supreme Court Decision Clarifies the Definition of
"Employee" Under the ADA
By
Douglas J. Paul, Esq.
The
United States Supreme Court recently considered the
question of whether four physicians actively engaged in
medical practice as shareholders and directors of a
professional corporation should be counted as "employees"
under the Americans with Disabilities Act (ADA). In the
case of Clackamas Gastroenterology Associates v. Wells,
the Court held that the element of "control" was the
principal guidepost in determining the status of the
doctors. A particular title, such as partner, director or
vice president, was not determinative of the issue.
Neither was the mere existence of a document titled
"employment agreement."
Citing prior decisions, Justice Stevens, writing for the
Court, found that Congress, by using the term "employee"
without defining it, intended to incorporate common law
notions of master-servant law, including specifically, the
employer’s right to "control" the employee. The Supreme
Court cited as relevant to the inquiry the six factors
utilized by the Equal Employment Opportunity Commission:
1.
Whether the organization can hire or fire the
individual or set the rules and regulations of the
individual’s work;
2.
Whether, and, if so, to what extent the
organization supervises the individual’s work;
3.
Whether the individual reports to someone higher in
the organization;
4.
Whether, and, if so, to what extent the individual
is able to influence the organization;
5.
Whether the parties intended that the individual be
an employee, as expressed in written agreements or
contracts; and
6.
Whether the individual shares in the profits,
losses, and liabilities of the organization.
The Court
emphasized that the above factors were only part of the
overall analysis and did not constitute an "exhaustive"
listing of relevant facts. Citing prior decisions,
Justice Stevens reiterated that the answer to the employee
status of any particular individual "depends on all of the
incidents of the relationship with no one factor being
decisive."
In
response to arguments that the issue should be resolved in
favor of a broad definition of the term "employee" in
order to provide statutory protection to a larger group of
people consistent with the statute’s purpose of ridding
the workplace of the evils of discrimination, the Court
pointed to the countervailing policy expressed by Congress
that the 15 or more threshold had "its own justification
that must be respected."
The
Supreme Court did not actually decide the question for the
Clackamas practice. Rather, it remanded the case for
further proceedings consistent with the opinion. The
Court noted that, in the case before it, certain findings
– that the doctors controlled operation of the clinic,
shared the profits, and were personally liable for
malpractice claims – seemed to argue against them being
classified as employees. Other findings – that they
received salaries, had to comply with standards
established by the clinic, and reported to a personnel
manager – argued in favor of their status as employees.
The Court has often had to determine whether or not a
person was an "employee" for purposes of the protection of
the anti-discrimination laws. In this case, however, it
was not one of the doctors claiming entitlement to the
benefit of those statutes who initiated the case. Rather,
Deborah Wells, a bookkeeper in the practice sued, claiming
unlawful discrimination on the basis of her disability.
The defense raised by the practice was that it was not
subject to the ADA because it did not have the minimum
number of employees necessary to trigger the application
of the law. Like other anti-discrimination statutes, the
ADA only applies to employers who have 15 or more
employees. Since there is a 20-employee threshold for the
Age Discrimination in Employment Act (ADEA) and a
15-employee threshold under Title VII of the Civil Rights
Act of 1964, the Clackamas decision will likely
also impact the application of those statutes for all
employers in all industries.
In the Clackamas decision, the Court has cleared up
a grey area in the law of small employers’ coverage under
the anti-discrimination statutes, and further emphasizes
through the right of control test that mere titles will
not be sufficient for an employer to escape coverage under
the Act. A full text copy of this decision may be
obtained by accessing the following link:
Clackamas.
Douglas Paul is a Shareholder in our
Litigation and Employment Law Practice Groups. He can be
reached at
dpaul@bdblaw.com
or 216.615.7340.
Telecommuting as a Reasonable Accommodation Under the
ADA
By
Jason M. Baasten, Esq.
The Equal Employment Opportunity
Commission (EEOC) has provided additional guidance to
employers regarding the question of whether
telecommuting privileges must be offered to a person
with a disability as a reasonable accommodation under
the Americans With Disabilities Act (ADA). The EEOC
recently issued a telework fact sheet that expanded upon
its prior guidance on this topic regarding reasonable
accommodation and undue hardship under the ADA.
As the telework fact sheet
explains, the ADA does not require an employer to offer
a telework program. If an employer does offer such a
program, however, the employer might be required either
to waive eligibility requirements or to modify its
existing program for an employee with a disability who
needs to work at home.
Even if an employer does not offer
telecommuting privileges to its workforce, permitting an
employee to work at home may be viewed as a reasonable
accommodation under the ADA. To determine whether a
particular job can be performed at home, an employer
should first identify and review all the essential job
functions. An employer does not have to remove any
essential job duties to permit an employee to work at
home. If minor job duties or marginal functions cannot
be performed outside the workplace, the employer may
reassign some duties or substitute other minor tasks
that the employee with a disability could perform at
home in order to keep employee workloads evenly
distributed.
After determining what the
essential job functions are, the employer should engage
the employee in an "interactive process" in order to
determine whether some or all of the functions can be
performed at the employee’s home. If the employer
determines that some job duties must be performed in the
workplace, the employer and the employee should consider
whether working part time at home and part time in the
workplace would satisfy both of their needs.
The frequency with which an
employee is granted telecommuting privileges should be
determined based on the employee’s particular disability
and needs. An employer can require that an employee may
work at home only to the extent that his or her
disability necessitates it.
It should be noted that an employer
is not obligated to adopt an employee’s preferred or
requested accommodation and may instead offer other
accommodations as long as they would be effective and
feasible.
Finally, federal courts are not
bound by the EEOC’s interpretation of the law, and
courts have differed regarding whether work at home can
be a reasonable accommodation. However, courts may
defer to the EEOC due to the fact that this agency
enforces the ADA, and therefore the EEOC’s telework fact
sheet provides some valuable guidance on the issue of
telecommuting and reasonable accommodation under the
ADA. A copy of the telework fact sheet may be obtained
by accessing the following link:
EEOC.
Jason Baasten is an Associate attorney in
our Employment Law Practice Group. He can be contacted
at
jbaasten@bdblaw.com
or 330.491.5231.
The
Employment Law Practice Group
Welcomes Paul J. Pusateri
The
Employment Law Practice Group welcomed new shareholder
attorney
Paul J. Pusateri to the practice group in the
Canton, Ohio office this summer. Paul obtained his
bachelor’s degree from Walsh University prior to
attending Case Western Reserve University where he
obtained a master’s degree, and then a law degree in
1991.
Paul has worked as a city attorney
and in private practice in New Mexico and
in Ohio. Paul focuses his practice on
employment law and litigation, and his clients
include hospitals, long term care providers,
municipalities, small and large businesses,
and insurers. Paul was also recently selected
as Interim Law Director Director for the City
of North Canton, Ohio.
Paul and his wife Mary Jean live in
Canton, Ohio with their three children. Paul is active
in multiple community and professional organizations,
and is also fluent in Spanish. Welcome Paul!
Practicing in
Buckingham Boca RatonSM
If you do business or have a residence in Florida, we
want to remind you we have a Florida office staffed with
outstanding attorneys. Our Florida office can address
business, estate planning, financing, intellectual
property, litigation, employment, and real estate
matters, to name a few. We welcome the opportunity to
provide legal services when you are traveling to
Florida.
For additional information contact us
at 1.800.686.2825.
Save
the Date for these Upcoming Presentations:
LAST CHANCE
to attend the 15th
Annual Employment Law Seminar.
The final seminar for this year will be
held on October 22, 2003, in Independence
(Cleveland), Ohio at the Holiday Inn - Rockside Road.
To register on line visit
www.bdblaw.com/seminars.asp or contact Maria
Denisiak at
mdenisiak@bdblaw.com or 330.258.6478.
On November 5, 2003,
Douglas J. Paul (Buckingham ClevelandSM)
will be presenting at the National Business
Institute Seminar titled "Powerful Legal Negotiation in
Ohio." Please contact the National Business Institute
for additional information at
www.nbi-sems.com or 800.930.6182. This
seminar is offering six(6) CLE credit hours.
Out and
About – Recent Presentations:
Gerald B. Chattman,
Natalie F. Grubb, and
Douglas J. Paul (Buckingham ClevelandSM)
presented at the "Homeland Security Great Lakes Region
Conference 2003." Their topics were "Violence in the
Workplace in the Age of Terrorism," "Employer Background
Screening and DOT Drug Testing," and "Avoiding
Costly Litigation."
Gerald B. Chattman spoke on "The Provider
Perspective on Managing Risks" at the Consortium
Against Adult Abuse sponsored by the Western Reserve
Area Agency On Aging in Cleveland, Ohio.
If you are interested in obtaining information on upcoming
seminars or would be interested in having speakers from
Buckingham, Doolittle & Burroughs, LLP make a presentation
to your organization, please contact: Lorna Henderson,
Senior Marketing Coordinator
lhenderson@bdblaw.com or 800.686.2825 ext. 473.
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