DOL’s Persuader Rule Enjoined

Earlier this week, a federal district court in Texas granted a nationwide preliminary injunction that halts the Department of Labor's implementation of its Persuader Final Rule: Nat'l Fed'n of Indep. Bus. v. Perez (N.D. Tex. June 27, 2016). The development was welcome news for employers, who would have been required to comply with the Final Rule beginning July 1, 2016.

The Final Rule represents DOL's new interpretation of the so-called "advice exemption" under the Labor-Management Reporting and Disclosure Act (LMRDA). Under the LMRDA, employers are required to report relationships with labor consultants who are engaged to persuade employees on union activities. However, the LMRDA does not require employers to file reports when a consultant has been engaged to give "advice," which has been interpreted to include "indirect" persuasion activities. As a result, the advice exemption has historically limited an employer's reporting obligations to those situations when a consultant has been engaged to have direct contact with employees.

The Final Rule significantly narrows the advice exemption by requiring employers to report not only "direct" persuader activities, such as when a consultant is hired to speak with employees in the midst of a union campaign, but also "indirect" persuader activities, such as when a consultant is hired to prepare scripts for managers or otherwise coach supervisors on communications to employees.

The concern of many employers - and their consultants - has been that the Final Rule will stifle the ability of employers to obtain timely advice and will discourage consultants from providing many services, such as trainings and seminars on union matters, which could become subject to reporting requirements under the rule. The federal district court in Texas agreed. In addition to finding that the Final Rule likely infringes on employers' free speech and exceeds the DOL's rule-making authority, the court found that the rule essentially eliminates the advice exemption under the LMRDA and is therefore "defective to its core."

Under the court's ruling, the DOL is only preliminarily enjoined from implementing the Final Rule pending final resolution of the case, which could include any appeals by DOL. Consequently, although the Final Rule's implementation may no longer be imminent, it remains an issue that employers and their consultants must continue to monitor.

EEOC on Workplace Wellness Programs: Final Rules Announced

Earlier this month, the Equal Employment Opportunity Commission issued its final rules on employer wellness programs.  The final rules, which go into effect in January 2017, provide guidance on how workplace wellness programs can comply with the Americans with Disabilities Act (ADA) and Genetic Information Nondiscrimination Act (GINA).

The final rules address a number of issues, including the amount of incentives that an employer may offer to employees for participating in a wellness program.  Prior to the final rules, for example, the ADA regulations provided that employers could ask health-related questions and conduct medical examinations as part of a “voluntary” wellness program.  The regulations did not, however, define the term “voluntary” or address whether the offer of an incentive made a program involuntary.

The final rules clarify that a wellness program that requires employees to answer disability-related questions or to undergo medical examinations may offer incentives of up to 30 percent of the total cost for self-only coverage.  The 30 percent incentive limit brings the regulations in line with HIPAA, which applies the same incentive limit to health-contingent programs that require employees to achieve certain outcomes.

 
The final rules also set out a number of other requirements that must be met for a wellness program to be considered voluntary.  For example, employers may not deny an employee access to health coverage if the employee chooses not to participate in a wellness program.  Employers must also provide a notice that clearly explains what medical information will be obtained from employees in the wellness program.  The final rules also require that wellness programs be “reasonably designed to promote health or prevent disease” – in other words, a wellness program must actually promote health and cannot include burdensome time requirements for participation, involve unreasonably intrusive procedures, or be used to shift insurance costs or to gain sensitive medical information that would otherwise be in violation of the law.  In addition, the final rules include two confidentiality provisions.  The first generally provides that information from wellness programs may be disclosed to employers only in an aggregate form that does not disclose specific individuals.  The second provision prohibits employers from requiring employees to agree to the sale of health information or the waiver of confidentiality as a condition for participating in a wellness program or receiving an incentive

The Beat Goes On: D.C. Circuit Upholds NLRB View That Orchestra Musicians Are Employees

Last week, a federal appeals court enforced a ruling by the NLRB that orchestra musicians are employees, not independent contractors. The import of the decision in Lancaster Symphony Orchestra v. NLRB is sure to reverberate in concert halls throughout the country – particularly those with small to medium-sized orchestras, which often rely on contracted players – but it also holds lessons for employers outside the music industry.

The case began in 2007, when a local chapter of the American Federation of Musicians filed a petition seeking to represent the musicians of the Lancaster (Pennsylvania) Symphony Orchestra. The Orchestra challenged the petition on the grounds that its musicians were independent contractors, not employees covered under the NLRA, but the Board disagreed. Applying a multi-factor test derived from the common law of agency, the Board found the balance of factors pointed toward employee status.

On appeal, the U.S. Court of Appeals for the District of Columbia noted that it would adopt a “middle course” in reviewing the Board’s decision and uphold it as long as it was supported by substantial evidence. In other words, the Court did not decide how it would “classify the musicians in the first instance, but only whether the Board confronted two fairly conflicting views.”

After reviewing the evidence, the Court found that several factors pointed toward employee status. For example, the Court agreed that the Orchestra exerted extensive control over the means and manner of the musicians’ performance, including controlling the musicians’ posture and limiting their conversations during rehearsals and performances. The Court also found that the Orchestra’s conductor exercised “virtually dictatorial authority” over the manner in which the musicians performed and circumscribed their independent discretion. Further pointing toward employee status, the Court noted that the musicians were in the business of performing music and their work therefore comprised a part of the Orchestra’s regular business. Although the musicians were free to perform with other symphonies, the Court found that provided only limited entrepreneurial opportunity, as the musicians could increase their income only by taking a job with another orchestra.

At the same time, the musicians’ high degree of skill, coupled with the short amount of time they were engaged by the Orchestra (approximately 140 – 150 hours per year), pointed toward the musicians’ status as independent contractors. The Court also noted that the musicians provided most of their critical tools, i.e. their instruments, but it also noted, as the Board had found, that the Orchestra supplied other necessary tools, such as music stands, chairs, and the concert hall.

Faced with these “two fairly conflicting views,” the Court deferred to the Board’s conclusion that the musicians were employees, not independent contractors. Because of the Court’s standard of review – and because the outcome of the case rested on standards that the Court admitted were “decidedly unharmonious” – the Lancaster decision is by no means a coda on the issue of employee classification. Other courts and agencies, for example, have found orchestra members to be independent contractors for purposes of anti-discrimination laws (Lerohl v. Friends of Minnesota Sinfonia), state unemployment laws (Portland Columbia Symphony v. Oregon Employment Department), and state labor laws (Waterbury Symphony Orchestra v. AFM, Local 400). Still, the Lancaster decision shows that the NLRB does not intend to slow the tempo of its pro-employee agenda.

Labor & Employment Law: Determining the Accrual Date of a Wrongful Discharge Action

Preti Flaherty's Peter G. Callaghan and Gregory L. Silverman recently authored an article in the April 20th, 2016 edition of the New Hampshire Bar Association's Bar News. 

An employee has three years to bring a common law wrongful discharge claim in New Hampshire. Determining the exact date a wrongful discharge claim accrues remains an area of uncertainty under New Hampshire law.

Resolving the date after which a wrongful discharge claim is time-barred depends on the nature of the claim and whether the employee is alleging wrongful termination, a constructive discharge, or that the employer wrongfully failed to renew or offer a new contract....

Read more here.

Legislative Update on Maine’s Substance Abuse Testing Law

In legislative news, a bill that would have implemented new changes to Maine’s substance abuse testing law has died after the House and Senate failed to agree on amendments to the bill from the Committee on Labor, Commerce, Research and Economic Development.

As originally drafted, LD 1384 proposed a number of changes to the current law, including a revision to the probable cause standard that would have permitted an employer to find probable cause based on a single work-related accident that results in personal injury or significant damage to property. The current law prohibits a single work-related accident from forming the basis of probable cause to believe an employee may be under the influence of a substance of abuse.

In February, the Maine Department of Labor issued a lengthy report recommending other changes to the current statute, including the development of a uniform drug testing policy to be used by employers in the state.  The report followed a workgroup convened by the Department to study issues related to the impairment of workers due to the use of medical marijuana, opiates, prescription drugs, and other legal and illegal substances.

The Department’s report included a draft amendment to LD 1384 that was presented to the LCRED committee.  However, the amendment did not receive unanimous approval from the committee, which issued a divided report largely along party lines, and the House and Senate subsequently voted to pass competing amendments to the bill, resulting in the bill dying between houses.  This means that the Department’s recommended changes to the current law will remain just that—recommendations—for now.

Update on Publication of the New FLSA Overtime Regulations

The final overtime rule is edging closer to release: the U.S. Department of Labor (USDOL) has sent its final changes for determining which workers are eligible for overtime pay to the Office of Management and Budget (OMB) for an administrative review.  Procedurally, this is the final step before a new regulation is published as a final rule.  OMB’s final review could take several months or just a few weeks.  Once complete, the final rule will be published in the Federal Register and take effect within 60 days of publication.

Commentators believe that the final rule will work its way quickly through OMB and most likely be published by July 7, meaning it would take effect on Labor Day, Sept. 5.  That has obvious symbolic meaning.  Alternatively, considering other significant events taking place this fall, if the rule is published on September 2 -- the Friday before Labor Day -- it will take effect on November 1, the day prior to Election Day.

Although the proposed regulations were issued in July 2015, the differences between those proposed regulations and the final rule won't be made public until the final rule is actually issued.

According to the Unified Agenda and Regulatory Plan, published in November 2015 by OMB, the earliest the final rule could be released would be in July. Timing is important. Under the Congressional Review Act, a joint resolution from both houses of Congress and the President can undo laws and rules passed during the final 60 legislative days of the previous Congress.  In other words, the Obama Administration must work quickly so that the regulations take effect before President Obama leaves office and to protect the new regulations from being overridden, if a Republican wins the White House.

Employers ought to be planning now for implementation of the new regulations.  Among the changes likely to be reflected in the new regulations when they are published include:

• The salary threshold under which employees would be required to receive overtime pay (regular hourly rate x 1.5 for all hours worked beyond 40 hours in a given workweek) would be the 40th percentile of average weekly earnings in the U.S. The USDOL has projected that the 40th percentile weekly wage in the final rule will be $970, or $50,440 per year for a full-time employee.  This represents a significant jump from where it currently stands -- $23,660.
  
• This new salary-level threshold will be annually updated, based either on the percentile or indexed to inflation.
  
• For highly compensated employees (considered exempt without regard to any duties test), the new annual salary threshold will be $122,148, which is up from the current level of $100,000.

It remains to be seen whether changes in the applicable duties test will be incorporated into the new regulations.  No proposed changes to the duties test were reflected in the proposed rule published in 2015.

To avoid paying overtime to employees who would need to be reclassified as nonexempt, employers might consider increasing the employees’ salaries to a level above $50,440.   Alternatively, employers might considering reducing the hours of employees who would be newly non-exempt and eligible to receive overtime.  A third option is to adjust the hourly rates of newly non-exempt employees downward so that, when their additional overtime pay is considered, their overall weekly compensation remains unchanged.  Most employers will implement some combination of these tactical options in order to control the financial implications of the new regulations.

New Developments in Medical Marijuana and the Workplace

According to the National Conference of State Legislatures, twenty-three states now have medical marijuana laws on the books.  The conventional wisdom is that these laws bring with them greater protections for employees who are users of medical marijuana.  Court rulings over the last several years, however, have shown that this conventional wisdom is not always correct and that not all state medical marijuana laws are created equal.

For example, last summer the Colorado Supreme Court held that although Colorado law allowed for the use of medical marijuana, that law did not prevent an employer from terminating a medical marijuana user who had tested positive for marijuana in violation of the company’s zero-tolerance drug policy.  Reaching a similar conclusion, a federal district court in Washington recently dismissed an employee’s discrimination complaint and found that the law in Washington does not require employers to accommodate the use of medical marijuana where they have a drug-free workplace policy.  Swaw v. Safeway, Inc. (W.D. Wash. 2015).  In Swaw, the court pointed to an earlier 2011 decision from the Washington Supreme Court, which held that Washington’s medical marijuana law “does not regulate the conduct of a private employer or protect an employee from being discharged because of authorized medical marijuana use.”

That courts in Colorado and Washington (and California and Oregon, to name a few others) have construed medical marijuana laws in favor of employers does not mean that employers in other states with medical marijuana laws can assume their courts would reach similar interpretations.  This is because the medical marijuana laws in some states, such as Washington and Colorado, simply de-criminalize medical marijuana without providing any specific employment protections.  Other states, however, such as Maine, include specific protections that prohibit employers from taking adverse action against an employee based on his or her status as a medical marijuana user.  Consequently, court rulings from “de-criminalization” states should not be viewed as indicative of how a court would rule in another jurisdiction, such as Maine, where the applicable law expressly provides for some level of employment protection for medical marijuana users.

Although Maine’s courts have had little opportunity to weigh in on the issue of medical marijuana, Maine’s Department of Labor has recently issued a report that recommends several changes to the state’s drug testing law.  The report is the culmination of a workgroup that was convened by MDOL to explore a number of issues relating to substance use and abuse in the workplace, including the medical use of marijuana. The report, which is available here, recommends two changes.  The first change is directed at streamlining the process to approve drug testing policies and recommends the use of a uniform drug testing policy, which would be prepared by MDOL and used by all employers in the state. The second change involves replacing the “probable cause” standard for drug testing with a program whereby employers would receive training to detect impairments, regardless of their cause, and employers would then have the option to refer the alleged impairment case to a “preferred occupational provider” to confirm the impairment and make recommendations to address or accommodate the cause.