Federal Employment Law Update – April 2018

Federal Employment Law Update

DOL Releases Assistance for Enforcement of Tip Credit Rules under FLSA

On April 6, 2018, the U.S. Department of Labor released a field assistance bulletin (FAB No. 2018-3) providing guidance concerning the Wage and Hour Division’s (WHD) enforcement of tip credit rules under the Fair Labor Standards Act (FLSA) after Congress amended the FLSA in the Consolidated Appropriations Act, 2018 (act), Pub. L. No. 115-141, Div. S., Tit. XII, § 1201.

The act prohibits employers from keeping tips received by their employees, regardless of whether the employer takes a tip credit under 29 U.S.C. § 203(m). The act also provides that portions of the WHD’s regulations codified at 29 C.F.R. §§ 531.52, 531.54, and 531.59 that barred tip pooling when employers pay tipped employees at least the full FLSA minimum wage and do not claim a tip credit will have no further force or effect (until any future action by the WHD Administrator).

Read the bulletin

EEOC Releases New Guidance for Preventing Harassment

In April 2018, the U.S. Equal Employment Opportunity Commission (EEOC) released a new guidance, Promising Practices for Preventing Harassment, identifying five core principles that have generally proven effective in preventing and addressing harassment:

  • Committed and engaged leadership.
  • Consistent and demonstrated accountability.
  • Strong and comprehensive harassment policies.
  • Trusted and accessible complaint procedures.
  • Regular, interactive training tailored to the audience and the organization.

The promising practices identified in the guidance are not legal requirements under federal employment discrimination laws; however, according to the EEOC, they may enhance employers’ compliance efforts.

Read the guidance

IRS Releases Employer Credit for Paid Family and Medical Leave FAQs

In April 2018, the federal Internal Revenue Service (IRS) released frequently asked questions covering the § 45S employer credit for paid family and medical leave. The employer credit is a general business credit that employers may claim, based on wages paid to qualifying employees while they are on family and medical leave, subject to certain conditions.

The credit is a percentage of the amount of wages paid to a qualifying employee while on family and medical leave for up to 12 weeks per taxable year. The minimum percentage is 12.5 percent and is increased by 0.25 percent for each percentage point by which the amount paid to a qualifying employee exceeds 50 percent of the employee’s wages, with a maximum of 25 percent. In certain cases, an additional limit may apply.

The credit is generally effective for wages paid in taxable years of the employer beginning after December 31, 2017, and is not available for wages paid in taxable years beginning after December 31, 2019.

See the FAQs

DOL Releases New Opinion Letters and Fact Sheet

In April 2018, the U.S. Department of Labor (DOL) released three new opinion letters on the following topics:

  • Compensability of frequent rest breaks required by a serious health condition and the federal Fair Labor Standards Act (FLSA). Rest breaks to accommodate an employee’s serious health condition that predominantly benefit the employee are not compensable.
  • Compensability of travel time and the FLSA.
  • Lump-sum payments and earnings under the garnishment provisions of the federal Consumer Credit Protection Act (CCPA).

In March 2018, the DOL also released Fact Sheet 17(s): Higher Education Institutions and Overtime Pay Under the FLSA, addressing white collar exemptions and their applicability to jobs that are common in higher education institutions.

Read the FLSA opinion letters, the CCPA opinion letter, and the fact sheet.

Supreme Court Rules Auto-Service Advisors Exempt from FLSA Overtime Requirement and Rejects Narrow Construction of Exemptions

On April 2, 2018, the U.S. Supreme Court ruled in Encino Motorcars v. Navarro that auto-service advisors are exempt from the federal Fair Labor Standards Act (FLSA) overtime requirements. According to the court, because service advisors at car dealerships are “salesmen who are primarily engaged in servicing automobiles,” they are exempt from the FLSA’s overtime-pay requirement. Per the FLSA at 29 U.S.C. § 213(b)(10)(A), any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles, trucks, or farm implements is exempt from overtime pay.

In Encino, the service advisors argued that they did not sell cars or perform repairs as a part of their job or job description; therefore, they were not exempt from overtime compensation. However, the majority found that their activity selling services makes them salesmen in the ordinary meaning of the term, and in pointing to the broad range of tasks they perform, service advisors “are integral to the servicing process.” The majority acknowledges that “service advisors do not spend most of their time physically repairing automobiles,” but emphasizes that the same is true of partsmen. For example, according to the court opinion, “[p]artsmen, like service advisors, do not spend most of their time under the hood. Instead, they obtain the vehicle parts and provide those parts to the mechanics. In other words, the phrase primarily engaged in servicing automobiles must include some individuals who do not physically repair automobiles themselves but who are integrally involved in the servicing process. That description applies to partsmen and service advisors alike.”

The court also rejected the service advisors’ argument in reliance of the principle that exemptions to the FLSA should be narrowly construed. Rather, Justice Thomas stated, “the narrow-construction principles rely on the flawed premise that the FLSA ‘pursues its remedial purpose at all costs.’” Because the exemptions “are as much a part of the FLSA’s purpose as the overtime-pay requirement,” Thomas holds that the court has “no license to give the exemption anything but a fair reading.” This is notable as the court rejects the principle that the FLSA exemptions should be narrowly construed and instead essentially holds that the exceptions are often the price of FLSA passage.

Read the SCOTUSblog coverage and the opinion

FLSA Amendments to Tip Sharing Provisions

On March 23, 2018, President Trump signed legislation (H.R. 1625) amending the federal Fair Labor Standards Act (FLSA) by prohibiting employers from keeping tips received by employees for any purpose. This includes prohibiting managers or supervisors from keeping any portion of employees’ tips, regardless of whether the employer takes a tip credit. Employers in violation of these protections are liable to the affected employee(s) for the sum of any tip credit taken, and all tips unlawfully kept, in addition to an equal amount as liquidated damages. Regarding willful violations of the employment of minors provisions (at 29 U.S.C. § 216(c)), any person in violation of the law will be subject to a civil penalty of up to $1,100 for each violation and will be liable to the affected employee(s) for all tips unlawfully kept and an additional equal amount as liquidated damages.

The law is currently effective.

Read US H.R. 1625