Federal Employment Law Update – November 2018

Federal

OSHA Crane Operator Final Rules

On November 9, 2018, the U.S. Department of Labor, Occupational Safety and Health Administration (OSHA) announced the release of its Cranes and Derricks in Construction: Operator Certificate Extension final rule (Final Rule 82: 51986-51998). The final rule:

  • Removes the requirement that crane operator certifications include the crane’s rated lifting capacity. The two testing organizations that have certified the majority of operators have issued certifications by “type” but not “capacity.” These certifications, therefore, would not have been valid without a change to the rule. OSHA has concluded that the capacity requirement for certification is not necessary to protect workers and a shortage of certified operators will disrupt the construction industry severely.
  • Permanentizes an employer’s duty to ensure that operators are competent to operate the equipment safely. While certification establishes an objective baseline of general knowledge of crane operation, it does not ensure that operators know how to operate a particular crane for a specific task. For this reason, OSHA revised the crane standard to preserve a requirement that employers assess the ability of their operators to run the cranes they will be using for the tasks to which they are assigned. This employer duty would have ceased to exist without this new rulemaking.

The final rule was published in the Federal Register on November 9, 2018. The final rule, with the exception of the evaluation and documentation requirements, becomes effective 30 days after publication in the Federal Register (December 10, 2018). The evaluation and documentation requirements become effective 90 days after publication (February 8, 2019). Rather than having to re-evaluate an operator that an employer has already determined is competent to operate particular equipment safely, OSHA will allow employers who have evaluated operators prior to the publication of this final rule to simply document their previous evaluation of those operators.

Read the final rule and the FAQs

80/20 Tip Credit Rule Rescinded

On November 8, 2018, the U.S. Department of Labor’s Wage and Hour Division (WHD) released a decision letter (FLSA2018-27) rescinding the 80/20 Tip Credit Rule (dual jobs). Under the 80/20 portion, of the dual jobs rules, when an employee works in both a tipped and a non-tipped occupation, the tip credit is available only for the hours spent by the employee in the tipped occupation; however, when a tipped employee spends a substantial amount of time — in excess of 20 percent in the workweek — performing related duties, no tip credit may be taken for the time spent in such duties.

The rescission letter specifically discusses the “related duties” portion of the rule because employers were having difficulty with its application. According to the WHD, “[w]e do not intent to place a limitation on the duties related to a tip-producing occupation that may be performed, so long as they are performed contemporaneously with direct customer-service duties and all other requirements of the federal Fair Labor Standards Act are met.”

The letter specifies that the determination of whether a particular duty is part of a tipped occupation should be made based on the following principles:

  • Duties listed as core or supplemental for the appropriate tip-producing occupation in the Tasks section of the Details report in the Occupational Information Network (O*NET) or 29 C.F.R. 531.56(e) are considered directly related to the tip-producing duties of that occupation. No limitation will be placed on the amount of these duties that may be performed, whether or not they involve direct customer service, as long as they are performed contemporaneously with the duties involving direct service to customers or for a reasonable time immediately before or after performing such direct-service duties.
  • Employers may not take a tip credit for time spent performing any tasks not contained in the O*NET task list. However, some of the time spent by a tipped employee performing tasks that are not listed in the O*NET may be subject to the de minimis rule at 29 C.F.R. 785.47 (where working time records show insubstantial or insignificant periods of time that cannot, as a practical matter, be precisely recorded for payroll purposes and may be disregarded).

The rescission of the 80/20 Tip Credit Rule became effective November 8, 2018.

Read more about tipped employees, and read FLSA2018-27

FLSA Exemptions and “Reasonable Relationship” Test

On November 8, 2018, the U.S. Department of Labor, Wage and Hour Division, released an Opinion Letter (FLSA2018-25) providing guidance about when an employee who works on an hourly, daily, or shift basis (subject to a weekly guarantee) may qualify as an exempt executive, administrative, or professional employee under the federal Fair Labor Standards Act (FLSA). According to the letter, “this letter responds to whether a professional employee’s guaranteed weekly salary creates a ‘reasonable relationship’ with the employee’s ‘usual earnings’ for purposes of determining whether the employee is paid a salary under 29 C.F.R. 541.604(b).”

According to the opinion letter, salaried employees may receive additional compensation, including hourly wages for hours worked beyond the normal workweek without losing the applicable exemption or violating the salary basis requirement, if they receive a guaranteed weekly salary of at least the standard salary level and a reasonable relationship exists between the guaranteed amount and the amount actually earned. A reasonable relationship exists when the weekly guarantee is roughly equivalent to the employee’s usual earnings at the assigned hourly rate for the employee’s normal scheduled workweek.

The regulations, 29 C.F.R. § 541.604(b), provide that a guaranteed salary of $500 is roughly equivalent — and therefore reasonably related to — usual weekly earnings of $600 – $750. The ratio of $750 per week to $500 per week is 1.5 to 1. Accordingly, a 1.5-to-1 ratio of actual earnings to guaranteed weekly salary is a reasonable relationship under the regulations. The letter goes on to state that a range of permissible ratios is from 1.2 – 1 to 1.5 – 1. However, a ratio of 1.8 – 1 or more (which is close to double the guaranteed weekly salary) is not roughly equivalent to the salary and thus would not meet the legal standard.

The opinion letter provides guidance, not new law.

Read FLSA2018-25

USCIS to Continue Implementing New Policy Memorandum on Notices to Appear

On November 8, 2018, U.S. Citizenship and Immigration Services (USCIS) announced that it is continuing to implement its June 2018 Policy Memorandum (PM-602-0050.1), Updated Guidance for the Referral of Cases and Issuance of Notices to Appear (NTAs) in Cases Involving Inadmissible and Deportable Aliens. Based on this continuance and beginning November 19, 2018, USCIS may issue a Notice to Appear (NTA) on denials of the following forms:

If applicants, beneficiaries, or self-petitioners who are denied are no longer in a period of authorized stay and do not depart the United States, USCIS may issue an NTA. USCIS will continue to send denial letters for these applications and petitions to ensure adequate notice regarding period of authorized stay, checking travel compliance, or validating departure from the United States.

USCIS began implementing the PM for denied Forms I-485 and I-539 on October 1, 2018. USCIS will not implement the memorandum with respect to employment-based petitions at this time. Existing guidance for these case types remain in effect.

USCIS will continue to prioritize cases of individuals with criminal records, fraud, or national security concerns for referral for removal proceedings. USCIS has not changed to the current processes for issuing NTAs on these case types, and the agency will continue to use discretion in issuing NTAs for these cases.

USCIS will continue to take an incremental approach to implement this memorandum. Additional information and updates on the implementation of this PM are available on the Notice to Appear Policy Memorandum page.

Read the press release

Final Rules Protecting Conscience Rights in Health Insurance

On November 7, 2018, the Departments of Health and Human Services, Treasury, and Labor released two final rules to provide conscience protections for Americans who have a religious or moral objection to health insurance that covers contraception methods:

  • The first final rule provides an exemption from the contraceptive coverage mandate to entities that object to services covered by the mandate on the basis of sincerely held religious beliefs.
  • The second final rule provides protections to nonprofit organizations and small businesses that have non-religious moral convictions opposing services covered by the mandate.

The religious and moral exemptions provided by these rules also apply to institutions of education, health insurance issuers, and individuals. The moral exemption does not extend to publicly traded businesses, and neither exemption applies to government entities.

The rules leave in place government programs that provide free or subsidized contraceptive coverage to low income women. In addition, the regulations do not ban any drugs or devices, nor do they prohibit any employer from covering contraceptives.

Of note, under the Affordable Care Act, employer-provided health insurance plans are required to cover certain preventative services, including all contraception methods approved by the Food and Drug Administration. In October 2017, the Trump administration issued two interim final rules providing an exemption for those who had sincerely held religious or moral objections to such coverage, while seeking public comment on the rules.

The rules take effect 60 days after their publication in the Federal Register and they are scheduled to be published on November 15, 2018.

Read a fact sheet with additional information on the final rules; read the final rule on exemptions for religious beliefs; and read the final rule on exemptions for moral convictions.

SCOTUS Decision: ADEA Applies to All State and Local Governments Regardless of Employee Count

On November 6, 2018, the Supreme Court of the United States (SCOTUS) unanimously held, in Mount Lemmon Fire District, Petitioner v. John Guido, et al., that state and local governments are covered employers under the federal Age Discrimination in Employment Act (ADEA) regardless of the number of employees they have. The ADEA defines certain private and public entities as employers and prohibits them from discriminating against employees because of their age. The act applies to private entities only if they had “twenty or more employees for each working day in each of twenty or more calendar weeks in the current or preceding calendar year” (29 U.S.C. § 630(b)).

In Mount Lemmon, two firefighters filed suit alleging that the fire district, a political subdivision in Arizona, terminated their employment as firefighters in violation of the ADEA. The fire district responded that it was too small to qualify as an employer under the ADEA. According to the court’s holding:

“The definitional provision’s two-sentence delineation, set out in §630(b), and the expression “also means” at the start of §630(b)’s second sentence, combine to establish separate categories: persons engaged in an industry affecting commerce with 20 or more employees; and States or political subdivisions with no attendant numerosity limitation.

The words “also means” in §630(b) add new categories of employers to the ADEA’s reach. First and foremost, the ordinary meaning of “also means” is additive rather than clarifying. See 859 F. 3d 1168, 1171 (case below) (quoting Webster’s New Collegiate Dictionary 34). The words “also means” occur dozens of times throughout the U. S. Code, typically carrying an additive meaning. E.g., 12 U. S. C. §1715z–1(i)(4). Furthermore, the second sentence of the ADEA’s definitional provision, §630(b), pairs States and their political subdivisions with agents, a discrete category that carries no numerical limitation.

Reading the ADEA’s definitional provision, §630(b), as written to apply to States and political subdivisions regardless of size may give the ADEA a broader reach than Title VII, but this disparity is a consequence of the different language Congress chose to employ. The better comparator for the ADEA is the FLSA, which also ranks States and political subdivisions as employers regardless of the number of employees they have. The Equal Employment Opportunity Commission has, for 30 years, interpreted the ADEA to cover political subdivisions regardless of size, and a majority of the States impose age discrimination proscriptions on political subdivisions with no numerical threshold.”

The holding is immediately effective.

Read about the case

Drug Testing of Unemployment Compensation Applicants

On November 5, 2018, the U.S. Department of Labor (DOL) published a notice of proposed rulemaking (NPRM, document number 2018-23952) in the Federal Register proposing that states be permitted to enact legislation to require drug testing for a far larger group of unemployment compensation applicants than the previous rules permitted. According to the NPRM, “[t]his flexibility is intended to respect the diversity of States’ economies and the different roles played by employment drug testing in those economies. The DOL recognizes that imposing a nationally uniform list may not fully effectuate Congress’ intent that States be permitted to drug test when the only suitable work for an applicant is in an occupation that regularly conducts such tests.” This proposed rule would replace a 2016 DOL Rule that outlines specific occupations for which drug-testing would be permissible.

The comment period ends in 51 days, and written comments to the NPRM must be submitted on or before January 4, 2019.

Read the NPRM

401(k) and IRA 2019 Limits Increase for 2019

On November 1, 2018, the Internal Revenue Service announced cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2019 along with technical guidance in Notice 2018-83.

Highlights of Changes for 2019

The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan increases from $18,500 to $19,000.

The limit on annual contributions to an Individual Retirement Arrangement (IRA), which last increased in 2013, increases from $5,500 to $6,000. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.

The income ranges for determining eligibility to make deductible contributions to traditional IRAs, to contribute to Roth IRAs, and to claim the saver’s credit all increase for 2019.

Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or their spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. (If neither the taxpayer nor their spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply.) The phase-out ranges for 2019 are as follows:

  • For single taxpayers covered by a workplace retirement plan, the phase-out range is $64,000 to $74,000, up from $63,000 to $73,000.
  • For married couples filing jointly, where the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is $103,000 to $123,000, up from $101,000 to $121,000.
  • For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $193,000 and $203,000, up from $189,000 and $199,000.
  • For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

The income phase-out range for taxpayers making contributions to a Roth IRA is $122,000 to $137,000 for singles and heads of household, up from $120,000 to $135,000. For married couples filing jointly, the income phase-out range is $193,000 to $203,000, up from $189,000 to $199,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

The income limit for the Saver’s Credit (also known as the Retirement Savings Contributions Credit) for low- and moderate-income workers is $64,000 for married couples filing jointly, up from $63,000; $48,000 for heads of household, up from $47,250; and $32,000 for singles and married individuals filing separately, up from $31,500.

Highlights of Limitations that Remain Unchanged from 2018

The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $6,000.

Detailed Description of Adjusted and Unchanged Limitations

Section 415 of the Internal Revenue Code (Code) provides for dollar limitations on benefits and contributions under qualified retirement plans. Section 415(d) requires that the Secretary of the Treasury annually adjust these limits for cost of living increases. Other limitations applicable to deferred compensation plans are also affected by these adjustments under § 415. Under § 415(d), the adjustments are to be made following adjustment procedures similar to those used to adjust benefit amounts under § 215(i)(2)(A) of the Social Security Act.

Effective January 1, 2019, the limitation on the annual benefit under a defined benefit plan under § 415(b)(1)(A) increases from $220,000 to $225,000. For a participant who separated from service before January 1, 2019, the limitation for defined benefit plans under § 415(b)(1)(B) is computed by multiplying the participant’s compensation limitation, as adjusted through 2018, by 1.0264.

The limitation for defined contribution plans under § 415(c)(1)(A) increases in 2019 from $55,000 to $56,000.

The Code provides that various other dollar amounts are to be adjusted at the same time and in the same manner as the dollar limitation of § 415(b)(1)(A). After taking into account the applicable rounding rules, 2019 amounts are as follows:

  • The limitation under 402(g)(1) on the exclusion for elective deferrals described in § 402(g)(3) increases from $18,500 to $19,000.
  • The annual compensation limit under 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) increases from $275,000 to $280,000.
  • The dollar limitation under 416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan increases from $175,000 to $180,000.
  • The dollar amount under 409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan subject to a five year distribution period increases from $1,105,000 to $1,130,000, while the dollar amount used to determine the lengthening of the five-year distribution period increases from $220,000 to $225,000.

The limitation used in the definition of highly compensated employee under § 414(q)(1)(B) increases from $120,000 to $125,000.

The dollar limitation under § 414(v)(2)(B)(i) for catch-up contributions to an applicable employer plan other than a plan described in § 401(k)(11) or § 408(p) for individuals aged 50 or over remains unchanged at $6,000. The dollar limitation under § 414(v)(2)(B)(ii) for catch-up contributions to an applicable employer plan described in § 401(k)(11) or § 408(p) for individuals aged 50 or over remains unchanged at $3,000.

The annual compensation limitation under § 401(a)(17) for eligible participants in certain governmental plans that, under the plan as in effect on July 1, 1993, allowed cost of living adjustments to the compensation limitation under § 401(a)(17) to be taken into account, increases from $405,000 to $415,000.

The compensation amount under § 408(k)(2)(C) regarding simplified employee pensions (SEPs) remains unchanged at $600.

The limitation under § 408(p)(2)(E) regarding saving incentive match plan for employees (SIMPLE) retirement accounts increases from $12,500 to $13,000.

The limitation on deferrals under § 457(e)(15) concerning deferred compensation plans of state and local governments and tax-exempt organizations increases from $18,500 to $19,000.

The limitation under § 664(g)(7) concerning the qualified gratuitous transfer of qualified employer securities to an employee stock ownership plan remains unchanged at $50,000.

The compensation amount under § 1.61 21(f)(5)(i) of the Income Tax Regulations concerning the definition of “control employee” for fringe benefit valuation remains unchanged at $110,000. The compensation amount under § 1.61 21(f)(5)(iii) increases from $220,000 to $225,000.

The dollar limitation on premiums paid with respect to a qualifying longevity annuity contract under § 1.401(a)(9)-6, A-17(b)(2)(i) of the Income Tax Regulations remains unchanged at $130,000.

The Code provides that the $1,000,000,000 threshold used to determine whether a multiemployer plan is a systemically important plan under § 432(e)(9)(H)(v)(III)(aa) is adjusted using the cost-of-living adjustment provided under § 432(e)(9)(H)(v)(III)(bb). After taking the applicable rounding rule into account, the threshold used to determine whether a multiemployer plan is a systemically important plan under § 432(e)(9)(H)(v)(III)(aa) increases for 2019 from $1,087,000,000 to $1,097,000,000.

The Code also provides that several retirement-related amounts will adjust using the cost-of-living adjustment under § 1(f)(3). After taking the applicable rounding rules into account, the amounts for 2019 are as follows:

  • The adjusted gross income limitation under § 25B(b)(1)(A) for determining the retirement savings contribution credit for married taxpayers filing a joint return increases from $38,000 to $38,500; the limitation under § 25B(b)(1)(B) increases from $41,000 to $41,500; and the limitation under §§ 25B(b)(1)(C) and 25B(b)(1)(D) increases from $63,000 to $64,000.
  • The adjusted gross income limitation under § 25B(b)(1)(A) for determining the Retirement Savings Contribution Credit for taxpayers filing as head of household increases from $28,500 to $28,875; the limitation under § 25B(b)(1)(B) increases from $30,750 to $31,125; and the limitation under §§ 25B(b)(1)(C) and 25B(b)(1)(D) increases from $47,250 to $48,000.
  • The adjusted gross income limitation under § 25B(b)(1)(A) for determining the Retirement Savings Contribution Credit for all other taxpayers increases from $19,000 to $19,250; the limitation under § 25B(b)(1)(B) increases from $20,500 to $20,750; and the limitation under §§ 25B(b)(1)(C) and 25B(b)(1)(D) increases from $31,500 to $32,000.
  • The deductible amount under § 219(b)(5)(A) for an individual making qualified retirement contributions increases from $5,500 to $6,000.

The applicable dollar amount under § 219(g)(3)(B)(i) for determining the deductible amount of an IRA contribution for taxpayers who are active participants filing a joint return or as a qualifying widow(er) increases from $101,000 to $103,000. The applicable dollar amount under § 219(g)(3)(B)(ii) for all other taxpayers who are active participants (other than married taxpayers filing separate returns) increases from $63,000 to $64,000. If an individual or the individual’s spouse is an active participant, the applicable dollar amount under § 219(g)(3)(B)(iii) for a married individual filing a separate return is not subject to an annual cost-of-living adjustment and remains $0. The applicable dollar amount under § 219(g)(7)(A) for a taxpayer who is not an active participant but whose spouse is an active participant increases from $189,000 to $193,000.

The adjusted gross income limitation under § 408A(c)(3)(B)(ii)(I) for determining the maximum Roth IRA contribution for married taxpayers filing a joint return or for taxpayers filing as a qualifying widow(er) increases from $189,000 to $193,000. The adjusted gross income limitation under § 408A(c)(3)(B)(ii)(II) for all other taxpayers (other than married taxpayers filing separate returns) increases from $120,000 to $122,000. The applicable dollar amount under § 408A(c)(3)(B)(ii)(III) for a married individual filing a separate return is not subject to an annual cost-of-living adjustment and remains $0.

Read the announcement

OSHA Top 10 Most Frequently Cited Standards

On October 23, 2018 at the National Safety Council (NSC) Congress and Expo, the federal Occupational Safety and Health Administration (OSHA) announced the preliminary top 10 most-frequently-cited workplace safety violations for 2018:

  1. Fall Protection — General Requirements (29 C.F.R. 1926.501): 7,270 citations
  2. Hazard Communication (29 C.F.R. § 1910.1200): 4,552 citations
  3. Scaffolding (29 C.F.R. § 1926.451): 3,336 citations
  4. Respiratory Protection (29 C.F.R. § 1910.134): 3,118 citations
  5. Lockout/Tagout (29 C.F.R. § 1910.147): 2,944 citations
  6. Ladders (29 C.F.R. § 1926.1053): 2,812 citations
  7. Powered Industrial Trucks (29 C.F.R. § 1910.178): 2,294 citations
  8. Fall Protection — Training Requirements (29 C.F.R. § 1926.503): 1,982 citations
  9. Machine Guarding (29 C.F.R. § 1910.212): 1,972 citations
  10. Eye and Face Protection (29 C.F.R. § 1926.102): 1,536 citations

OSHA publishes this list to alert employers about commonly cited standards so they can take steps to find and fix recognized hazards. Of note, the only new violation for 2018 is the eye and face protection category. Last year, in 10th place was electrical, wiring methods, components and equipment, general industry (29 C.F.R. § 1910.305).

See the NSC announcement and OSHA page where the top 10 is annually posted (to be updated for 2018)

Proposed Rule Making on FLSA Tip Regulations

In October 2018, the U.S. Department of Labor released its Fall 2018 Regulatory Agenda, which included a Notice of Proposed Rulemaking (NPRM) on the federal Fair Labor Standards Act (FLSA) tip regulations. According to the agenda, “in the fiscal year 2018 Consolidated Appropriations Act, Congress amended multiple provisions of the FLSA with respect to an employer’s use of its employees tips and additionally provided that portions of the Department’s 2011 rule regarding tips shall have no further force or effect until any future action taken by the Department. In this Notice of Proposed Rulemaking, the Department will align its regulations with the recent statutory changes.”

The NPRM should be released later this month.

See the agenda