DOL increases fringe rate under Service Contract Act, issues reminder

By Stacey Mark
July 28, 2017

On July 25, the Department of Labor issued an all agency memorandum announcing an increase in the fringe rate contribution required under the Service Contract Act (SCA).  The rate will increase from $4.27 to $4.41 per hour, effective August 1, 2017.  The SCA sets prevailing wages and benefits that federal contractors who provide certain services to the federal government must pay to their employees.  

The memorandum also reminds federal contractors of their obligations under Executive Order 13706, which requires covered contractors to provide employees with up to 56 hours of paid sick leave annually.  Executive Order 13706 applies to new contracts with the federal government arising out of solicitations issued on or after January 1, 2017.  Sick leave paid to comply with Executive Order 13706 may not be credited to satisfy contractor obligations under the SCA.

DOL seeks comments on proposed federal overtime rule

By Stacey Mark
July 25, 2017

In response to court challenges to the federal overtime rule that was scheduled to go into effect on December 1, 2016, the Department of Labor (DoL) has decided not to advocate for the minimum weekly salary ($913) required by the final rule. Instead, the DoL plans to issue a Request for Information (RFI) to aid in formulating a proposal to revise the current overtime regulations contained in CFR Part 541.  In response to President Trump's Executive Order 13777, entitled "Enforcing the Regulatory Reform Agenda," the RFI is directed at reducing regulatory burden.  The RFI, which is scheduled to be published on July 26, 2017, asks for comment on the following questions:

  1. In 2004 the Department set the standard salary level at $455 per week, which excluded from the exemption roughly the bottom 20 percent of salaried employees in the South and in the retail industry. Would updating the 2004 salary level for inflation be an appropriate basis for setting the standard salary level and, if so, what measure of inflation should be used? Alternatively, would applying the 2004 methodology to current salary data (South and retail industry) be an appropriate basis for setting the salary level? Would setting the salary level using either of these methods require changes to the standard duties test and, if so, what change(s) should be made?
  1. Should the regulations contain multiple standard salary levels? If so, how should these levels be set: by size of employer, census region, census division, state, metropolitan statistical area, or some other method? For example, should the regulations set multiple salary levels using a percentage based adjustment like that used by the federal government in the General Schedule Locality Areas to adjust for the varying cost-of-living across different parts of the United States? What would the impact of multiple standard salary levels be on particular regions or industries, and on employers with locations in more than one state?
  1. Should the Department set different standard salary levels for the executive, administrative and professional exemptions as it did prior to 2004 and, if so, should there be a lower salary for executive and administrative employees as was done from 1963 until the 2004 rulemaking? What would the impact be on employers and employees?
  1. In the 2016 Final Rule the Department discussed in detail the pre-2004 long and short test salary levels. To be an effective measure for determining exemption status, should the standard salary level be set within the historical range of the short test salary level, at the long test salary level, between the short and long test salary levels, or should it be based on some other methodology? Would a standard salary level based on each of these methodologies work effectively with the standard duties test or would changes to the duties test be needed?
  1. Does the standard salary level set in the 2016 Final Rule work effectively with the standard duties test or, instead, does it in effect eclipse the role of the duties test in determining exemption status? At what salary level does the duties test no longer fulfill its historical role in determining exempt status? 
  1. To what extent did employers, in anticipation of the 2016 Final Rule’s effective date on December 1, 2016, increase salaries of exempt employees in order retain their exempt status, decrease newly non-exempt employees’ hours or change their implicit hourly rates so that the total amount paid would remain the same, convert worker pay from salaries to hourly wages, or make changes to workplace policies either to limit employee flexibility to work after normal work hours or to track work performed during those times? Where these or other changes occurred, what has been the impact (both economic and non-economic) on the workplace for employers and employees? Did small businesses or other small entities encounter any unique challenges in preparing for the 2016 Final Rule’s effective date? Did employers make any additional changes, such as reverting salaries of exempt employees to their prior (pre-rule) levels, after the preliminary injunction was issued?
  1. Would a test for exemption that relies solely on the duties performed by the employee without regard to the amount of salary paid by the employer be preferable to the current standard test? If so, what elements would be necessary in a duties-only test and would examination of the amount of non-exempt work performed be required?
  1. Does the salary level set in the 2016 Final Rule exclude from exemption particular occupations that have traditionally been covered by the exemption and, if so, what are those occupations? Do employees in those occupations perform more than 20 percent or 40 percent non-exempt work per week?
  1. The 2016 Final Rule for the first time permitted non-discretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the standard salary level. Is this an appropriate limit or should the regulations feature a different percentage cap? Is the amount of the standard salary level relevant in determining whether and to what extent such bonus payments should be credited?
  1. Should there be multiple total annual compensation levels for the highly compensated employee exemption? If so, how should they be set: by size of employer, census region, census division, state, metropolitan statistical area, or some other method? For example, should the regulations set multiple total annual compensation levels using a percentage based adjustment like that used by the federal government in the General Schedule Locality Areas to adjust for the varying cost-of-living across different parts of the United States? What would the impact of multiple total annual compensation levels be on particular regions or industries?
  1. Should the standard salary level and the highly compensated employee total annual compensation level be automatically updated on a periodic basis to ensure that they remain effective, in combination with their respective duties tests, at identifying exempt employees? If so, what mechanism should be used for the automatic update, should automatic updates be delayed during periods of negative economic growth, and what should the time period be between updates to reflect long term economic conditions?

Interested employers are encouraged to weigh in on all of these important questions.  

 

What Oregon’s expanded version of the Equal Pay Act of 2017 means for employers

By Stacey Mark
July 5, 2017

The Oregon legislature recently enacted an expanded Equal Pay Act designed to eliminate discriminatory pay practices based on race, color, religion, sex, sexual orientation (as defined in ORS 174.100), national origin, marital status, veteran status, disability, or age. 

Section 2 of the Act (amending ORS 652.220) prohibits discrimination in the payment of compensation based on protected class for work of "comparable character," defined as work requiring “substantially similar knowledge, skill, effort, responsibility and working conditions in the performance of work, regardless of job description or job title.”  To insure that employers do not perpetuate the effect of other employers' past discriminatory pay practices, the law precludes employers from screening applicants based on current or past compensation, determining compensation for a position based on an applicant’s current or past compensation, or seeking a salary history of an applicant until an offer of employment has been made.  

Differentials in pay for work of comparable character are permissible only when they are based solely on one or more of the following factors: (1) a seniority system; (2) a merit system; (3) a system that measures earnings by quantity or quality of production, including piece-rate work; (4) workplace locations; (5) travel, if travel is necessary and regular for the employee; (6) education; (7) training; and (8) experience.  Amounts owed to an employee because of the failure of the employer to comply with the Act are defined as “unpaid wages.” 

Individuals may address violations of Section 2 by filing a complaint with the Commissioner of BOLI under ORS 659A.820, a civil action under ORS 652.230, or a civil action under 659A.885.  Violations of Section 4 of the Act, which makes it unlawful under Chapter 659A to request a salary history of an applicant, may also be addressed under ORS 659A.885.  Each of these options affords a prevailing plaintiff a different remedy:

  • In a private action under ORS 652.230, an individual may recover up to one year of back pay, an equal amount as liquidated damages, attorney fees and costs.
  • If the individual files an administrative complaint under ORS 652.820, the BOLI Commissioner is empowered to award the lesser of (1) two years’ back pay plus back pay for the period during which the complaint is pending, or (2) pay for the period the individual is subject to an unlawful wage differential plus the period during which the complaint is pending. 
  • Under ORS 659A.885, the remedies available are injunctive and equitable relief, including reinstatement or hiring with or without back pay, up to two years’ back pay, the greater of compensatory damages or $200, attorney fees, and costs. In addition, punitive damages are available if it is shown by clear and convincing evidence that the employer (1) engaged in fraud, acted with malice or with willful and wanton misconduct, or (2) was previously found to have violated ORS 652.220 in a proceeding under ORS 659A.885 or ORS 659A.850.  An employer may avoid liability for compensatory and punitive damages by showing that it completed an appropriate equal-pay analysis of its pay practices in good faith that related to plaintiff’s protected class, eliminated the wage differentials for the plaintiff, and made reasonable and substantial progress toward eliminating wage differentials for plaintiff’s protected class.  Evidence of such an analysis is not admissible in any other proceeding.

The potential ramifications of Oregon’s Equal Pay Act are significant.  An employer’s inability to substantiate a pay differential based exclusively on permissible factors may be sufficient to establish liability without the need to prove discriminatory intent.  This means that employers who have never intentionally discriminated, but historically set compensation by relying on salary history or other factors made impermissible under the Act could face monumental financial exposure.  Employers may not reduce the compensation of an employee to comply with their obligations under Section 2, so employers who wish to correct the results of past practices will presumably need to raise salaries of all of the employees who were negatively impacted.  Also, it is unclear whether a violation of ORS 652.220 may also result in a late payment penalty under Oregon’s final pay law, or whether an individual must elect between the available statutory remedies.  

The good news is that employers who want to get ahead of this issue have some time to comply.  The prohibition on requesting salary histories of applicants goes into effect 91 days after the end of the current legislative session, but the private right of action to enforce it does not go into effect until January 1, 2024.   The rest of the Act's provisions go into effect on January 1, 2019.  

Employers who need help analyzing their pay practices and complying with the Equal Pay Act may contact Ater Wynne's employment group for assistance.