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What Employers Need To Know About Latest Federal COVID-19 Stimulus Package

December 24 - Posted at 8:34 AM Tagged: , , , , , , , , , , , , ,

Federal lawmakers agreed to a second round of stimulus legislation late Monday night, sending a nearly 6,000-page bill to President Trump for his expected signature. The proposal allocates $900 billion in economic relief to businesses and workers across the country. Of the many provisions tucked within the mammoth bill are several key provisions of interest to employers. Specifically, the proposal continues the popular small business loan program, provides new options for unemployed workers, extends tax credits for continued paid sick leave, and offers a variety of other tax- and benefit-related provisions. It does not, however, create a liability shield for COVID-19 litigation. What do you need to know about the critical workplace-related portions of Stimulus 2.0? Here are summaries of the most significant employment-related provisions and recommendations for actions you should consider as a result of each.

Continuation Of The Paycheck Protection Program

Foremost in the eyes of many businesses, Stimulus 2.0 apportions approximately $284 billion to a revamped Paycheck Protection Program (PPP). It provides small businesses with much-needed financial support in the form of potentially forgivable loans equal to the total money spent on payroll and other specified costs during an eight or 24-week period after the disbursement of the loan. However, the Stimulus 2.0 program makes many critical changes from the previous PPP, including lowering the employee threshold for businesses to 300 employees or fewer (down from 500), and the loan maximum to $2 million (down from $10 million). What do potential borrowers need to know?

Tax Deductibility of Expenses

The first PPP iteration provided that the forgiven amount was tax-free, but the Internal Revenue Service (IRS) ruled that the expenses paid with forgiven PPP loan proceeds were not deductible. Thus, before Stimulus 2.0, the amount of loan proceeds used to cover payroll, if forgiven, would not be deductible. 

Stimulus 2.0 changes that, clarifying that gross income does not include any amount that would otherwise arise from the forgiveness of the PPP loan. The bill states:

no deduction shall be denied or reduced, no tax attribute shall be reduced, and no basis increase shall be denied, by reason of the exclusion from gross income provided by [the loan forgiveness provision that says forgiven PPP loans will not count as income.

This means that deductions are allowed for deductible expenses paid with forgiven PPP loan proceeds. This provision is effective as of the date of enactment of the CARES Act and applies to second draw PPP loans.

New Allowable Expenses

Stimulus 2.0 expands qualifying expenses for new borrowers and those who have not yet applied for forgiveness, including the following:

  • Payment for any software, cloud computing, and other human resources and accounting needs;
  • Covered property damage costs, including costs for property damage due to public disturbances that occurred during 2020 that are not covered by insurance;
  • Covered supplier costs for expenditures supplier according to a contract, purchase order, or order for goods in effect before taking out the loan that are essential to the recipient’s operations when the expenditure was made (supplier costs of perishable goods can be made before or during the life of the loan); and
  • Covered worker protection expenditures for personal protective equipment (PPE) and help for compliance with federal health and safety guidelines or any equivalent State and local guidance related to COVID-19 during the period between March 1, 2020, and the end of the national emergency declaration.

The bill also allows loans made under PPP before, on, or after enacting Stimulus 2.0 to be eligible to utilize the expanded forgivable expenses except for borrowers who have already received loan forgiveness.

Second Draw PPP Loans

Section 311 of Stimulus 2.0 provides for second draws of PPP loans for smaller businesses, capping the loan amount at $2 million. Under this section, eligible borrowers must (1) employ not more than 300 employees; (2) have used or will use the full amount of their first PPP; and (3) demonstrate at least a 25% reduction in gross receipts in the first, second, or third quarter of 2020 relative to the same 2019 quarter. Borrower applications submitted on or after January 1, 2021, are eligible to utilize the gross receipts from the fourth quarter of 2020. Eligible second draw borrowers also include non-profit organizations, housing co-operatives, veterans’ organizations, tribal businesses, self-employed individuals, sole proprietors, independent contractors, and small agricultural co-operatives.

Second draw loan terms are reduced and calculated up to 2.5X the average monthly payroll costs in the 12 months before the loan application or the calendar year (2019), with maximum loan amounts capped at $2 million. However, Stimulus 2.0 maximizes benefits for borrowers in the restaurant and hospitality industries by calculating loans up to 3.5X average monthly payroll costs. Additionally, the bill reinstitutes the waiver of affiliation rules that applied during initial PPP loans for second loan borrowers with multiple locations employing not more than 300 employees per location.

Second draw loan recipients are eligible for loan forgiveness equal to the sum of their payroll costs and expanded allowable expenses, subject to the previous program’s 60%/40% allocation between payroll and non-payroll costs.

Streamlined Applications For Borrowers Under $150K

Stimulus 2.0 provides a streamlined process for loans under $150,000. In fact, such borrowers will not be subject to the required reductions in forgiveness amounts generally imposed by reductions in salaries or headcount by simply certifying that the borrower meets the revenue loss requirements described above on or before the date the entity submits the loan forgiveness application.

What You Should Do Next: If you are considering seeking financial assistance, regardless of whether or not you’ve previously received any, you should determine your eligibility for this second round of PPP loans. Additionally, you should continue to follow this rapidly developing situation, especially given the fluidity of the previous Paycheck Protection Program. 

Continued Assistance For Unemployed Workers

The CARES Act previously expanded unemployment assistance for countless Americans whose employment was impacted by the COVID-19 pandemic. Among other things, the CARES Act provided a $600 weekly supplement to state unemployment benefits until the end of July and expanded eligibility to cover COVID-19 related reasons as well as many workers not traditionally covered by unemployment benefits. However, many of the unemployment benefits provided by the CARES Act were set to expire December 31. In light of the ongoing COVID-19 pandemic, Stimulus 2.0 provides for further unemployment benefits in an attempt to bring cash flow to millions of Americans whose employment was adversely impacted. 

Pandemic Unemployment Assistance

Stimulus 2.0 expands the Pandemic Unemployment Assistance (PUA) created by the CARES Act to March 17, 2021 and allows those who have not yet exhausted their rights under PUA to continue to receive such assistance until April 5, 2021. The stimulus package also expands the number of weeks for these PUA unemployment benefits from a 39-week period to a 50-week period.

While providing these additional benefits, Stimulus 2.0 adds a documentation requirement starting January 31, 2021 for both new applicants as well as those receiving PUA. Specifically, new applicants must submit documentation to substantiate employment or self-employment within 21 days although this deadline may be extended for good cause. Similarly, individuals receiving PUA as of January 31, 2021 must submit documentation to substantiate employment or self-employment within 90 days.

Federal Pandemic Unemployment Compensation

Stimulus 2.0 restores the Federal Pandemic Unemployment Compensation (FPUC) supplement to all state and federal unemployment benefits. While lower than its predecessor under the CARES Act, this stimulus package provides a $300 weekly boost from December 26, 2020 to March 14, 2021.

Pandemic Emergency Unemployment Compensation

Like the PUA, the Pandemic Emergency Unemployment Compensation (PEUC) permits individuals receiving benefits as of March 14, 2021 to continue to receive such assistance through April 5, 2021 as long as they have not reached the maximum number of weeks. The new stimulus also increases the number of benefit weeks under the PEUC from 13 weeks to 24 weeks.

Mixed Earner Unemployment Compensation

Stimulus 2.0 provides $100 per week additional benefit to individuals who have at least $5,000 a year in self-employment income but are disqualified from PUA because they are eligible for regular state unemployment benefits.

 

Federal Support To Governments And Non-Profit Organizations

To help make these expanded benefits possible, Stimulus 2.0 extends the unemployment relief for government entities and non-profits from December 31 to March 14, 2021. Similarly, this stimulus package extends several CARES Act provisions originally created to incentivize states to provide the unemployment benefits by aiding with the expense and burdens created by these unemployment programs.

Return-To-Work Reporting Requirement

Stimulus 2.0 requires states to implement methods within 30 days to address situations where claimants refuse to return to work or accept an offer of suitable work without good cause. This must include a reporting method for employers to notify the state when an individual refuses employment and a notice to claimants informing of return-to-work laws, their rights to refuse work, and what constitutes suitable work.

What You Should Do Next – You should ensure you provide information on the additional unemployment benefits to those employees impacted by your staffing decisions. In addition, you should continue to monitor your obligations to report when individuals refuse employment, as states will likely change these over the next 30 days.  

No Extension Of FFCRA Paid Leave (Yet) – But Tax Credit Period Extended Through March

The compromise agreement does not extend the paid sick leave and paid family and medical leave requirements of the Families First Coronavirus Response Act (FFCRA), which expires on December 31. Therefore, an employer’s obligation to provide paid leave under the FFCRA will cease at the end of the year. 

However, the final legislation does extend the tax credit for both the Emergency Paid Sick Leave and the Emergency Family and Medical Leave under the FFCRA until March 31, 2021. This means that you are not required to provide paid leave under the FFCRA after December 31, 2020. If you choose to voluntarily do so (assuming the employee still has eligible leave remaining), you will be able to obtain a tax credit for those payments until the end of March under the compromise agreement contained in Stimulus 2.0.

In addition, depending on the circumstances of an employee’s leave, it is possible that the employee could be entitled to normal unpaid leave under the FMLA even after the FFCRA expires, if they still have weeks available under the FMLA. You should work with counsel to determine whether any employees out on FFCRA leave may be entitled to regular FMLA unpaid leave after the end of the year. 

Moreover, you should pay close attention to developments in Congress after the new year. There is already talk about a larger stimulus package after Congress returns and President-elect Biden is inaugurated. Congress could very well pass legislation early in the new year that extends (or even expands) the paid leave requirements of the FFCRA, and they could make it retroactive to the expiration of the prior law. 

In addition, you need to be aware of state and local laws passed in recent months that require the payment of sick leave to employees for a variety of COVID-19-related reasons. Some of these local laws expire at the end of the year, some are tied to the expiration of the FFCRA, and some do not expire. We could also see state and local lawmakers extend these paid sick leave requirements into the future. You should work closely with counsel to determine any applicable state and local mandates, and to continue to monitor developments on this front into 2021.

What You Should Do Next – Decide whether you will voluntarily extend paid leave benefits into the new year in order to gain a tax credit for those payments through March 2021. Work with counsel to determine whether any employees out on FFCRA leave may be entitled to regular FMLA unpaid leave, or some other form of leave under state law, after the end of the year. 

Tax And Benefit-Related Provisions

The bill also contains the following tax and benefit related provisions:

  • PPP Forgiven Loan Amounts – The IRS had argued that expenses incurred using forgiven PPP funds were not deductible. For example, wages paid with those funds could not be deducted. With Stimulus 2.0, Congress overruled the IRS and decreed that expenses incurred using forgiven PPP funds are deductible.
  • 2019 income may be used for the earned income tax credit – If 2020 earned income is less than 2019 earned income, 2019 income can be used when calculating the earned income tax credit. A lower 2020 income (for example, due to loss of employment during the year) may reduce the amount of credit available. Using a higher 2019 income amount may mean a higher credit for those who otherwise qualify.
  • Deductibility of business meals – Derided by some as the “three martini lunch” deduction, business meals after December 31 and before January 1, 2023 will be fully tax deductible. The current administration believes this provision will aid in reviving the ailing restaurant industry.
  • The Employee Retention Tax Credit – The employee retention tax credit is a credit for wages paid to certain employees during: i) a full or partial suspension of operations; or ii) a significant decline in gross receipts. The stimulus package enacts several technical clarifications but more importantly extends the credit’s availability from January 1, 2021 until June 30, 2021.
  • Flexible Spending Accounts – The law has several provisions which increase employer flexibility in administering health and dependent care flexible spending accounts. Usually subject to the “use it or lose it rule” (unused amounts at the end of the year are forfeited) the act makes available expanded carryover, grace period, and election change rules.

What You Should Do Next – Work with your counsel and your tax preparers to ensure you understand the new tax and benefit provisions and work them into your planning for 2021 and beyond.

No Federal Liability Shield In Stimulus 2.0

It is often said that the result of a good mediation leaves both sides a little bit unhappy. The negotiations for the stimulus bill could be said to have done that with the Democrats not getting aid to state and local governments, and Republicans not getting liability protection for business owners.

Republicans had sought through various bills, such as the Safe to Work Act, to offer a liability protection for business owners. These efforts were criticized by organized labor and safety advocates as potentially diminishing employee safety measures. The proposal also sought to pre-empt state laws that conflicted with it. While the liability shield did not survive the sausage making process of Congress, some states have already taken measures to implement similar shields.

Roughly a dozen states have instituted some form of liability shield through either legislation or executive order. The types of protection vary from broad to narrow. Some states provide immunity for businesses as long as the owner attempted in good faith to comply with guidance from public health agencies. This protection may be in the form of an affirmative defense where the burden is on the business to demonstrate that it made good faith efforts to at least attempt to comply with public health guidance. Other states provide broader protections: as long as the owner did not act with willful misconduct or gross negligence, the burden will be on plaintiffs to prove that the business acted with willful misconduct or gross negligence. At least one state, North Carolina, has limited these protections to “essential businesses.” While some of the states provide immunity from civil liability, others focus on limiting what types of damages can be recovered.  

The majority of states have not implemented any COVID-19-specific protections – or at least not yet. This has led to a cottage industry of COVID-19 litigation springing up in workplaces across the country, as detailed in the Fisher Phillips COVID-19 Employment Litigation Tracker (with over 1,200 such lawsuits having been filed against employers through date of publication).

What You Should Do Next – You should determine whether the states in which you operate are providing any form of liability protections, and if so how is it limited. The best thing employers and businesses can do, even in state that are providing liability shields, is to make best efforts to comply with the ever-changing guidance from health departments, the CDC, and state and federal OSHA.

New Change from DOL on FFCRA

April 01 - Posted at 9:00 AM Tagged: , , , , , , , ,
The Department of Labor issued this afternoon “temporary regulations” to assist with interpreting and complying the Families First Coronavirus Relief Act (FFCRA), which provides for paid sick leave and expanded FMLA leave.  The text of the regulations can be found here
 
Two significant portions of the regulations stand out at first glance:

 
Item #1- 

The “stay at home” orders are now considered “quarantine or isolation orders” under the FFCRA.  The DOL provides the following guidance (located on p. 88 of the PDF at the above link): 
 
“For the purposes of the EPSLA [the portion of the FFCRA that provides for 80 hours of paid sick leave], a quarantine or isolation order includes quarantine, isolation, containment, shelter-in-place, or stay-at-home orders issued by any Federal, State, or local government authority that cause the Employee to be unable to work even though his or her Employer has work that the Employee could perform but for the order. This also includes when a Federal, State, or local government authority has advised categories of citizens (e.g., of certain age ranges or of certain medical conditions) to shelter in place, stay at home, isolate, or quarantine, causing those categories of Employees to be unable to work even though their Employers have work for them.”
 

Item #2- 

The DOL has provided guidance as to which smaller employers will be exempt from the paid sick leave and expanded FMLA provisions.  
The following is from p. 103:  
 
“Exemption from requirement to provide leave under the EPSLA Section 5102(a)(5) and the EFMLEA for Employers with fewer than 50 Employees. (1) An Employer, including a religious or nonprofit organization, with fewer than 50 Employees (small business) is exempt from providing Paid Sick Leave under the EPSLA and Expanded Family and Medical Leave under the EFMLEA when the imposition of such requirements would jeopardize the viability of the business as a going concern. A small business under this section is entitled to this exemption if an authorized officer of the business has determined that: (i) The leave requested under either section 102(a)(1)(F) of the FMLA or section 5102(a)(5) of the EPSLA would result in the small business’s expenses and financial obligations exceeding available business revenues and cause the small business to cease operating at a minimal capacity; (ii) The absence of the Employee or Employees requesting leave under either section 102(a)(1)(F) of the FMLA or section 5102(a)(5) of the EPSLA would entail a substantial risk to the financial health or operational capabilities of the business because of their specialized skills, knowledge of the business, or responsibilities; or (iii) There are not sufficient workers who are able, willing, and qualified, and who will be available at the time and place needed, to perform the labor or services provided by the Employee or Employees requesting leave under either section 102(a)(1)(F) of the FMLA or section 5102(a)(5) of the EPSLA, and these labor or services are needed for the small business to operate at a minimal capacity.”
 
 
Since the State of Florida has been put under at Stay at Home Executive Order, the following will now apply:
  • Employees with an “essential business” will still report to work as normal
  • Employees with a “non-essential business” will now qualify for the 80 hour Emergency Paid Sick Leave under FCCRA.

Labor Department Offers Guidance On Families First Coronavirus Response Act, Effective As Of April 1

March 25 - Posted at 1:54 PM Tagged: , , , , , , , ,

The U.S. Department of Labor released a preliminary “Questions and Answers” page today, attempting to answer some preliminary compliance questions related to the new Families First Coronavirus Response Act, which will bring emergency family and medical leave, as well as paid sick leave, for many employers across the country. The agency stated it also will be issuing implementing regulations regarding the new law in the near future. The big news is that the law will take effect April 1, 2020 – not April 2 as originally expected – but there are also plenty of other helpful pieces of information in the document. What do employers need to know about this latest development? 

Not An April Fool’s Joke: Law Effective April 1, 2020

As a major surprise, the Department of Labor (DOL) announced the paid leave provisions of the Families First Coronavirus Response Act (FFCRA) are effective on April 1, 2020 and will apply to leave taken between April 1, 2020 and December 31, 2020.

This effective date took many by surprise. The FFCRA states the leave provisions “shall take effect not later than 15 days after the date of enactment.” As the FFCRA was signed by President Trump on March 18, 2020, many assumed DOL would implement the law on April 2, 2020.

The DOL gave no reason why it chose to move up implementation by one day, but there is speculation this was done to line up the effective date of the law with the calendar quarter.

How Do You Count To 500?

Both leave provisions of the FFCRA apply to private employers with fewer than 500 employees. One of the most common questions for employers regarding the FFCRA involves uncertainty as to how and when you count employees for these purposes, and when you consider separate entities to be a single employer for these purposes. The DOL’s Questions and Answers attempt to address the following by stating:

You have fewer than 500 employees if, at the time your employee’s leave is to be taken, you employ fewer than 500 full-time and part-time employees within the United States, which includes any State of the United States, the District of Columbia, or any Territory or possession of the United States. In making this determination, you should include employees on leave; temporary employees who are jointly employed by you and another employer (regardless of whether the jointly-employed employees are maintained on only your or another employer’s payroll); and day laborers supplied by a temporary agency (regardless of whether you are the temporary agency or the client firm if there is a continuing employment relationship). Workers who are independent contractors under the Fair Labor Standards Act (FLSA), rather than employees, are not considered employees for purposes of the 500-employee threshold.

Typically, a corporation (including its separate establishments or divisions) is considered to be a single employer and its employees must each be counted towards the 500-employee threshold. Where a corporation has an ownership interest in another corporation, the two corporations are separate employers unless they are joint employers under the FLSA with respect to certain employees. If two entities are found to be joint employers, all of their common employees must be counted in determining whether paid sick leave must be provided under the Emergency Paid Sick Leave Act and expanded family and medical leave must be provided under the Emergency Family and Medical Leave Expansion Act.

In general, two or more entities are separate employers unless they meet the integrated employer test under the Family and Medical Leave Act of 1993 (FMLA). If two entities are an integrated employer under the FMLA, then employees of all entities making up the integrated employer will be counted in determining employer coverage for purposes of expanded family and medical leave under the Emergency Family and Medical Leave Expansion Act.

Therefore, the DOL provides the opinion that an employer is covered if, at the time the leave is to be taken (a “snapshot” approach), the business employs fewer than 500 employees.  Moreover, the analysis addresses important issues regarding whether separate entities are counted as one employer for purposes of the new leave laws. First, the DOL states that if two entities are found to be “joint employers” under the FLSA, all of their common employees must be counted in determining whether leave must be provided under for Emergency Paid Sick Leave and Emergency Family and Medical Leave.

The DOL document also states that if two entities are an “integrated employer” under the Family Medical Leave Act (FMLA), all of the employees of the integrated employer will be counted in determining employer coverage for purposes of Emergency Family and Medical Leave.

The “joint employer” analysis under the FLSA and the “integrated employer” analysis under the FMLA are complicated and involve a critical analysis of specific facts. Employers with questions about how these tests may apply to their specific situation should reach out for legal opinion.

Is The FFCRA Retroactive?

Another common inquiry was whether employees can take paid sick leave under the FFCRA prior to the effective date (that would count towards their FFCRA paid sick leave entitlement), and whether the law will have retroactive effect. The DOL attempted to address these issues by stating:

Can my employer deny me paid sick leave if my employer gave me paid leave for a reason identified in the Emergency Paid Sick Leave Act prior to the Act going into effect?

No. The Emergency Paid Sick Leave Act imposes a new leave requirement on employers that is effective beginning on April 1, 2020.

Are the paid sick leave and expanded family and medical leave requirements retroactive?

No.

Does Emergency Paid Sick Leave And Emergency FMLA Run Concurrently For Leave Related To School Closures?

The qualifying reason for leave under the Emergency FMLA involves caring for a child when their school or place of care is closed. One of the six qualifying reasons for Emergency Paid Sick Leave similarly addresses this same reason. Therefore, many employers have inquired as to whether these leaves will run concurrently when taken for the same qualifying reason. The DOL addressed this issue when it stated:

If I am home with my child because his or her school or place of care is closed, or child care provider is unavailable, do I get paid sick leave, expanded family and medical leave, or both—how do they interact?

You may be eligible for both types of leave, but only for a total of twelve weeks of paid leave. You may take both paid sick leave and expanded family and medical leave to care for your child whose school or place of care is closed, or child care provider is unavailable, due to COVID-19 related reasons. The Emergency Paid Sick Leave Act provides for an initial two weeks of paid leave. This period thus covers the first ten workdays of expanded family and medical leave, which are otherwise unpaid under the Emergency and Family Medical Leave Expansion Act unless the you elect to use existing vacation, personal, or medical or sick leave under your employer’s policy. After the first ten workdays have elapsed, you will receive 2/3 of your regular rate of pay for the hours you would have been scheduled to work in the subsequent ten weeks under the Emergency and Family Medical Leave Expansion Act.

Next Steps

Employers should note that this is an initial and informal compliance assistance document from DOL. These answers may change or be added to over time. Moreover, the DOL will be developing more formal guidance and regulations that may definitively answer these questions and may do so in a different manner. Nevertheless, this preliminary “Questions and Answers” document may give some indication about how the agency is likely to formally interpret and enforce the new law in the near future.

We will continue to monitor the rapidly developing COVID-19 situation and provide updates as appropriate. 

Workplace Law Predictions For 2019

January 09 - Posted at 7:15 PM Tagged: , , , , , , , , , , , , , ,

Courtesy of Fisher Phillips LLP

2018 has seen quite a few changes in labor and employment law. But with the New Year having just rung in, it’s time to look forward rather than backward. The question on the tip of everyone’s tongue is: what’s next? Here are our predictions for what to expect in 2019 when it comes to workplace law.

Expect More Class Actions

We’re going to start out with the bad news. Because of the potential for a big payout, class and collective actions are a favorite for plaintiffs’ attorneys. You should not expect that to change in 2019.

The California Supreme Court’s decision in Troester v. Starbucks Corporation has opened up even more avenues for potential wage and hour claims in the Golden State, and the trend could hit the rest of the country, too. In July 2018, the California Supreme Court narrowed the scope of the de minimus doctrine under state law and held that employees must be paid for off-the-clock work that regularly lasts several minutes per day. While the California Supreme Court refused to shut the door entirely on the de minimus doctrine, it noted that technological advances should help employers track small bits of time, and that employers can restructure work to avoid off-the-clock time.

Employers outside of California may see plaintiffs’ attorneys attempting to use the same rationale employed by the California Supreme Court to argue that the de minimus doctrine should not apply in the circumstances of their case. Moreover, with more employees having remote access to emails and other mobile platforms, the number of ways for employees to argue that they were working off the clock has increased. 

The Ascendance Of Arbitration Agreements 

One way for employers to avoid class actions is through arbitration agreements. Last May, the Supreme Court ruled in Epic Systems Corporation v. Lewis that mandatory class action waivers in arbitration agreements are enforceable. As a result, you can expect to see an increase in the number of companies rolling out updated agreements to include class action waiver language. (Note: if you have not had your arbitration agreement reviewed since May when Epic Systems came out, make it your New Year’s Resolution to do so.)

However, while popular with employers, arbitration agreements are decidedly not so with the plaintiffs’ bar. Expect to see plaintiffs’ counsel becoming more creative in challenging arbitration agreements on grounds related to unconscionability. 

We may even be starting to see a backlash against arbitration agreements. Most recently, some law students have been pressuring big law firms to do away with them when it comes to their own hires. And last year, the California legislature passed a law banning mandatory employment arbitration agreements for claims arising out of alleged violations of the Fair Employment and Housing Act or California Labor Code. Although the bill was ultimately vetoed by outgoing Governor Jerry Brown, expect to see the fight continue in 2019.

Don’t Look To Congress To Lead The Way

With Democrats controlling the House, and Republicans controlling the Senate and Executive Branch, you can expect that most employment legislation will be dead on arrival. When it comes to innovative legislation impacting the workplace, you should look to the states to lead the way. This is not to say that there won’t be any changes to labor and employment law on the federal level in 2019. However, we expect the most significant changes to be made by agencies (such as the National Labor Relations Board, the Department of Justice, the Equal Employment Opportunity Commission, etc.) rather than Congress.

NLRB Will Narrow The Definition Of Joint Employer

One of those agencies—the NLRB—made noise last year when it published a proposed rule that would alter the definition of joint employment to make it more difficult to hold multiple businesses responsible for alleged labor and employment law violations by staffing companies, franchisees, and other related organizations. Expect to see continued movement and updates on this proposed rule in 2019. 

But before getting too excited at any potential changes, you should keep in mind that states may have their own rules regarding joint employment that could differ from what the NLRB comes up with. Any new rules may not affect your organization’s liability under state law.

USDOL Has A Full Plate

Another agency you should keep an eye on is the U.S. Department of Labor (USDOL).  Not only is the USDOL considering its own joint employment rule, but the agency has proposed regulations regarding the regular rate of pay and white collar exemptions (also known as the “overtime” rule). 

The regular rate of pay is of particular importance to employers because it is used to calculate the overtime rate of non-exempt employees. While we know that changes to the proposed regulations are targeting sections 7(e)(2) and 7(g)(3) of the Fair Labor Standards Act, the USDOL has been rather vague about what the proposed regulations will look like. The USDOL states that they aim to “provide employers more flexibility in the compensation and benefits packages they offer employees” and “lessen litigation regarding the regular rate.”   

The regulation relating to the white collar exemption is less opaque. As employers may recall, the minimum salary threshold for white collar exemptions was supposed to increase from $455 per week (or $23,660 annually) to $913 per week (or $47,476 annually), with the amount to be updated every three years. However, right before these changes were scheduled to take effect in December 2016, a federal court blocked their implementation. Under a new administration, we expect that we will see a more modest proposed increase in the white collar exemption in 2019—perhaps in the low $600s per week. 

Paid Sick Leave Will Continue To Be On Trend

Although there are no federal laws mandating paid sick leave (yet), you can expect that paid sick and family leave will continue to be a big issues, with states and localities picking up the slack. Right now, 11 states and the District of Columbia require paid sick leave. Additionally, various cities and counties have stepped in where states have not provided for such leave or to give more generous benefits than the state. 

You generally should anticipate an expansion of paid sick leave benefits in 2019. The New Jersey Paid Sick Leave Act went into effect October, while Michigan, Washington, and Westchester County (NY) have paid sick leave laws going into effect this year. 

While some municipalities in Texas want to get in on this trend, a Texas appeals courtruled the Austin Paid Sick Leave Ordinance violates the state constitution because it preempts the Texas Minimum Wage Act. San Antonio passed its own sick leave ordinance in 2018, but it may only be a matter of time before it, too, is challenged in court. 

Privacy Issues Remain Paramount

The EU General Data Protection Regulation (GDPR) went into effect in May 2018, ushering in sweeping reforms for companies that do business in the EU or employ EU residents. The GDPR threatens strict penalties for non-compliance—up to the greater of 20 million Euro or 4 percent of global annual turnover in the prior year. Having been in effect less than a year, it is still not clear how fines will be assessed and what the potential exposure will be for companies that are found to be non-compliant. As 2019 progresses, you can expect to see many investigations that began in 2018 come to a close, and we’ll begin to get a better idea of how regulatory authorities will assess fines for non-compliance—including whether the fearsome 4 percent penalty will be assessed.   

Lest you think the major developments in privacy are safely across the ocean in Europe, you can be sure there will be plenty of action closer to home in 2019. The Illinois Supreme Court currently has a case before it over whether a technical violation of the Illinois Biometric Information Act (BIPA) gives standing to sue absent a person suffering a concrete injury. If the court answers in the affirmative, you can expect to see a continued proliferation of BIPA class actions.

Further, California passed the California Consumer Privacy Act (CCPA) in 2018, which goes into effect at the beginning of 2020. While the law is not as comprehensive as the GDPR, California employers will soon need to figure out this year if it applies to them. You should take compliance seriously: the CCPA allows consumers whose rights have been violated under the Act to bring suit for actual damages or statutory penalties (whichever is greater) under a mechanism somewhat akin to a California Labor Code Private Attorneys General Act. You can expect the proliferation of CCPA lawsuits will be on next year’s list of predictions. 

 

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