Immigration Law Violations Occurring After November 2, 2015 Carry Heavier Penalties

Effective August 1, 2016 the Department of Justice is assessing higher penalties for employers that violate immigration laws. These penalties cover violations that occurred after November 2, 2015.  Specifically, the DOJ’s interim final rule increases penalties for a myriad of violations, including penalties for employing unauthorized workers and for technical Form I-9 paperwork violations. These increases are driven by the Civil Monetary Penalties Inflation Adjustment Final Rule which directs federal agencies periodically to increase their administrative penalties to account for inflation. With this increase, the minimum penalty for unlawfully employing a single unauthorized worker will increase from $375 to $539, and the maximum increases from $3,200 to $4,313. These fines apply to the employer’s first offense. For each additional offense, the penalty increases significantly and tops out at $21,563 per unauthorized worker.

The increases in penalties for Form I-9 paperwork violations are similarly stiff. The interim final rule increases the minimum fine from $110 to $216 per I-9 violation, and the maximum penalty increases from $1,100 to $2,156 for a single violation. Fines for I-9 paperwork violations are independent of any unlawful hiring violation. Since the I-9 fines apply to each discrete technical violation and increase with each additional offense, a growing business whose I-9 compliance process is out of compliance could face tens of thousands of dollars in fines if audited by Immigration and Customs Enforcement (ICE).

In addition, the U.S. Department of Labor will also increase penalties for H-1B visa related violations. For example, misrepresenting material facts on the Labor Condition Application now carries a maximum penalty per violation of $1,782. In addition, an employer that displaces a U.S. employee in the period starting 90 days before and ending 90 days after it files an H-1B visa petition faces a maximum penalty of $35,000 to $50,758 per violation, if it does so in conjunction with certain willful violations.

Although these increases are touted as merely keeping pace with inflation, they are problematic for employers that have a poor track record of either ensuring their new hires are authorized to work in the U.S. or completing I-9 paperwork accurately for their new hires. Since these new penalties apply to violations that occurred as far back as November 2015, many in the employer community suspect that ICE has been delaying issuing fines for older violations until now, to recover the higher penalties. Also it is reasonable to anticipate that workplace audits will increase in number since ICE now has greater financial incentives to find employers out of compliance.

An audit with the assistance of counsel allows employers to detect and potentially correct any I-9 or other immigration compliance issues. It can also help to train the personnel responsible for immigration compliance, preventing errors in the future. For further information regarding how the ICE regulatory environment affects your business, recruiting, and hiring, and assistance with auditing your Form I-9 process, please contact Patrick W. McGovern, Esq., the Director of our Immigration Law Practice Group, at 973-535-7129 or pmcgovern@nullgenovaburns.com.

Allison Benz, a recent summer associate at Genova Burns LLC, assisted in the preparation of this blog post.

N.J. Supreme Court Rejects Defense of Federal Labor Law Preemption of CEPA Claim in Underlying Unpaid Wage Action

On August 16, 2016 the N.J. Supreme Court held, in a 6-0 opinion, that neither the federal Labor Management Relations Act nor the National Labor Relations Act preempts a claim under the Conscientious Employee Protection Act (CEPA) by a private sector employee who is covered by a collective bargaining agreement.  Puglia v. Elk Pipeline, Inc. (Case No. A-38-14).

Elk Pipeline employed Mr. Puglia, a union member, on a construction project in Camden. The project was subject to N.J. prevailing wage law and apparently as a cost savings measure, Elk reduced severely the wages of several laborers on the project, claiming that the employees were re-classified as apprentices.  Puglia complained to his supervisor and to Elk’s project manager that with the wage reduction, he was not being paid correct prevailing wages. An unhelpful fact for Elk was that its project manager commented to the project engineer that “the owner wanted to [f**k] with [Puglia] and wants to get rid of him.” In fact, no more than 11 months after Puglia first complained to Elk about his wages, Elk laid Puglia off, ahead of two less senior employees who were not laid off. Elk explained that the two less senior employees had relevant certifications that Puglia lacked. Puglia’s CEPA claim alleged that, by complaining internally about Elk’s failure to pay him proper prevailing wages, he engaged in protected whistleblowing activity, for which he lost his job. Elk moved for summary judgment, arguing that Puglia’s CEPA claim was preempted by federal labor law.

The trial court concluded that Puglia’s CEPA claim was preempted, by both the Labor Management Relations Act (LMRA), and based on Garmon preemption, a U.S. Supreme Court-based doctrine that holds that state-law claims that involve conduct arguably subject to Section 7 or Section 8 of the NLRA are preempted. The Appellate Division affirmed, holding that Puglia’s claim was preempted by the LMRA, and by the NLRA under Garmon. The Appellate Division reasoned that the issues of Puglia’s contract seniority and Elk’s assertion that the Camden project was winding down required evaluation of the terms of Elk’s labor agreement.

The Supreme Court reversed and held that Puglia’s CEPA claim was not preempted by federal labor law. The issue the Court teed up for analysis and foreshadowed the Court’s conclusion was “whether complaints about violations of that minimum labor standard [of prevailing wages], and the concomitant State interest in curbing retaliation for such complaints, invoke preemption concerns.”  The Court analyzed Puglia’s CEPA complaint to determine whether it required an interpretation of the CBA and found that it did not. “Whether Puglia performed a whistleblowing activity in reporting the alleged failure by Elk to abide by Prevailing Wage Act requirements, and whether Elk retaliated against Puglia for doing so are factual questions, untied to any interpretation of the CBA.” The Court dismissed Elk’s best argument — that Puglia’s complaint depended on interpreting the labor agreement — and strained to find no contract issue. “It is far from clear that Puglia claimed a violation of the CBA in [his complaint]. He was making a factual allegation: He was more senior than other employees who were not let go. … That Puglia mentioned seniority in his deposition does not alter the substance of his claim. Nor does it inject a question of CBA interpretation into the factual questions at the heart of a CEPA claim. … Having a claim under the CBA does not void state-law remedies that are independent of the CBA. The employer’s attorney cannot change that by the course of his questioning at a deposition.” Despite Puglia’s claim that he was laid off out of seniority order, the Court still determined that it was “unclear” that he was claiming a contract violation. The Court gave no weight to Elk’s argument that the labor contract permitted Elk to lay Puglia off ahead of more junior employees and therefore Puglia’s layoff was dictated by the labor contract, and not retaliatory. Turning to Garmon preemption, the Court agreed with Elk “that Puglia’s conduct was at least arguably protected under Section 7” of the NLRA.  However, the Court determined it could not find that “Puglia’s CEPA claim is identical to the claim that he could have, but did not, present to the Board.” The Court explained, “[W]e believe that when the State’s interests in enforcing CEPA in a factual setting like this one — whistleblowing activity arising out of a prevailing wage dispute — are balanced against any potential interference with the federal labor scheme, the State’s interests win out. New Jersey’s interest in enforcing CEPA runs deep.” The Court concluded with this syllogism: “If an employee can allege a violation of those state minimum labor standards without being preempted by federal law, then it follows that allegations of retaliatory discharge based on whistleblower conduct in response to a violation of those standards should not be preempted.”

This decision indicates that rarely if ever will this Court find that a CEPA claim based on an alleged violation of N.J. wage laws is preempted by federal labor law, no matter how many labor contract issues are pled or implicated. A major concern for N.J. businesses flowing from this decision is the proliferation of claims and litigation, since this holding confirms that union-represented employees like Mr. Puglia can prosecute claims of retaliatory discharge and get three bites at the apple — in the contractual grievance-arbitration procedure, before the NLRB, and in state court under CEPA.

Questions relating to this important decision may be directed to any partner in our firm’s Labor Law Practice Group. Our Group’s attorney roster can be accessed at http://www.genovaburns.com/attorney-search-results.

 

Appellate Division Finds c.78 Health Benefits Contributions Requirements Do Not Apply to Public Sector Disability Retirees

Last month, in Brick Twp. PBA Local 230 v. Twp. of Brick, the Appellate Division of the Superior Court of New Jersey confirmed that N.J.S.A. 40A:10-21.1, P.L. 2011, c. 78, § 42, more commonly known as Chapter 78, does not require ordinary disability or accidental disability retirees of public employers to make premium payments for health insurance benefits.

Chapter 78, concerning public employee pension and health care benefits, was passed in recognition of “serious fiscal issues” confronting the State and the underfunding of the pension system. It implemented various changes to pension and health care benefits such as increased required contributions from public employees and suspension of cost-of-living adjustments.  Among these reforms included requirements for certain retirees to pay contributions toward their health benefits in retirement.

In Brick, the Township had required a former police employee, who had retired due to a disability he had sustained while on duty in 2011, to continue making health insurance premium contributions in order to maintain his retiree health benefits coverage. The trial court concluded that Chapter 78 exempted only those employees with 20 or more years of service on its effective date from having to make contributions toward health benefits in retirement. Due to the fact that the employee had served only 19 years, the trial court believed that his obligation to make contributions was required by Chapter 78.

On appeal, the Appellate Division considered “whether Chapter 78 applies to government employees who receive disability retirement benefits.” The Appellate Division opined that the clear language of Chapter 78 does not require that contributions be made by those who retire on disability pensions even if they have less than 20 years of pensionable service. The Court found support for its conclusion based on the fact that the Legislature had designated different statutory sections for employees disabled while at work, which was further supported by the legislative history of Chapter 78. Thus, the Court reasoned that while ordinary retirement is linked to a member’s age or years of service, disability retirement is not predicated on length of service or age, but awarded because of an employee’s disability.

Thus, the opinion suggests that Chapter 78 contributions requirements apply with respect to active public employees and those who retire based on meeting the service requirements. In contrast, those who are forced to retire on an ordinary disability or accidental disability retirement are exempt from making premium payments for health insurance benefits.

If you have any questions or for more information regarding Chapter 78 health benefits or the impact of other laws affecting public employers, please contact Joseph M. Hannon, Esq., jhannon@nullgenovaburns.com or Brett M. Pugach, Esq., bpugach@nullgenovaburns.com in the Firm’s Labor Law Practice Group.

IRS Proposes Restrictions on Employer Opt-Out Payments for ACA Coverage Waivers

In early July the IRS issued proposed regulations addressing the effect that employer payments to employees who waive employer-sponsored health coverage, known as Opt-Out Payments, have on determining whether an ACA-covered employer must pay an ACA penalty known as the Affordability Penalty. Generally, the proposed regulation will apply to Opt-Out Payments adopted after December 16, 2015, but there will be a phase-in period for Opt-Out Payments in labor agreements.

By way of background, ACA-covered employers are subject to a monthly Affordability Penalty for each full-time employee who (1) is required to pay more than 9.66% (indexed for 2016) of the employee’s household income to purchase self-only coverage under the employer’s health plan (“employee premium payment”) and (2) instead purchases individual coverage through an ACA exchange. In determining the amount of the employee premium payment and whether the affordability standard is satisfied, the proposed regulations would allow the employer to exclude the value of any Opt-Out Payment from the employee premium payment, but only where receipt of the Opt-Out Payment is conditioned on the employee’s (1) declining employer-sponsored coverage and (2) providing reasonable evidence that the employee and all other individuals for whom the employee expects to claim a personal exemption deduction have minimum essential coverage (other than coverage in the individual market, whether or not obtained through an ACA exchange).  This example illustrates when the value of an Opt-Out Payment would be excluded in calculating the employee premium payment: Employer offers its employees coverage under a plan that requires Employee to contribute $3,000 for self-only coverage. Employer also makes available to Employee a payment of $500 if Employee (1) declines to enroll in the plan and (2) provides reasonable evidence that Employee and all other members of B’s expected tax family are or will be enrolled in minimum essential coverage through another source (other than coverage in the individual market, whether or not obtained through the Marketplace). The Opt-Out Payment provided by Employer is a conditional Opt-Out Payment as defined under the regulations, and, therefore, Employee’s required contribution for self-only coverage under the plan is $3,000 since the $500 Opt-Out Payment is disregarded.

On the other hand, the value of an unconditional Opt-Out Payment (i.e., Opt-Out Payments conditioned only on waiving coverage) must be included in the calculation of the employee premium payment in determining affordability.  Therefore, any unconditional Opt-Out Payment will increase the employee premium payment, and make it less likely that the premium payment will come below the 9.66% household income percentage limit. Under the same facts as in the example above, except that eligibility for the Opt-Out Payment is unconditional, the $500 Opt-Out Payment increases the employee premium payment from $3,000 to $3,500, regardless of whether the employee accepts or declines the employer’s offer of coverage.

The proposed regulations are subject to public comment and our firm will continue to monitor and report on any developments. In the meantime, we recommend that ACA-covered employers review their current and planned Opt-Out Payment arrangements to determine how these payments will be treated under the proposed regulations and what adjustments must be made to avoid ACA penalties.  If you have any questions or for more information regarding the impact of the proposed regulations or ACA requirements generally on your organization, please contact Patrick W. McGovern, Esq., pmcgovern@nullgenovaburns.com or Gina M. Schneider, Esq., gmschneider@nullgenovaburns.com in the Firm’s Employee Benefits Practice Group.

NLRB General Counsel Seeks to Prohibit Employers from Unilateral Withdrawal of Union Recognition

The National Labor Relations Board’s General Counsel recently released Memorandum GC 16-03 (May 9, 2016), proposing to make it more difficult for an employer to withdraw recognition of an incumbent union. This memorandum directs the Board’s regional offices to treat an employer’s withdrawal of union recognition without a Board-supervised election as a violation of the National Labor Relations Act (“the Act”). Under the new rule proposed by the memorandum, an election would be required even if the employer possesses objective evidence that a union has lost majority support. This is a departure from the standard previously established by the Board in the seminal case of Levitz Furniture Company of the Pacific, Inc., 333 NLRB 717 (2001).

The Board rejected a similar proposal by the General Counsel fifteen years ago in Levitz. Before Levitz, an employer could unilaterally withdraw recognition of an incumbent union based on a good faith belief concerning the union’s loss of majority support. The Board in Levitz continued to allow unilateral withdrawal of union recognition, but required objective evidence of the union’s loss of majority support before withdrawal could occur. However, the Board left open the possibility of revisiting the issue if its revised standard did not prove effective for the purposes of the Act.

The General Counsel now wishes to revisit the issue, stating that the Levitz standard has proven problematic. The General Counsel proposes that the Levitz standard has failed to promote stable bargaining relationships and negatively impacts employees’ ability to make decisions regarding union representation. Under Levitz, an employer’s basis for unilateral withdrawal of union recognition could still be challenged by a union through filing an unfair labor practice charge with the Board.  The General Counsel proposes that such charges have resulted in years of unnecessary litigation. The General Counsel further proposes that the new requirement of Board-supervised elections will benefit employers, employees, and unions alike by mandating a fair and efficient mechanism to determine whether an incumbent union actually retains majority support.

The General Counsel’s new proposal seeks to eliminate unilateral withdrawals of union recognition so that an employer can only withdraw recognition following a Board-supervised “RM” or “RD” election. An RM election follows a petition made by the employer to the Board. Such a petition can be made if the employer has a good faith doubt about the incumbent union’s majority support. An RD election follows a petition made by  employees to the Board. The employer cannot solicit or substantively assist employees in creating or signing such a petition. Any involvement by the employer involving more than ministerial assistance will automatically taint the petition and render it and any resulting election invalid. The majority of employees who vote in either type of election must vote against the union in order for an employer to withdrawal recognition.

Regardless of whether the General Counsel’s new proposal is adopted by the Board, employers should proceed with caution. Even before the issuance of this memorandum, the Board was skeptical of unilateral withdrawals of union recognition, and it has been difficult to establish the type of evidence necessary for withdrawal to be successful. As a result, it has been a safer practice to request a Board-supervised election. With the issuance of this memorandum, regional offices will now treat unilateral withdrawals of union recognition as violations of the Act. Even if the Board were to ultimately reject the General Counsel’s proposal, it would only be after lengthy and costly litigation on the issue.  Moving forward, employers should seek experienced counsel before making decisions in this regard.

For more information, please contact James J. McGovern, III, Chair of the Labor Law and Alcohol & Regulated Products Law Practice Groups, Genova Burns LLC, at jmcgovern@nullgenovaburns.com.

Your Credit is No Good Here: Philadelphia Becomes Latest Jurisdiction to Make It Unlawful to Use Credit Information in Employment

On June 7, 2016, Philadelphia Mayor Jim Kenney signed into law Philadelphia Bill No. 160072, which amends Philadelphia’s “Fair Practices Ordinance: Protections Against Unlawful Discrimination,” Chapter 9-1100, et seq. of the Philadelphia Code.  Employers comprised of one or more people are covered by the Ordinance, which, as amended, prohibits an employer from procuring, or seeking a person’s cooperation or consent to procure, credit information regarding an employee or applicant in connection with hiring, discharge, tenure, promotion, discipline or consideration of any other term, condition or privilege of employment.  Philadelphia’s Ordinance follows other several other jurisdictions, including New York City, which have enacted similar laws.

The ordinance does provide some exceptions to its anti-discrimination provisions, which guide businesses seeking to utilize credit information in lawful ways.  These exceptions include allowing business to seek credit information if the information must be obtained pursuant to state or federal law, or if the specific job the employer seeks employee credit information for:

  • requires the employee to be bonded under City, state, or federal law;
  • is supervisory or managerial in nature and involves setting the direction or policies of a business or a division, unit or similar part of a business;
  • involves significant financial responsibility to the employer, including the authority to make payments, transfer money, collect debts, or enter into contracts, but not including handling transactions in a retail setting;
  • requires access to financial information pertaining to customers, other employees, or the employer, other than information customarily provided in a retail transaction; or
  • requires access to confidential or proprietary information that derives substantial value from secrecy.

However, if an employer relies on the credit information either in whole or in part when considering adverse action in these instances, it must disclose its reliance thereon and provide the particular information upon which it relied. Employers are also required to give the employee or applicant a chance to explain the circumstances prior to making an adverse decision.

Employer Takeaways: 

  • Employers should evaluate their hiring and internal employment processes to ensure it complies with the new ordinance and with the federal Fair Credit Reporting Act (and local iterations).
  • If a credit check is done in certain circumstances, the employer should disclose its reliance and should allow for any explanation or clarification on behalf of the employee or applicant.

For more information regarding the potential impacts of this legislation or how your business can prepare to develop a compliant credit-check policy, please contact Dina M. Mastellone, Esq., Chair of the firm’s Human Resources Practice Group, at dmastellone@nullgenovaburns.com or 973-533-0777.

 

OFCCP UPDATES GUIDANCE ON SEX DISCRIMINATION TO REFLECT MODERN WORKPLACE

On June 15, 2016 the U.S. Department of Labor’s Office of Federal Contract Compliance Programs (“OFCCP”) published its Final Rule updating federal contractor the requirements to ensure nondiscrimination on the basis of sex in the workplace and to take affirmative steps to review and revise hiring and employment policies and procedures so that they do not discriminate against applicants or employees, intentionally or inadvertently, based on sex. This marks the OFCCP’s first substantive revision to its guidance on sex discrimination since 1970. The Final Rule takes effect August 15, 2016 and interprets Executive Order 11246, which became law in 1964 and prohibits sex discrimination in employment, among other things. The new Rule makes the OFCCP’s sex discrimination guidelines consistent in many ways with court decisional law under Title VII and EEOC regulations. However, the Final Rule makes clear that OFCCP is not at this time incorporating EEOC regulations. The Rule extends not only to gender and pregnancy discrimination, but also to workplace rights to use restrooms corresponding to gender identity.

The Final Rule’s guidance explicitly prohibits discrimination on the basis of pregnancy, childbirth and related medical conditions, gender identity, transgender status and sex stereotyping (e.g., making or withholding job assignments based on preconceived notions of one sex’s supposed or expected capabilities, behaviors, manner of dress, or appearance). The Final Rule expressly makes disparate treatment and disparate impact discrimination analyses applicable to sex discrimination. The Rule highlights that contractors “may not hire and employ employees on the basis of sex unless sex is a bona fide occupational qualification (BFOQ) reasonably necessary to the normal operation of the contractor’s particular business or enterprise.” However, the OFCCP notes that gender will rarely qualify as a BFOQ. Furthermore, the Final Rule mandates equal benefits to male and female employees participating in fringe benefit plans (i.e. increased cost of providing a fringe benefit to members of one sex is not a defense to a contractor’s failure to provide equal benefits to members of the other sex), and gender-neutral access to jobs and workforce development opportunities.

While many of these guidelines are familiar, the provisions dealing with gender identity and gender stereotyping will likely face resistance from some contractors. Federal contractors and subcontractors should immediately begin reviewing their workplace practices in order to ensure compliance with the guidelines in the Final Rule. The OFCCP Final Rule offers best practices to guide employers through the process. Suggested best practices include designating single-user restrooms or similar facilities as sex-neutral, making a reasonable accommodation to an employee who is unable to perform job duties because of pregnancy or related medical conditions (e.g., providing modified job duties or assignments during pregnancy), and providing flexible work arrangements for child care obligations on a gender-neutral basis. Failure to comply with the Final Rule risks agency administrative enforcement actions and, in an extreme case, debarment from federal contracts.

For any assistance regarding the OFCCP’s Final Rule on sex discrimination, including whether your organization is a covered federal contractor, or any other OFCCP compliance issues, please contact Patrick W. McGovern, Esq. at 973-535-7129 or pmcgovern@nullgenovaburns.com, or Nicole L. Leitner, Esq. at 973-387-7897 or nleitner@nullgenovaburns.com.

Allison Benz, a summer associate at Genova Burns LLC, assisted in the preparation of this blog post.

Unhappily, Ever After: NJ Supreme Court Rules Divorcing Employees Protected by NJLAD

Unfortunately, not all marriages are happily ever after.  When divorce seems inevitable, losing your job as a result of a looming divorce is something no employee wants to worry about.  On June 21, 2016, the New Jersey Supreme Court in Smith v. Millville Rescue Squad (074685 (A-19-14) unanimously ruled that the New Jersey Law Against Discrimination’s (“NJLAD”) protection against discrimination on the basis of marital status also includes protection for divorced employees.  The New Jersey Supreme Court upheld the 2014 decision of the Appellate Division which concluded that the Millville Rescue Squad’s decision to terminate the plaintiff, Robert Smith, based on an assumption about his ability to work with his ex-wife was discriminatory.  In finding that the protections afforded by NJLAD’s marital status are not limited to the state of being single or married, the New Jersey Supreme Court effectively extended the reach of the NJLAD to include those who are separated, going through a divorce or divorced and recently widowed. Employers are prohibited from assuming, based on “invidious stereotypes,” that an employee will be disruptive or ineffective simply because of their marital status.

Smith, a 17-year veteran at Millville Rescue Squad (“MRS”), was allegedly fired when his supervisor heard the news about an impending separation from his then-wife and coworker.  Knowing the contentious nature of divorces, and worried about the spillover effect of a potential divorce involving two of his employees, Smith’s supervisor allegedly warned him that his continued employment with Millville was contingent on how the separation turned out.  After receiving confirmation from Smith that an amicable reconciliation was unlikely, Smith’s supervisor allegedly stated that he could not promise that it would not affect plaintiff’s job, as he believed Smith and his co-worker wife would certainly have an “ugly divorce”.  Smith was subsequently terminated for performance based on “company restricting” reasons.

Smith ultimately filed suit for wrongful termination and discrimination in violation of the NJLAD based on marital status, claiming the reasons given for his departure were discriminatory, improper and pretextual.  At oral argument before the New Jersey Supreme Court, the attorney for MRS conceded that although Smith’s supervisor’s comments were made in reference to the potential negative impact the divorce would have in the workplace, the disparaging comments were not signifying a bias against divorce itself.  Smith contended that the supervisor’s ugly comment demonstrated clear evidence of prejudice given his stellar performance record.

Notably, the New Jersey Supreme Court was careful to emphasize that the presumptive extension of NJLAD does not preclude employers from implementing and enforcing “anti-nepotism” policies in the workplace, confirming that the ability of an employer to restrict employees related by blood or marriage from working together has not been diminished.  Nonetheless, such policies must be enforced in a nondiscriminatory manner and in strict adherence the precedent set by NJLAD.  Additionally, the Court further clarified that employers are allowed to discipline employees based on performance and conduct, irrespective of their marital status so long as the reason for their discipline is not related to circumstances in his or her personal life.

As a result of this decision, employers must use caution when terminating an employee who is either in the process of getting divorced or is divorced.  The decision to terminate an employee cannot be based on an assumption about an employee’s inability to perform their job given for reasons related to their marital status.  The decision to terminate must only be based on actual workplace conduct or performance issues unrelated to marital status that has been clearly and routinely documented.

For more information on this decision and best practices regarding employee documentation and termination, please contact John C. Petrella, Esq., Director of the firm’s Employment Litigation Practice Group at jpetrella@nullgenovaburns.com, or Dina M. Mastellone, Esq, Director of the firm’s Human Resources Practices Group, at dmastellone@nullgenovaburns.com, or 973-533-0777.

Supreme Court Punts on Whether Service Advisors Are Exempt from FLSA Overtime Premium Pay

The United States Supreme Court recently issued its long awaited decision in Encino Motorcars, LLC v. Navarro. At issue in the case was whether “service advisors” employed by car dealerships are exempt from the Fair Labor Standards Act’s overtime premium pay requirement, as well as the validity of a related 2011 United States Department of Labor regulation. Unfortunately, the Court did not decide whether service advisors are exempt. Instead, the Court remanded the case to the Ninth Circuit Court of Appeals with the instruction that the Ninth Circuit decide the issue “without placing controlling weight” on the DOL’s 2011 regulation.

The issues in Encino Motorcars were rooted in a provision of the FLSA that expressly provides that “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles” is exempt from the FLSA’s overtime premium pay requirement. The FLSA is silent as to whether service advisors qualify for this exemption. In 1970, the DOL issued an interpretive regulation in which it concluded that service advisors do not fall within the exemption. Several courts rejected the DOL’s interpretation, and in a 1978 Opinion Letter the DOL changed course and took the position that service advisors are exempt. The DOL maintained this position until 2011, when it issued a regulation that, without explanation, excluded service advisors from the exemption.

The Supreme Court’s opinion in Encino Motorcars arose from a Ninth Circuit decision in which the Ninth Circuit relied on the DOL’s 2011 regulation to hold that a group of service advisors were eligible for overtime premium pay. The service advisors at issue would meet with a customer, evaluate the customer’s car, suggest repairs and dealership service plans, and then send the car to a mechanic who repaired and/or serviced the car. In remanding the case, the Supreme Court found that the DOL failed to follow basic procedural requirements of administrative rulemaking, which require administrative agencies to explain their rules. The Supreme Court found this especially important here, where the DOL issued a rule contrary to its prior position. The Supreme Court was critical of the DOL for its failure to explain adequately its rationale for changing its position, and its failure to consider the public’s reliance on the DOL’s longstanding policy. Car dealerships will have to wait for the Ninth Circuit’s subsequent decision, and possibly another Supreme Court decision, before the issue of whether service advisors are exempt from the FLSA’s overtime premium pay requirement is resolved.

For more information regarding the potential impact of the Supreme Court’s decision, or regarding any other wage and hour issues, please contact John R. Vreeland, Esq. Director of the Firm’s Wage & Hour Compliance Practice Group, at 973-535-7118 or jvreeland@nullgenovaburns.com, or Joseph V. Manney, Esq. at 973-646-3297 or jmanney@nullgenovaburns.com.

$15 Minimum Wage Bill Heads to Governor Christie’s Desk

In a close 21-18 vote the New Jersey State Senate passed bill S15, the $15 Minimum Wage Bill. The bill will now head to Governor Christie’s desk after its previous stamp of approval from the New Jersey State Assembly.  The vote proceeded along party lines with the 18 Republican legislators raising objections to the increased costs on businesses and the 21 Democratic legislators fighting to provide a living wage.

Governor Christie has not commented on whether he will veto the bill but it is highly unlikely he accepts the $15 wage increase. State Democratic leaders have promised to submit the $15 minimum wage to the voters in a constitutional referendum if Governor Christie vetoes the bill.

$15 minimum wage bills have already been signed into law in New York and California.  Massachusetts, Vermont and Connecticut are currently considering similar bills. In addition to the $15 minimum wage there are potential costs for insurance and payroll taxes.  Employers should continue to stay informed on the movement of this legislation with an eye on implementation in early 2018.

For more information regarding the potential impacts of Bill S15, or regarding any other wage and hour issues, please contact John R. Vreeland, Esq. Director of the Firm’s Wage & Hour Compliance Practice Group, at 973-535-7118 or jvreeland@nullgenovaburns.com, or Aaron C. Carter, Esq. at 973-646-3275 or acarter@nullgenovaburns.com.