The content in The Weld Report blog posts are based upon the law applicable at the times blog posts are originally published. Due to frequent changes in the law, the content in these blog posts may not remain accurate or reliable. None of the information contained in these blog posts is intended as legal advice or opinion relative to specific matters, facts, situations, or issues. You should not act upon the information in these blog posts without discussing your specific situation with a licensed attorney. Nothing within The Weld Report blog posts creates an attorney-client relationship.

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DOL Provides Opinion Letter Concerning “Reasonable Relationship” Test for Exempt Status

By: Attorney David A. Richie – Weld Riley, S.C.

If you’re reading this blog, you’re probably familiar with the Fair Labor Standards Act (FLSA); it’s the law that requires employers to pay their employees for overtime and at least minimum wage.  What you might not be as familiar with is the “executive, administrative, or professional employee” exemption that allows employers to avoid these requirements.  29 U.S.C. § 213(a)(1).  Typically, an employee must be paid on a “salary basis” to take advantage of the exemption.  What happens, though, when an employee earns a guaranteed weekly salary, but also gets paid on an hourly, daily, or shift basis?  Can such an employee still qualify for the exemption?   Thankfully for employers – who are subject to steep penalties for misclassifying their employees – the Department of Labor’s Wage and Hour Division (WHD) addressed this question in a recent opinion letter.

In its opinion letter – issued on November 8, 2018 – WHD addressed a scenario where an engineering firm classified its engineers as “exempt professionals.”  The engineers were paid a guaranteed weekly salary of $2,100, which was calculated by multiplying $70 by 30 hours (the minimum hours the employees typically worked per week).  This guaranteed amount was paid even if an employee worked fewer than 30 hours.  But, if an employee worked more than 30 hours, the employee earned $70 for each additional hour.  So, for example, if an employee worked 45 hours in a week, he or she received $3,150 (the $2,100 weekly guarantee plus $1,050 for the extra hours worked [$70 x 15 hours]).  On average, these employees’ weekly compensation ranged from $1,793 to $3,761.

In its letter, WHD made clear that to qualify for the exemption, the employee typically must be compensated on a salary basis.  However, the FLSA’s implementing regulations allow an employee’s earnings to be calculated on an hourly, daily, or shift basis if two conditions are met.  29 C.F.R. § 541.604(b).  First, the employment arrangement must include a guarantee of at least the minimum weekly required amount paid on a salary basis regardless of the number of hours, days, or shifts worked.  Second, a “reasonable relationship” must exist between the guaranteed amount and the amount the employee actually earns.

The regulations go on to say that a “reasonable relationship” between the employee’s guaranteed compensation and the amount he or she actually earns is found if the two are “roughly equivalent.”  Of course, the regulations do not define “roughly equivalent” (If they did, WHD wouldn’t have had to issue its opinion letter and I wouldn’t have had to write this blog post!).  While the regulations do not define the term, they do give an example of what constitutes “roughly equivalent.”

In the example found in the regulations, an exempt employee is paid $150 per shift, normally works four or five shifts each week, thereby earning $600 or $750 per week.  The “reasonable relationship” test is met if the employee is guaranteed at least $500 in weekly salary.  29 C.F.R. § 541.604(b).  The ratio of $750 in actual earnings to $500 in guaranteed earnings is 1.5 to 1.  Accordingly, a 1.5-to-1 ratio of actual earnings to guaranteed weekly salary is a “reasonable relationship” and “roughly equivalent” under the regulations.

Turning back to the scenario addressed by the opinion letter, WHD determined that a 1.5-to-1 ratio of actual earnings to guaranteed salary must satisfy the reasonable relationship test.  Thus, the employees of the engineering firm – who have a $2,100 guaranteed weekly salary – could earn up to $3,150 per week and undoubtedly qualify for the FLSA exemption (since $2,100 x 1.5 = $3,150).

WHD went on to note that “the regulations, of course, do not provide that a 1.5-to-1 ratio of actual earnings to guaranteed weekly salary is the absolute maximum permissible ratio to satisfy the ‘reasonable relationship’ test.”  With that being said, WHD stated that a ratio of 1.8-to-1 (i.e., $3,761 in actual earnings with only a $2,100 guaranteed weekly salary) would “materially exceed” the 1.5-to-1 ratio, such that the two amounts are not reasonably related.  In other words, actual earnings of $3,761 are not “roughly equivalent” to a guaranteed weekly salary of $2,100, and an employee earning these amounts would not qualify for the FLSA exemption.

While WHD felt comfortable saying a 1.5-to-1 ratio satisfies the reasonable relationship test and a 1.8-to-1 ratio likely does not, WHD did not even discuss whether a ratio somewhere in between would be acceptable.  Accordingly, to play it safe and avoid harsh potential penalties, employers that pay their exempt employees on an hourly, daily, or shift basis should ensure that their weekly earnings don’t exceed their weekly guarantee by a ratio of more than 1.5-to-1.

Safety First – Trump OSHA Makes Employer Post-Accident Drug Testing Safe Again

By Attorney Bryan T. Symes and Attorney David A. Richie – Weld Riley, S.C.

Under prior Obama-OSHA guidance addressing post-accident drug testing [issued on May 12, 2016], employers often faced an unenviable dilemma when accidents happened—test in an environment marked by uncertainty caused by a lack of clear administrative guidance about how employers must determine if a drug likely contributed to the accident [OSHA’s “bee sting” example was not terribly instructive], or forego testing altogether.  Understandably, without clear direction, employers were concerned that testing could be viewed as retaliatory under the Obama-OSHA guidance. Since May 12, 2016, the employer community has been clamoring for better, clearer direction.

Thankfully for employers, Trump-OSHA issued new guidance on October 11, 2018, which clarified the agency’s position as to whether certain types of drug testing violate 29 C.F.R. § 1904.35(b)(1)(iv), which prohibits employers from discharging or discriminating against an employee for reporting a work-related injury or illness.  In its memorandum, OSHA unequivocally stated that its regulations do “not prohibit workplace safety incentive programs or post-incident drug testing.

In its memorandum, OSHA noted that many employers who conduct post-incident drug testing “do so to promote workplace safety and health.”  OSHA wants to encourage such behavior and believes that an employer who “consistently enforces legitimate work rules (whether or not an injury or illness is reported) would demonstrate that the employer is serious about creating a culture of safety.”  The only time that a post-incident drug test would violate 29 C.F.R. § 1904.35(b)(1)(iv) would be if the employer mandated the test “to penalize an employee for reporting a work-related injury or illness rather than for the legitimate purpose of promoting workplace safety and health.”  Accordingly, OSHA has eliminated the need for employers to analyze whether there was a “reasonable possibility” that drugs or alcohol contributed to the accident.  Instead, employers now have the green light to conduct post-accident drug/alcohol testing, so long as all employees whose conduct could have contributed to the accident are tested, rather than testing only the employees who reported injuries.

OSHA further stated that “most instances of drug testing are permissible,” including:

  • Random drug testing
  • Drug testing unrelated to the reporting of a work-related injury or illness
  • Drug testing under a state workers’ compensation law
  • Drug testing under other federal law, such as a U.S. Department of Transportation rule

In addition to clarifying the propriety of post-incident drug/alcohol testing, OSHA’s guidance also explained how incentive programs can be used by employers as a tool to promote workplace safety and health without violating 29 C.F.R. § 1904.35(b)(1)(iv).  For example, the agency explained that positive action taken under an incentive program that rewards workers for reporting near-misses or hazards is always permissible under the regulation.  Another type incentive program is rate-based and focuses on reducing the number of reported injuries and illnesses.  A program like this typically rewards workers with prizes at the end of an injury-free month.  This type of program is also permissible if it is “not implemented in a manner that discourages reporting.”

Thanks to OSHA’s new guidance, employers are now safer.  Employers are free to implement post-incident drug/alcohol testing without analyzing whether there was a “reasonable possibility” that drugs or alcohol contributed to the incident, so long as the employer tests all employees involved.  Further, OSHA encourages employers to create incentive programs that promote workplace safety, so long as the program is not designed to discourage reporting.

Expunction Junction, What’s Your Function: Labor and Industry Review Commission Determines that “Substantial Relationship” Defense Cannot Be Based Upon Expunged Convictions

By Attorney Bryan T. Symes – Weld Riley, S.C.

Recently, the State of Wisconsin Labor and Industry Review Commission (“LIRC”) provided the employer community with an educational nugget concerning how to best, proactively analyze potential conviction-record discrimination scenarios in connection with applicants and current employees.    More specifically, through its opinion in Staten v. Holton Manor, a copy of which is available here: http://lirc.wisconsin.gov/erdecsns/1533.htm, LIRC determined that the oft-cited “substantial relationship” defense is unavailable when an employer predicates an employment-related decision on an applicant’s/employee’s expunged conviction record.

Under Wisconsin law, employers are generally prohibited from taking adverse employment actions against applicants and current employees in connection with “conviction records.”  “Conviction record” is defined broadly, as follows:

[I]nformation indicating that an individual has been convicted of any felony, misdemeanor or other offense, has been adjudicated delinquent, has been less than honorably discharged, or has been placed on probation, fined, imprisoned, placed on extended supervision or paroled pursuant to any law enforcement or military authority.

However, under Wisconsin law, “…it is not employment discrimination because of conviction record to refuse to employ…or terminate from employment…any individual who…[h]as been convicted of any felony, misdemeanor or other offense the circumstances of which substantially relate to the circumstances of the particular job…”   In other words—without getting too far into the legal minutiae—think of an applicant for a bank teller position who previously was convicted of embezzlement.   This example, under the right circumstances, meets the “substantial relationship” test and is a defense to the general prohibition against conviction-record discrimination—meaning the bank employer could likely deny employment.    Okay, against this backdrop, let’s dive into the substance of the Holton Manor decision and explore why the decision is important.

In Holton Manor, the employer, skilled nursing facility, rejected an applicant for a CNA position after initially offering her a conditional offer of employment—because of two conviction records.   For purposes of this blog post, only the expunged conviction record matters.   To that end, the applicant had previously [approximately 10 years earlier, in fact] been convicted of misdemeanor disorderly conduct, which she openly disclosed in response to pre-employment background check question.    The applicant ultimately furnished proof that the misdemeanor was expunged, and received a conditional offer of employment.   Holton Manor ultimately rejected the applicant, and told her specifically that it rejected her candidacy in response to her conviction record [let’s save this decision for another day].

Significantly, in Holton Manor, LIRC agreed with the applicant, “…that an expunged offense may not be used as a reason to deny her future employment opportunities.”  According to LIRC, “[t]he Wisconsin expunction statute permits individuals who commit criminal offenses before age twenty-five to request expunction…[t]he statute contemplates that, once an offense has been expunged, all references to the defendant’s name and identity will be obliterated from the record.”   According to LIRC, “[t]he benefit of expungement allows certain offenders to wipe the slate clean of their offenses and to present themselves to the world—including future employers—unmarked by past wrongdoing.”  So…based on Wisconsin public policy, LIRC determined, “[g]iven all the circumstances, the commission concludes that the affirmative defense of substantial relationship may not be based upon an offense that has been expunged from the complainant’s record.”

The significance of the Holton Manor decision is clear—and employers are now on notice that they will be required to exercise a heightened level of caution in connection with conviction-record status.  “Best practices” dictate that employers will immediately engage in a dialogue with their trusted background-check providers to ensure that expunged conviction records do not inadvertently slip through the cracks.    Employers that routinely consider conviction-record status in connection with employment-related decisions will need to exercise an increased level diligence to ensure that decision-makers are informed about the new legal landscape.   In light of the Holton Manor decision, employers are also strongly encouraged to dust off pre-employment application and background-check forms, to ensure that appropriate disclaimers are added.

No Cakewalk: SCOTUS to Determine Proper Interplay Between Religious Liberty Rights and Anti-Discrimination Law

By Attorney Bryan T. Symes – Weld Riley, S.C.

Recently, during a supervisor-training session I conducted with one of my colleagues to address the “#MeToo uprising,” upper-management personnel asked me about the workplace implications, if any, of the Masterpiece Cakeshop case that is set to be heard by the Supreme Court of the United States (“SCOTUS”) tomorrow, December 5, 2017.   I responded that reconciling religious liberty rights and anti-discrimination protections is no cakewalk [if you know me, you know this cheesy pun is totally intended]—and that I don’t envy the Justices in the slightest. Continue reading No Cakewalk: SCOTUS to Determine Proper Interplay Between Religious Liberty Rights and Anti-Discrimination Law

Hit the Road Jack: Trucking Company Had Just Cause To Terminate Employee’s Employment for Violating Work Rules

By Attorney Bryan Symes

Employers are generally much more restricted in connection with employee discipline in the unionized workplace setting.   To that end, one hallmark of the typical employer/union relationship is the existence of a labor agreement that incorporates the so-called “just cause” standard of employee discipline—which is in stark contrast to the concept of “at-will” employment applicable to most non-union work environments.   In the unionized workplace setting, what is, and what is not, appropriate in terms of discipline for employee misconduct under the “just cause” standard has developed through decades worth of labor-arbitration decisions.    One recent labor-arbitration decision is the latest reminder of what an employer must do to increase the likelihood that a termination decision will withstand “just cause” scrutiny.   The decision is In re ADM Trucking, Inc. and Bakery, Confectionary, Tobacco Workers, and Grain Millers International Union, Local 103G, 137 LA 1469 (Oct. 5, 2017).  Continue reading Hit the Road Jack: Trucking Company Had Just Cause To Terminate Employee’s Employment for Violating Work Rules

Federal Court to Whole Foods – Candid Camera Policy No Laughing Matter under the NLRA

By: Attorney Bryan Symes

Recently, the federal Second Circuit Court of Appeals [which makes decisions primarily impacting businesses located in Connecticut, New York and Vermont], in an unpublished summary order [which carries no precedential impact], upheld a National Labor Relations Board decision that the popular grocery chain, Whole Foods, violated the National Labor Relations Act by maintaining an overly-broad no-recording policy.   The opinion comes in Whole Foods Mkt. Grp., Inc. v. NLRB, Case No. 16-346, Doc. No. 81-1, available here.

Continue reading Federal Court to Whole Foods – Candid Camera Policy No Laughing Matter under the NLRA

Local Attorneys

For Crying Out Loud: Employee’s Out-of-Character Tears Place Employer on Constructive Notice of Need For FMLA Leave

By: Attorney Bryan Symes

Okay, so there’s no crying is baseball—that much we know with certainty [thank you, Tom Hanks].   Not the case with workplaces, however.   In fact, recently, a federal court sitting in Illinois addressed whether a former employee—who “began crying regularly and uncontrollably at work”—placed her former employer on notice of a need for FMLA leave.  The case is Valdivia v. Township High School, District 214, available here.   In Valdivia, the former employee alleged that her employer interfered with her rights under the FMLA by failing to provide her with notice that she had a right to take job-protected leave under the FMLA, even though her former employer allegedly knew or should have known that she suffered from a medical condition that made performing her job untenable. 

Continue reading For Crying Out Loud: Employee’s Out-of-Character Tears Place Employer on Constructive Notice of Need For FMLA Leave