NLRB just rewrote the rules on employee classification

Independent contractors (IC) can’t join unions. As a result, it’s in the National Labor Relations Board’s (NLRB) best interest to make it harder to classify employees as ICs — and that’s exactly what it just did.

In a case involving FedEx drivers, the NLRB has added another factor to the test a lot of employers — and courts — use to determine whether a worker is an IC or not.

And in doing so, it has waved its hand in the face of precedent set by a D.C. Circuit Court.

The added factor is more of an amendment to an existing one — the entrepreneurial opportunity standard.

The entrepreneurial standard says that to be considered an employee, an individual has to be in business for his or herself — and have the opportunity to incur a profit or a loss in the course of that business.

In a nutshell, individuals can’t be considered an IC unless they have the autonomy to do business with others of their choosing. In other words, they can’t be tied down to one employer.

Satisfying this factor alone doesn’t make someone an IC — as other factors also have to be considered — but it’s an important part of the equation.

The NLRB, however, recently ruled simply being allowed to do business with others isn’t enough to satisfy the entrepreneurial opportunity standard. What also needs to be considered is whether or not individuals are exercising those rights.
Sound reasoning?

The NLRB has received a lot of flack recently for trying to aid the organized labor movement and, often times, the criticism seems warranted.

But in this case, at least, it’s reasoning for adding the caveat to the often-cited standard seems … well … reasonable.

If you want to slog through the NLRB’s 168-page decision on the matter, be our guest, but here’s basically what the NLRB says:
Other factors may be at play

Simply telling workers they have the ability to go out and do business with others doesn’t necessarily mean its something they can reasonably do. After all, the organization they’re contracted with could make doing so very difficult.

And one way to tell if the organization is making the act of exercising their entrepreneurial opportunity difficult is to see how many ICs are actually doing so — and if not, finding out why.

In the case of FedEx, its IC delivery drivers were told they could:

* hire another driver to work their route for them — but FedEx retained the right to approve that person
* sell their routes to another driver — but FedEx had to deem the buyers qualified, and the driver had to essentially enter the same contract with FedEx as the original driver, and
* obtain a route from another FedEx driver — but this would often require the person obtaining an additional route to hire another driver under the terms stipulated above.

So, at least in the NLRB’s eyes, there appeared to be some fairly strict restrictions on FedEx IC’s ability to go into business for themselves.

As a result, the NLRB did a little digging, and it found:

* at the time of the hearing, only one driver at the FedEx location in question had ever employed another driver to work their route for them
* there had been only two route sales at the location since 2000, and
* just six drivers had operated multiple routes since 2000.

After reviewing those facts, the NLRB said FedEx ICs weren’t exercising their entrepreneurial opportunity and therefore were misclassified.
Troubling for employers

While it’s easy to see how the NLRB reached it’s ultimate conclusion, what should trouble employers is that the NLRB has thrown precedent out of the window and essentially created a new rule on its own, upon which employers will have to judge worker classifications.

In 2009, a D.C. Circuit Court heard a similar case involving FedEx drivers and looked at the entrepreneurial opportunity standard in a much more conservative way — ruling that since drivers had the ability to do business on their own and incur a profit or a loss, they satisfied the standard. The court didn’t look into whether or not the drivers actually exercised their entrepreneurial rights.

In essentially rejecting the D.C. courts methodology, the NLRB has shown, once again, it’s willing to rewrite the rule books in favor of organized labor.

In addition, this further muddies the waters for employers who are tasked with trying to reconcile myriad laws and regulations governing who is and who isn’t an IC.

Oversight on FMLA form costs employer $173K

There’s one element of the Family Medical Leave Act (FMLA) that doesn’t get a lot of press. But forgetting about it could be a very costly mistake.

Here’s a question for your company: When you request FMLA certification from an employee, do you make it clear — in writing — what the consequences are of failing to provide an adequate certification?

If not, you can’t take a negative action against the employee for failing to provide an adequate certification — like denying leave or, even worse, terminating an employee because the person’s absences didn’t count as FMLA leave.

It’s all outlined in black and white under section 29 C.F.R 825.305(b) of the FMLA.
No medical certification, no excused absence

FedEx recently failed to comply with this regulation, and ended up having to shell out $173,000 in back pay and damages to an employee it terminated after she failed to provide a medical certification.

Here’s what happened:

Tina Wallace was a senior paralegal at the delivery service company, and she suffered from a variety of health problems. When her health condition required her to take leave, FedEx offered her FMLA leave and asked her to complete medical certification forms and return them within 15 days.

Wallace, however failed to return the forms within the 15 days because, as she later told a court, “she could not bring [herself] to contact them [FedEx] or see them or go to them to provide those [forms] to them because of … the way that [she] was feeling …”

When the forms didn’t arrive on time, Wallace’s supervisor then tried contacting her numerous times by phone, claiming he received a busy signal each time. He also sent Wallace an email stating that he’d received no documentation from her, but he didn’t receive a “read receipt” indicating that Wallace had opened or seen the email.

Shortly thereafter, FedEx terminated her for failing to comply with its attendance policy, which states “[e]mployees who are absent for two (2) consecutive workdays without notifying a member of management within their organizational hierarchy shall be considered to have voluntarily resigned their employment with [FedEx].”

Wallace then sued for FMLA interference.

At trial she claimed she would have turned in the medical certification forms if she’d known the consequences of not doing so.
Court: No consequences, no legal termination

FedEx fought her suit, claiming that she was never entitled to FMLA benefits because she failed to return the medical certification form required under the law — and if she wasn’t entitled to benefits, FedEx couldn’t have interfered with them.

But a court denied this motion, ruling a reasonable jury could conclude that FedEx failed to comply with the FMLA requirement to explain the consequences of not returning a medical certification form.

Wallace’s case then went before a jury, which ruled she should receive $173,000 in back pay and damages — and that award was later upheld by the U.S. Court of Appeals for the Sixth Circuit.

New DOL action makes using independent contractors even riskier

To all those using independent contractors: The Department of Labor (DOL) is no longer looking to just strengthen its own enforcement of employee classification rules, it’s now strengthening states’ enforcement efforts as well.

That means expect even more audits of employer relationships with independent contractors.

The DOL just announced that it’s providing a total of $10.2 million in funding to 19 states to enhance misclassification auditing programs and other initiatives aimed at cutting down on classification mistakes — both unintentional and willful.

This marks the first time the DOL has awarded state grants dedicated to this effort. The grants were made possible by the Consolidated Appropriations Act of 2014.

Should employers be worried about this grant funding? You betcha.

The feds generally don’t like to give this kind of money away unless they feel it’ll produce a significant return on investment.

The Internal Revenue Service (IRS), as well as the states, aren’t happy about the tax revenue they lose when employers improperly classify employee as independent contractors, and you can bet they expect to see a lot of that money find its way into their hands.
Shore up insurance program

The DOL says the grants are meant to help shore up state’s unemployment insurance programs, which were drained by high unemployment rates experienced the past several years.

Employers don’t have to pay unemployment insurance premiums for independent contractors, and usually attempt to block their attempts to collect unemployment insurance upon the termination of their contracts.

“This is one of many actions the department is taking to help level the playing field for employers while ensuring workers receive appropriate rights and protections,” said U.S. Secretary of Labor Thomas E. Perez in a statement issued by the DOL. “Today’s federal grant awards will enhance states’ ability to detect incidents of worker misclassification and protect the integrity of state unemployment insurance trust funds.”

While attempting to shore up unemployment trust funds is a logical excuse for increasing enforcement efforts, both the feds and the states are likely hoping to gain much more from increasing enforcement. Not only will they be able to add to unemployment insurance coffers, they’ll increase direct tax revenue and possibly collect large sums in penalties — in addition to awarding benefits (or the value thereof) to workers.
Troubles facing employers

One of the bigger problems highlighted — especially for those employers trying to do the right thing — is figuring out exactly what the feds consider an independent contractor. The rules are murky and confusing.

Adding to the mess is the fact that the Supreme Court has openly said there is no single rule for determining whether an individual is an employee or independent contractor for the purposes of complying with the Fair Labor Standards Act (FLSA).

The closest things employers have to go by are:

* the FLSA’s “economic realities test,” and
* the IRS’s more simplified three-prong test.

To help sort out the mess (a little), the DOL recently issued a fact sheet on classifying employees (which we broke down for you back in August).

Then there are the numerous state laws on the subject. An employer can be found to have properly classified a worker under the federal standards above and still be guilty of misclassification under some states’ standards.

So you’ll definitely want to make sure you’re on the right side of both the federal guidelines and the guidelines your state has put forth when it comes to the classification of your independent contractors.
States benefiting

Employers in Maryland, New Jersey, Texas and Utah will want to tread extra carefully. The DOL is granting them “high-performance bonuses” due to their “high performance or most improved performance in detecting incidents of worker misclassification.”

Those four states will split $2 million in bonus money — in addition to receiving a cut of the remaining $8.2 million in grant funding.

The states that will get a cut of the remaining $8.2 million:

* California
* Delaware
* Florida

* Hawaii
* Idaho
* Indiana
* Maryland
* Massachusetts
* New Hampshire
* New Jersey
* New Mexico
* New York
* Oregon
* South Dakota
* Tennessee
* Texas
* Utah
* Vermont
* Wisconsin

3 red flags in EEOC’s first ADA lawsuit against wellness plan

In a groundbreaking move, the Equal Employment Opportunity Commission (EEOC) is suing an employer, alleging its wellness plan violates the Americans with Disabilities Act (ADA). It’s lawsuit well worth taking a gander at.

Here’s what the ADA says: Employers can only require employees to submit to medical exams and medical inquiries that are “job-related and consistent with business necessity.”

One exception: Employers can ask employees to undergo medical exams and answer medical inquiries in conjunction with “voluntary” wellness programs.

However, there’s a problem with the whole “voluntary” part. The EEOC hasn’t released any definition or guidance as to what it considers a “voluntary” wellness program.

So employers are left to guess what’s voluntary and what isn’t, and that appears to be the root of the problem in the EEOC’s latest lawsuit.
‘Submit to assessment or pay premiums’

Here’s what happened: Wendy Schobert refused to take a health risk assessment that was part of a wellness program sponsored by her employer, Orion Energy Systems.

She had concerns about the confidentiality of the results.

The penalty for not participating: Orion said she had to pay the entire premium for her health insurance — $413 a month, plus a $50 non-participation penalty.

Had she submitted to the assessment, Orion would have picked up the entire tab for her health insurance.

After her refusal to submit to the assessment, Schobert tried to persuade others to follow her lead, which eventually led to her termination.
EEOC: ‘Wellness program not voluntary’

When the EEOC caught wind of Schobert’s tale, it sued Orion.

The agency’s allegations: The penalty for not participating in the health risk assessment portion of the company’s wellness program — having to pay $463 a month — was so steep it rendered the program “involuntary.”

That alone, however, isn’t illegal.

The EEOC’s real beef is that since medical inquiries were made of Schobert and other employees that were not “job-related and consistent with business necessity” (because they were preventive in nature) and were not part of a voluntary wellness program, the assessment violated the ADA’s rules regarding employee medical exams and inquiries.

The EEOC is also claiming that Orion illegally retaliated against Schobert for voicing her “good-faith” objections to the wellness program.
Warnings to employers

The lawsuit still has to play itself out, but it offers three distinct warnings to employers:

* Warning No. 1: Expensive penalties are likely to render your wellness programs involuntary in the EEOC’s eyes. This is the first time the feds have shed light on what they consider “involuntary,” and while no specific threshold was mentioned, it’s clear expensive penalties won’t do you any favors with the EEOC. Attorney Robin Shea, writing on her Employment & Labor Insider blog, said she recommends erring on the side of caution and offering rewards for wellness participation instead of imposing penalties against non-participants.
* Warning No. 2: Don’t ask employees to submit to medical exams or inquiries that aren’t job-related unless you can say beyond a shadow of a doubt that you’re doing so under a wellness program that is truly “voluntary.”
* Warning No. 3: Be careful not to retaliate against employees because they refuse to participate in wellness programs or because they voice their displeasure about such programs — even if they go so far as to actively attempt to persuade others not to participate.

Fixed leave policy costs company $1.35M

A recent Equal Employment Opportunity Commission (EEOC) lawsuit highlights the dangers of fixed leave policies. 

Princeton HealthCare System, which operates several medical facilities, will pay $1.35M to settle a disability discrimination lawsuit stemming from a fixed leave policy and leave tracking system it had in place.

According to the EEOC, Princeton’s leave tracking system only took into account the requirements of the Family Medical Leave Act (FMLA) when it came to handling employees’ medical leaves.

This resulted in two actions, which spurred the EEOC’s suit:

  • terminating employees who weren’t yet eligible for FMLA after a few absences, and
  • automatically terminating employees once they’d been out on FMLA leave for more than 12 weeks.

According to the EEOC, such actions robbed employees of rights they may have been entitled to under the Americans with Disabilities Act (ADA).

It says hard-line fixed leave policies slam the door on the chance for employees to receive reasonable accommodations under the ADA that may allow them to return to performing the essential functions of their jobs — and reasonable accommodations can include medical leave given in addition to FMLA leave.

The EEOC sued Princeton, claiming it failed to at least seek out reasonable accommodations for employees who were absent for medical-related reasons.

As part of the settlement agreement, Princeton has also agreed to:

  • no longer require employees returning from disability leave to present a fitness-for-duty certification stating they are able to return to work without any restrictions (because that too slams the door on the possibility of some employees receiving reasonable accommodations that may allow them to return to their jobs)
  • not subject employees to progressive discipline for ADA-related absences, and
  • provide ADA training to its workforce.

The $1.35M will be distributed to those unlawfully terminated under Princeton’s former fixed leave policy.

The EEOC also said in the future Princeton must engage in the interactive process with ADA-covered employees, including employees with a disability related to pregnancy, when deciding how much medical-related leave is needed.

Always enter the interactive process

While it appears the EEOC is taking a hard-line stand against fixed leave policies here, what it’s really trying to do is make employers aware of their responsibilities to enter the interactive process whenever a medical condition interferes with an employee’s ability to perform his or her job.

When such conditions are in play, even if an employee has already been granted a full 12 weeks of FMLA leave, employers must enter the interactive process to see if a reasonable accommodation exists that would allow affected employees to return to work.

Companies can have policies that impose caps on how long workers can be on leave. But they must be flexible enough to allow room for reasonable accommodations — including more leave — that help employees return to work.

How much medical leave is too much? In a recent landmark decision by the U.S. Court of Appeals for the Tenth Circuit, it was ruled anything beyond six months is generally not reasonable.

10 ACA questions employees want you to answer – now

If employees haven’t come to you with questions about the Affordable Care Act’s (ACA) affect on them, get ready … they’re coming. Want to know what they’re going to ask? 

In a recent survey to gauge how single-employer plans are being affected by the ACA, the International Foundation of Employee Benefit Plans, a nonprofit research and education organization, asked employers to submit the most common questions their HR and benefits staff have been receiving from employees about the law.

More than 600 employers responded to the query.

Here are the top 10 questions employers were approached with — along with ways you can respond:

1. How do the exchanges work? Am I eligible? Are they free? Could I qualify for a subsidy? How does exchange coverage compare to my current coverage?

Answer: The exchanges act as an insurance agent of sorts, allowing employees to shop for plans that meet their needs. And yes, everyone can to use them. But whether or not employees get a subsidy depends upon a number of things — like whether or not you offer them coverage, the level of that coverage and their income.

2. How does the law affect me? Do I need to do anything?

Answer: The biggest effect is that individuals are now forced to have insurance or pay a penalty. And if you’re offering them coverage that meets the law’s minimum requirements, they don’t have to do anything.

3. What will this cost me? Why are my costs going up?

Answer: Just about the only cost figures you could reasonably present them with are your health plan’s premiums and cost-sharing information. As for why costs are increasing, it’s because the cost to treat people in general is increasing, and insurers are accounting for that.

4. Is the company planning to drop coverage?

Answer: Only you can say for sure.

5. How will our benefits change? Are the changes because of health reform?

Answer: Chances are your plan underwent some changes over the past year — or you’re planning changes for 2015. Be prepared to explain what they are and the reasons behind them.

6. Can my child stay on the plan longer?

Answer: Starting in 2010, the health reform law mandated that plans’ coverage to dependent children be extended until they turn 26. But beyond that, nothing has changed in this area as far as federal law is concerned.

7. Do I have to get coverage if I don’t have it now? When will there be an open enrollment opportunity?

Answer: Again, individuals are required by law to obtain health coverage or pay a penalty. The exchanges will open again this November. You’ll also want to be prepared to share your plan’s next open enrollment period begins.

8. Will I have an average of 30 hours per week and qualify for benefits in 2015?

Answer: If they don’t qualify for your company-sponsored plan, they can always obtain health coverage on the exchanges in November.

9. Are we dropping spousal/dependent coverage?

Answer: Again, by law, dependent children must be allowed to remain on a parent’s plan until age 26. However, employer plans are not required to cover spouses. But be prepared to share whether you will or not.

10. How does the law impact the future of the company?

Answer: This is a broad question, and one only you can answer. But if you don’t plan to make any drastic changes as a result of the law, share that with employees. It’ll help put them at ease.

What do conflicting Obamacare rulings mean for the future of health reform?

As you’ve probably heard, two federal appeals courts issued contradictory rulings this week concerning the part of the Affordable Care Act that provides subsidies to individuals who can’t afford health insurance premiums. So what does this mean for the future of Obamacare?

First, some background. Both cases center on a single phrase in the section of the health care reform law that states the government can provide subsidies to those who buy insurance on an exchange “established by a state.”

In the case before the District of Columbia appeals court, Halbig v. Burwell, a three-judge panel ruled that the law should be interpreted exactly as written — thus only allowing the subsidies in the 16 states (and the District of Columbia) which have set up their own exchanges.

Thus, participants in the 34 remaining states would not be eligible for the subsidies — a development that would largely gut the whole health reform program.

Just a couple of hours after the D.C. court issued its ruling, the Fourth Circuit Court of Appeals in Richmond, VA, released its decision — and it was exactly the opposite of that of its sister circuit.

In King. v. Burwell, the judges ruled that the ACA language was ambiguous, so that the Obamacare subsidies should be available to participants using any health exchange, state-established or not.

The Obama administration immediately announced it would seek an “en banc” hearing in the D.C. case — bringing the matter before the entire 11-member appeals court. The administration also said all subsidies will continue during the appeals process.

Whatever the outcome, it’s entirely possible that the question will end up before the U.S. Supreme Court.
If D.C. decision does hold up …

For the sake of argument, let’s say the D.C. court’s decision stands. What would that mean for Obamacare?

Here’s what Tiffany Downs, an attorney for the law firm FordHarrison, had to say:

The D.C. Circuit’s ruling … is a significant setback for the Obama administration …

The ruling could impact the ACA’s requirement that large employers offer affordable health care as defined by the Act or pay a penalty. The penalty is triggered when an employee receives a subsidy for purchasing insurance on an Exchange. Reducing the number of individuals who receive subsidies will decrease the number of employers subject to the penalty.

Additionally, this ruling could impact the individual mandate, which requires most Americans to obtain health insurance that meets the requirements of the Act or face a penalty. Low-income individuals are exempt from this requirement. The Act defines low-income individuals as those for whom the annual cost of health coverage exceeds eight percent of their projected household income.

In calculating this percentage, the premium tax credit is deducted from the cost of the health insurance. Thus, if the tax credit is not available for insurance purchased on federal Exchanges, the number of people exempt from the individual mandate will increase exponentially.

What are administration’s chances?

What are the chances the D.C. ruling actually stands up? Not very good, according to Tom Goldstein, an attorney with extensive experience before the Supreme Court and co-founder of SCOTUSblog.

Writing in the Washington Post, Goldstein said he thought “the administration probably will come out ahead in the end.”

Why? Because under the law, courts defer to a broader interpretation of a statute “if the language is ambiguous and the administration’s position is reasonable,” Goldstein said.

What’s more, many other sections of the law refer to an exchange established by a state, but actually cover the federal government.

“Also, the law actually requires every state to set up an exchange, and it refers to all the exchanges as having been established by states,” Goldstein writes. “So you can look at the statute as a whole and reasonably read it to extend the subsidies to residents of every state.”

So. At least one expert thinks the administration will eventually win this battle. But making predictions about the outcome of federal court cases — especially ones that may well involve the Supreme Court — is a tricky business indeed.

An insider reveals Obama’s plan to increase overtime eligibility

The Obama administration is dead set on increasing overtime availability for workers.

In fact, when President Obama announced his intention to amend the current FLSA overtime regs, even the DOL was surprised by the move.

Now employers are wondering exactly when those changes will take place and what the impact will be.
An expert’s insight

If anybody’s likely to have that info, it’s Tammy McCutchen, a former administrator of the DOL’s Wage and Hour Division (WHD).

Not only was McCutchen instrumental in drafting the most recent changes to the OT regs (enacted in 2004), she also participated in a number of recent “listening sessions” with DOL Secretary Thomas Perez on the current rulemaking process.

These sessions involve the agency soliciting the feedback and questions of employers and employment groups.

At the 2014 SHRM Conference & Exposition in Orlando, McCutchen talked about when employers can expect the final rules (not just the proposed version) as well as the methods the DOL is currently considering to overhaul the current regs.

Here are the highlights.
Ready by 2015?

The DOL recently said it expects to have proposed rules on the “white collar” OT exemption by November of this year. But when can firms expect the final rules to actually take effect?

McCutchen said she expects the DOL to move faster than usual with this rule change. In her estimation, the final rules are likely to be published by September 2015 – and likely to go into effect by January 1, 2016.
3 critical DOL questions

To come up with the most efficient way to change the regs, Secretary Perez is asking three main questions:

1. What should the salary level be moving forward? One thing is certain about the new OT regs: The salary level – currently $455 per week or $23,660/year – will be increased.
The agency is looking at the most effective ways to raise this level and according to McCutchen, these are the front-runners:
Raise the level – after adjusting for inflation – to 1975’s level. That would bump the minimum salary level all the way up to $50,000 per year and force many firms to change the status of many employees they had previously classified as exempt.
Adopt the California salary level. This method relies on auto-corrections for inflation. Based on today’s standards, that level would be $570 per week.
2. What changes should be made to the duties test? The DOL also plans to increase the availability of OT by amending the current duties test.
The agency is likely to narrow the duties test – rather than make wholesale changes – and simplify language in the current regs. It’s also likely to specifically spell out more jobs which are definitely OT exempt.
Also, the agency will probably revise the “concurrent duties” regs under the executive exemption test; this gives managers an exemption even if they’re doing the same work as direct reports.
The DOL is seriously considering adopting California’s duties test instead, which requires an exempt manager to spend more than 50% of his or her time supervising employees.
Bottom line: Prepare for more borderline workers to be eligible for OT as soon as the new regs pass.
3. What can the DOL do to streamline the process? According to McCutchen, the DOL realizes this is a massive undertaking. As a result, it’s looking to employers for suggestions and insight to make the new rules as clear and effective as possible.

Docking pay for exempt employees: What’s allowed?

Don’t feel bad if you have trouble understanding the pay-docking rules laid out by the Fair Labor Standards Act (FLSA). The regs are pretty murky.

 

As a rule of thumb, FLSA doesn’t permit deductions from exempt employees. The regs state that the amount of money a salaried employee earns can’t be dependent on the number of days or hours he or she works. You also can’t deduct money based on the quantity or quality of work the employee produces.

But – no surprise here – there are several exceptions. What happens if your company accidentally makes an improper deduction? Nothing, so long as it’s an isolated incident and the company corrects it. But if there are repeat violations, entire departments of exempt workers can suddenly transform into OT-eligible ones by the magical powers of FLSA.

Permitted and prohibited deductions

Here’s a rundown of the situations in which you can dock exempt employees pay.

  • Exempt employees do not need to be paid for any workweek in which they perform no work.
  • Exempt employees who are absent for a day or more for personal reasons other than sickness or accident. (Note that these deductions must be made only in full-day increments – not for partial-day absences.)
  • Exempt employee absences of a day or more caused by sickness or disability, if the company maintains a plan that provides compensation for loss of salary caused by sickness and disability and the employee exhausted his or her “bank” of leave.
  • Penalties imposed for violation of safety rules of major significance
  • To offset any amounts received by an employee as jury or witness fees or military pay; however, beyond those offsets, deductions may not be made for absences caused by employee jury duty, attendance as a witness or temporary military leave.
  • Unpaid disciplinary suspensions of one or more full days for breaking workplace conduct rules.
  • Partial weeks worked during the initial or final weeks of employment. For example, if Joe resigns in the middle of a workweek, pay him only for the days actually worked in that week.
  • In some cases, when a salaried/exempt employee has worked a reduced or intermittent work schedule under the Family and Medical Leave Act (FMLA). (You can convert a salaried employee to an hourly rate during the time he or she is on intermittent or reduced-workweek FMLA leave without destroying the person’s exempt status.

Red flags

On the flip side, the following deductions are FLSA red flags. These deductions can make a formerly exempt employee eligible to collect overtime:

  • Business trips. You can’t deduct salary (or run the clock on paid time off benefits) for absences related to business trips, and
  • Lack of work. If an exempt employee is ready, willing and able to work, you can’t deduct money for slow times when there’s little or no work assigned.

Court decision defines ‘reasonable’ medical leave

So many companies have landed themselves in legal trouble over “inflexible leave policies” — those requiring workers to return to work after a certain amount of leave — that many firms are hesitant to enforce such a policy any longer. But a recent appeals court ruling could mean companies have more leeway in this area than they thought.

The case is Hwang v. Kansas State University, and it hinged on the idea that all inflexible leave policies are inherently discriminatory.
Needed more than 6 months

Some background on this case: Kansas State had granted Hwang six months of leave. After she exhausted that leave time, Hwang requested additional leave.

Kansas State rejected Hwang’s request, citing its company policy which capped employees’ leave at six months, and she sued under the Rehabilitation Act — a law that covers government workers with disabilities.

It’s very similar to the Americans with Disabilities Act (ADA), and it prohibits the discrimination on the basis of an individual’s disability.

In Hwang’s lawsuit, she cited EEOC guidance and argued that Kansas State’s inflexible leave policy was inherently discriminatory. She also claimed Kansas State was required to provide her with additional leave as a reasonable accommodation.
A timeline for employers?

The court not only ruled in favor of the employer, it also offered a succinct explanation on why Hwang’s request wasn’t feasible.

The court commented on Hwang’s request for additional leave, saying it:

perhaps goes without saying that an employee who isn’t capable of working for [six months] isn’t an employee capable of performing a job’s essential functions — and that requiring an employer to keep a job open for so long doesn’t qualify as a reasonable accommodation. After all, reasonable accommodations — typically things like adding ramps or allowing more flexible working hours — are all about enabling employees to work, not to not work.

That statement is significant in and of itself because the court is essentially shooting down the argument that additional leave is a reasonable accommodation in most situations — a stance many employers feared courts were leaning toward.

Even more significant, however, is what the court said regarding the company’s six month leave policy and its ability to terminate workers who can’t return to work after their leave time is over.

According to the court, it’s:

difficult to conceive how an employee’s absence for six months … could be consistent with discharging [i.e., performing] the essential function of most any job in the national economy today.

With that statement, the court seems to be spelling out a timeline employers can use to deny additional leave, claiming more than six months of leave presents an undue hardship to business. In the past, courts have ruled that additional leave must be considered as a reasonable accommodation, but intentionally avoided mentioning specific time periods.

In fact, the closest we’ve seen is a ruling that touched on additional leave being unreasonable is a case where a court dismissed the idea that “indefinite” leave could be considered an accommodation under the ADA.

Here the court seems to be saying that keeping an employee’s position open for longer than six months would almost always present an undue hardship on the company.

Policy can ‘protect rather than threaten’

The court also offered some interesting commentary on how inflexible leave policies impact workers with disabilities.

As the court put it, these policies:

can serve to protect rather than threaten the rights of the disabled by ensuring disabled employees’ leave requests aren’t secretly singled out for discriminatory treatment, as can happen in a leave system with fewer rules, more discretion, and less transparency.

Although this decision’s certainly welcome news for employers, it’s important to remember that it’s just one appeals court — other federal circuits could certainly have ruled differently. Still, if your company ever finds itself in a similar legal snarl, it’s good to know that there is existing case law that argues in your favor.