The Importance of Clear Floating Holidays and Personal Days Policies

Q:  My company offers floating holidays to employees.  Can we have a “use it or lose it” policy for unused floating holidays?  Do they have to be paid out at termination?  What about personal days?

A.  Like many wage and hour questions, the treatment of floating holidays and personal days is governed by state law. As explained in more detail below, in most states, treatment of floating holidays and personal days is governed by the employer’s policy.  However, in California, treatment is governed by state law.

Many employers offer paid floating holidays and/or paid personal days to give employees flexibility to use them for religious holidays or special events, such as birthdays. Some employers allow employees to use floating holidays/personal days anytime during the year, while others tie their use to a specific event.  For example, some employers provide a floating holiday upon an annual employment anniversary, and require that the holiday be used within a week of the anniversary.  Under most employer policies, personal days can be used at any time during the year, subject to employer approval.

Most states, including New Jersey and Pennsylvania, allow for floating holidays and personal days to be governed by the employer’s written policies. If the employer’s policy states that unused floating holidays/personal days are forfeited at the end of the year, that policy governs.  Likewise, an employer’s policy may provide that floating holidays and personal days will not be paid upon termination.  In many cases, however, the lack of a written policy may be held against the employer, even if the employer’s practice is to require forfeiture and/or refuse payout at termination.  In short, in most jurisdictions, the employer may set the rules for floating holidays, but the employer is well-advised to do so in a clear written policy.

In California, the type of floating holiday/personal day affects its treatment. The California Division of Labor Standards Enforcement has opined that leave time that is provided without condition is presumed to be vacation (and thus treated as wages) no matter what the employer calls the days off.  Thus, floating holidays/personal days that can be used at any time are treated like vacation, which means that under California law, they cannot be forfeited (i.e. must roll over from year to year) and must be paid out upon termination.  Floating holidays/personal days that are tied to a specific date (such as an employment anniversary, a birthday or the selection of one of a number of holidays) and must be used on or near that date, are not treated as vacation and therefore, under California law, they can be forfeited if not used and the employer does not have to pay the employee for the unused time upon termination.

Regardless of where they do business, employers should have clear written policies regarding treatment of floating holidays and personal days. Moreover, in California, employers who do not want floating holidays/personal days to roll over year-to-year or be paid out upon termination should revise their policies so that the time off is tied to a specific event or date, rather than allowing floating holidays or personal days that may be used for any reason.

–Jessica Rothenberg

Complying with the Department of Labor’s Proposed Overtime Regulations

Q.  I heard that the United States Department of Labor is planning to raise the salary threshold for exempt status again. What is the new rule and when does my company have to comply?

A.  On March 7, the U.S. Department of Labor issued its long-anticipated proposed rule that would expand overtime eligibility under the Fair Labor Standards Act (FLSA) to include a significant number of additional workers. The proposal will be open to public comment for 60 days, with the final rule set to take effect around January 1, 2020.

Under current regulations, in effect since 2004, employees with a salary below $455 per week, or $23,660 annually, are nonexempt and must receive overtime pay for hours worked over 40 hours per week, regardless of whether their duties fall within one of the FLSA exemptions. The new rule would raise the salary threshold from $455 to $679 per week, or $35,308 per year, meaning that employees who earn less than those thresholds will be automatically nonexempt and eligible for overtime on the effective date. Employees earning salaries in excess of either threshold may still be nonexempt and eligible for overtime based on their job duties.

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Connecticut Law Prohibiting Wage History Inquiries and Restrictions on Employee Wage Discussions Now in Effect

Q: I have employees in Connecticut.  What do I need to know about the new pay equity law?

A:  Effective January 1, 2019, employers are not allowed to: (1) inquire (whether directly or through a third party) about a prospective employee’s wage history; or (2) prohibit employees from disclosing or discussing the amount of their wages or the wages of another employee that has been voluntarily disclosed by the other employee.

“Wages” are defined as “compensation for labor or services rendered by an employee, whether the amount is determined on a time, task, piece, commission or other basis of calculation.” 2018 Conn. Pub. Act No. 18-8, Section 1(a)(3).  Employers can  inquire about the existence of other elements of a prospective employee’s compensation structure (such as stock options), but cannot inquire about the value of those elements.

Under the new law, employees must be permitted to discuss wages with each other, but the law does not require any employer or employee to disclose the wages paid to any employee.  As a result, employees have a right to discuss their wages with other employees, but are under no obligation to do so.  Importantly,  employers may continue to keep individual employee wage information confidential.

Connecticut joins many other states and localities that have enacted similar laws, including New York City, Delaware, and California. Like New York City’s law,  Connecticut’s prohibition on, inquiries about wage history does not apply if the applicant discloses his or her wage history voluntarily.  The question of whether such a disclosure was made voluntarily can be tricky, however, especially after the fact, so employers should tread carefully.

The Connecticut law provides a private right of action to both prospective employees and employees, and authorizes suit within two years of an alleged violation. Employers who are found to have violated the law may be liable for compensatory damages, punitive damages, and attorney’s fees and costs.

To ensure compliance, employers should review job applications for positions in Connecticut to ensure that they do not include inquiries about wage history. Employers should also review offer letters and employment agreements to ensure they do not contain language prohibiting disclosure and/or discussion of compensation.  Finally, employers should update internal policies and interview guidelines, and ensure that all relevant personnel are aware of the new law.

Jessica Rothenberg

Philadelphia Enacts Fair Workweek Ordinance

Q.  Can you explain to me Philadelphia’s new Fair Workweek Ordinance?

A.  In late December 2018, Philadelphia Mayor Jim Kenney signed an Ordinance that will require large fast-food chains, retailers, and hotels to provide employees with advance notice of their schedules and a variety of other protections. The Ordinance—known as the “Fair Workweek” Ordinance—requires certain Philadelphia employers to provide employees with at least two weeks’ advance notice of their schedules, offer remuneration to employees if their schedules are changed, and provide minimum periods of rest in between shifts. The Ordinance is similar to ordinances adopted in New York, San Francisco, and other large cities.  It is scheduled to become effective on January 1, 2020.

Some key facts about the Ordinance:

  • The Ordinance applies only to “Covered Employers,” which consist of retail, hospitality and food services establishments that have 250 or more employees and 30 or more locations worldwide. This definition includes chain establishments and franchises associated with a franchisor or network of franchises.
  • Upon hire, all Covered Employers must provide employees with a written, good faith estimate of the employee’s work schedule. The Covered Employer must provide a revised schedule when the employee’s availability changes or the Covered Employer’s business needs change. The employee’s work schedule must include the following information: (1) The average number of work hours the employee can be expected to work over a typical 90 day period; (2) Whether the employee will be expected to work any on-call shifts; and (3) A subset of days/times/shifts that the employee typically will work.
  • Covered Employers also must provide employees with written work schedules. When the law takes effect in 2020, the schedules must be provided at least 10 days in advance of the schedule start date. Covered Employers will be required to provide 14 days advance notice beginning in 2021.
  • An employee may decline to work hours or additional shifts not included in the posted work schedule.
  • The Ordinance requires “Predictability Pay.” Predictability Pay is a monetary payment made by a Covered Employer to an employee as compensation for making changes to the employee’s work schedule. Predictability Pay is in addition to any other wages earned by the employee for actual work performed.
  • Covered Employers must pay one hour of “Predictability Pay” at the employee’s regular rate of pay if the Covered Employer adds time to a work shift or changes the date, time, or location of the shift, even if there is no loss of hours. Additional Predictability Pay is required if a Covered Employer subtracts hours from a regular shift or a regular shift is cancelled. If the employer makes changes to a posted schedule within 24 hours of initially posting the schedule, then no Predictability Pay will be required.
  • Employees may decline, without penalty, any work hours that are scheduled or otherwise occur less than nine hours after the end of the previous shift. An employee working a shift that begins less than nine hours after the end of the previous shift must be compensated $40 (in addition to their normal wages) for each such shift.
  • Covered Employers must offer work shifts to existing employees before utilizing subcontractors or hiring new employees from an external applicant pool. The work must remain available to existing employees for at least 72 hours (unless less time is necessary in order to complete the work).
  • As with most statutes, Covered Employers must post notice of the requirements of the Fair Workweek Ordinance. It is expected that the City will provide a model notice before the Ordinance’s effective date.
  • Covered Employers must be careful to maintain records (including but not limited to good faith estimates of work schedules provided to employees at the commencement of employment, work schedules, and payroll records that specify the amount of Predictability Pay paid to employees) for a period of at least two years in order to demonstrate compliance with the Ordinance.
  • At the request of any employee, a Covered Employer must provide employees with work schedules for all employees at the particular location for any previous week in the past two years, including the originally posted and any modified versions of work schedules.
  • Employees will have a private right of action under the Ordinance, and upon prevailing in such an action, can recover the full amount of any unpaid compensation, including Predictability Pay, and an equal amount as liquidated damages up to a maximum of $2,000. Employees will also be able to recover attorneys’ fees and costs.We expect that the agency charged with enforcing the Ordinance will issue implementing regulations prior to the Ordinance’s effective date. While the Ordinance does not take effect until 2020, the Ordinance is likely to impose significant administrative burdens and costs on Covered Employers. Covered Employers should work with experienced employment law counsel to minimize the burden and begin to take steps to prepare for implementation of the Ordinance.

Lee Tankle

MINIMUM WAGE INCREASES SCHEDULED FOR NEW YORK EMPLOYEES

Q.  My company conducts operations in several locations throughout New York State. What do I need to know about the upcoming minimum wage increases and new salary threshold requirements for our administrative and executive level employees?

A.  Employers in New York State should prepare to ring in the New Year with yet another increase in the minimum wage, as well as substantial increases in the salary thresholds for exempt executive and administrative employees. In 2016, as part of a sweeping overhaul of the state’s wage and hour law, the New York Department of Labor amended the rules to provide for annual increases across the spectrum of wages, with the third phase set to go into effect on December 31, 2018.

Minimum Wage Increases

The increases in the general minimum wage depend on the employer’s location and number of employees. For example, in New York City, the minimum wage requirement for employers with 11 or more employees will rise from $13 to $15 per hour, with no additional increases planned for the following years.  For New York City employers with fewer than 11 employees, the minimum wage will increase from $12 to $13.50, with an additional increase to $15 slated for December 31, 2019.

The minimum wage requirements increase more gradually for employers outside of New York City. In Nassau, Suffolk, and Westchester counties, employers must raise wages for hourly employees from $11 in 2018 to $12 in 2019.  Employers in all other counties are required to raise the minimum wage from $10.40 to $11.10 per hour.  These increases outside of New York City will continue at the same rate and on the same date annually, with the final increase effective December 31, 2021.  On that date, the statewide minimum wage settles at $15 per hour, regardless of the employer’s location or number of employees.

In addition, the law provides a separate schedule of increases for employees in the fast food industry. Effective December 31, 2018, New York City fast food workers must receive a minimum wage of $15 per hour, while those workers in the rest of the state will see incremental increases annually before arriving at the statewide $15 per hour minimum wage at the close of 2021.

Employers should note several points regarding these changes. First, the applicable minimum wage rate is based on where the employee works, rather than the location of the employer’s headquarters.  Notably, for employees working in more than one location, employers must pay wages based on the applicable rate for the location where a given hour is worked.  In those cases, the employer must record the location worked and the commensurate wage, although the law allows the employer to use a hybrid overtime rate based on the applicable rates for the different locations.

Increases to Salary Threshold for Exempt Status

In addition to changes to the minimum wage, employers must ensure that their employees classified as exempt under the executive or administrative exemption meet the new salary threshold for exempt status. For non-hourly executive and administrative employees, the minimum salary necessary to claim the overtime exemption will rise significantly, again depending on the employer’s size and location.  Regarding the location, it is thus far unclear whether the applicable salary threshold is determined by the location where the work is performed, or some other factor such as the location of the employer’s primary place of work.

Assuming the employee works in one location, on December 31, New York City employers with 11 or more employees must raise salaries for exempt employees from $975 per week in 2018 to $1,125 per week. Along the same timeline, for employers with fewer than 11 employees, the weekly salary threshold increases from $900 to $1,102.50.  In Nassau, Suffolk, and Westchester counties, the salary threshold for exempt status rises from $825 to $900 per week, with further increases yearly until salaried employees in those counties reach the $1,125 threshold in 2021.  For all other counties, the salary threshold increases from $780 to $832 per week at the end of this year, with two additional increases scheduled before arriving at $937.50 at year end 2020.

Employers with employees earning salaries that fall below the new threshold on the effective date have several options going forward. If feasible, the simplest solution for employers in most cases is to raise salaries for exempt employees up to the threshold.  Alternatively, to mitigate the financial burden of the new law, employers might consider reclassifying these employees as non-exempt, track hours worked, and pay them overtime for hours worked over 40 in a workweek.

Given the scope of these changes, every employer in New York should conduct a thorough analysis of its workforce to ensure compliance with the new laws and to assess the financial impact of these changes. For exempt workers earning salaries near the new threshold, employers should carefully analyze the particular circumstances in light of the options discussed above before deciding the most prudent course of action.  Finally, employers in counties outside New York City (and small employers in the City) should mark their calendars in preparation for additional increases annually over the next several years.

Rogers Stevens