Comp Time in Lieu of Overtime

Q.  An employee worked several hours of overtime last week. Can I offer him compensatory time off, to use in the future, rather than pay him overtime?

A.  Currently, unless you are a public-sector employer, the answer is no. Under the Fair Labor Standards Act, employees who are not exempt must be paid overtime pay (one and one-half times their regular pay rate) for all hours worked over 40 in a work week.

That may soon change, however.

Just yesterday, the House of Representatives passed a bill that would amend the Fair Labor Standards Act to allow certain employees to take paid time off rather than receive overtime pay when working more than 40 hours in a week.  Dubbed the Working Families Flexibility Act, the Bill would allow employees to accrue up to 160 hours of compensatory time in a year, at a rate of 1.5 hours for each hour of overtime worked.

The Bill contains some guidance on how to administer such a policy. The employer may provide compensatory time to employees in lieu of overtime pay only if the arrangement is agreed to through a collective bargaining agreement or  in a written agreement between the employer and employee.  The employee must be allowed to use the comp time within a reasonable period after the request, so long as the comp time does not “unduly disrupt the operations of the employer.”

To become eligible to participate in a comp time program, employees will have to have worked at least 1,000 hours of continuous employment in the 12-month period preceding the date of the agreement or receipt of comp time.

Any unused comp time would have to be paid back by the employer at the end of the year (or upon 30 days of notice by the employee in the case of accrued time in excess of 80 hours). Significantly, an employee who has accrued compensatory time off also must be paid for the unused comp time upon termination, regardless of whether the termination was voluntary or involuntary.  In this way, comp time would need to be handled differently from accrued vacation time, which is not necessarily subject to pay upon termination, depending on state law.

It remains to be seen whether this Bill will become actual law, or if it does, whether it will be modified to pass the Senate. If it does pass through the Senate, however, the President has pledged to sign it.

If this option becomes available to private-sector employees in the future, employers will have to take a hard look at their processes to determine whether offering comp time in lieu of overtime makes sense for their organization. While some employers may applaud this initiative as a cost-saving method and a way to provide flexibility to employees, others may see such a program as an administrative burden.

– Tracey E. Diamond

Philly Wage Ordinance on Hold . . . For Now

Q.  I understand that the Philadelphia Wage Ordinance was supposed to go into effect soon. Do I need to take action to comply now?

A.  As we blogged previously, the new Philadelphia Ordinance would make it unlawful for employers in Philadelphia to inquire about a prospective employee’s wage history or require disclosure of wage history as a condition of employment. Employers would only be permitted to rely on such information if the prospective employee knowingly and willingly disclosed his or her wage history to the employer.

The Ordinance provides that its requirements go into effect on May 23, 2017. On April 6, 2017, however, the Philadelphia Chamber of Commerce brought suit to challenge the Ordinance.  The Chamber filed a motion for a preliminary injunction on the grounds that the ordinance violates the free speech rights of businesses under the First Amendment and is unconstitutionally vague.

On April 19, 2017, the Court issued a temporary restraining order staying the enforcement of the Ordinance until the Court can consider and decide the Chamber’s motion for a preliminary injunction. Thus, at least for now, the Ordinance will not go into effect on its May 23rd effective date.

While the suit has halted the effective date of the Ordinance for the time being, we recommend that employers take steps now to prepare in case the Chamber’s suit is unsuccessful. The Philadelphia Ordinance is one of several initiatives across the country enacted to limit employers’ ability to obtain salary history as part of the interview process, and we expect this trend to continue.

If the Ordinance ultimately is upheld, employers who do business in Philadelphia will have to revise their employment applications to delete any questions inquiring about an applicant’s wage history. Recruiters, HR personnel and managers also may need to be trained about the new law so that these individuals know not to ask wage-based questions during the interview process.  In addition, employers may have to consider revising their Equal Employment Opportunity policies to add wage history to the list of protected categories.

-Tracey E. Diamond

Summer Internships: To Pay or Not to Pay?

Q.  My company is thinking about hiring a summer intern. Is there a requirement that we pay the intern, or can we hire him or her on a voluntary basis?

A.  Now that the weather is getting warmer, many companies are looking at their workforce needs during the summer months. Summer internships provide an excellent way for interns to get much needed “real world” job experience, while helping employers by adding another set of hands to complete projects that have not been completed during the rest of the year.

But must the employer pay for this assistance?

In most instances, the intern must be paid at least minimum wage and overtime for time worked above 40 hours in a workweek. Thus, payment of a small stipend, that does not meet minimum wage requirements, will not be enough.  The Fair Labor Standards Act defines the term “employ” very broadly as including anyone who is “suffered or permitted to work.”  Internships in the “for-profit” private sector will most often be viewed as employment.

There is an exception, however, for interns who receive training for their own educational benefit, if the training meets certain criteria. Courts looks to the following six-part test to determine whether an internship can be voluntary:

  1.  The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
  2. The internship experience is for the benefit of the intern;
  3. The intern does not displace regular employees, but works under close supervision of existing staff;
  4. The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
  5. The intern is not necessarily entitled to a job at the conclusion of the internship; and
  6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

If all of the factors listed above are met, the intern is not considered to be “working,” and the Wage Act’s minimum wage and overtime provisions do not apply.

Thus, if the internship program is structured around a classroom or academic experience (such as when the intern receives college credit for the program), as opposed to the employer’s actual operations, then it is more likely that the internship will be viewed as an extension of the individual’s educational experience.

Likewise, if the employer is providing job shadowing opportunities that allow an intern to learn certain functions under the close and constant supervision of regular employees, but the intern performs no or minimal work, the activity is more likely to be viewed as a bona fide education experience and payment is not necessary.

Conversely, if the intern displaces a regular employee and is expected to perform productive work, then the internship is considered to be “employment” and must meet minimum wage and overtime requirements.

Be aware that the test for determining whether an internship is volunteer work is interpreted quite narrowly.  Before hiring that summer intern, think through the above test carefully to see if the internship qualifies for the exception.  Most interns must be paid for their time.

Furthermore, while some employers try to get around the minimum wage laws by hiring their intern as an independent contractor, that relationship can be subject to scrutiny if the relationship is not classified correctly. As a general rule, if the employer expects the intern to work at the job site and provides supervision, the intern will be considered to be an employee and not an independent contractor.

– Tracey E. Diamond

 

New York City Employers May Not Inquire About Applicants’ Salary History

Q.  My company has employees in New York City.  We often ask applicants about their salary history as a starting point for negotiating and setting a new salary.  Are we still permitted to do this?

A.  Effective October 2017, it will be unlawful for employers to ask job applicants in New York City about their salary history.  Salary history includes “current or prior wage, benefits, or other compensation.”  The ban includes inquiries to an applicant’s current or former employer and searches of publicly available information for salary history.

The new law provides that employers can still engage in discussion with an applicant about his/her expectations with respect to salary, benefits, and other compensation, so long as the employer does not inquire about salary history or rely on salary history for determining compensation. Employers can also continue to run background checks and verify an applicant’s disclosure of non-salary related information. However, if the verification or background check discloses the applicant’s salary history, then the employer cannot rely upon it for determining salary.

Prospective employees can volunteer salary history (so long as it is “without prompting”), and in those cases, the employer can consider salary history in determining salary, and can verify the applicant’s salary history.

The new legislation aims to combat pay inequity by preventing employers from perpetuating pay inequity applicants may have experienced in the past. Such legislation has also recently been passed by Philadelphia (effective May 2017), as well as in numerous other cities and states. In 2016, Mayor Bill de Blasio issued an executive order prohibiting New York City agencies from asking prospective employees about their pay history.

The Philadelphia and New York City laws have many similarities. Like the New York City law, the Philadelphia law broadly defines wages as “all earnings of an employee,” including fringe benefits, wage supplements and “other compensation.” The Philadelphia law is enforced by Philadelphia’s Commission on Human Relations, and the New York law is enforced by its equivalent agency, the New York City Commission on Human Rights. Both laws provide that applicants can volunteer salary history, in which case the employer can rely on it to determine the new salary.

To prepare for this law, employers should ensure that job applications for positions in New York City do not ask about salary history. Employers should also update their internal policies and interviewing guidelines to ensure all relevant personnel are aware of the change. Employers who have employees both in and outside of New York City should consider whether to make such changes company-wide, or only to applicants for New York City positions.

Jessica Rothenberg

Uber Sex Harassment Scandal Is Sobering Reminder of the Costs of Ignoring Complaints

Uber made headlines last week when Susan Fowler, a former engineer, claimed that she was harassed by her direct supervisor and her complaints were ignored by the human resources department. Uber took another hit a few days later when a recently-hired executive resigned amidst allegations that he had harassed employees at his former company.

How can you prevent your company from becoming the next media story?

There are several takeaways from the Uber incidents:

  1.  Distribute a written policy prohibiting harassment based on sex and other protected categories. The policy should clearly explain the legal definition of harassment, provide examples of conduct deemed offensive, provide alternative avenues for an employee to lodge a complaint, explain the investigation process, and promise absolute protection against retaliation for good faith complaints of harassment.
  2. Provide harassment prevention training at regular intervals.  Not only is such     training crucial to ensuring that employees understand their rights and obligations, but it also may provide an affirmative defense if an employee sues after failing to make an internal complaint.
  3. Train supervisors on their responsibilities to lead by example.  Supervisors need to be taught how to recognize harassment and what to do if they witness or receive a complaint about inappropriate conduct in the workplace.
  4. Take all complaints of harassment seriously and perform a prompt and thorough investigation.  Analyze emails and text messages as part of your investigation.  Ms. Fowler said that the multiple emails that she forwarded to HR were ignored.  Electronic communications can assist HR departments in determining what really happened in what sometimes can be a “he said/she said” situation.
  5. Take corrective action if appropriate, even if it is the first offense. According to Ms. Fowler, Uber didn’t take her complaint seriously because her supervisor was a “high performer.” Ensure that your evaluation metrics take into account professional behavior in addition to job performance.
  6. Never forget that diversity matters.  Ms. Fowler emphasized the low number of women on her team and in the company in general.  Promoting diversity based on gender, race, ethnicity and other categories helps to ensure that all voices are heard.
  7. Take a hard look at your hiring practices.  When performing background and reference checks, dig into information about previous claims against the prospective employee for workplace misconduct.  Keep in mind, however, that certain federal and state laws may govern your company’s ability to gather this type of information.
  8. Finally, never forget the power of the Internet.  Ms. Fowler’s story gained immediate national attention after she published a detailed essay on her personal blog.  While the Internet is a powerful place to promote your brand, this is not the sort of publicity most companies would like to see.

– Tracey E. Diamond