Federal Law Half-Year Update for The Vision Council Members

Federal Law Half-Year Update for The Vision Council Members

Written by Hedley Lawson, Global Managing Partner, Aligned Growth Partners, LLC

As we crossed through the first half of 2019, it seemed appropriate to inform The Vision Council members of recent federal law changes issued by various federal agencies.

EEO-1 Pay and Hours Data Due Sept. 30, 2019

Employers that file EEO-1 reports should make note of this significant change: This spring, a federal court reinstated the revised EEO-1 report that was stayed "indefinitely" back in 2017, which means employers must submit hours and pay data (also known as "Component 2 data") for calendar years 2017 and 2018 to the Equal Employment Opportunity Commission (EEOC) by Sept. 30, 2019. Although the federal government has appealed the court's decision, this appeal doesn't alter employers' obligations to submit Component 2 data by the Sept. 30 deadline.

The Sept. 30 deadline to file Component 2 data is in addition to the May 31, 2019, deadline by which employers had to file the EEO-1 report that collected data about gender, race and ethnicity (also known as "Component 1 data") for 2018.

The EEOC expects to begin collecting the Component 2 data in mid-July 2019 and will notify filers of the precise date the survey will open as soon as it is available. The EEOC plans to release guidance for employers on the collection process. For more information, visit the EEOC's website.

Social Security Agency "No-Match" Letters Are Back

In March 2019, the Social Security Administration (SSA) resumed sending "no-match" letters (formally known as Employer Correction Requests) to advise employers that information submitted on an employee's Form W-2 doesn't match SSA records. Employers have 60 days from receipt of the letter to submit a Form W-2C with the necessary corrections.

The no-match letters don't imply that the employer or employee intentionally reported incorrect information, they simply advise an employer of any SSA record discrepancies. The letters also don't address an employee's work authorization or immigration status; the SSA cautions that a no-match letter is not proof that an employee is not authorized to work and should not be the basis for any adverse action against an employee. California law also protects employees who update their personal information, such as their name or Social Security number. If you receive no-match letters, look on the SSA's website for helpful resources.

Department of Labor Proposes Changes to Federal Overtime Rule

The U.S. Department of Labor (DOL) proposed overtime rule would increase the white-collar exemption salary test from $455 per week to $679 per week. The proposed rule also increases the salary test for highly compensated employees from $100,000 to $147,414 per year, and it allows employers to satisfy up to 10 percent of the salary test through the payment of nondiscretionary bonuses, incentives and commissions that are paid at least annually. The proposed rule doesn't change the duties test for the exemptions or include automatic increases to the salary test. More information on the proposed rule can be found on the DOL website.

It's important to note that because the proposed federal salary test is still lower than California's exempt salary test, employers must follow the more generous California salary test when classifying employees under California's executive, administrative and professional exemptions. California's salary basis test requires employees to earn a minimum monthly salary of no less than two times the state minimum wage for full-time employment, and the salary must be a pre-determined sum. California's current salary test is $3,813.33 per month for employers with 25 or fewer employees and $4,160 per month for employers with 26 or more employees. In addition, California law doesn't contain a highly compensated employee exception, nor does it allow employers to count bonuses, incentives or commissions toward the salary test.

DOL Also Proposes Changes to Regular Rate of Pay

The DOL also proposed changes to the regulations that govern how employers calculate an employee's regular rate of pay for purposes of paying overtime. The DOL proposal identifies specific kinds of compensation or benefits that may be excluded from an employee's regular rate of pay. More information about the proposed rule can be found on the DOL website.

DOL Issues Opinion Letter on Family and Medical Leave Act

The DOL issued an opinion letter that addresses how employers designate Family and Medical Leave Act (FMLA) leave, stating that employers are prohibited from:

  • Delaying designation of FMLA-qualifying leave, even if the employee would prefer that the designation be delayed; and
  • Designating more than 12 weeks of leave (or 26 weeks of military caregiver leave) as FMLA leave.

According to the DOL, a practice that allows employees to exhaust paid time off before starting FMLA leave would not be permissible because an employer can neither delay designation of leave as FMLA-qualifying nor provide the employee with more than 12 weeks of protected FMLA leave.

The DOL opinion letter directly conflicts with a 2014 Ninth Circuit case that held an employee could decline the use of FMLA leave (Escriba v. Foster Poultry Farms, Inc., 743 F.3d 1236 (9th.Cir. 2014)). Although the DOL opinion letter acknowledges that it disagrees with the Escriba holding, the case is still binding in the Ninth Circuit, which includes California. Employers faced with an employee in California who wants to decline FMLA-qualifying leave should consult legal counsel in light of these conflicting authorities.

DOL Proposed Changes to Joint-Employer Regulations

Lastly, the DOL proposed changes to the federal joint-employer regulations to include a four-factor test for determining whether a joint-employer relationship exists between two entities. The proposed test looks at whether the potential joint employer actually exercises the power to:

  • Hire or fire the employee;
  • Supervise and control the employee's work schedules or conditions of employment;
  • Determine the employee's rate and method of payment; and
  • Maintain the employee's employment records.

The proposal also includes a set of examples to help clarify what may constitute joint-employment status. More information on the proposed rule also can be found on the DOL website.