Thursday, May 19, 2016

Obama Administration Extends Overtime Pay to Millions of Middle Class Workers

On May 18, 2016, President Obama released the Department of Labor’s final rule updating the Fair Labor Standards Act (“FLSA”) overtime regulations and dramatically expanding the number of employees entitled to overtime pay. The FLSA overtime regulations were last updated more than a decade ago.

The FLSA guarantees, among other things, overtime pay at a rate of not less than one and one-half times the employee’s regular rate for hours worked over 40 in a workweek. There are a number of exemptions, however. The most common exemptions from overtime pay are those for executive, administrative, professional, outside sales, and computer employees—otherwise referred to as the “white collar exemptions.” Employees in those categories are considered “FLSA exempt.”

Previously, FLSA exempt employees were those who met certain minimum tests related to their primary job duties and were paid more than $455 per week or $23,660 for a full-year. The impact of the old rule is clear: any hourly employee earning more than $23,660 per year (which comes to less than $12 per hour) is not eligible for overtime no matter how many hours they work per week. This gave rise to exploitation of middle class employees by paying them just over the threshold, such as $24,000 a year, thereby ensuring they were exempt from the overtime rules, even though $24,000 is considered poverty level for a family of 4 in 2016.

The final rule, which takes effect on December 1, 2016, dramatically expands the number of employees entitled to overtime pay by effectively doubling the salary exemption level, from $23,660 to $47,476 (or $913 per week). The new rule will automatically update to ensure the threshold is maintained at the 40th percentile of full-time salaried workers in the lowest-wage Census Region, which is currently the South. In addition, the total compensation threshold for highly compensated employees was raised to $134,004, or the 90th percentile of full-time salaried workers nationally.

According to DOL, about 35% of full-time salaried employees will now be eligible for overtime pay when they work over 40 hours, in comparison to the 7% eligible under the old threshold. DOL estimates that the new regulation will boost more than 4.2 million workers’ pockets within the first year of implementation. This is because to avoid paying employees overtime, employers will either have to pay them more than $47,476 per year, or not require that they work more than 40 hours in a week. Vice President Biden noted that the share of full-time workers qualifying for overtime based on their salaries has plummeted from 62% in 1975 to 7 percent today.

The upside of these changes for workers is more pay, more free time, or perhaps a raise to put them over the salary threshold. Also, employers may have to hire additional employees to work hours that used to be overtime. The downside, however, may come in the form of layoffs and salary adjustments—i.e., the employee continues to work the same hours and the employer lowers the hourly rate.

Small businesses and nonprofit groups were quick to criticize the changes. “As it stands, throngs of employees across the country…will face reduced opportunity and flexibility in the workplace,” said American Bankers Association President and CEO, Rob Nichols. Similarly, the Society for Human Resource Management stated that “[w]hile changes in regulations were meant to benefit employees, a change of this magnitude will do the opposite. There likely will be fewer opportunities of overtime pay as employers are forced to restructure their compensation and staffing.” These changes remain to be seen.

For more information on how the overtime rule changes may impact you or your business, please contact us at Kalijarvi, Chuzi, Newman, & Fitch.


Written by Alex Kutrolli

Tuesday, May 17, 2016

How Appealing are HHS Scientists Now?

It is widely known that the Department of Health and Human Services (HHS) is the home of one of the greatest collection of scientists and physicians in the world.  The Centers for Disease Control employs investigators of Ebola and other infectious diseases who operate around the globe; the Food and Drug Administration requires researchers in food and drug safety and medical devices; and the National Institutes of Health is widely regarded as the most sophisticated medical research institution in the world.

What is not widely known is that, according to HHS, between 7,000 and 10,000 of these employees were not entitled to appeal to the Merit Systems Protection Board if they are fired, demoted, or suspended for 15 days or more.  A recent decision from the U.S. Court of Appeals for the Federal Circuit declared for the first time that these employees do have civil service appeal rights.

About 70 years ago, the Government realized it could not compete with the private sector for the services of scientists and physicians if their salaries were limited by the Government’s pay scales.  Accordingly, Congress granted the Public Health Service, the agency where most of these employees worked, the authority to “appoint employees without regard to the civil service laws.”  This language, which allows the Government to pay much higher salaries to these employees, was included in two statutes, 42 U.S.C. § 209(f) and 42 U.S.C. § 209(g); as the result, the employees hired under these statutes are called “Title 42 employees.”

In 1979, Congress enacted the Civil Service Reform Act.  The CSRA established procedures, such as advance written notice and an opportunity to reply, which had to be given to “employees” before they could be fired or suspended, and it also allowed them to appeal those actions to the MSPB.  The definition of “employee” included non-probationary competitive service employees, as well as preference eligible employees (veterans) who spent at least a year in the excepted service.  In 1990, Congress changed the definition of employee to include excepted service employees with 2 years of service.  Throughout the introduction of these new laws, however, one thing remained the same: regardless of the definition of “employee”, HHS told its Title 42 employees they could not appeal to the MSPB because Title 42 allowed them to be “appointed without regard to the civil service laws.”  HHS and the MSPB interpreted that language to mean that Title 42 employees could be fired “without regard to the civil service laws.”  Some Title 42 employees, such as CDC employees, were fired or suspended with no notice or opportunity to be heard, while others, such as NIH employees, were given a Proposal and a right to Reply, but were told they would not be able to appeal to the MSPB if the decision went against them.

In 2014, the CDC gave one of these employees, Dr. Renu Lal, a letter telling her she was terminated, but it did not say why and she was not permitted to tell her side of the story.  Dr. Lal went to the MSPB, which dismissed her appeal based on 209(f).

On May 11, 2016, however, the U.S. Court of Appeals for the Federal Circuit reversed the Board. Since Congress expanded the definition of “employee” in 1990 to include excepted service employees, the Federal Circuit has decided three cases in which agencies have taken actions against employees and argued they could not appeal.  In the first case, Todd v. Merit Systems Protection Board, the court agreed that Todd could not appeal the reduction in his salary, but that was because the statute under which he was hired provided that “the employment relationship may be fixed without regard to the Civil Service Act and . . . [sections] 7511, 7512, and 7701 of title 5.”  5 U.S.C. sections 7511, 7512, and 7701 define “employee” and the protections available to employees, including the right to appeal.

In the second case, King v. Briggs, an employee was fired and the agency argued she was not entitled to appeal, citing Todd.  In Briggs, the statute said Ms. Briggs could be appointed “without regard to the provisions of Title 5 governing appointments in the competitive service, or the provisions of chapter 51 and subchapter III of chapter 53 of such title relating to classification and General Schedule pay rates.”  Unlike the statute in Todd, the statute in Briggs said nothing about her removal or appeal rights.  The court held that this difference was critical and that she was entitled to appeal her removal to the Board.

In the third case, Bennett v. Merit Systems Protection Board, a Department of Veterans Affairs employee was fired and was denied the right to appeal to the Board.  She pointed to the decision in Briggs and argued she should have that right.  The statute under which Ms. Bennett was appointed, however, said that she could be “appointed, compensated from funds of the Service, and removed by the Secretary without regard to the provisions of title 5 governing appointments.”  The court held that this statute, as with the statute in Todd but unlike the statute in Briggs specifically provided for removal of the employee without the appeal rights to which she was otherwise entitled.

Reviewing those cases, the court held that the statute under which Dr. Lal was appointed, which said merely that she could be “appointed with regard to the civil service laws”, could not preclude her right to appeal her removal because Congress said nothing about removal in the statute.  The court sent Dr. Lal’s appeal back to the MSPB, where she will be able to argue that she was denied basic due process.

While the court’s decision in Dr. Lal’s case involves 42 U.S.C. § 209(f), there is no reason to believe that the decision applies any differently to employees appointed under § 209(g).  According to a Government Accountability Office Report (look on p. 11), “In 2010, 25% of all NIH employees were Title 42 employees, while 10% of CDC employees and 6% of FDA employees were Title 42. NIH relied on Title 42 authority for a substantial portion – 44% its total research and clinical practitioner workforce.”

Recognizing the government’s need to recruit scientists with specialized knowledge and skills, Congress opened a way for HHS to hire the world’s best scientists at competitive salaries. This worthwhile purpose is not served by permitting HHS to fire these scientists and physicians without the civil service protections normally allowed to tenured federal employees.  The Federal Circuit made the right decision in holding that Dr. Lal, and the thousands of other HHS scientists, have the same appeal rights as other federal employees.  Public health will be served by retaining those specialists who would otherwise be fired for arbitrary or erroneous reasons.

By George Chuzi

Note:  Mr. Chuzi is the attorney who represented Dr. Lal in her appeal to the Federal Circuit.

Tuesday, May 3, 2016

Post-Employment Retaliation: Being Right For All The Wrong Reasons

Retaliation is the most frequently alleged basis of discrimination in the federal sector and the most common discrimination finding in federal sector cases.  Of all U.S. Equal Employment Opportunity Commission (EEOC) charges filed in fiscal year 2015, 44.5% asserted retaliation claims—a percentage that has nearly doubled over the last 20 years.  But how far does Title VII’s anti-retaliation provision reach?  The answer: pretty far, according to two U.S. Supreme Court cases, which greatly expanded who and what is protected under Title VII’s anti-retaliation provision.

First, in 1997, the Supreme Court held in Robinson v. Shell Oil Co. that the term “employees” in Title VII’s anti-retaliation provision extends to former employees.  In choosing to read the anti-retaliation provision broadly, the Supreme Court noted that exclusion of former employees from protection would “undermine Title VII’s effectiveness by allowing the threat of post-employment retaliation to deter victims of discrimination from complaining to the EEOC, and would provide a perverse incentive for employers to fire employees who might bring Title VII claims.” Id. at 338. Following Robinson, the EEOC fully recognizes that “[f]ormer employees . . . have standing to bring a claim for actions which occurred post-employment and are alleged to be in retaliation for protected activity engaged in while an employee.”

Second, in 2006, the Supreme Court held in Burlington Northern & Santa Fe Railway Co. v. White that Title VII’s anti-retaliation provision covers any employer action that would be “materially adverse” to a reasonable employee or applicant (i.e., any action that might “dissuade[] a reasonable worker from making or supporting a charge of discrimination.”).  Thus, unlike the substantive anti-discrimination provision, unlawful employment practices under the anti-retaliation provision are not limited to only those affecting an employee’s “compensation, terms, conditions, or privileges of employment.”

Applying these principles, “courts have routinely held that filing a meritless lawsuit or counterclaim against a former employee can form the basis of a retaliation claim.”  The Supreme Court’s liberal interpretation of Title VII’s anti-retaliation provision in Burlington Northern, however, pushes these principles one step further:  any nontrivial action that is likely to dissuade a reasonable worker from engaging in protected conduct can likewise form the basis of a retaliation suit.  For example, the D.C. Court of Appeals in Young & Co. v. Sutherland held that the anti-retaliation statute of the D.C. Human Rights Act, analogous to the anti-retaliation provision of Title VII, “contains no safe harbor for otherwise lawful acts done for an improper retaliatory purpose.”  In that case, the employer took legal action to foreclose on its former employee’s property, which served as collateral for a loan to the employee, after the employee asserted a gender discrimination complaint against the employer.  In discrimination cases, courts continue to hold that “the fact that the employer may have a valid claim does not preclude the employee from establishing that the employer’s motive in asserting the claim was impermissible retaliation.”  Id. at 368.  These holdings demonstrate the far-reaching protections guaranteed by state and federal anti-retaliation statutes—long after an employee leaves the company; to which truth is not always a defense.

On April 26, 2016, the Supreme Court took the opportunity to reaffirm the breadth of anti-retaliation statutes in Heffernan v. City of Paterson.  Here, petitioner, a police officer, was demoted on the mistaken belief that he had engaged in protected speech.  Specifically, that he had supported for mayor a candidate opposing the incumbent mayor.  The City’s defense was that the mayor had not engaged in illegal conduct, because—in fact—the officer was not engaged politically.  The Court emphasized that it is “the employer’s motive, and in particular the facts as the employer reasonably understood them,” that matters.  Id. at 5.  Justice Breyer, writing for the majority, recognized that “a discharge or demotion based upon an employer’s belief that the employee has engaged in protected activity can cause the same kind, and degree, of constitutional harm whether that belief does or does not rest upon a factual mistake;” namely, “discouraging employees—both the employee discharged (or demoted) and his or her colleagues—from engaging in protected activities.”  Id. at 6-7.

In the ADA Amendments Act of 2008 (an Act of Congress, effective January 1, 2009, that amended the Americans with Disabilities Act of 1990 (ADA)), Congress articulated this principle in the statute itself.  Not only can an employer discriminate against a qualified employee or applicant who is disabled, but it is a violation of the ADA to discriminate against an employee or applicant the employer believes is disabled, even if he or she is not.  It is the intent of the employer, rather than the status of the claimant, which controls.

The reach of Title VII’s anti-retaliation provision has yet to be restricted by the courts—employer liability for retaliation does not end when the employee leaves the company and is not relieved because the employer’s action is based on verifiable facts.  The latter provides the fullest protection to former employees:  the focus is not on the former employee’s activity, but is instead on the employer’s “reasons for acting, accounting for what officials believed to be the facts and their motive in response to those perceived facts.”  Thus, employers must ensure that former employees who have engaged in protected activities are treated the same as former employees who have not.

Written by:  Aaron Herreras