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09/01/2017

Zinser update: DOL seeking comments on changes to overtime exemption rules

Editor's Note: The article below is written by Nashville attorney Michael Zinser, who is one of the newspaper industry's leading experts on employee relations and independent contractor matters. This column is written for the ONMA Circulation Managers Committee and does not constitute specific legal advice. To contact Zinser, e-mail mzinser@zinserlaw.com.

By L. Michael Zinser

On July 25, 2017, the U.S. Department of Labor issued a formal Request for Information in preparation for drafting a Proposed Rule on salary levels for the white collar overtime exemptions.

The Request for Information notes that the pending order of the U.S. District Court in Texas called into question the DOL’s authority to utilize a salary level test in determining the exempt status of executive, administrative, and professional employees. The DOL is appealing that part of the District Court’s order.

At this time, the DOL has decided not to advocate for the specific salary level ($930 per week) set in the 2016 Final Overtime Rule, and intends to undertake further rulemaking to determine what the salary level should be. In light of the pending litigation, the DOL has decided to issue this request for information, rather than proceed immediately to a Notice of Proposed Rulemaking. The DOL believes that gathering public input now will greatly aid in the development of a Notice of Proposed Rulemaking.

The Request for Information notes that, on February 24, 2017, President Trump signed Executive Order 13777, “enforcing the regulatory reform agenda.” Consistent with this Executive Order, the DOL is reviewing the impact of the 2016 Final Overtime Rule’s changes, with a focus on lowering the regulatory burden.

Additionally, the Request for Information acknowledges the DOL’s awareness that the standard salary level set in the 2016 Final Rule was too high.

The DOL is inviting comments on the 2017 revisions to White Collar Exemption Regulations, “including whether the standard salary level set in that Rule effectively identifies employees who may be exempt, whether a different salary level would more appropriately identify such employees, the basis for setting a different salary level, and why a different salary level would be more appropriate or effective.”

The DOL seeks comment and information on the following questions:

  1. Would updating the 2004 salary level for inflation be an appropriate basis for setting the standard salary level and, if so, what measure of inflation should be used?
  2. Should the regulations contain multiple standard salary levels? If so, how should these levels be set: by size of Employer, census region, census division, state, metropolitan statistical area, or some other method?
  3. Should the DOL set different standard salary levels for the executive, administrative, and professional exemptions, as it did prior to 2004 – and, if so, should there be a lower salary for executive and administrative employees, as was done from 1963 until the 2004 Rulemaking?
  4. Would a test for exemption that relies solely on the duties performed by the employee, without regard for the amount of salary paid by the Employer, be preferable to the current standard test? If so, what elements would be necessary in a duties-only test, and what examination of the amount of non-exempt work be required?
  5. The 2016 Final Rule, for the first time, permitted non-discretionary bonuses and incentive payments (including commission) to satisfy up to 10% of the standard salary level. Is this an appropriate limit or should the regulations feature a different percentage cap?
  6. Should there be multiple total annual compensation levels for the highly compensated employee exemption? If so, how should they be set? By size of Employer, census region, census division, state, metropolitan statistical area, or some other method?
  7. Should the standard salary level of a highly compensated employee total annual compensation level be automatically updated on a periodic basis to ensure they they remain effective, in combination with their respective duties test, at identifying exempt employees?

To view the full Request for Information and obtain instructions for submitting comments, visit the Federal Register website (http://tinyurl.com/yco2cssi). Note that written comments must be submitted on or before September 25, 2017.

 

Court of Appeals Reverses NLRB on Handbook Policies

In recent years, the National Labor Relations Board has relentlessly attacked common sense policies found in many employee handbooks. This writer has been hoping that the U.S. Court of Appeals would correct these egregious decisions. I am delighted to report that, on July 25, 2017, the U.S. Court of Appeals for the 5th Circuit issued an opinion in a case involving
T-Mobile that did just that.

By way of introduction, the Court stated that the NLRB must give a workplace rule a reasonable reading. The NLRB must refrain from reading particular phrases in isolation and must not presume improper interference with employee rights. The appropriate objective inquiry is not whether a rule could conceivably be read to cover Section 7 activity, but rather, whether a reasonable employee reading the rules would construe them to prohibit conduct protected by the National Labor Relations Act.

In this case, the Court said the reasonable employee is a T-Mobile employee aware of his legal rights, but also interprets work rules as they apply to the everyday-ness of his job. The reasonable employee does not view every employee policy through the prism of the NLRA. The Court stated, “Indeed, the Board must not presume improper interference with employee rights.”

The Court first addressed the following “Workplace Conduct” policy:

T-Mobile expects all employees to behave in a professional manner that promotes efficiency, productivity, and cooperation. Employees are expected to maintain a positive work environment by communicating in a manner that is conducive to effective work and relationships with internal and external customers, clients, coworkers, and management.

The NLRB had found the policy violated the NLRA because it discouraged protected activity, including candid, potentially contentious discussion of unionizing. The Court found the rule to be unreasonable and poked fun at the NLRB, with a footnote stating, “Indeed, the Late Show host Stephen Colbert mocked the Board’s decision in this case, joking that the government says ‘I can’t legally ask my employees to be happy.’”

The Court stated that a reasonable employee would interpret the policy as requiring professional manners, positive work environment, effective and courteous communications, getting along with everybody, common sense, and people skills. Further, the Court noted that the NLRB erred by interpreting the rule as to how the reasonable employee could rather than would interpret these policies – an incorrect analysis.

The Court also quoted the D.C. Circuit in another case, which stated, “It is preposterous that employees are incapable of organizing a union or exercising their other statutory rights under the NLRA without resorting to abusive or threating language.”

The Court next examined the following “Commitment to Integrity” policy:

At T-Mobile, we expect all employees, officers, and directors to exercise integrity, common sense, good judgment, and to act in a professional manner. We do not tolerate inconsistent conduct. While we cannot anticipate every situation that might arise or list all possible violations, the acts listed below are unacceptable.

Some of the unacceptable acts included arguing or fighting with coworkers; insubordination to supervisors; failing to treat others with respect; and/or failing to demonstrate appropriate teamwork.

The NLRB had ruled that this policy violated the Act. The Court disagreed, stating that the rule, like the Workplace Conduct rule, is, on its face, only a common sense civility guide. The Court stated that a reasonable employee would be fully capable of engaging in debate or union activity working conditions without inappropriately “arguing or fighting,” “failing to treat others with respect,” or “failing to demonstrate appropriate teamwork.”

The Court examined the Company’s “Acceptable Use” policy:

Users may not permit non-approved individuals access to information or information resources, or any information transmitted by, or received from, printed from, or stored in these resources, without prior written approval from an authorized T-Mobile representative.

The NLRB found the policy violated the Act because it would prohibit protected activity such as accessing and sharing wage and benefit information contained in the employee’s e-mail. The Court again disagreed, stating that the NLRB ignored the context of the rule. The “Scope” section of the rule explicitly states that the policy “applies to all non-public T-Mobile information.”

The Court stated that, where a Company policy prohibits the disclosure of non-public information, courts presume that a reasonable employee would not construe the policy to prohibit the disclosure of information that may be properly used in protected activity, such as wage and benefit information, so long as the policy does not explicitly state that it encompasses such information. The Court believed the NLRB’s finding was just unreasonable.

T-Mobile also had a recording policy that the NLRB found violated the Act. Here, the Court agreed with the NLRB that the policy was unlawful. The Court stated:

We are primarily concerned with the broad reach of the recording ban. The ban, by its plain language, encompasses any and all photography or recording on corporate premises at any time without permission from a supervisor. This ban is, by its own terms alone, stated so broadly that a reasonable employee, generally aware of employee rights, would interpret it to discourage protected and concerted activity, such as even an off-duty employee photographing a wage schedule posted on a corporate bulletin board.

This writer notes that the Court indicated a narrower policy banning recording may pass muster.

Conclusion

To sum up, the Courts of Appeal are, in some cases, correcting these NLRB decisions that defy common sense. Let us hope that the NLRB itself reverses course and restores common sense once William Emanuel is confirmed to fill the Board’s final remaining vacancy.

 

Non-Union Employee Raise is Okay

The U.S. Court of Appeals for the D.C. Circuit, in a June 30, 2017 decision, reversed a two to one decision of the National Labor Relations Board and held that the Employer lawfully granted unrepresented employees a three percent wage increase while withholding the same from represented employees whose union was negotiating a first-time contract with the Employer.

The D.C. Circuit was obviously influenced by NLRB Member Miscimarra’s dissenting opinion. The D.C. Circuit noted that the Board has long held:

Absent an unlawful motive, an employer is privileged to give wage increases to his unorganized employees, at a time when his other employees are seeking to bargain collectively through a statutory representative. Likewise, an employer is under no obligation under the Act to make such wage increases applicable to union members, in the face of collective bargaining negotiations on their behalf involving much higher stakes. [Emphasis added]

The Court held that, in order for there to be a violation of Section 8(a)(3), discrimination under the circumstances of this case, the NLRB must find that the Employer’s action was motivated by anti-union animas, with an intent to prejudice the employees because of their decision to vote for union representation.[1]

The Court found that there was no substantial evidence to support the Board’s decision. The Court stated that the Board erroneously relied upon four findings:

Statement No. 1 – The Manager stated that the Company “was going to give us a raise until we voted the Union in.” The Court criticized the Board’s reliance on this statement, believing it was nothing more than an accurate statement of the same strategy the Board held lawful in Shell Oil. The statement was “merely a realistic statement of the effects of the bargaining obligation which the [Employer] incurred when the Union was certified to represent the employees”).

Statement No. 2 – A statement made by a Supervisor that $56,000 previously budgeted for a raise was instead going to be used to pay the Company’s lawyers. The Court noted that the statement was “made during ongoing bargaining and faults not the employees' decision to unionize but the Employer's increased costs, an unavoidable reality affecting its resources.”

Criticizing the Board, the Court stated, “Perhaps the Board thinks employees do not understand that collective bargaining has costs in addition to benefits, but pointing that out is not an appeal to desert the Union.” The Court further noted that Management did not suggest that “represented employees could capture the wage increase if they abandoned the Union.”

Statement No. 3 – Supervisors stated that giving the represented employees a three percent wage increase “when the Union was demanding a 20% raise immediately and 50% over three years, would have likely provoked a strike,” which had been authorized. The second justification was Management’s claim that they “gave a three percent wage increase to the nonunion employees … in order to stem the high quit rate among unrepresented supervisors and managers.”

The Court thought these justifications were “respectively a facially reasonable bargaining strategy and a rational business decision.” The Court also noted that the Board “entirely failed to address why granting a three percent increase to represented employees would not have severely impaired the Employer's bargaining position.” The Employer also stated that they were “attempting to avoid a charge for ‘not good faith bargaining.’”

Statement No. 4 – A statement made by a Supervisor that “the Union would be gone in November” was made before any increase was approved for the unrepresented employees. The Administrative Law Judge found that that statement “simply indicates that [the Supervisor] believed no contract would be negotiated.” The Board disagreed but did not explain its basis for doing so.

The Court indicated that for that “statement to reflect the Company's antiunion animus when it later withheld the wage increase from represented employees, the Board would have to find that [the Supervisor] knew or foresaw in May that the Employer would refuse to increase the wages of represented employees in October.”

Bottom line, the Employer’s withholding the increase from union-represented employees was for legitimate, non-discriminatory reasons: to preserve bargaining leverage; prevent a strike; and avoid an unfair labor practice charge.

 

[1] This was the second trip to the D.C. Circuit for this Employer. In the first drip to the D.C. Circuit, the Court rejected the NLRB’s decision that the Employer violated Section 8(a)(5). The Union had argued that the Employer had a past practice of giving raises every year; the D.C. Circuit found that the Board could not possibly have concluded that annual, across-the-board increases were an established condition of employment under these facts.