New Overtime Rules Halted

Just days before the new overtime rules were set to take effect on December 1, a federal judge in Texas has issued an injunction that will stop the new rules from becoming effective. The new rules were to significantly increase the salary threshold applicable to certain exemptions from overtime pay requirements — from $23,600 per year to $47,476 per year.

Judge Amont Mazzant III of the Eastern District of Texas ruled yesterday that the Department of Labor lacked the authority to make the change. The judge reasoned that such a high salary threshold would mean that the salary aspect of exemption tests would effectively supplant the duties test. The judge said that the original intent of including a salary threshold in the exemption tests was merely to “screen out” obviously nonexempt workers so that a duties test would not be necessary in their case. An increase of the salary requirement to $47,476 per year would create, he said, “essentially a de facto salary-only test,” making the duties of the employees in question irrelevant to their status as exempt or non-exempt.

Although yesterday’s ruling was only a preliminary injunction, pundits have predicted that the new salary threshold is unlikely to be revived, given the conservative bent of the Fifth Circuit Court of Appeals (which would hear any appeal of Judge Mazzant’s ruling) and the fact the Department of Labor under the upcoming Trump administration may be less likely to fight for the would-be rule. Employers, stay tuned!

Those with questions about the Texas court’s decision and what it means for their business should contact Portnoy Messinger & Pearl. In particular, employers who have already taken steps to implement the new rules – especially those who have announced salary raises or other changes to their staff – may need guidance in determining next steps.

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Portnoy, Messinger, Pearl & Associates, Inc. is here to answer any questions you have regarding the Texas court’s decision. Please keep in mind that in addition to our staff of seasoned HR professionals, we also have a staff of experienced employment lawyers on hand to address any questions you may have regarding compliance.  Contact us at 800-921-2195 or 516-921-3400. You can also visit our website http://www.pmphr.com/ or e-mail us at info@pmpHR.com.



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Concerns in Non-Profit Executive Compensation

Guest Article By:

Michael F. Maciekowich, National Director

Astron Solutions, LLC

A natural concern that many have in the non-profit sector is the compensation of executives. In fact, a 2011 report from the Chronical of Philanthropy highlighted that the median pay of executives in a survey of 132 charities and foundations increased by 3.8% of the prior year. Three years later, Charity Navigator reported that the typical charity CEO’s compensation had increases of just 2.6% over the prior year. Their report surmises that raises have been modest since the recession. However their report also acknowledges that despite this, there are some non-profit leaders that earn “excessive” wages of more than $1 million. Factors involved in enhancing pay include:

  • Greater competition among non-profits to attract top talent
  • Difficult in retaining staff and a lack of internal candidates for some important positions
  • Non-profits desire to lure corporate executives as the finances of non-profits have become subject to greater government scrutiny.

In addition to higher pay, some non-profits compensate for the lack of stock options and other corporate extras by allowing flexible work time. Others even pay bonuses, once rare at non-profits.

In recent years, the Internal Revenue Service has begun examining executive compensation at non-profits with an eye toward uncovering potential abuse. Understanding the need to recruit and retain quality staff has added to the concern over how to structure compensation policies and programs to be fair and competitive. Incentive plans and other innovative compensation and human resources practices are becoming critical elements in the organizational strategy of many non-profit organizations.

Consider these details when developing a compensation plan for executives in non-profit:

  1. Rationale for developing plans

  Non-profits indicated multiple reasons for creating new programs. More than half of the participants indicated their program objectives included the following: improve morale and/or employee relations; improve employee retention; link pay to performance/improve employee performance; and become more competitive in total compensation (i.e., cash compensation, recognition, and benefits).

  1. Types of plans and performance measures

  The most popular types of cash compensation and recognition programs implemented by the participants were bonuses, incentives, and non-cash recognition programs.

  Productivity, financial, and quality measures were the performance criteria most often used as the basis for the respondents’ compensation awards under a variety of programs.

  1. Budget and award amounts

  The average variable compensation award payouts typically ranged from 20% – 30% of salary. In some organizations, the targeted payouts ranged from 10% – 20% of the salary range midpoint. Interestingly, in Astron’s confidential database of non-profit organizations, target incentives levels are as follows:

  Staff / Non-Management: 5% – 10%

  Supervisory Staff: 5% – 15%

  Middle Management: 10% – 20%

  Senior Management: 15% – 30%

  Executive Management: 20% – 40%

  CEO: 30% – 50%

In addition, here are some guidelines to consider when implementing a new compensation plan:

  1. Non-profit organizations should first conduct an assessment to determine the appropriateness of innovative compensation to their culture and organization. This assessment should focus on the objectives to be achieved through implementing an innovative compensation program, what motivates staff, the opinions and views of members, constituents, and volunteer leaders, and the financial resources available.
  2. Any innovative compensation program should be viewed as part of a total approach to compensation and carefully integrated into the design of that program. A market analysis of current compensation levels related to the jobs in the organization should be conducted in the early stages of or prior to developing a program.
  3. The innovative compensation program, especially management incentive programs that provide significant opportunities for financial rewards, should be clearly tied to performance. The program should demonstrate the achievement of overall organization objectives in finance, program, development, client service, membership, public affairs, government relations, community relations, and any other areas deemed important to the organization.
  4. Organizations should consider pilot testing an innovative compensation program on a selected group of staff before introducing it to all staff. More than one innovative compensation program should be considered, especially in larger organizations. The majority of non-profit organizations in the survey had implemented at least two types of programs.
  5. Innovative compensation programs should be well communicated to staff and used as a vehicle to announce the success of employees, teams, and the organization.

Do you work in the non-profit sector? Is executive pay a concern for your organization? Is there some form of transparency to alleviate those concerns? Are you considering or recently changed your compensation plan? Contact Michael Maciekowich, National Director, Astron Solutions, LLC at 212-792-8886 or michaelm@astronsolutions.com.



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Think You Are Prepared For The New Overtime Changes? Think Again!

Just Before New Exemption Salary Thresholds Become Effective Under Federal Overtime Law, NY DOL Issues Proposed Changes to Its Own Exemptions

Are you a responsible, prepared employer who has already addressed the changes coming to federal overtime exemption rules on December 1, 2016? Have you thoroughly planned for these changes, and have now become bored and listless since your work is done? Are you searching for fresh overtime-based challenges? Well, search no more! The NY DOL has issued a complex new proposed rule that, if passed, will keep New York employers busy – and quite likely confused – for years to come!

Yes, that’s right. Just weeks before the federal overtime changes are set to go into effect on December 1st the New York Department of Labor has issued a proposed rule to significantly change New York’s salary thresholds for the administrative, professional and executive exemptions. The thresholds differ depending on the size and location of the employer.

Here is the breakdown:

For employees working for “large” employers (11 or more employees) in New York City:

  • $825.00 per week on and after December 31, 2016;
  • $975.00 per week on and after December 31, 2017;
  • $1,125.00 per week on and after December 31, 2018.

For employees working for “small” employers (fewer than 11 employees) in New York City:

  • $787.50 per week on and after December 31, 2016;
  • $900.00 per week on and after December 31, 2017;
  • $1,012.50 per week on and after December 31, 2018;
  • $1,125.00 per week on and after December 31, 2019.

For employees working in Nassau, Suffolk and Westchester Counties:

  • $750.00 per week on and after December 31, 2016;
  • $825.00 per week on and after December 31, 2017;
  • $900.00 per week on and after December 31, 2018;
  • $975.00 per week on and after December 31, 2019;
  • $1,050.00 per week on and after December 31, 2020;
  • $1,125.00 per week on and after December 31, 2021.

For upstate employees –i.e., those working anywhere other than New York City or Nassau, Suffolk, or Westchester County:

  • $727.50 per week on and after December 31, 2016;
  • $780.00 per week on and after December 31, 2017;
  • $832.00 per week on and after December 31, 2018;
  • $885.00 per week on and after December 31, 2019;
  • $937.50 per week on and after December 31, 2020.

 

These changes mean, among other things, that as of December 31, 2017 for large NYC employers and December 31, 2018 for small NYC employers, the threshold for the administrative, professional and executive exemptions under New York law — $975/week and $1,125.00/week, respectively — will be greater than the threshold under federal law at that time, $913/week. The federal thresholds may or may not catch up to the state thresholds on or about December 1, 2019, based on the automatic increase mechanism built into the rules. Specifically, the federal threshold will increase every three years as necessary to meet the 40th percentile of full-time salaried workers in the lowest-wage Census Region.

These changes also mean that businesses with employees in various parts of the state will be forced to apply different salary thresholds to different employees. For example, where two employees have the exact same duties and the exact same salary, one might be exempt and the other non-exempt because one works in, say, Westchester County and the other works in, say, Sullivan County.

The NY DOL has invited public comments on the proposed rule. Comments may be submitted until December 2, 2016.

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Portnoy, Messinger, Pearl & Associates, Inc. is here to answer any questions you have regarding the proposed rule and/or how the rule would interact with the new federal exemption thresholds. Please keep in mind that in addition to our staff of seasoned HR consultants, we also have a staff of experienced employment lawyers on hand to address any questions you may have regarding legal compliance.  Contact us at 800-921-2195 or 516-921-3400. You can also visit our website http://www.pmphr.com/ or e-mail us at info@pmpHR.com.

 



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Do Your Commissioned Salespersons Have Written Agreements?

The majority of employees in the United States do not have written employment agreements. Because employment agreements are not the norm, they often do not occur to employers as a possibility when hiring a new employee, let alone a requirement. With most employees, the lack of a written agreement is not an issue, except for one glaring exception:  commissioned salespersons.

Pursuant to New York labor law, New York employers must have a written agreement in place with each commissioned salesperson. This agreement must be signed by the employer and the employee, and must include a description of how all compensation will be earned and calculated, including any wages, salary, and commissions. If the terms of compensation include a recoverable draw, this must also be addressed in the agreement. For those not in-the-know:  A recoverable draw is a fixed amount advanced to an employee within a given time period. If the employee’s commissions during that period exceed the draw amount, the employee is then paid the difference. If the employee earns less in commissions than the draw amount, the employer can deduct the amount of the difference from the employee’s commissions in the next draw period. If such practices are part of the employer’s arrangement with the salesperson, they must be clearly explained in the written agreement, including the frequency with which the draw will be reconciled. The agreement should also detail how all forms of compensation will be calculated upon the employee’s termination or resignation.

In addition, it is vital that written commission agreements address the issue of when commissions are considered “earned.” Are they earned when the employee books the sale? When the client pays in full? How to define “earned” is up to you as the employer, but it should be clearly stated in the agreement. If the agreement is silent or ambiguous on this point, the employer runs the risk that a court reviewing the agreement will construe it against the employer.

The commission agreement is a good place to address other issues as well, such as at-will employment status and the obligation to adhere to the policies set forth in the company’s employee handbook. The agreement should also state whether the employee is exempt or non-exempt from overtime laws. Of course, before making this designation, the employer must educate itself on the applicable exemptions; many employers make the mistake of just assuming their salespersons are covered by the outside salesperson exemption without verifying that the exemption applies to each employee’s particular situation. The requirements for meeting the outside salesperson exemption are quite specific. The exemption applies only if the employee’s “primary duty” is making sales or obtaining orders or contracts for which a consideration will be paid by the client/customer, and the employee “customarily and regularly” works away from the employer’s place or places of business.

Employers should also consider including a non-solicitation covenant in agreements with salespersons, commissioned or otherwise. Because salespersons, by definition, are going to cultivate relationships with your company’s clients, they are well-positioned to poach clients when they leave the company. A well-drafted non-solicitation clause will restrict their ability to do so.

If entering into written agreements with each salesperson on your staff sounds like too much work, bear in mind that, without such an agreement, the Department of Labor will accept as true whatever terms the salesperson says were agreed upon. Thus, this is not a step any employer with commissioned sales staff should be skipping. For assistance in drafting compliant commission agreements, please contact an HR professional at PMP.

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Portnoy, Messinger, Pearl & Associates, Inc. is here to answer any questions you have regarding written agreements. Please keep in mind that in addition to our staff of seasoned HR consultants, we also have a staff of experienced employment lawyers on hand to address any questions you may have regarding compliance.  Contact us at 800-921-2195 or 516-921-3400. You can also visit our website http://www.pmphr.com/ or e-mail us at info@pmpHR.com.



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Failing to Contribute to Multiemployer Benefit Fund for “Alter Ego” Company Resulted in Criminal Indictments

A husband and wife who owned two businesses in New Hampshire were indicted in September on charges including mail fraud and false ERISA statements. The charges arose, in part, from the couple’s failure to make benefit fund contributions in connection with one of the two businesses—despite the fact that the business in question was  non-union. The federal court in Massachusetts that heard the case found that the non-union business was the “alter ego” of the couple’s other business, which was union-affiliated.

The two businesses had been set up as a “double-breasted” operation, in which unionized employer creates a separate non-union business to perform the same type of work in the same area as it does, generally for the purpose of obtaining work not available to a union-affiliated business. While the court in this case acknowledged that “double-breasted” operations are not “inherently unlawful,” there must be sufficient separation between the two businesses to avoid being deemed “alter ego” companies. The court found that the two businesses at issue in this case operated as a single employer, meaning that both entities, not the just the unionized entity, were bound by the applicable collective bargaining agreements.

 



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EEOC Issues Final Guidance on Retaliation

The U.S. Equal Employment Opportunity Commission recently issued final Enforcement Guidance on Retaliation and Related Issues.

The guidance addresses retaliation under each of the laws enforced by EEOC, including Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act (ADEA), Title V of the Americans with Disabilities Act (ADA), Section 501 of the Rehabilitation Act, the Equal Pay Act (EPA) and Title II of the Genetic Information Nondiscrimination Act (GINA). The guidance covers such topics as:

  • The scope of activity protected by anti-retaliation laws.
  • Legal analysis applicable to retaliation claims
  • Remedies available to employees who experience retaliation.
  • Rules prohibiting an employer from interfering with an employee’s exercise of rights under the ADA.


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New ADA Regulations Clarify Definition of Disability

The Department of Justice recently published its Final Rule amending regulations under the Americans with Disabilities Act (ADA) to incorporate changes made to the ADA as a result of the ADA Amendments Act of 2008 (ADAAA). The ADAAA, which went into effect January 1, 2009, was passed by Congress in response to Supreme Court decisions that had narrowly interpreted the ADA’s definition of “disability.” The ADAA was enacted to ensure that the term would be broadly construed and applied without extensive analysis of whether an individual’s impairment or condition meets the technical definition of “disability.” The DOJ’s Final Rule is intended to clarify the interpretation and application of the ADAAA.



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“Cat’s Paw” Theory of Retaliation: Employers can be held Liable for the Retaliatory Motives of Non-Management Employees

When you investigate an employee complaint of sexual harassment, how you conduct the investigation — and the actions you take as a result – matters a great deal. In fact, given a recent case expanding the basis upon which an employer can be held liable for retaliation, it may matter now more than ever.

In the case Vasquez v. Express Ambulance Service, Inc., the Second Circuit Court of Appeals held that an employer may be liable for unlawful retaliation if the employer allows itself to be manipulated by an employee into taking an adverse action against another employee, even if the employer itself had no retaliatory intent. The case arose from the complaint of Andrea Vasquez, an EMT working for Express Ambulance Service, Inc. Vasquez’s co-worker, dispatcher Tyrell Gray, sexually harassed Vasquez – harassment that culminated in Gray texting Vasquez a photo of his erect penis. Vasquez informed management about the harassment after receiving the photo and management began an investigation. Meanwhile, Gray found out Vasquez had reported him. Anticipating that he would be questioned about it, he altered text messages on his phone to make it appear that Vasquez had participated in a consensual sexual relationship with him. He printed out screen shots and had them at the ready when he was questioned by management about Vasquez’s allegations.

Management believed Gray’s side of the story, accepting the doctored text messages at face value and refusing Vasquez’s offer to show them her own phone. Determining that Vasquez had engaged in an inappropriate sexual relationship with Gray, they fired Vasquez. And so it seemed that, in this particular bout of he-said-she-said in the workplace, Gray had won.

But of course, that was not the end of the story. Vasquez sued Express Ambulance Service, and when the case reached the Second Circuit, the appellate court rejected the employer’s argument that it could not be held responsible for the retaliatory animus of Gray, a low-level, non-supervisory employee. Instead, the court adopted a legal theory known as the “cat’s paw” theory to hold the employer liable.

The cat’s paw theory of liability derives from an Aesop’s fable in which a monkey persuades a cat to pull roasting chestnuts out of the fire, promising they will eat them together. But the monkey eats all the chestnuts himself, leaving the cat with nothing but a burned paw for his trouble. In the Vasquez scenario, the employer is the cat and Gray is the monkey, tricking the unwitting employer into doing his bidding. The Second Circuit reasoned that the employer allowed itself to be manipulated by Gray due to its own negligence in refusing to examine Vasquez’s phone when she offered it, instead crediting Gray’s side of the story without question—despite the fact that, as the accused party, Gray had every reason to lie.

This case is significant in that the retaliatory animus of a non-supervisory employee was attributed to the employer. The takeaway for employers is that any investigation of discrimination or harassment must be handled carefully and even-handedly. It should not be an exercise in merely going through the motions and papering the file. Before accepting one party’s version of disputed facts, the employer must conduct a meaningful examination of the evidence and consider each party’s credibility and motives. PMP’s HR professionals and staff attorneys can provide assistance in this regard, or even conduct the investigation for you.  The experienced HR Consultants at PMP can customize a harassment/discrimination/retaliation prevention training for your staff.

The next time you receive a complaint of sexual harassment or discrimination, tread carefully and keep a cool head. Don’t get your paw burned in the fire.

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Portnoy, Messinger, Pearl & Associates, Inc. is here to answer any questions you have regarding retaliation. Please keep in mind that in addition to our staff of seasoned HR professionals, we also have a staff of experienced employment lawyers on hand to address any questions you may have regarding legal compliance. Contact us at 800-921-2195 or 516-921-3400. You can also visit our website http://www.pmphr.com/ or e-mail us at info@pmpHR.com.

This article is intended for general information only and should not be construed as legal advice.

 



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EEOC Pay Data Collection: Get Ready, Here It Comes

On September 29, 2016, the EEOC announced that starting on March 31, 2018, certain employers will be required to submit employee pay data to the agency. The data will be used by the EEOC to combat pay discrimination.

The new requirement will apply to private employers, including federal contractors and subcontractors, with 100 or more employees. These employers will be required to report aggregate W-2 income of their employees broken down by sex, race, ethnicity, and job group. Employers will not be asked to report individual salaries or any personally identifiable information of employees.

The EEOC says that collecting pay data will enable it to spot pay disparities indicative of unlawful discrimination. Critics say the use of W2 data for this purpose is an oversimplified approach, failing to take into account work experience, job responsibilities, an employee’s choice to take on overtime work, and other nondiscriminatory factors that may affect pay. Further, many employers have expressed concern over the significant burden the new reporting requirements will place on them, both in terms of cost and time spent.

Although the new requirements will not go into effect for another 18 months, employers should begin preparing for the changes without delay. A first step would be to conduct a rigorous internal review of compensation practices and W2 data to look for any appearance of discrimination that could be rectified before the March 31, 2018 deadline. Companies should also begin preparing for the administrative aspect of the new requirements, by planning who will be involved in the reporting process and what systems will be used.

The EEOC’s requirements are bound to cause major headaches for affected employers. For guidance on preparing and complying with these requirements, or to schedule a compliance audit focusing on your pay data, please contact one of the HR consultants at PMP.

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Portnoy, Messinger, Pearl & Associates, Inc. is here to answer any questions you have regarding pay data collection. Please keep in mind that in addition to our staff of seasoned HR professionals, we also have a staff of experienced employment lawyers on hand to address any questions you may have regarding legal compliance. Sign up for our Fall 2016 Compliance Workshop Series or contact us at 800-921-2195 or 516-921-3400. You can also visit our website http://www.pmphr.com/ or e-mail us at info@pmpHR.com.

This article is intended for general information only and should not be construed as legal advice.

 



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Use of Social Media in the Recruiting and Hiring Process

Social media is ubiquitous in today’s world. Chances are, your company has used it in recruiting or candidate screening at one time or another, whether by checking out a candidate’s LinkedIn, Facebook or Twitter profile, or by using social media to post a job listing. These methods can help employers access qualified candidates and can provide useful information about applicants. For example, you might learn about a candidate’s work experience, communication skills, volunteer work, or professional passions. You might also discover negative information about the applicant. For instance, you might learn about illegal activities, threats of violence, or disparagement of past employers.

But using social media in recruiting and hiring is not without risk. By reviewing a candidate’s online postings, you may find information that cannot legally be considered in the hiring process. For example, you may learn a candidate’s race, ethnicity, disability, marital status, age or religion. Once you know such information, you are vulnerable to being accused of using it in your hiring decisions.

While these risks are very real, an employer who is careful and conscientious in its use of social media may be able to reduce them. One way to diminish risk is to check social media only after a candidate has been interviewed, rather than using it as a way to screen candidates sight-unseen. Another way is to have someone in the company who is not involved in hiring decisions be in charge of viewing social media content of job candidates and filtering out any information about protected characteristics (e.g., race, age, disability, etc.) before sending other information on to HR or the hiring manager. Also, an employer should never ask an applicant for his password or username information, or try to “friend” him or otherwise join his social network. A number of states have statutes prohibiting this conduct, and refraining from it is best practice in all states.

There is no foolproof method for removing all risk from the use of social media in the hiring process. Whether the benefits of using it may outweigh the risks, and how to minimize that risk, will likely depend on the circumstances. Feel free to contact PMP if you would like to speak to an HR consultant or staff attorney about how best to navigate these waters successfully.  Sign up for our educational workshop, Risk and Reward: The Dangers of Social Media in the Workplace on Wednesday, December 14, 2016.

Portnoy, Messinger, Pearl & Associates, Inc. is here to answer any questions you have regarding use of social media in the workplace. Please keep in mind that in addition to our staff of seasoned HR consultants, we also have a staff of experienced employment lawyers on hand to address any questions you may have regarding legal compliance. Contact us at 800-921-2195 or 516-921-3400. You can also e-mail us at info@pmpHR.com.



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