2016: An Employment Law Odyssey
Washington has taken its position in the forefront of employment law protections for workers for several years now, and the federal government has similarly pushed the boundaries of employee protections. With the change of administrations, and presumably administration priorities, we look backward to examine the most significant employment law developments of 2016 and forward to forecast how they may potentially be impacted by the new administration.
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Exempt/Nonexempt Classification
Was any issue more of a roller coaster ride than this one? In May 2016, the DOL announced new guidelines to determine whether an employee was exempt or nonexempt from overtime pay requirements. In sum, the DOL raised the “salary basis” test from $23,600 to $47,476. Employers prepared to comply with the new regulations by the deadline of December 1, 2016. But wait! In November 2016, a Texas Federal Judge entered a nationwide injunction to prevent implementation of the new rules. Employers quickly reversed course on compliance steps. But wait! The DOL filed an appeal to the injunction to reinstate the new regulations, scheduled to be heard after January 31, 2017. But wait! We are only weeks away from a new administration with a new DOL chief, Andrew Puzder, who has stated opposition to the guidelines. Employers should expect that Mr. Puzder and the DOL will withdraw the appeal and the regulations
Washington Minimum Wage Law
Washington state voters approved Initiative 1433 which amends the state’s existing minimum wage law (RCW 49.46) to set minimum wage at $11.00 for ALL Washington employees subject to the state’s minimum wage statute effective January 1, 2017. After that, employees will experience a 50¢ raise in minimum wage each year until 2020, when there will be a sizable bump to $13.50 and a subsequent annual adjustment for inflation.
Sick Leave
While employers operating under minimum wage ordinances in Seattle, SeaTac, and Tacoma continue to have higher minimum wage rates than the new state wage floor, they must still be mindful of Initiative 1433 because its new paid sick leave requirements affect ALL employers — even if the employers already comply with local sick and safe leave ordinances. As of January 1, 2018, all employers must provide their employees with 1 hour of paid sick leave for every 40 hours worked. The new law forbids employers from requiring employees to find coverage when they need to use protected sick leave. The new law also forbids employers from adopting or enforcing a policy that counts the use of protected sick leave as an absence that may lead to discipline. Due to open-ended drafting there are some notable differences between the state law and local ordinances, and employees must receive the greater protections afforded under the laws as a whole. This puts the burden on employers to look at both local and state law when determining accrual rate, carryover, use, and eligibility.
EEOC Was Busy!
Changes to the EEO-1: The EEO-1 Report requires employers with more than 100 employees (and federal contractors or subcontractors with more than 50 employees) to collect and provide to the EEOC certain demographic information. In February of 2016, the EEOC proposed changes to the EEO-1 report, which would require employers to submit employee compensation data by gender, race, and ethnicity. Unless implementation is delayed or stopped, employers will have to start filing these new reports on March 31, 2018. Some employers suspect that the EEOC is asking for this information to obtain data to bring more lawsuits under the Equal Pay Act and Title VII alleging wage discrimination.
In addition, in 2016, the EEOC created and announced a new Strategic Enforcement Plan for 2017- 2021. The new SEP identifies the same six priorities as the earlier SEP. However, it added two new areas of developing and emerging issues in the workplace. The first of the two is “complex” employment relationships, such as temporary workers, staffing agencies, independent contractor relationships, and those that arise in the on-demand economy. The second area is what the EEOC calls “backlash discrimination” against Muslims, Sikhs, and other persons of Arab, Middle Eastern, or South Asian descent. Employers with contracted employees, and those who see applications from or employ Muslim or Middle Eastern workers, may want to insure that their practices meet EEOC standards
Sanctuary Cities
The year 2016 saw a rise in the controversy of so-called “sanctuary cities.” This term often refers to a state or political subdivision that has a statute, policy, or practice in effect that prohibits or restricts: (1) information sharing about an individual’s immigration status; or (2) compliance with a lawfully issued detainer request or notification of release request. King County, along with over two dozen Washington counties, have joined the ranks of sanctuary counties around the country. In addition, cities like Seattle has reaffirmed their commitment to protect undocumented immigrants despite President-elect Donald Trump’s intention to crack down on sanctuary cities. In 2016, Republican members of Congress proposed a number of bills designed to punish sanctuary cities by denying certain federal funds. Because similar bills are expected to be proposed in 2017, employers should pay attention to these bills and continue to verify the identity and employment authorization of individuals they hired. Indeed, they should ensure proper completion of Form I-9 and other guidelines included in the employer sanctions provisions of the Immigration Reform and Control Act of 1986 (“IRCA”).
Marijuana
The 2016 election of Donald Trump could possibly signal a sea of change in the federal government’s approach to marijuana use. President-elect Trump’s nomination of Senator Jeff Sessions for U.S. Attorney General may lead to a reversal of the Department of Justice’s position not to enforce federal law against conduct lawful under I-502, the law that legalized certain use, production, possession and distribution of cannabis in Washington. Senator Sessions is an outspoken opponent against legalizing marijuana and as U.S. Attorney, he will influence the Trump Administration’s policy toward enforcement of federal anti-drug laws. Employees who are not actively under the influence of cannabis but test positive will remain unprotected in the workplace, but the entire recreational marijuana industry may be upended.
If you are a producer, processor or retailer of marijuana, any increase in enforcement of federal policy would adversely impact your business operations, including potentially shutting it down, and could expose you and your employees to criminal prosecution under the federal Controlled Substances Act and other anti-drug laws. This change may also impact a Washington attorney’s ability to provide further legal counsel beyond informing as to this change in federal enforcement policy and the immediate impacts such a change may have. At least in the short term until the State Supreme Court speaks to the issue, your attorney, who is ethically prohibited from advising clients to engage or help to engage in illegal activities, may be required to withdraw as counsel. In turn, you should anticipate how to protect yourself from any harm and/or prejudice to your legal and other affairs from a prompt and sudden withdrawal of your attorney.
Tips, Wages and Tip Sharing
This year the Ninth Circuit prohibited mandatory tip pooling for back of the house workers in restaurants/hospitality. Some employers were debating changing their tip pool policies in light of various appeals, and indeed, an appeal has been made to the Supreme Court. Nonetheless, the current enforcement date is January 19, 2017, although individual employees may still seek enforcement if they are illegally subjected to mandatory tip pooling with non server staff. There is only a small chance that the Supreme Court will hear this appeal, and we recommend restaurants change their pooling structure now to ensure compliance.
Affordable Care Act
The new administration has made repeated resolutions to repeal the Affordable Care Act. Many political pundits have speculated on how this could be achieved and some have stated that it may not occur for several years if at all. Even if the new administration has the ability to repeal the Act or otherwise truncate it through the budget process, the administration will have to deal with the prospect of disenfranchising 20 million Americans from their newly acquired health care. Thus, despite being a campaign focal point, employers should not forego their ACA responsibilities just yet. The Act is the current law and employers should anticipate compliance for at least 2017.
Excessive CEO Compensation
In 2016, Portland’s City Council voted to impose a surtax linked to CEO pay to address income inequality. Under the new rule, companies must pay 10 percent in taxes if CEO pay is 100 times the median pay of all employees and a 25 percent surcharge if CEO pay is 250 times the median. The tax will take effect in 2017 after the S.E.C. begins to require public companies to calculate and disclose how its CEO pay compares with their workers median pay. Income inequality has increased exponentially along with CEO pay. CEO pay compared to worker pay surged from a multiple of 20 in 1965 to almost 300 in 2013. The promise of making more than your parents declined by 42 percent from a 92 percent chance in 1940 to a 50 percent chance if you were born in 1980. Meanwhile, most of the 61 percent income growth from 1980 to 2014 has been enjoyed by the top 10 percent of earners. What is the appropriate ratio of CEO pay to the average worker’s pay? The Economic Policy Institute recommends a 58-to-1 ratio from the late 1980s, before the stock option craze of the 1990s. Peter Drucker, the “father of modern management,” advised the SEC in 2011 that the ratio should be 20-to-1, up from his 1977 suggestion of 25-to-1. Germany’s is 147-to-1. Currently, the average multiple of CEO pay to workers’ pay is eight times the ratio Drucker suggested, 204-to-1. It has been suggested that Portland’s local movement may spread like Seattle’s minimum wage increase to $15 an hour. We shall see.
LGBTQ Rights
While the federal government and courts continue to wrestle with the applicability of employment, education and public accommodation protections to same sex couples and to transgender individuals, Washington law remains clear in extending legal protection in those areas. Washington employers must be knowledgeable about and conscientious in applying appropriate safeguards and protections in their policy manuals and in practice.