Tag Archives: EEOC

Favorite Firing: Do Not Terminate a Disabled Employee Without a Reasonable Accommodation Dialogue


EEOC sealBack in May 2016, Lowe’s, the home improvement store giant, agreed to pay $8.6 million to settle a lawsuit brought by the EEOC over Lowe’s firing of many individuals with disabilities when they exceeded the maximum amount of disability leave Lowe’s provided. The problem, as the EEOC saw it, was that Lowe’s failed to engage in reasonable accommodations beyond the standard disability leave policy. See U.S. Equal Employment Opportunity Commission v Lowe’s Companies, Inc., et al., C.D. Ca., Case No. 2:16-CV-03041-AB-FFM.

The Facts: This lawsuit began with three charges of disability discrimination filed by three employees of Lowe’s back in 2007 and 2009. These three plaintiffs alleged that Lowe’s violated the Americans with Disabilities Act (ADA) by terminating their employment when their medical leave of absence exceeded Lowe’s 180-day (later extended to 240-day) maximum leave policy. The plaintiffs claimed that failure to engage in any discussion about further accommodations beyond the maximum leave violated the ADA. They wanted extended leaves of absence as a reasonable accommodation.

The EEOC agreed with the plaintiffs and also claimed that thousands of other Lowe’s employees were in the same situation. The EEOC ultimately filed a lawsuit in the Central District of California, the terminated Lowe’s employees were found to be a suitable class, and the case proceeded as a class action.

It was settled in May 2016, and the Court approved the settlement on May 12, 2016. (A copy of the Consent Decree can be found here.) Lowe’s admitted no wrongdoing, and the Consent Decree is not an admission. However, the company did agree to settle the lawsuit for $8.6 million and also consented to comply with a variety of non-monetary provisions. Lowe’s agreed to contact the terminated employees in the class and pay their damages out of the $8.6 million fund, as calculated by the EEOC, and to donate the remainder (if any) to non-profit organizations benefiting the disabled.

Lowe’s also agreed to amend its policies so that it would “engage in the interactive process with any employee with a disability who requests leave as a reasonable accommodation.” And the company agreed to retain Equal Employment Opportunity consultants approved by the EEOC for four years. These consultants will advise on policies, track all requests for accommodation, and educate managers on their duties under the ADA.

The Moral: There are few bright lines when it comes to working through disability situations. If an employee requests an accommodation, the employer ignores that request at its peril. A firm policy regarding leaves of absence is no longer a firm policy—exceptions must be at least considered if the employee claims to be disabled and to need more time away from work.

When the ADA was first enacted in 1990, I worked with managers to parse through how to simultaneously comply with disability leaves, worker’s compensation laws, absence policies, and the like. The situation grew even more complex with the passage of the Family and Medical Leave Act in 1993. I used to tell managers to stack up all the applicable laws and policies like slices of Swiss cheese. Only if an employee’s situation fit in gaps in every layer could the employee be discharged with minimal risk.

What the Lowe’s case shows is that some of the legal layers have no gaps—all employees requesting a reasonable accommodation should at least be given consideration, and an employer cannot have a blanket rule prohibiting certain accommodations. The EEOC will not accept any mandatory maximum leave policy.

The Lowe’s case is also interesting because of the broad relief granted pursuant to the Consent Decree. The provisions in the Lowe’s decree are the types of relief that the EEOC is likely to seek in every disability case it decides to take to court. Employers should consider whether and when accepting these types of interference in their business are worth disposing of a lawsuit, particularly a large class action case of the type that Lowe’s faced. It doesn’t take a loss in court to cause upheaval in the business; settlement can also be onerous.

It is best, therefore, to avoid as many lawsuits as possible. Therefore, engage in an interactive reasonable accommodation dialogue, document that engagement and all options considered, and be clear on why the employee’s requested accommodation is not reasonable and would constitute an undue hardship on the business.

When have you dealt with a difficult reasonable accommodation case?

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Favorite Firing: “I’ve Hired a Murderer!”


asglassOne morning about twenty-five years ago I sat in my law office. I took a call from an HR manager who was a regular client of mine.

“Sara, I think I’ve hired a murderer!” she said with panic in her voice.

“OK, Roxie, tell me what happened,” I replied, trying to keep my voice lawyer-calm.

Roxie explained that an employee had come to see her about another employee, a shipping employee who worked on the loading dock at her company. According to the report, the shipping employee had been convicted of murder and served time in a state prison. Roxie hadn’t talked to the dockworker yet, but she had pulled his personnel file.

His application had left the space blank where it asked “Have you ever been convicted of a crime?” The hiring staff had either not noticed or had not asked about the missing information. At the time, this company didn’t do background checks beyond reference checking. But company policy stated that they didn’t hire any ex-felons.

“You’ll have to talk to him,” I said. “Ask whether the information is true. Then let’s talk again.”

“You want me to talk to a murderer?”

“Has he shown any sign of violence at work?” I asked.

“No. He’s been a decent employee.”

“Just have Security standing by,” I suggested.

Apply_HandThe Facts: Roxie talked to the employee, who admitted he had been convicted of murder. He hadn’t wanted to tell the company about his felonious past, so he deliberately left that part of the application blank. He had been a little surprised that no one asked him about the missing answer, but he was glad to have received the job.

Roxie and I discussed the situation, and she deliberated with other company managers. They decided to terminate the man’s employment. I told her there was some risk, as the man was African-American, and could file a claim of race discrimination. But at the time, the law was pretty clear that if a company had a blanket rule that no felons of any race could be employed, they had a strong defense. Although I told her they needed to check their applications more carefully and raise issues before making their hiring decisions.

The Moral: There are several morals to this story. Some applied twenty-five years ago, and some have developed in the time since this incident occurred.

1. Get hiring data before the person is hired

If you have certain rules that can disqualify applicants, be sure to ask about these issues before hiring someone. Ask about the qualifications of each and every applicant. Blanks in employment applications about qualifications are not acceptable, and the burden will be on the employer to show that the rule is justified, if you don’t even ensure that the forms are filled out correctly.

2. Apply the same qualifications to all applicants

If you have employment qualifications, they should apply to everyone. Don’t let some applicants slip through with lower qualifications than what you have said are required. And certainly don’t vary the qualifications based on an applicant’s race, sex, or other protected classification.

3. Address discrepancies immediately

If you find a discrepancy in an employee’s application, whether before the person is hired or after, address it as soon as you can. Provide an opportunity for the applicant or employee to provide the missing information, if it can be fixed.

If the person has already been hired and the discrepancy can’t be remedied—such as this employee’s prior conviction—you have a difficult decision to make, particularly if the employee has performed adequately. How can you show the missing qualification is job-related, if the employee has performed well? However, if you don’t fire the person, then you risk the validity of your qualifications.

4. Stay on top of federal, state, and local hiring regulations.

Although criminal convictions were an acceptable reason to weed out applicants twenty-five years ago, the EEOC now takes the position that employers cannot have a blanket rule against hiring felons, because minorities have higher conviction rates than whites. The criminal conviction must be related to the job for it to disqualify an applicant. A conviction of fraud would probably disqualify a bookkeeper, but probably would not disqualify the dockworker.

Thus, the risk today of firing the murderer is much greater than it was twenty years ago. Some employers would take the position that any violent crime is a disqualification for any position. Whether the EEOC and your local agencies would accept such a policy is uncertain. Know how judges in the state and federal courts where your business is located have ruled.

Have you ever been surprised by information missing from an applicant’s records?

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Keeping Your Wellness Programs Well: EEOC Notice of Proposed Rulemaking


EEOC sealWellness programs are a popular component of many employee benefit plans. Employers use these programs to encourage healthy behaviors among their employees, thereby reducing long-term medical costs. In addition, these programs often provide financial incentives to employees to engage their interest and sometimes include contests and classes that promote camaraderie and improve the workplace culture.

Over the last fifteen years, I have worked with several employers in a variety of workplaces to design and implement wellness programs. The employers are usually concerned about how to balance the costs and benefits of the programs and how to measure whether the program has a positive impact on employee health. It is also important to focus on changing behaviors that employees can control, while not penalizing them for health issues they cannot control.

On April 20, 2015, the EEOC released a Notice of Proposed Rulemaking addressing how Title I of the Americans with Disabilities Act (ADA) applies to employer wellness programs.

Previously, federal regulations defined acceptable wellness programs under HIPAA. After passage of the Affordable Care Act in 2010, several government agencies approved wellness programs that offered financial incentives to employees, so long as the incentives did not exceed 30% of the cost of coverage to employees. Incentives of up to 50% of coverage were permitted for programs related to preventing or reducing the use of tobacco products.

However, the EEOC was not one of the agencies involved in the earlier regulatory effort. The EEOC took the position that wellness programs designed under the earlier regulations may not comply with Title VII of the Civil Rights Act of 1964 or the ADA. The EEOC challenged several wellness programs in court, most notably in a lawsuit filed against Honeywell International, Inc. Honeywell’s program imposed a penalty on workers who refused to undergo biometric testing. Such penalties are a common component in wellness program design.

The EEOC’s enforcement efforts against Honeywell and other companies has made many employers hesitant to develop new wellness programs, despite the desire of employers to promote healthy behaviors among their employees and to manage their rising health care costs.

With its recent Notice of Proposed Regulations, the EEOC is finally providing guidance on how to design wellness programs it believes are acceptable under the ADA.

First, the EEOC says, wellness programs must be voluntary.

Wellness programs must be voluntary.

  • Employees may not be required to participate in a wellness program, may not be denied health insurance or given reduced health benefits if they do not participate, and may not be disciplined for not participating.
  • Employers also may not interfere with the ADA rights of employees who do not want to participate in wellness programs, and may not coerce, intimidate, or threaten employees to get them to participate or achieve certain health outcomes.
  • Employers must provide employees with a notice that describes what medical information will be collected as part of the wellness program, who will receive it, how the information will be used, and how it will be kept confidential.

Next, the programs can only offer limited incentives for employee participation or for achieving health outcomes.

Employers may offer limited incentives for employees to participate in wellness programs or to achieve certain health outcomes.

  • The amount of the incentive that may be offered for an employee to participate or to achieve health outcomes may not exceed 30 percent of the total cost of employee-only coverage.
  • For example, if the total cost of coverage paid by both the employer and employee for self-only coverage is $5,000, the maximum incentive for an employee under that plan is $1,500.

This 30% “incentive” basically accepts the existing HIPAA regulatory definition of “reward”, although there are some differences. Most notably, the EEOC proposed regulations cap smoking cessation rewards at 30%, instead of the HIPAA 50%, although if all the employer requires is that the employee answer a question about tobacco use, then a 50% incentive is permitted.

The Notice also limits incentives to 30% for programs that ask an employee to respond to a disability-related inquiry or undergo a medical examination. This is contrary to the HIPAA safe harbor exempting bona fide benefit plans from the ADA prohibition on medical examinations.

The Notice also specifically states that compliance with the proposed rules will not mean that an employer has complied with Title VII of the Civil Rights Act, nor with the Age Discrimination in Employment Act.  Thus, the EEOC’s proposed rules are narrowly limited to compliance with the ADA.

Moreover, the rules state that employers must provide reasonable accommodations to disabled employees who seek to participate in wellness programs, such as sign language interpreters at classes for hearing-impaired participants.

Thus, the EEOC’s proposed regulations are of limited help to employers seeking to design wellness programs. It is of some benefit to know that 30% incentives are acceptable, but the regulations do not go far enough.

For more information, see

EEOC Issues Proposed Rule on Employee Wellness Programs and ADA Compliance, by Terri Gillespie, HRLegalist.com, April 21, 2015 

Wellness Programs: Agencies Issue Helpful Guidance but Look Before You Leap, by Nancy Campbell, SWLaw.com, April 21, 2015

EEOC Publishes Proposed Rule on How the ADA Applies to Employer Wellness Programs, McGuireWoods.com, April 23, 2015

EEOC Finally Releases Notice of Proposed Rulemaking for Wellness Programs, EmployeeBenefitsUpdate.com, Monday, April 27, 2015

The EEOC’s New Wellness Program Regulations: Notable or Needless, by Michael Mishlove, GSHLLP.com, April 30, 2015

New Guidance On Wellness Programs, by Mathew Parker, LaborLawyers.com, May 2, 2105

What should employers do as a result of the new EEOC Notice of Proposed Rulemaking?

  1. Read the proposed regulations and evaluate your wellness programs for compliance
  2. Consult your attorney and/or benefit plan advisors about possible changes to your wellness plans.
  3. Send your comments on the proposed regulations to the EEOC by June 19, 2015, if you so choose.

What has been your experience with employee wellness programs? What has worked best at your company?

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Who Must Raise the Topic of Religious Accommodation in the Workplace?


A&F logoI wrote recently about religious accommodation, but the Supreme Court arguments in Equal Employment Opportunity Commission v. Abercrombie & Fitch Stores, Inc., last week keep this issue top of mind. The Abercrombie & Fitch case is one where I have sympathy with both the applicant and the employer.

The issue in this case is whether an employer has any duty under Title VII of the Civil Rights Act of 1964 to try to accommodate an employee’s or applicant’s religious practices if the employee or applicant doesn’t directly request an accommodation. In this case, a Muslim woman, Samantha Elauf, interviewed for employment with Abercrombie & Fitch wearing a hajib. Whether or not she was Muslim did not come up during the interview, but the employer assumed she was Muslim and decided not to hire her, because her appearance did not fit the “look” it wanted for sales employees in its stores.

hijabIt is a shame that this case has reached the Supreme Court. By all accounts, Ms. Elauf has had a successful career since Abercrombie & Fitch rejected her application. Most likely, Abercrombie & Fitch lost a good prospective employee by making a decision without discussing accommodation with this applicant. In fact, Abercrombie & Fitch later changed its policy to permit sales employees to wear hijabs, so the whole lawsuit might have been avoided had the issue been addressed before the retailer rejected Ms. Elauf’s application.

I am sympathetic to the applicant, because I believe that religious practices should be accommodated. As I stated in my February 16 post, this nation was founded to permit a diversity of religious beliefs, and we should give each other a little space to make that happen. The “look” policy, if strictly applied with no flexibility, might not have been the best practice from either a customer service or an employment perspective.

With respect to the specifics of the case, the hiring managers at Abercrombie & Fitch correctly perceived Ms. Elauf’s hijab to be an indication that she was Muslim. Therefore, the Supreme Court could easily rule that the employer should have done more before rejecting the applicant. The company should at least have raised the issue, as the EEOC argues. However, the challenge for the Court might be to do justice to Ms. Elauf without issuing broad rules of law that go beyond the intended scope of Title VII and could make managing a business more difficult.

There are many reasons why the employer’s position is also sympathetic. In my opinion, particularly for customer-facing employees—which retail sales employees are—an employer should be able to set appearance standards. Moreover, placing the burden on the employer to determine whether there might be a religious practice at stake, as the EEOC argued, goes beyond the capability of many hiring managers. How is any particular manager supposed to be aware of all religious practices—for example, whether a particular tattoo is religiously based or simply a style that an applicant likes? It is much more likely that the applicant will recognize when his or her religious practices might be an issue than that the employer representative will.

Moreover, many employers are legitimately concerned about mentioning religion at all during a hiring interview. Whether the applicant is or is not of a particular religion, the employer opens itself up to the possibility of a discrimination claim for “perceiving” the applicant to be of a protected group. Most Human Resources personnel and other management representatives have been carefully trained to avoid bringing up religion unless and until the employee does, and even then to handle the situation gingerly.

Also supporting the employer’s position in this case is that the standard for religious accommodation under Title VII has traditionally been quite low. Unlike under the Americans with Disabilities Act, where “reasonable accommodation” has placed some significant burdens on employers, under Title VII the only accommodations required have been those that do not impose more than a “de minimis” burden on the employer. So, even if Abercrombie & Fitch had raised the issue of Ms. Eleuf’s hijab, the retailer might not have had to change its “look” policy to accommodate her.

Nevertheless, it is quite possible, as the EEOC argued here, for the employer to have policies and procedures that the applicant does not know about—such as Abercrombie & Fitch’s “look” policy. It does not seem fair to make the applicant raise the issue of religion because there might possibly be a problem that the applicant knows nothing about. If employers do not need to discuss religion, why should applicants?

Thus, keeping the focus on the job—as Justices Sotomayor and Alito seemed to suggest during oral argument—might well be a workable solution. The hiring managers’ questions can ask about the job requirements and whether the applicant sees any problem performing them. Then, if religion might be an issue, the applicant can tell the employer what his or her religious beliefs require.

My advice to hiring managers was always to keep the focus on the job requirements.

How have you dealt with religious accommodation issues in the past? How do you feel about the issues raised in the Abercrombie & Fitch case?

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Sexual Harassment: Size Rarely Matters


Image from Forbes

Image from Forbes

If any employment law issue stays hidden “behind the corporate veil,” it is sexual harassment. Until the cover is blown, and the problem becomes public. What many start-up businesses and non-profits don’t realize is that sexual harassment issues can arise in workplaces with very few employees.

Why do sexual harassment laws matter to small businesses?

Small businesses usually operate informally and have few policies and procedures when they start. Moreover, the early employees are often friends or family members, and these relationships add complexity to the work relationships.

Still, if you are running a small business, you are at risk if you do not comply with sexual harassment laws.

Title VII of the Civil Rights Act, the federal law administered by the Equal Employment Opportunity Commission, regulates sexual harassment. Title VII applies to employers with fifteen or more employees. But most state anti-discrimination laws cover employers with just a handful of employees—five in California and four in New York, for example. City ordinances also impose requirements on very small employers in some jurisdictions.

Because most states look to federal law, even small businesses should follow EEOC and federal court interpretations under Title VII. But employers must also be aware of their state laws also—sometimes state law permits broader theories of liability or remedies (such as higher punitive damage awards) than federal law.

What’s the minimum that a small business should do?

A good place for small business owners to start is to read through the EEOC’s sexual harassment fact sheet, Questions and Answers for Small Employers on Employer Liability for Harassment by Supervisors.

The law requires more of employers to avoid liability for a supervisor’s actions than for actions by co-workers or non-employees.

  • The EEOC position is that an employer is always responsible for harassment by a supervisor that culminated in a tangible employment action, meaning an action that results in harm to the harassed employee.
  • If the supervisor’s harassment did not lead to a tangible employment action, the employer is liable unless it proves that:
    (1) it exercised reasonable care to prevent and promptly correct any harassment; and
    (2) the employee unreasonably failed to complain to management or to avoid harm otherwise.

This means that as a business owner, you should communicate a policy against sexual harassment, provide viable methods for your employees to complain (other than to the alleged harasser), and promptly address any complaints of harassment. It is better to have a written anti-harassment policy, though orally communicating the policy might work, if you can prove the communication took place, for example, through staff meeting minutes.

But it may be difficult for your small business to develop a strong anti-harassment policy. Usually, such policies need two or more avenues for the employee to complain, in case one of the usual persons to whom complaints can be voiced is allegedly the harasser.

If you are the only manager in your business, how do you find a second person to take complaints? You may not be able to. In that case, you should have an attorney or a human resources consultant conduct an investigation into complaints that might involve you.

Unfortunately, that is likely to cost you. But litigation will cost you far more.

A few more cautions

If you do get a complaint of harassment in your business,

  • Investigate promptly, stop the harassment, and remedy any adverse employment actions against the complaining employee.
  • Keep the complaint confidential, to the extent possible, and
  • Don’t retaliate—complaints of retaliation are easier to make than the initial complaint of harassment, and harder to defend.

The Best Defense: Don’t Let It Happen

Although the anti-harassment policy and complaint procedure are important, the best way that a small business can avoid harassment complaints is by not permitting an atmosphere of casual remarks about sex and employees’ personal lives in the first place.

Even if the business started in a college dorm, the standards are different once the business becomes real. Even if the same people are involved.

Really.

I know it’s hard to accept that you can’t continue to treat your friends like you did when you were eighteen, but if you are running a business and providing people’s livelihoods, you need to act with maturity.

For more on this subject, see

Sexual Harassment Policy for Small Businesses, by Ruth Mayhew, Demand Media, on Chron.com

Sexual Harassment in the Workplace; Forming a Basis for Prevention and Management, by Caron Beesley, on SBA.gov

Even Start-Ups Need Anti-Discrimination Policies and Reporting Mechanisms, by Richard B. Cohen, on Employment Discrimination Report (Fox Rothschild)

When has an unprofessional atmosphere in the workplace caused you problems?

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New EEOC Guidelines on Accommodation of Religious Dress and Grooming Practices: A Higher Standard?


"Celtic Cross (#0383)" by regan76

“Celtic Cross (#0383)” by regan76

On March 6, 2014, the EEOC issued new guidelines on what employers must do to accommodate their employees’ religious dress and grooming practices. See EEOC publication titled Religious Garb and Grooming in the Workplace: Rights and Responsibilities.  The agency takes the position that employers must accommodate these religious practices, even when they violate company policies, unless doing so presents an “undue hardship” on the employer’s business.

Specifically, Q&A 6 of the guidelines states:

“Title VII requires an employer, once it is aware that a religious accommodation is needed, to accommodate an employee whose sincerely held religious belief, practice, or observance conflicts with a work requirement, unless doing so would pose an undue hardship.  Therefore, when an employer’s dress and grooming policy or preference conflicts with an employee’s known religious beliefs or practices, the employer must make an exception to allow the religious practice unless that would be an undue hardship on the operation of the employer’s business.”

"Turban Day 2012-15" by Anuraj Singh

“Turban Day 2012-02” by Anuraj Singh

According to the EEOC, employers must accommodate all aspects of religious observance, including not only the well-established religious practices of traditional religions (Christianity, Judaism, Islam, etc.), but also “new, uncommon” practices “not part of a formal church or sect,” and any “sincerely held” beliefs, even where they are not part of a formal church practice and even if the belief seems “illogical or unreasonable to others.” See Q&As 2 and 4.

One tricky issue for employers is the standard of accommodation to which the EEOC will hold employers. Traditionally, the standard for religious accommodation has been that employers need not agree to any accommodation that causes more than a de minimis cost or burden to the employer’s operations. Q&A 6 of the EEOC’s new guidelines pays lip service to retaining this de minimis standard:

“For purposes of religious accommodation, undue hardship is defined by courts as a “more than de minimis” cost or burden on the operation of the employer’s business. For example, if a religious accommodation would impose more than ordinary administrative costs, it would pose an undue hardship. This is a lower standard than the Americans with Disabilities Act (ADA) undue hardship defense to disability accommodation.”

EEOC sealNevertheless, the new EEOC guidelines make it clear that the following cannot be the basis for the employer’s claim of undue hardship:

  • customer preferences (Q&As 5 and 6)
  • co-worker disgruntlement (Q&As 5 and 6)
  • an employer’s desire to use a particular image or marketing strategy (Q&A 10)

If these core business considerations cannot be rationales for objecting to a religious accommodation, then an employer’s operations can in fact be significantly altered by compliance with an employee’s request for an exemption from a dress or grooming policy, contrary to the expressed de minimis standard.

It appears that the only  acceptable “undue hardship” the EEOC will recognize is one which causes and actual impact on safely, security or health. See Q&A 12. And the only example of permissible refusal to accommodate a dress or grooming requirement in Q&A 12 is requiring an employee with a beard to wear two face masks instead of one for hygiene reasons (Example 15). Even prohibiting an employee from wearing a dull knife that is a religious symbol is an illegal denial of religious accommodation (Example 19).

In many instances an employer can acquiesce to an employee’s religiously motivated requests for different dress and grooming standards with little or no hardship, and accommodating these requests is appropriate. Nevertheless, many of the examples given in the EEOC guidelines do not feel like de minimis intrusions into employers’ businesses to me. They feel like they impose a significant risk that the agency will second-guess an employers’ decisions.

And how far should the EEOC’s higher standard of accommodation be allowed to extend? What about religiously motivated speech? The new guidelines do not (yet) speak to anything more than religious dress and grooming accommodations. But there is no rationale that I can see why customer or co-worker objections to dress and grooming accommodations should be prohibited, while objections to words should be allowed.

I was involved in a situation where an employee in a retail operation insisted in answering the phone “In the name of Jesus Christ of Nazareth, this is [XYZ Department Store].” When questioned about this practice, she said that her beliefs required her to always speak in the name of Jesus Christ and to so preface her remarks.

We had many complaints from both Christian and non-Christian customers. After much discussion with the employee and her minister, the retailer ultimately terminated her employment. A court found the termination proper and granted the store summary judgment. But I wonder whether we might have been liable for employment discrimination under these new EEOC new religious accommodation guidelines, no matter how many customers we lost as a result of her statements.

What types of religious accommodation requests have you encountered in the workplace?

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Proposed Changes to Overtime Regulations Don’t Update Wage Laws Sufficiently


Obama SOTUIn his State of the Union speech on January 28, 2014, President Obama promised to use his regulatory authority and executive orders to bypass Congress when they could not reach a deal. He has begun to follow through aggressively on this promise in the labor arena.

This call for new regulations to cut back on the FLSA exemptions from overtime is the subject of this post.

imagesIn general, the FLSA requires overtime pay for workers who work more than 40 hours/week, unless they fit into one of several categories of employees who are “exempt” from FLSA requirements. The largest exempt categories are for executive, administrative, and professional employees.

In his March 13 memorandum, President Obama stated:

. . . regulations regarding exemptions from the Act’s overtime requirement, particularly for executive, administrative, and professional employees (often referred to as “white collar” exemptions) have not kept up with our modern economy. Because these regulations are outdated, millions of Americans lack the protections of overtime and even the right to the minimum wage.

Therefore, I hereby direct you [DOL] to propose revisions to modernize and streamline the existing overtime regulations. In doing so, you shall consider how the regulations could be revised to update existing protections consistent with the intent of the Act; address the changing nature of the workplace; and simplify the regulations to make them easier for both workers and businesses to understand and apply.

Labor experts expect that the Department of Labor will increase the salary threshold for these exempt workers from $455/week to somewhere in the neighborhood of $970/week.

I’m not adverse to an increase in the salary threshold. The current threshold of $455/week has been quite low, equating to $24,000/year, and was last increased ten years ago.

However, I have two concerns about changing the FLSA regulations—the first that it won’t improve workers’ wages as the President said, and the second that it doesn’t get at the heart of the problems with the FLSA.

1.  Businesses will change their hiring practices in response

An increase in the salary threshold of the anticipated magnitude will greatly expand the number of workers eligible to receive overtime pay. But businesses will not stand still in response.

Rather than increase the overtime wages they have to pay, many businesses are likely to change the way they structure jobs. They may pay their supervisory workers overtime and hire fewer non-supervisory workers to offset the overtime paid to the supervisors. They may hire more workers, but work them fewer hours to avoid the extra cost of overtime. They may cut back everyone’s hours to keep labor costs the same. Businesses are not likely to let an increase in overtime pay increase their cost structures increase without any response.

As one commentator stated,

“Employers should begin to consider, however, how increases to the required salary level and revisions to the duties tests under the “white collar” exemptions may impact long-standing staffing and compensation models for a wide range of employees.”

These changes may or may not be good for the economy. But if President Obama thinks more workers will automatically get “the protections of overtime” with an increase in the salary threshold, he is wrong. Some workers may find their pay cut when their hours are reduced.

2.      FLSA is out of date in many respects

My second concern is that we are missing a big opportunity to improve our wage laws overall. The FLSA was adopted in 1938 in response to the Great Depression. The labor market has changed substantially in the last 76 years, and many aspects of the FLSA regulations do not fit today’s labor market.

One issue that many employers and employees alike have requested is additional flexibility on the definition of “work week” and the ability to offer “compensatory time off” in lieu of overtime wages. For example, defining a two week period of 80 hours, rather than a single week of 40 hours, and permitting employees and employers to agree to flexible schedules, or occasional fluctuations, across that longer period of time before overtime is payable.

Moreover, we no longer live in a world where most employers do all their work at the employer’s place of business. Many workers do some work from home, or at least answer work-related calls and emails. Policing overtime work is increasingly difficult, and if the new regulations do not address the problems of monitoring employees’ working hours will set employers up to pay for time they never intended employees to work.

Any regulatory change that only addresses the narrow issue of the salary threshold for white collar exemptions is missing a huge opportunity to update one of our nation’s core labor laws.

Many of the broader changes in the FLSA would require statutory change, and the President cannot address these problems unilaterally. But it would be a big step forward if President Obama worked with Congress to bring the FLSA into the 21st century, offering changes that employers want in addition to increasing overtime and minimum wage levels as Democrats want. Rather than unilateral executive actions, we need a bipartisan approach to updating work rules across the board.

What aspects of the FLSA do you think are out of date?

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