The year 2020 is bringing several new employment law changes. Below is a summary of key employment law trends and new legislation to consider in 2020.
DOL Defines Joint Employment/Independent Contractor Status
Effective March 16, 2020, a new final rule from the U.S. Department of Labor (DOL) may limit the scope of joint employment liability for wage and hour matters and lead to fewer employers being considered “joint employers” under the Fair Labor Standards Act (FLSA). Overall, this is good news for employers.
Generally, a joint employer relationship is characterized by two or more companies that exercise some degree of control and supervision over the work or working conditions of the same individual. Where parties are found to be “joint employers,” both companies—including the company that is not the actual employer—will incur many of the employment-related obligations that an actual employer would owe to its employees.
The DOL’s new rule discusses the following four-factor balancing test to determine whether an entity is an “employer”:
1. Does the alleged employer hire or fire?
- The employer must have actual exercise of control—not just the “power” to hire or fire.
2. Does the alleged employer supervise and control the employee’s work schedule or conditions of employment to a substantial degree?
- This is not limited to day-to-day supervision.
3. Does the alleged employer determine the employee’s rate and method of payment?
- The DOL states that an entity requiring suppliers to pay its workers a minimum hourly wage higher than the federal minimum wage will not be considered a joint employer; a simple wage floor does not equate to control over how and how much a supplier should pay its employees.
4. Does the alleged employer maintain the employee's employment records?
- Satisfaction of this factor alone will not establish joint employment. Further, the DOL clarified that records maintained by the potential employer regarding compliance with contractual agreements will not be considered “employment records.”
Once effective, this new rule will provide additional clarification and support to businesses/employers that have some joint employment exposure. Employers should examine their policies, procedures, and practices to see how they fit into the balancing test.
EEOC and the NLRB Revise Their Prior Anti-Arbitration Policies
On December 17, 2019, the U.S. Equal Employment Opportunity Commission (EEOC) rescinded its “Policy Statement on Mandatory Binding Arbitration of Employment Discrimination Disputes as a Condition of Employment.” This is also good news for employers. This policy had asserted, “The use of unilaterally imposed agreements mandating binding arbitration of employment discrimination disputes as a condition of employment harms both the individual civil rights claimant and the public interest in eradicating discrimination.” The Commission announced that it made this decision in light of recent U.S. Supreme Court decisions holding that “agreements to arbitrate employment-related disputes are enforceable under the Federal Arbitration Act for disputes between employers and employees.” The EEOC noted, however, that its rescission does not limit the Commission’s ability, or the ability of anyone else, to challenge the enforceability of an arbitration agreement.
Further, the National Labor Relations Board (NLRB) announced in its decision, Case No. 06-CA-143062, United Parcel Service, Inc., and Robert C. Atkinson, Jr., that it will return to a more employer-friendly standard in determining whether to defer to an arbitrator’s resolution of grievances alleging illegal disciplinary or firing practices under the National Labor Relations Act (NLRA). Under this standard, the NLRB will defer to the arbitrator’s decision where: (1) the arbitral proceedings appear to have been fair and regular; (2) all parties have agreed to be bound; (3) the arbitrator considered the unfair labor practice issue; and (4) the arbitrator’s decision is not clearly repugnant to the NLRA.
The recent positions of the EEOC and NLRB are consistent with recent U.S. Supreme Court cases favoring arbitration.
DOL Amends FLSA Regulations
Effective January 1, 2020, the DOL changed many of its regulations of the Fair Labor Standards Act (FLSA). The most publicized change was the increase to the salary basis test. As background, in order to properly classify an employee as overtime exempt under the FLSA, the employee must meet a minimum salary threshold (i.e., the salary basis test) and establish the types of responsibilities and knowledge required (i.e., the duties test).
Under the new rule, the salary basis requirement increases from $455 per week (or $23,660 per year) to $684 per week (or $35,568 per year). The revised rules further permit employers to count nondiscretionary bonuses and incentive payments (including commissions) paid at least annually, to satisfy up to 10% of the standard salary basis test.
In addition, the rule increases the minimum annual salary for highly compensated employees (who, because they fall into this category, are subject to minimal duty test requirements) to $107,432 (up from $100,000).
The DOL estimates that an additional 1.2 million workers will be entitled to minimum wage and overtime pay as a result of the increase to the standard salary threshold, and that over 100,000 workers will be entitled to overtime pay as a result of the increase to the highly compensated employee compensation threshold.
National Minimum Wage Increase
Beginning January 1, 2020, federal contractors must pay covered workers at least $10.80 per hour. The DOL also gave notice that beginning January 1, 2020, covered tipped employees performing work on or in connection with covered contracts must be paid a cash wage of at least $7.55 per hour.
Effective January 1, 2020 (or soon thereafter), the minimum wage increased (or will increase) in 26 states and several municipalities, such as Arizona: $12 an hour (Flagstaff: $13 an hour); Colorado: $12 an hour (Denver: $12.85 an hour); California: $13 an hour if the employer has 26 or more employees and $12 an hour for 25 or fewer employees (special rates in various municipalities throughout the state); and Washington: $13.50 an hour.
Therefore, companies should be mindful of these changes and update their payroll, policies, and posters accordingly.
Colorado Overtime & Minimum Pay Standards Order
The Colorado Overtime and Minimum Pay Standards (COMPS) Order (Wage Order No. 36) was finalized on January 22, 2020 and will go into effect on March 1, 2020. The most notable provisions in COMPS are an increase to the salary threshold for overtime exemptions and an expansion of the minimum wage order’s coverage to all private employers.
The initial draft of the Order proposed a minimum exempt salary threshold of $42,500, beginning on July 1, 2020, but the finalized version will instead delay and limit the increase to $40,500 on January 1, 2021. As explained above, the new federal exempt salary threshold, effective January 1, 2020, is $35,568, and the new state rules keep the wage threshold at the current federal level for 2020. COMPS will increase the threshold by $4,500 in 2022 and then $5,000 every year after that until it reaches $55,000 in 2024 (after which it will be adjusted by the same consumer price index as is the Colorado minimum wage).
Additionally, whereas Colorado’s Minimum Wage Order previously restricted coverage to four specific industries—retail and service; food and beverage; commercial support service; and health and medical industry—COMPS will presumptively apply to workers in all industries, with limited statutory exceptions.
Colorado Wage Payment Law
Effective January 1, 2020, the Colorado Wage Payment Act provides that an employer (which is defined the same as in the FLSA but also includes foreign labor contractors, migratory field labor contractors, and crew leaders) commits “wage theft,” a felony, if the employer willfully refuses to pay wages or other forms of compensation to its employees. The Act also defines intentionally paying a wage less than the minimum wage as theft, which is a felony when the theft is of an amount greater than $2,000.
Previously, the Act exempted employers from criminal penalties when the employer was unable to pay wages or compensation because of a Chapter 7 bankruptcy action or another court action resulting in the employer having limited control over his or her assets. The Act has removed this exemption.
Colorado Wage Protection Act Rule
The Colorado Wage Protection Act Rule was also amended in December of 2019 by the Colorado Department of Labor and Employment in response to the Colorado Court of Appeals Decision, Nieto v. Clark’s Market, Inc., June 27, 2019, which held that a vacation policy where employees forfeited earned vacation pay if they did not comply with company policy did not violate the Colorado Wage Claim Act (CWCA). Rule 2.15, CCR 1103-7, clarifies that although employers may cap “at a year’s worth of vacation pay” employees’ vacation time may not be forfeited.
Colorado Equal Pay for Equal Work Act
The Colorado Equal Pay for Equal Work Act, effective January 21, 2021, falls in line with similar state laws throughout the country. It contains pay equity and pay transparency provisions, a salary history ban, and requirements that employers provide notice of promotional opportunities and position wage rates. It also provides an incentive to employers that conduct proactive self-audits of compensation practices. The main provisions are summarized below:
- The Act prohibits all employers employing Colorado employees from discriminating in wages among employees based on sex (which also includes gender identity) or sex in combination with another protected status, unless differences are based upon seniority, merit, geographic location, a system that measures earning by quantity or quality of production, education/travel/experience if reasonably related to work in question, or travel.
- The Act also contains pay transparency requirements by prohibiting employers from preventing employees from discussing their own compensation information with others and prohibiting employees from doing so by requiring them to sign a waiver.
- Salary history inquiries are also prohibited under the Act. Employers may not seek the wage history of a prospective employee, rely on the wage history of a prospective employee to determine a wage rate, or discriminate or retaliate against a prospective employee for failing to disclose wage history.
- The Act also contains unique notice requirements, which require that employers make reasonable efforts to announce, post, or make known all opportunities for promotion to current employees on the same calendar day AND require that employers disclose in each job opening posting the compensation or compensation range.
- There are also recordkeeping requirements and the Act mandates that employers maintain records of job descriptions and the wage rate history of each employee for the duration of employment plus two years after the end of employment.
- An applicant or employee who believes an employer has violated the pay equity section of the Act has two years to bring a lawsuit, and there is no requirement to file a charge with the Colorado Civil Rights Division. Each time an employee receives a paycheck with a discriminatory wage rate, a new violation occurs for purposes of the two-year statute of limitations. An aggrieved employee may obtain relief for a back-pay period not to exceed three years.
- Employers may also be liable for the differences between what the employee was paid and what the employee would have been paid if there was no violation, plus an equal amount as liquidated damages. However, liquidated damages may be avoided if the employer can demonstrate good faith and reasonable grounds for believing there was no violation. Good faith can be shown if the employer, within two years prior to the lawsuit being filed, completed a thorough and comprehensive pay audit of its workforce, with the specific goal of identifying and remedying unlawful pay disparities.
- For violations of the job-posting portion of the Act, employees may file a written complaint with the director of the Colorado Department of Labor within one year of learning of the violation. If the DOL determines that a violation occurred, an employer may be subject to fines between $500 and $10,000 per violation.
- In addition, if an employee demonstrates a violation of the posting requirements of the Act, the court may order appropriate relief, including a rebuttable presumption that any records the employer was required, but failed to keep, contained information favorable to the employee’s claim. An employee may also be entitled to a jury instruction that failure to keep records can be considered evidence that the violation was not made in good faith.
In short, the Act creates significant new risks and responsibilities for employers. While the new requirements do not take effect until January 1, 2021, Colorado employers should consider reviewing their pay policies, postings, and practices with both Human Resources and employment law counsel.
The Employment & Labor Group of Davis Graham & Stubbs LLP works to assist and advise clients on virtually every aspect of the employment relationship. Please contact Lana Rupprecht or Katie Brown if you would like to further discuss these updates.