What Change Would the Rule Bring?

The U.S. Department of Labor (DOL)’s proposed new rule would:

• Adopt an “economic reality” test to determine whether a worker is an employee or an independent contractor under the FLSA. That is, whether a worker is economically dependent on an entity for work and would be an employee, or conversely, whether the individual is in business for him/herself (independent contractor);
• Identify and explain two “core economic reality factors,” specifically the nature and degree of the worker’s control over the work, and the worker’s opportunity for profit or loss based on initiative and/or investment. The DOL would weigh these two factors more heavily than any others to help determine if a worker is economically dependent on an entity’s business or is in business for themselves. The DOL believes that taking this approach will likely encourage the creation of independent contractor jobs that provide autonomy and satisfying entrepreneurial opportunities;
• Identify three other factors that the DOL will consider: 1) amount of skill required for the work; 2) degree of permanence of the working relationship between the worker and the potential employer (the more permanent, the more likely there is an employee status); and 3) whether the work is part of an integrated unit of production and if so, that would weigh in favor of finding employee status (meaning where a worker is a component of a potential employer’s integrated production process that “requires the coordinated function of interdependent subparts working toward a specific unified purpose.” For instance, if a worker depends on the overall process to perform work duties as would a computer programmer on a software development team, that person would be more likely to be classified as an employee.
• Advise that the actual practice of what the parties are doing is more relevant to determining whether the worker is an independent contractor or an employee than what may be contractually or theoretically possible.

What Should Employers Do Now?

Nonprofit organizations and businesses have an opportunity to provide public comment on the proposed rule until October 26, 2020.  Even if the final rule is substantially unchanged from the proposed rule, organizations should remain mindful that their respective State Departments of Labor and court rulings relating to State labor laws and wage orders may impose stricter definitions or interpretations of “independent contractor” than under the FLSA.  Therefore, employers should speak with their legal counsel before determining whether a worker is properly classified as an independent contractor rather than an employee to help minimize legal risk.

The post U.S. Department of Labor Proposes Rule to Clarify Independent Contractor Status first appeared on Perlman Sandbox.

That means that organizations and companies that choose to take this payroll tax deferral would then withhold additional amounts from those affected employees’ paychecks from January 1, 2021 through April 30, 2021 to repay that deferred tax obligation.  The payroll tax deferral would not excuse the requirement of payment of such taxes. Additionally, the deferral is not retroactive meaning that an employer may only defer payment of taxes prospectively through December 31, 2020 (it may not include deferral of taxes or reimbursement of taxes to employees that were already withheld starting September 1).

There remain questions about the legality of President Trump’s memorandum in the absence of approval from Congress which constitutionally holds the power over the federal “purse strings”— to tax and spend public money for the national government. Although the Internal Revenue Service (IRS) issued guidance on August 28, 2020 (Notice 2020-65), employers are still awaiting further IRS guidance regarding how the deferral would be implemented, including whether (or how) an employee’s obligation to pay those deferred taxes or an employer’s obligation to withhold will be forgiven in the absence of Congressional approval, written confirmation that the choice of whether to implement deferrals rests with the employer, not the employee, and employer obligations with respect to such taxes if an employee is no longer employed with that employer at the time that repayment is due.

The payroll tax deferral is simply a deferral, not a forgiveness of taxes.  If an employer does not pay the deferred payroll tax to the IRS by April 30, 2021, it could potentially be liable for penalties, interest and late fees.

Organizations should confer with their legal counsel and accountant before deciding to defer payroll tax withholding and to discuss structuring any agreements with affected employees concerning repayment if those organizations do decide to defer payroll tax withholdings.

The post Employee Payroll Tax Deferral Causes Confusion and Uncertainty for Employers first appeared on Perlman Sandbox.

These and other considerations are discussed in my article Avoiding Legal Pitfalls When Re-Opening Your Workplace: What Nonprofits and Businesses Need to Know.

The post Avoiding Legal Pitfalls When Re-Opening Your Workplace first appeared on Perlman Sandbox.

Effective January 7, 2020, pursuant to NYLL Section 203-E, employers of all sizes within New York State must notify employees of their rights under the law and remedies.  For those employers with an employee handbook, the notice of rights and remedies must be contained in that handbook.  The NYS Department of Labor has not issued any guidance yet, including whether independent contractors are encompassed by this law as “employees” and whether they must receive written notice of rights as well.

Employees may sue in court for violation of the law.  Violation of the law can result in damages, including, but not limited to, back pay, benefits and reasonable attorneys’ fees and costs for a prevailing plaintiff, injunctive relief against an employer, reinstatement; and/or 100% liquidated damages of the award for damages unless an employer proves a good faith basis to believe that its actions were in compliance with the law.  The law also contains civil penalties against employers that retaliate against an employee for complaining of a violation of this law.  The New York State Labor Law amendment does not exempt religious or faith-based organizations (see below for further information).  It also does not define “employee” and so it is unclear whether the mandated employee notice must also be provided to an entity’s independent contractors who are now covered by NYSHRL antidiscrimination provisions.

The justification for the law is that the federal Affordable Care Act (ACA) recently required that health insurance plans cover FDA-approved birth control methods without out-of-pocket costs to employees. Some for-profit employers have attempted to prevent employees from accessing health insurance plan coverage of FDA-approved birth control without out-of-pocket costs on the grounds that this health insurance benefit conflicts with an employer’s personal beliefs. As a result, over 100 federal lawsuits have been filed by employers to deny employees this benefit, including employers operating in New York State. New York State’s legislature seeks to ensure that employees’ decisions about pregnancy, contraception, and reproductive health are protected under state law from employment discrimination.

This amendment to New York State’s Labor Law prevents an employer from discriminating against employees based on reproductive health decisions, regardless of how the employer became aware of those decisions. Despite medical confidentiality protections under The Health Insurance Portability and Accountability Act (HIPAA), an employer does receive health insurance utilization summaries, which are distributed to each employer on a regular basis. In these reports, in some cases, an individual’s identity may be deduced by an employer based on the nature of the service and composition of the insured class reported in the summaries, and the State does not want employers using information about an employee’s reproductive health decision as a basis for discriminating against an employee or taking a negative employment action against them.

The State Labor Law amendment follows a recent amendment to New York City’s own Human Rights Law, which prohibits employers with four or more employees in New York City, labor organizations or employment agencies, from discriminating against or harassing job applicants, employees, interns, and independent contractors without employees, based on their sexual and reproductive health decisions. [1]

Note to religious/faith-based nonprofit organizations:  The State Labor Law and New York City Human Rights Law amendments are currently being challenged in federal court in New York by Evergreen Association, Inc., a nonprofit that operates pregnancy centers, and its founder and President, Chris Slattery, on the grounds that the law violates their constitutional rights to freedom of speech, freedom of association and due process, and that the term “reproductive health decision-making” is undefined, making that law unconstitutionally vague.  Stay tuned for developments in this litigation as there is no exemption for religious or faith-based organizations under the New York State Labor Law. While New York State and New York City Human Rights Laws do contain religious organization exemptions from those laws (though NYCHRL does not define a “religious organization”), those exemptions are nonetheless limited in their scope.[2]  Religious organizations, in particular, should consider the impact of the amendment to New York State’s Labor Law and consult with their legal counsel about their rights and obligations.

What Should an Employer Do Now?  Provide a written notice of employee rights and remedies as required and review and update all EEO and other policies prohibiting discrimination and employment-related hiring materials.

[1] New York City’s Human Rights Law defines “sexual and reproductive health decision” as “any decision by an individual to receive services, which are arranged for or offered or provided to individuals relating to sexual and reproductive health, including the reproductive system and its functions.” Services include, but are not limited to:

• Fertility-related medical procedures;
• Sexually transmitted disease prevention, testing, and treatment; and
• Family planning services and counseling, such as birth control drugs and supplies, emergency contraception, sterilization procedures, pregnancy testing, and abortion.

[2] NYC’s Human Rights Law does not prohibit religious organizations from limiting employment or giving preference to persons of the same religion or denomination or from making such selection as is calculated by such organization to promote the religious principles for which it is established or maintained.

The post NY Employers Must Provide Notice of Rights to Employees Regarding Reproductive Health Decision Discrimination first appeared on Perlman Sandbox.

Employers hiring in New York State should review all of their hiring practices and employment applications to ensure they comply with this new law, and train all HR staff and hiring managers on the law’s legal requirements.

The post New York State Ban Employers from Inquiring about Salary History first appeared on Perlman Sandbox.

What is Paid Family Leave?

As described by New York State, Paid Family Leave provides partial wage replacement and job protection to eligible employees for paid time off from work:

• To bond with and care for a newborn, adopted or fostered child during the first 12 months following the birth, adoption or fostering of the child.
• To tend to obligations arising from a spouse, child, domestic partner or parent who has been notified of an order of active military duty.
• To care for a close relative with a serious health condition.

A “close relative” is defined as: an employee’s spouse, domestic partner, child, parent, parent in-law, grandparent, or grandchild.

An employee may be granted paid family leave only once in a 12-month period, which will be measured forward from the date the employee’s first Paid Family Leave begins.

Unlike federal Family and Medical Leave Act leave, employees may not use paid family leave for their own serious health condition.

 Who is Eligible?

Employees are eligible:

• After 26 work weeks if they work a regular schedule of twenty or more hours per week; or
• After 175 work days if they work a regular schedule of fewer than twenty hours per week.

May Employees Opt-Out?

In certain circumstances, temporary or seasonal employees may opt-out of such benefits.

How Much Leave May Employees Take and How Much Do They Receive?

The amount of paid leave and the amount of pay, will be staggered from years 2018 to 2021, eventually increasing from 8 to 12 weeks of paid family leave, as follows:

Starting January 1, 2018, eligible employees may take 8 weeks of Family Leave during any 52-week period, beginning on the first day they take paid family leave.  They may be eligible to receive 50% of their salary during their 8 weeks of leave, up to (but not more than) the state average weekly wage.

As of January 1, 2019, eligible employees may take 10 weeks of paid family leave and will receive 55% of their salary during the 10 weeks of leave, up to the state average weekly wage at that time.  If weekly earnings are greater than the state average weekly wage, earnings during the leave period will be capped at 55%.

As of January 1, 2020, eligible employees may take 10 weeks of paid family leave and will receive 60% of their salary during the 10 weeks of leave.  If weekly earnings are greater than the state average weekly wage, earnings during the leave period will be capped at 60%.

When fully phased-in on January 1, 2021, employees will be eligible to take 12 weeks of paid family leave and receive 67% of their salary during their 12 weeks of leave.   If their weekly earnings are greater than the state average weekly wage, their earnings during their leave period will be capped at 67% of the state average weekly wage level.

Who Pays for Paid Family Leave?

The program is included as a rider to an employer’s short-term disability policy, but will be fully funded by employees through payroll deductions each pay period, which employers could have begun making as early as July, 2017, unless the employer chooses to pay the premium itself.

The New York State Department of Financial Services has established the employee contribution for coverage beginning January 1, 2018, to be 0.126% of an employee’s weekly wage, up to and not to exceed the statewide average weekly wage, currently $1,305.  That percentage will be deducted each pay period from an employee’s paycheck to pay for the premium for this insurance benefit.

A maximum rate of employees’ contribution will be established each year.

Does the Law Apply to Non-Profit Organizations?

Yes, generally, but coverage restrictions for disability benefits for employees of non-profit or religious institutions also apply to Paid Family Leave.  As you may know, “[r]eligious, charitable or educational institutions operating on a non-profit basis are required to obtain disability benefits insurance or to provide disability benefits through approved self-insurance to all of their employees, with exceptions, as noted below, if they employ one or more employees: …a duly ordained, commissioned or licensed minister, priest or rabbi; a sexton; a christian  science reader; a member of a religious order.

Also excluded from mandatory coverage are persons engaged in a professional or teaching capacity in or for a “religious, charitable or educational institution”; or an executive officer of an incorporated religious, charitable or educational institution; or persons participating in or receiving rehabilitative services in a sheltered workshop operated by such institutions under a certificate issued by the U.S. Department of Labor; or volunteers in or for such institutions; or recipients of charitable aid from a religious or charitable institution who perform work in or for such institution which is incidental to or in return for the aid conferred, and not under an expressed contract of hire.”

How Much Notice Must an Employee Provide to His/Her Employer Before Taking Leave?

If an employee’s Paid Family Leave is foreseeable, that employee must provide at least 30 days’ advance notice before the leave begins.

May an Employer Require Documentation of the Need for Paid Family Leave?

Yes, an employer may require a certification from a health care provider treating the employee’s family member or, if the leave is following birth of a child, the health care provider treating the mother of the child.  For adoption and foster care, different types of documentation will be needed.  Employees taking Paid Family Leave for a qualifying military event must provide copies of Duty Papers or other supporting documentation.

Do Employers Have an Obligation to Continue Health Insurance Benefits and Leave the Position Open During an Employee’s Paid Family Leave?

Yes, employers must continue employees’ health insurance benefits during the Paid Family Leave so long as employees continue to pay their share of health insurance premiums for coverage during their absence.   Such employee contributions will continue to be paid through payroll deductions.

The law requires employers to restore employees to the same position or a comparable one if the employee returns to work after paid family leave.   Failure to do so may result in claims of unlawful discrimination or retaliation.

What Should Employers Do Now?

In view of this impending law, New York employers should contact their disability insurance carrier if they have not done so already to obtain paid family leave insurance, set up employee payroll deductions for these benefits and inform employees in writing about the payroll deductions and their rights under the law, create written policies addressing paid family leave, post a mandatory notice in the workplace (as with workers’ compensation and disability benefits), and train managers on the law’s new requirements.  Copies of the Paid Family Leave forms and the mandatory poster can be found at: https://www.ny.gov/new-york-state-paid-family-leave/paid-family-leave-forms-employees-employers-and-insurance-carriers.

If you have any questions about this law’s application to your workplace, please contact Lisa M. Brauner, Head of Perlman & Perlman LLP’s employment practice, at 212-889-0575, lisa@perlmanandperlman.com.

The post New York State Paid Family Leave Takes Effect January 1, 2018: Are You Ready? first appeared on Perlman Sandbox.

Under the law, “to inquire” means:

1. to communicate any question or statement to an applicant, an applicant’s current or prior employer, or a current or former employee or agent of the applicant’s current or prior employer, in writing or otherwise, to get an applicant’s salary history, or
2. to conduct a search of publicly available records or reports for the purpose of getting an applicant’s salary history.

This amendment to NYC’s Human Rights Law follows on the heels of Mayor De Blasio’s November 2016 executive order, prohibiting city agencies from inquiring about salary history before making a job offer, and Governor Cuomo’s executive order similarly prohibiting state agencies from doing the same.  New York State already had existing gender equity laws requiring equal pay for equal work, but that law along with similar laws in other States apparently have not remedied the persistent gender pay gap.

Proponents of the New York City salary history bill believe that the bill is yet another way to close the gender pay gap.  They have stated that employers’ reliance on past salary history has perpetuated the gender pay gap, where women continue to be paid less than their male counterparts.  The purpose of the law is to reduce the likelihood that women will be prejudiced by past salary levels.  “Instead, employers would be encouraged to set salaries based on factors such as resources and market rates.”

The nonprofit organization American Association of University Women has reported that the gender pay gap is real, documenting its research and conclusions in a recently published Spring 2017 edition on the subject entitled: “The Simple Truth about the Gender Pay Gap,” http://www.aauw.org/aauw_check/pdf_download/show_pdf.php?file=The-Simple-Truth.

The NYC salary history ban follows similar bans in other jurisdictions like Philadelphia, Pennsylvania,[1] New Orleans, Louisiana and Puerto Rico.  In last year’s blog entitled “Is Asking a Job Applicant about Their Past Salary, History?” we reported that Massachusetts became the first State in the nation to prohibit employers from asking job applicants about salary history,[2] and that California is considering a similar law.  See https://www.perlmanandperlman.com/show-me-the-money-massachusetts-prohibits-employers-from-asking-job-applicants-about-salary-history-and-other-jurisdictions-may-follow/

Penalties for Violation of the Law

The New York City Commission on Human Rights is charged with enforcing the law, and can impose civil penalties ranging from $125,000 to $250,000.  Alternatively, if a complainant chooses to bring a private action in court and prevails, a finding of a violation of New York City’s Human Rights Law may result in compensatory damages, punitive damages, equitable remedies, reasonable attorneys’ fees, costs, and expert witness fees.

Take-Aways

In light of these legal developments, organizations may want to:

• conduct an audit (with assistance of legal counsel to preserve attorney-client privilege) of pay equity;
• review and update employment applications that ask for prior salary history and other relevant policies;
• ensure third-party background checks do not yield prohibited information about salary history;
• inform and train hiring managers, human resources, recruiters, and others involved in the hiring process on the new legal requirements; and
• consider reviewing various resources and market-rate compensation surveys for the positions at issue together with an applicant’s work experience and value to the organization to determine appropriate compensation. (Nonprofits may already be considering such factors in determining executive compensation).

For assistance with conducting audits, and legal review of your documentation, policies, hiring practices and training, please contact Lisa Brauner, Employment Law practice, at 212-889-0575, lisa@perlmanandperlman.com.

[1] A court has recently temporarily stayed enforcement of the Philadelphia law which was to take effect on May 23, 2017, pending a legal challenge to its constitutionality.  The Chamber of Commerce for Greater Philadelphia is claiming, among other things, that the law violates employers’ First Amendment rights.

[2] The law will take effect in July 2018.

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