Author: Scott Horton

Scott has been practicing Labor & Employment law in New York for almost 20 years. He has represented over 400 employers and authored 100s of articles and presentations and wrote the book New York Management Law: The Practical Guide to Employment Law for Business Owners and Managers. Nothing on this blog can be considered legal advice. If you want legal advice, you need to retain an attorney.

Confidentiality in Workplace Investigations

NLRB Restores Confidentiality in Workplace Investigations

A December 16, 2019 NLRB decision reinstated employers’ discretion to maintain confidentiality in workplace investigations. In 2015 the federal Labor Board had found that employees’ rights to communicate with each other generally trumped company secrecy in this area. The new ruling allows investigatory confidentiality to be the default, rather than the exception.

Previous Standard

In 2015, an Obama-era NLRB panel with a Democrat majority held companies to the burden of demonstrating a specific need for confidentiality regarding a particular investigation. In other words, the default was the employers could not force employees to keep quiet about an ongoing internal inquiry.

Under the Banner Estrella Medical Center ruling, employers could only require confidentiality upon affirmative evidence that:

  • witnesses need protection;
  • evidence is in danger of destruction;
  • testimony is in danger of fabrication; or
  • there is a need to prevent a cover-up.

In that decision, the Board found that, absent these factors, employees’ rights under Section 7 of the National Labor Relations Act outweighed company interests in preserving the integrity of an investigation. Section 7 of the NLRA protects employees who engage in concerted activity for their mutual aid and protection regarding terms and conditions of employment.

Concern with Lack of Confidentiality

A strenuous critique of the Banner Estrella Medical Center decision was that it was inconsistent with EEOC guidance encouraging confidentiality in workplace investigations. Specifically including investigations of sexual harassment, the EEOC has long emphasized that employer procedures for resolving internal complaints “should ensure confidentiality as much as possible. . . .”

Over the past few years, the EEOC and NLRB have attempted to reconcile their inconsistent stances. The new NLRB position eliminates the conflict between these federal agencies.

Changing the Presumption (Back)

The NLRB’s 3-1 decision in a case involving Unique Thrift Store once again permits employers to ask their employees to keep investigations confidential. They can do so as the default, without first evaluating prescribed criteria.

Unique Thrift Store maintained the following work rules for employees:

  • “Reporting persons and those who are interviewed are expected to maintain confidentiality regarding these investigations.”
  • “The following list . . . are examples of behaviors that . . . may lead to disciplinary action, up to and including termination . . . . Refusing to courteously cooperate in any company investigation. This includes, but is not limited to, unauthorized discussion of investigation or interview with other team members . . . .”

The Board majority overruled the Banner Estrella standard, in part, for its failure “to consider the importance of confidentiality assurances to both employers and employees during an ongoing investigation.”

Open Question on Investigatory Confidentiality Rules

The NLRB’s 2019 Unique Thrift Store decision didn’t actually determine whether the above rules are lawful. The Board withheld ultimate judgment in that regard because the rules themselves weren’t clearly limited to the duration of an investigation. In other words, they arguably required employees to keep quiet even after the company had completed its investigation.

The Board did not feel it had enough information to evaluate whether Unique Thrift Store had sufficient justification for requiring post-investigation confidentiality. So, it sent the case back down for further proceedings regarding that question.

Impact on Employers

Under this new ruling, companies can go back to directing employees to maintain confidentiality during an investigation. They can generally implement and enforce written rules to that effect. But they should be careful in the wording of such rules and directives. Requiring employees to stay silent even after an investigation has concluded may be more problematic. In that situation, your company should evaluate the specific circumstances and, ideally, consult with an experienced labor attorney.

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Click for the full decision in:

Apogee Retail LLC d/b/a Unique Thrift Store, 368 NLRB No. 144 (2019)

Banner Health System d/b/a Banner Estrella Medical Center, 362 NLRB 1108 (2015)

FLSA Regular Rate

U.S. DOL Clarifies FLSA Regular Rate

For the first time in over 50 years, the U.S. Department of Labor updated its interpretation of “regular rate of pay” under the Fair Labor Standards Act (FLSA). The new DOL rule takes effective January 15, 2020. The changes address new, more complicated perks and benefits. These include wellness plans, fitness classes, nutrition classes, and smoking cessation classes. The new rule will make it less costly for employers to provide additional benefits to employees. This, in turn, may increase workplace morale and employee retention.

The FLSA Regular Rate

The Fair Labor Standards Act is the federal law that establishes minimum wage, overtime pay, recordkeeping, and child labor standards. The FLSA covers most employees in the private sector and federal, state, and local governments.

Under the FLSA, an employee is eligible for minimum wage and overtime unless they qualify for a statutory exemption.

The employer must pay “non-exempt” employees at least minimum wage and compensate them for overtime at a premium rate of 1.5 multiplied by the employee’s “regular rate of pay” for all hours worked over 40 in a “workweek.”

Under current regulations, the “regular rate of pay” includes all remuneration for employment paid to or on behalf of an employee for hours worked, except for specific categories that were excluded under the FLSA. This “regular rate” includes the hourly wages and salaries for non-exempt employees, most bonuses, shift differential pay, on-call pay, and commission payments. The regular rate of pay is generally calculated by adding the employee’s includible compensation each week and dividing it by the number of hours worked within the workweek.

For more details on performing the FLSA regular rate calculation, read Calculating the Overtime ‘Regular Rate’.

New Rule on Regular Rate of Pay

The new rule clarifies that the following perks may be excluded from the calculation of an employee’s regular rate of pay, effective January 15, 2020:

  • The cost of providing parking benefits, wellness programs, onsite specialist treatments, gym access, and fitness classes, employee discount on retail goods and services, certain tuition benefits and adoption assistance;
  • Payment for unused paid leave, including paid sick leave and paid time off;
  • Certain penalties incurred by employees under state and local scheduling leave laws;
  • Business expense reimbursement for items such as cellphone plans, credentialing exam fee, organization membership dues and travel expenses that don’t exceed the maximum travel reimbursement under the Federal Travel Regulation system or the optional IRS substantiation amounts for certain travel expenses;
  • Certain sign-on and longevity bonuses;
  • Complimentary office coffee and snacks;
  • Discretionary bonuses (the DOL noted that the label given to a bonus doesn’t determine whether the bonus is discretionary); and
  • Contributions to benefit plans for accidents, unemployment, legal services, and other events that could cause financial hardship or expense in the future.

The DOL has also expanded the circumstances where employers can exclude call-back pay from the regular rate. Such payments no longer must go into the regular rate unless they are scheduled and prearranged.

Regular Rate Pitfalls

Overtime Must Be Calculated Weekly

Under the FLSA, an employer is responsible for determining the official workweek. Employers have considerable leeway in doing so. However, the workweek must consist of a fixed reoccurring 168 hours that contains seven, 24-hour workdays.  The workweek and workday start and end times must remain consistent unless employees receive advance notice of the changes.

Non-exempt employees must be paid overtime for all hours worked over 40 in a workweek (or as otherwise described by applicable law). Employers may not average the number of work hours worked by an employee over a two-week period, even if the employer has their payroll set up biweekly, to avoid paying overtime. For example, if an employee works 45 hours in week 1 and 35 hours in week 2, the employer may not average the hours worked over the two weeks resulting in a payment of zero overtime hours. Instead, the employee would be due 5 hours of overtime for week 1 and no overtime hours for week 2. Many employers make this mistake that could result in an extensive and expensive audit or litigation.

Employees Can’t Waive Overtime Pay

Non-exempt employees cannot waive their right to receive statutory overtime pay. This is true even for collective bargaining agreements or other written employment contracts.

Private Companies Can’t Use “Comp Time” Instead of Overtime Pay

Companies cannot provide employees with compensatory time (comp time) in exchange for payment for overtime hours worked each week. There are some exceptions to this rule for government workers.

Salaried, Non-Exempt Employees Are Still Eligible for Overtime Pay

An employer could pay a non-exempt employee a weekly salary that will represent pay for all regular hours of work. But if the employee works overtime during the workweek, the employer must pay additional premium compensation above and beyond the weekly salary for each overtime hour worked.

Example: An employee earns a weekly salary of $700 each week and works 43 hours. This employee’s regular rate of pay for this week would be $700/43=$16.28. The extra premium pay owed for the overtime hours can be determined by dividing the regular rate of pay in half. The employee should receive the normal weekly salary of $700, plus (3 hours x premium pay of $8.14) = $724.42.

State Overtime Laws

This new rule relates specifically to the FLSA. Many states have separate minimum wage and overtime laws. Employers often must satisfy both state and federal laws in this area. The “regular rate” concept may differ in some states. Therefore, be sure to consider the laws of your state in addition to the FLSA.

What Employers Should Do Next

Employers should conduct an overall audit to review what they include in their regular rate calculations. Companies using a third-party payroll provider should ask for clarification as to how overtime is calculated each week.

The FLSA is a complex law with many nuances beyond those described here. An experienced employment attorney can evaluate your pay practices and consult with you on overtime compliance. They might be able to identify alternative work schedules or payroll practices that comply with the wage and hour laws.

 

The new FLSA regular rate regulations are available here.

Company Email Use

Employers Regain Control Over Company Email Use

Say “goodbye” to Purple Communications and “hello” to Rio All-Suites Hotel and Casino. On December 17, 2019, the National Labor Relations Board released a new ruling about employees’ company email use. Specifically, the NLRB reversed a 2014 decision that had granted some employees the right to use their work email account for certain non-work purposes. What does this mean? And how long will it last?

Purple Communications Limited Private Company Property Rights

In December 2014, the NLRB decided a case involving Purple Communications. That decision gave a colorful name to a surprising encroachment on private companies’ control over their email systems.

A divided 3-2 Board for the first time ruled that employees had a federally-protected right to use their company work emails to engage in concerted activity for their mutual aid and protection. That refers to employees’ rights under Section 7 of the National Labor Relations Act. It’s the law that allows employees to join unions. And it also allows them to engage in other forms of joint activities toward improving their work conditions.

Three Democratic NLRB members comprised the Purple Communications majority. The two Republican members dissented.

The majority identified some limitations on their 2014 ruling:

  • “First, it applies only to employees who have already been granted access to the employer’s email system in the course of their work and does not require employers to provide such access.”
  • “Second, an employer may justify a total ban on nonwork use of email, including Section 7 use on nonworking time, by demonstrating that special circumstances make the ban necessary to maintain production or discipline. Absent justification for a total ban, the employer may apply uniform and consistently enforced controls over its email system to the extent such controls are necessary to maintain production and discipline.”

Employer Property Interest Overtakes Employee Interests

A 3-1 Republican NLRB majority has reaffirmed that federal law doesn’t entitle employees to use employer-owned equipment for non-work purposes.

The NLRB now holds that employers can restrict employees’ company email use for non-work purposes, including activity otherwise protected by Section 7.

The Board majority observed that “in modern workplaces employees also have access to smartphones, personal email accounts, and social media, which provide additional avenues of communication, including for Section 7–related purposes”. They did, however, allow that there might be an unusual workplace devoid of such alternative means of communication. There, perhaps, Section 7 rights might trump the employer’s property rights. But the majority did not attempt to hypothesize such a scenario.

On the last day of her term, outgoing Democrat Member Lauren McFarren dissented. She contends, “The majority’s decision aims to turn back the clock on the ability of employees to communicate with each other at work . . . .”

A Philosophical Divide

As with many questions under federal labor law, the NLRB’s ruling on this issue reflects a partisan debate. Several other decisions issued around the same day as Rio All-Suites Hotel and Casino demonstrate the same reality. Democrats and Republicans read the National Labor Relations Act differently. As a result, NLRB precedent may only last slightly longer than a Presidential term. Purple Communications, for example, was the law of the land for almost exactly five years.

Should Employers Change Their Policies?

If you had proactively responded to the NLRB’s 2014 pronouncement that employees had a right to use their work email for non-work purposes, then you might have changed or adopted written policies to that end. If so, you could consider revising those policies again. But it’s not a decision to be made automatically.

Employers who, for example, already allow employees to use work emails for a range of personal communications, should be cautious in how they suddenly limit that freedom. If nothing else, a strict contrary policy could anger and alienate employees. In extreme cases, it might even contribute to the type of employee dissatisfaction that contributes to unionization efforts. You probably don’t want that. (Read: Are Unions Bad? 4 Tips for Employers)

And if you do change your company email use policy or practice now, make sure to keep your ears open for the next time Democrats are in the majority on the NLRB.

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