Yesterday the Arizona Supreme Court issued a death knell to the pending legal challenge to Prop. 206. As you will recall from our blog post, last November our citizenry passed a referendum that raised the minimum wage and imposed mandatory paid leave on employers. The minimum wage hike took effect in January, while the paid leave provision becomes effective in July. The ensuing legal challenge to Prop. 206 found no traction, and met its demise yesterday when the Court unanimously rejected the appeal. Given the exigencies of the situation, the Court issued its ruling without a supporting opinion, but promised to publish an actual opinion when ready to do so. It appears that Prop. 206 is the law of the State, and only constitutional/political solutions remain. In the meantime, hello minimum wage hikes and paid leave.
Category Archives: Benefits
Arizona Paid-Leave Trickery
During the election cycle, Arizona voters were treated to ads featuring adorable families hit hard by the current minimum wage. We were asked to vote for Prop. 206 to raise the minimum wage incrementally until it reaches $12.00 an hour by the year 2020—a not-so-unreasonable request when fast-food workers are demanding a single-step increase in the minimum wage to $15.00. Missing in the ads, in fact, missing in the debate on Prop. 206 completely, was the other part of the initiative—employers must provide paid sick leave to employees. This mandate is a big deal for small and large employers alike. Prop. 206 requires employers with fewer than 15 employees to provide at least one hour of paid sick time for every 30 hours worked, although an employee may not accrue or use more than 24 hours of paid sick time per year. Prop. 206 requires employers with 15 or more employees to provide at least one hour of paid sick time for every 30 hours worked, and employees may accrue or use up to 40 hours of paid sick time per year. Arizona employers will have to implement Prop. 206 paid leave by July 1, 2017.
Arizona voters resoundingly approved a very gradual minimum wage hike through Prop. 206, one that was only slightly different from the statutory hikes established almost a decade ago through Prop. 202. But, when they voted for Prop. 206, did Arizonans understand they were creating a new financial burden on job-creators in the form of mandatory paid sick leave benefits?
Government Contractors Pay 56 PTO Hours
By Bill Wright
The U.S. Department of Labor has issued its final rule on paid leave for employees working on or in connection with government contracts. Contractors will be required to allow employees to accrue at least 1 hour of paid leave for each 30 hours worked on or in connection with government contracts. Only contractors who use the accrual method may cap accrual at 56 hours.
Employees may use the paid leave for the employee’s own illness, injury, or medical condition; visits to medical providers, care for child, spouse, parent, domestic partner, or relation; or to obtain counseling, relocate, or obtain assistance with regard to domestic violence, sex assault, or stalking. Existing policies that provide at least 56 hours of paid leave for these reasons may satisfy the rule. The employer may request certification of the need for the leave, but, in most cases, a statement from the employee is all that is required.
Interference and retaliation are banned, and the Wage & Hour Division will investigate complaints. Failure to comply may result in debarment from government contracts. Links to additional information are available here. https://www.dol.gov/newsroom/releases/whd/whd20160929.
AZ’s Hidden Employer Wage/Hour Gift
Much has been said about AZ Governor Ducey’s recent decision to sign into law HB 2579, which preempts local governments from enacting their own living wage or fringe benefits ordinances for private employers. See http://www.dcourier.com/news/2016/may/13/ducey-signs-bill-will-protect-private-employers-di/?templates=desktop. But next to nothing has been said about the impact of HB 2579 on treble damages wage claims under Arizona law, and that’s a shame, because HB 2579 incidentally provided Arizona Employers with a hidden gift.
Arizona law permits a trial court to award treble damages when an employer fails to pay wages that are due. Previously, Arizona law defined wages extremely broadly to include sick pay, vacation pay, severance pay, discretionary and non-discretionary bonuses, and the like. However, in the course of narrowly re-defining wages to limit local government enactments of local minimum wage or fringe benefits ordinances, HB 2579 deleted the broad definition of wages under Arizona law. As a result of HB 2579, the term “wages” now refers to nondiscretionary compensation only. This means when an employee brings a treble damages claim, the claim will be limited to nondiscretionary wages, and employees won’t be able to seek treble damages for unpaid sick pay, vacation pay, severance pay, discretionary bonuses and more. This means the specter of treble damages wage awards will be far less menacing going forward.
Note that HB 2579 is already facing legal challenges because some argue that the legislation effectively repeals Proposition 202, which the voters approved in 2006. See http://www.courthousenews.com/2016/06/24/lawmakers-sue-arizona-on-behalf-of-workers.html. However, even were HB 2579 struck down for that reason, the provision narrowly redefining wages under Arizona law should not be impacted.
New Overtime Pay Minimum Salary Doubles
By Andy Volin
$47,500 is the new minimum annual salary level ($914/week) for the white collar overtime exemption, according to an announcement [expected later] this week by the Department of Labor. This more than doubles the current minimum of $455/week. The effective date for this new requirement is December 1, 2016.
According to reports, the DOL is not, however, making any changes to the duties tests associated with the Executive, Administrative, or Professional exemptions.
Expect an announcement soon about a webinar that will go into more detail, after the Final Rule is published.
Here are at least five options for companies to consider:
- Increase salary level to maintain the exemption (and not worry about overtime).
- Divide current salary by 40 hours and switch to hourly (and worry about overtime).
- Convert from salaried to hourly based on actual hours worked, so the net cost is the same (requires reliable information about hours worked and final pay will vary with hours worked).
- Convert from salaried exempt to salaried non-exempt, and pay overtime for excess hours.
- Fluctuating Work Week: Salary is for all hours worked, including overtime (special rules apply).
Parental Leave Precautions
Last week, Coca-Cola announced that many new parents at the company (domestic non-bargaining employees) will soon be eligible for six weeks of paid leave. The benefits, which supplement existing short-term disability benefits for birth mothers, will be available to mothers and fathers, adoptive and foster parents, and same-sex couples. The announcement comes as the nationwide conversation about parental leave intensifies. According to SHRM, 21 percent of large U.S. corporations offered paid maternity leave in 2015, up from 12 percent in 2014.
If your company is considering an expanded leave program, ensure those valuable benefits don’t result in legal headaches down the road. When parental leave benefits distinguish between protected categories, or are otherwise incongruent with similar forms of leave benefits for other reasons, they run the risk of violating various discrimination laws, including Title VII, the Pregnancy Discrimination Act, and the Family and Medical Leave Act, in addition to state and local laws that might provide additional rights. At a minimum, policies that provide leave beyond a birth mother’s incapacitation due to pregnancy or labor should be gender-neutral and not based on stereotypes of a mother’s role, a father’s role, or a family’s composition. Consideration must also be given to the impact parental leave will have on other benefits, such as short-term disability, as well as the impact it will have on unionized employees and upcoming bargaining. And, of course, whenever you roll out a new benefit not required by law, consider asking employees for some form of quid pro quo, such as a restrictive covenant in exchange for the benefit.
Even with the best of intentions, companies that implement unfair or discriminatory policies risk negating the goodwill they are trying to build. If it’s worth doing, it’s worth doing right.
Wellness Rewards Under GINA
The EEOC has issued proposed regulations addressing the legality of inducements for spousal participation in wellness programs under the Genetic Information Nondiscrimination Act (GINA). The original GINA regulations prohibited employers from offering inducements to an employee for providing genetic information, including genetic information about employees’ spouses. The EEOC has now declared that employers may offer limited inducements (financial or in-kind), whether in the former of incentives or penalties to be avoided, to spouses covered by an employer’s group health plan who receive health or genetic services offered by the employer to provide information about their current or past health status as part of a health risk assessment. Inducements are still illegal as to spouses’ other genetic information or genetic tests, as well as the genetic information or tests of an employee’s children. The total inducement provided to a spouse may not exceed the total cost of coverage for the plan in which the employee and any dependents are enrolled minus 30 percent of the total cost of self-only coverage.
The EEOC is accepting comments on the proposed regulations until December 29, 2015. If you have a wellness plan and have not reviewed its provisions recently, now is a good time to evaluate whether the plan complies with the proposed regulations under both the ADA and GINA.
Colorado Vacation Pay Update
By Andy Volin
Earlier this month, we alerted you that the Colorado Department of Labor was considering an enforcement position with respect to “use it or lose it” vacation policies. The CDOL recently issued a FAQ document about Colorado’s 2015 Wage Protection Act, which included 2 questions and answers about these policies. CDOL website with link to FAQ PDF
We don’t think these answers are clear, because while on the one hand they permit “use it or lose it” policies, on the other hand they state such policies can’t be used to deprive an employee of earned vacation time. The CDOL also indicated it will look at these policies on a case by case basis, and consider the following non-exhaustive list of factors: “The employer’s historical practices;” “Industry norms and standards;” “The subjective understandings of the employer and employee,” and “And any other factual considerations which may shed light on when vacation time becomes “earned” under the agreement in question.”
In light of this, we repeat our prior recommendation to review your vacation policies, and consider whether there are better alternatives to “use it or lose it,” such as capping the amount of vacation that can be earned, or substituting Paid Time Off (“PTO”) for vacation and sick pay. Prospective changes to policies are permissible, but changes that diminish vacation that has already been earned should be avoided.