Workplace Labor Update J U N E 2 0 0 3 In This Issue: Proposed - - PDF document

Workplace Labor Update

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Proposed Regulations May Define How Overtime Exemptions Are Analyzed

By Darryl L. Franklin On March 31, 2003, the United States Department of Labor (DOL) published proposed revisions to the Fair Labor Standards Act (FLSA) regulations. The FLSA proposed revisions, if implemented, would re-define the way the current

• vertime exemptions for executive, administrative and professional employees are analyzed. According to the DOL, the

proposed regulations are necessary to update the current regulations, which have remained unchanged for the most part since 1949, and to make it easier for employees and employers to determine which employees are eligible to receive

• vertime pay.

If adopted, the proposed regulations would make several key changes to existing regulations. For example, the proposed regulations would alter the “duty” test for administrative, executive and professional employees who are exempt from

• vertime pay. In addition, the proposed regulations would eliminate all percentage limitations for all categories of

employees (i.e., percentage of work doing non-exempt versus exempt work). Under the proposed changes, the following tests would be applied: Administrative Employee The proposed regulations retain the requirement that an exempt administrative employee have a “primary duty” of “performing office or non-manual work related to the management or general business operations of the employer or the employer’s customers.” However, the proposed regulations replaced the confusing and hard to apply requirement that the employee exercise “discretion and independent judgment” with the requirement that he/she holds a “position of responsibility.” In order for an employee to hold a “position of responsibility,” he/she must either: (1) perform work of substantial importance; or (2) employ a high level of skill or training. Executive Employee Under the proposed regulations, an exempt executive employee must: (1) have a primary duty of managing the enterprise in which the employee is employed or of a customarily recognized department or subdivision thereof; (2) customarily and regularly direct work of two or more other employees; and (3) have the authority to hire or fire other employees or have particular weight given to suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees. Similar to the administrative exemption, the proposed regulations delete all references to the requirement that the employee exercise “discretion and independent judgment.” In This Issue: Proposed Regulations May Define How Overtime Exemptions Are Analyzed……………………………………………….1 Understanding the Impact of War on the Workforce: Employers Should Familiarize Themselves with Requirements of USERRA………………………..…………………………………………………………...2 Maryland High Court: No Wrongful Discharge Exception For Seeking Advice From Counsel..……………………………3

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Professional Employees For professional employees, the proposed regulations continue to recognize as exempt “learned professionals” who have earned an advanced degree in a specialized area of knowledge, such as doctors, lawyers and engineers.1 However, the proposed regulations broaden the number of employees who could potentially qualify under this exemption by including an employee with an advanced type of knowledge acquired by an equivalent combination of intellectual instruction and work experience. Like the administrative and executive exemptions, the amendments eliminate the phrase “discretion and independent judgment” in the professional exemption.2 In addition, the proposed regulations would increase the minimum salary for employees exempt from overtime payments from $155 per week to $425 per week. Finally, the proposed changes would allow employers to take deductions from an exempt employee’s salary for full day absences as a result of suspensions imposed by the employer against the employee for disciplinary reasons, such as sexual harassment or other violations of workplace rules. (The proposed regulations leave unchanged the current rule prohibiting deductions for partial day absences.) It is important to note that these proposed regulations are not final. Rather, DOL is currently soliciting comments to their proposed regulations. It is anticipated that representatives of organized labor and employee advocacy groups will submit extensive comments challenging and criticizing the proposed amendments.

Understanding the Impact of War on the Workforce: Employers Should Familiarize Themselves with Requirements of USERRA

By Connie N. Bertram In light of the recent military activity in Iraq, the activation of thousands of reservists and the deployment of thousands of soldiers to the Middle East and around the world, it is critical that employers understand their obligations under the Uniformed Services Employment and Reemployment Rights Act (USERRA), 38 U.S.C. § 4301, to provide job and benefit protection rights to employees. Employers will be well-served by familiarizing themselves with this little-known, but important, Act and its comprehensive job-protection provisions. USERRA applies to all employers, regardless of size. Under the Act, employers are prohibited from discriminating against employees and applicants who are members of or apply to be members of the armed services or who perform or apply to perform military duty. The Act also prohibits retaliation against any employee or applicant for exercising his or her right to participate in military service, testifying or making a statement in connection with any proceeding under the Act, or participating in an investigation under the Act. Under USERRA, employers must allow military leaves of absence totaling up to five years to any full or part-time employee who voluntarily or involuntarily enters active duty or training in the Armed Forces, including the Air National Guard, the Army National Guard, and the commissioned corps of the Public Health Service. To be entitled to coverage under USERRA, an employee must provide advance written or oral notice to his or her employer of service obligations. An employee, however, is not required to provide notice if military necessity precludes it or it is impossible or unreasonable. Employers have an obligation to reinstate employees when they complete military leave covered by USERRA. The time period within which an employee must seek reinstatement depends on the length of the military service:

1 In addition, the proposed regulations would create a distinct and separate section for “computer” employees. This

section would consolidate all of the current regulatory guidance on computer occupations.

2 With respect to “outside sales” employees, the requirements for exemption from overtime payments would remain

largely unchanged.

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• If the period of military service is less than 31 days, the employee generally must report for work on the first day

following the completion of military service.

• If the period of military service is more than 30 days and less than 181 days, the employee must submit an application

for reemployment within 14 days of the completion of military service.

• If the period of military service is more than 180 days, the employee must submit an application for reemployment

within 90 days after the completion of military service. When the employee applies for reinstatement, he or she must provide documentation verifying that his or her application is timely and that he or she was honorably discharged from service. Military personnel who are dishonorably discharged are not entitled to the job protections of USERRA. Reemployment obligations of an employer vary depending on the length of the employee’s leave. Employers generally must reemploy employees in the position that they would have attained if they had remained continuously employed, if they are qualified for the job or can become qualified with reasonable efforts. For employees who served less than 91 days, the employer must assign the employee to the position that he or she held prior to the military service or to the position that is the nearest approximation of that position if he or she is unable to become qualified for the position due to a disability incurred or aggravated during such military service. For employees who served more than 91 days, the employer must assign the employee to the position that he or she held prior to the military service or to a position of equivalent seniority, status and pay or, if he or she cannot qualify for such a position, to a position of “like status” for which he or she is qualified. An employer, however, does not have an obligation to reinstate an employee if reinstatement would be impossible, unreasonable or create an undue hardship on the employer. Much like the undue hardship standard of the ADA, this standard has been construed narrowly by courts and generally is only available in situations involving layoffs or other financial hardship. Courts have found that, even where the replacement employee is more efficient or does a better job, the employer is required to remove the replacement and reinstate the employee returning from military leave. Moreover, an employee who is reinstated pursuant to the Act generally cannot be discharged except for cause for a defined period after reinstatement. The length of the protected employment term depends on the amount of time that employee spent in service. Employees returning from military leave are entitled to the seniority and other seniority-based rights and benefits that they would have attained if they had not been in military service. A right or benefit is “seniority-based” if it is accrued or determined based on the employee’s length of service. For instance, if an employer has a leave policy based on length of service, a qualified returning employee is entitled to accrue leave at the same rate that he or she would have if he or she had not been on leave. For non-seniority-based benefits, USERRA requires employers to treat the employee the same as

• ther employees on an unpaid furlough or leave of absence. There are specific provisions of USERRA that address

participation in pension plans and 401(k) plans.

Maryland High Court: No Wrongful Discharge Exception For Seeking Advice From Counsel

By Karen L. Vossler A recent ruling by the Maryland Court of Appeals adds strength to the limitations placed on at-will employees to challenge their employers’ decisions to terminate them through claims of wrongful discharge. In Porterfield v. Mascari II, Inc., the Court of Appeals held that the general right to seek legal advice regarding civil, legal matters does not provide a public policy basis sufficient to support a claim for wrongful discharge in Maryland. In the absence of a written employment contract dictating terms of employment, employees in Maryland generally are considered to be “at-will,” meaning that either the employee or the employer may terminate the relationship at their pleasure, at any time and for any reason. Maryland courts have historically recognized a limited public policy exception to the “at-will doctrine,” which provides employees a cause of action for wrongful discharge where the employee can show that his or her termination violates a clear mandate of public policy. Such expressions of public policy may be found in

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statutes or in comments made by the legislature as recorded in legislative history surrounding the passage of particular statutes. The dispute in Porterfield arose when petitioner Deborah Porterfield made statements to her employer concerning her intent to seek advice from legal counsel regarding her rights and obligations before responding to an unfavorable performance evaluation. She was terminated almost immediately thereafter and subsequently filed a suit in which she claimed, among other things, wrongful discharge. Porterfield claimed that her termination violated a public policy in Maryland that all persons be permitted freely to consult with an attorney of their choice concerning matters of importance in their lives, including matters related to their employment. After her appeal from a dismissal of her complaint was denied, Porterfield asked the Maryland Court of Appeals to review the decision. In its recent ruling, the Court of Appeals declined Porterfield’s invitation to follow case law from Ohio and Iowa and find a clear mandate of policy in Maryland based on various constitutional, statutory and common law sources. In reaching its conclusion, the Court opined that Porterfield was “wrong to conflate any public policy generally favoring access to counsel with a policy that is violated by the mere suggestion by an employee that he or she may want to seek advice of counsel. The possibility that an assumed right may be exercised is not the same as the actual exercise of that right.” (emphasis added). The Court agreed with the respondent that the ruling sought by Porterfield would immunize employees from adverse employment actions by simply announcing their intention to call a lawyer. Ultimately, the Court held that Maryland law does not recognize with sufficient particularity the general right of an individual to freely consult with an attorney of one’s choice concerning matters of importance in one’s life, such that this general right may form the basis of a wrongful discharge complaint. The Court’s ruling is helpful in further delineating the contours of the public policy exception to the at-will doctrine. However, it is important to remember that courts have created exceptions to the at-will doctrine, and employees may seek protection for exercising certain rights. Workplace Labor Update is published by the Labor and Employment Law Section of the law firm of Venable LLP, Two Hopkins Plaza, Suite 1800, Baltimore MD 21201; 1201 New York Avenue, NW Suite 1000, Washington, DC 20005; One Church Street, Fifth Floor, Rockville, MD 20850; 210 Allegheny Avenue, P.O. Box 5517, Towson, MD 21204 and 8010 Towers Crescent Drive, Suite 300, Vienna, VA 22182. Internet address: http://www.venable.com. It is not intended to provide legal advice or opinion. Such advice may only be given when related to specific fact situations. Chairmen, Labor Department: Robert G. Ames and Ronald W. Taylor Editor: Patrick L. Clancy Associate Editor: Karen L. Vossler Questions and Comments concerning materials in this newsletter should be directed to Patrick L. Clancy, Venable LLP, One Church Street, Fifth Floor, Rockville, MD 20850. Telephone 301.217.5600 or email plclancy@venable.com. Address Changes should be directed to Ruth G. Kaufman, Venable LLP, 1201 New York Avenue, NW Washington, DC

• 20005. Telephone 202.216.8096 or email rgkaufman@venable.com.