Coming to a Workplace Near You: New Fair Labor Standards Act Overtime Regulations Appear Imminent

The U.S. Department of Labor (“DOL”) recently sent proposed regulations to the Federal Office of Management and Budget (“OMB”) to amend the Fair Labor Standard Act’s White Collar Exemptions – i.e., the professional, executive and administrative exemptions – by increasing the minimum salary requirement for exempt employees.

Readers may recall that in 2016, the Obama Administration planned to raise the minimum salary requirement for the White Collar Exemptions from $455 per week to $913 per week but was blocked from doing so by Judge Amos L. Mazzant of the United States District Court for the Eastern District of Texas. For a refresher on that case, take a look at our colleague, Bob Kilroy’s, article on Judge Mazzant’s decision here.

It is expected that OMB will take a few months to review the proposed regulations before they are published in the Federal Register, at which point the public (i.e., affected employers) will have the opportunity to review and comment on the proposed regulations for the first time. Following the public comment period, the DOL may further amend the proposed regulations based on comments received, or it could decide to adopt the regulations as proposed, without any further amendments.

Although we cannot anticipate with certainty where the proposed rule will set the minimum salary, several commentators expect the salary level to be set in the low to mid $30,000s, which would equate to a weekly salary of between $575-$700. If this were to happen, employees presently classified as exempt under one of the White Collar Exemptions making less than the new salary level would need to be reclassified as non-exempt hourly employees or, in the alternative, have their pay increased to at least the new salary level to retain their exempt status.

We will continue to track the status of the proposed regulations and update you when they are released for public comment.

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WARN Act Violations ≠ Wage Act Violations

Early in 2018, the Massachusetts Wage Act, G.L. c. 149, §148, was in the news with two noteworthy decisions by the Massachusetts Supreme Judicial Court. Bookending 2018, the Supreme Judicial Court closed the year with yet another decision narrowing the definition of earned wages under the Wage Act, this time in connection with a premature mass layoff.

In the case of Calixto v. Coughlin et al, ISIS Parenting (“ISIS”), which offered pre- and post-natal classes and sold related products, abruptly closed, throwing more than 200 employees out of work. ISIS, however, had failed to give the proper 60-day notice under the federal Worker Adjustment and Retraining Notification (WARN) Act. The employees instituted a federal class action against ISIS and obtained a $2 million default judgment, representing the pay they would have received during the 60-day notice period if the company had not closed prematurely.

As the judgment against ISIS was uncollectable, the employees then filed a state court action against four corporate officers of ISIS alleging that the WARN Act damages were wages to which they were entitled under the Massachusetts Wage Act. They sought to hold those four individuals personally liable and requested that their damages be trebled, remedies available to them only under the Wage Act.

Once again, the Court wasn’t buying. The Wage Act, the Court held, is directed at “particularly egregious behavior, i.e., not paying wages for work actually performed.” It is not intended to provide the same protection and enhanced remedies for other employment violations where work would have been performed but for some intervening event, such as the abrupt closure without notice. Giving the phrase, “wages earned,” its plain and ordinary meaning, the Court affirmed the dismissal of the employees’ suit.

Since his election in 2014, Governor Charlie Baker has appointed five of the seven current Supreme Judicial Court justices. In my blog posts regarding two earlier Wage Act decisions by that Court, Segal v. Genitrix, LLC, and Mui v. Massachusetts Port Authority, [See “Violation of Sick Time Payout Policy Not a Wage Act Violation,” January 31, 2018; “A Bridge Too Far – Individual Liability for Wage Act Violations,” January 3, 2018], I posed the question as to whether we were seeing a determined effort to hold the line against an expansive interpretation of “earned wages” under the Wage Act and the enhanced remedies that result. While it may still be too early to call that race, the recent data points suggest that a narrower view is prevailing.

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U.S. Secretary of Education Released Proposed Changes to Title IX Regulations

On November 16, 2018, U.S. Secretary of Education Betsy DeVos released proposed changes to Title IX regulations on sexual harassment. While the public has 60 days to comment before the regulations take effect, the following are the key aspects of the proposed changes:

  • New Definition.  The previous regulations defined sexual harassment broadly as “unwelcome conduct of a sexual nature.” The newly proposed regulations narrow the definition to “unwelcome conduct on the basis of sex that is so severe, pervasive and objectively offensive that it denies a person access to the school’s education program or activity.” This would create a much higher bar to establish sexual harassment than the current definition.
  • Mandatory Reporting.  Currently, most colleges designate professors and other staff as mandatory reporters, requiring them to report possible incidents to the Title IX Office. The new regulations would only require officials who are able to remedy the situation to report formal complaints, meaning professors, resident advisers and others would no longer necessarily be required to report.
  • Scope.  Colleges would only be responsible for investigating cases where the incident happened on campus or within an educational program or activity. Incidents that occur at off campus housing, for example, would not qualify under the proposed rules.
  • Cross Examination of the Accuser.  The accused would have the guaranteed right to cross-examine the accuser.  This would take place in a live hearing done by a lawyer or adviser, though the parties could be in separate rooms. This is one of the most significant changes from the previous Title IX guidance, which discouraged cross-examination to avoid traumatizing victims.
  • Optional Higher Standard of Proof.  Colleges would have the option of applying either a preponderance of the evidence standard or the more stringent clear and convincing evidence standard to allegations of sexual harassment.
  • Change in Procedures.  Colleges would be allowed to use informal resolution processes, such as mediation, if both parties agree.

The proposed Title IX changes would usher in a fundamental shift in the way colleges adjudicate claims of sexual harassment shifting from an investigative model to a system of court-like hearings, with a narrower definition of offending conduct, varying standards of proof, and the right to cross examination.


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Judicial Protection of the Employment Relationship: The Broad Reach of the Workers’ Compensation Retaliation Prohibition

The Massachusetts Appeals Court recently had the opportunity to assess the limits of a statute designed to protect employees – the prohibition on employer retaliation against employees for pursuing Workers’ Compensation claims. The Court seized upon the unique facts of Bermudez v. Dielectric, Inc., to preserve an employee’s right to sue for wrongful termination even where the employer was not the subject of the employee’s Workers’ Compensation claim.

In Bermudez, the plaintiff was an employee of a staffing company assigned to the defendant manufacturer Dielectric.  Following her injury at work, she successfully pursued a Workers’ Compensation claim against the staffing company, not Dielectric.  Once the plaintiff had recovered from her injury, she was hired to a full-time manufacturing position by Dielectric.

Eighteen months later, the plaintiff sued, naming as defendants Dielectric and the Dielectric employee that allegedly caused the original workplace injury. Shortly after, Dielectric fired the plaintiff.  In its termination notice, Dielectric stated “When you sued Dielectric after being compensated for your injury by workers’ compensation, we had little choice but to conclude that you don’t believe in the company and don’t have its best interests in mind.”

The plaintiff then sued Dielectric under the statute prohibiting retaliation against an employee for exercising her Workers’ Compensation rights even though the plaintiff had not exercised those rights against Dielectric. The trial court initially dismissed the wrongful termination claim, finding that the right to sue for negligence did not fall under the prohibition related to the Workers’ Compensation claim asserted against the earlier employer.

On appeal, the Court rejected that distinction and vacated the dismissal. In permitting the plaintiff’s termination claim to proceed, the Court found that a suit for negligence fit within the language found in the Workers’ Compensation statute that prohibited retaliation even if the defendant employer was not the subject of the Workers’ Compensation claim.

The Court noted that the Workers’ Compensation statute was “a remedial statute and should be given a broad interpretation, viewed in light of its purpose and to promote the accomplishment of its beneficent design.” In the Court’s eyes, that “beneficent design” dictated that an employee could accept employment and then sue her employer without repercussion.

While the facts of this situation are sufficiently unique that they are not likely to arise with the vast majority of employers, Bermudez presents an interesting case study about the extent to which courts may go to protect an employee from termination for reasons unrelated to performance.

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Massachusetts Employers: Don’t Forget to Submit the New HIRD Form by November 30

All Massachusetts employers with six or more employees must submit a Health Insurance Responsibility Disclosure form (“HIRD Form”) to MassHealth through the MassTaxConnect web portal by November 30, 2018.

In November 2017, Massachusetts amended Chapter 118E of the General Laws to include a new Section 78, which requires all employers with six or more employees to submit a new HIRD Form on an annual basis, by November 30 each year.  The HIRD Form collects information about employer-sponsored insurance and is designed to assist MassHealth in identifying its members with access to employer-sponsored insurance.  This requirement applies to Massachusetts employers who either: (a) at the time of submission, have six or more employees; or (b) had six or more employees in any month during the past 12 months preceding the due date of the Form.

Notably, employers must submit a separate HIRD Form for each Federal Employer Identification Number issued to the company, and employers must submit a HIRD Form even if they do not offer insurance.  Employers who fail to file the required HIRD Form(s) or who knowingly falsify the information provided on the HIRD Form(s) will be subject to a penalty between $1,000 and $5,000 for each violation.

Please do not hesitate to contact a member of the Labor, Employment and Employee Benefits Group if you have any questions about the HIRD Form requirements.

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Constructive Discharge Claims: Recent Appellate Decision Narrows Availability

In our defense of employers, we often see the situation where an employee who has quit makes the argument as part of the claim that the actions of the employer compelled the employee to resign. This “constructive discharge” argument can take a relatively modest claim and turn it into one where years of lost wages and benefits are sought.

An evolving body of case law has built up around this constructive discharge theory, first formally recognized in Massachusetts in 1995. Essentially that theory stands for the proposition that an employer cannot accomplish indirectly what the law prohibits it from doing directly. Stated differently, an employer who cannot terminate an employee discriminatorily cannot engage in a calculated discriminatory effort that forces that employee to quit.

Historically, there have been two types of constructive discharge cases recognized in this arena. In the “working conditions” line of cases, a court must gauge whether the working conditions imposed by the employer would have been so intolerable that a reasonable person in the employee’s shoes would have felt compelled to resign. There are limits to the “working conditions” line of cases, however. As colorfully stated by one judge, “the workplace is not a cocoon, and those who labor in it are expected to have reasonably thick skins—thick enough, at least, to survive the ordinary slings and arrows that workers routinely encounter in a hard, cold world. Thus, the constructive discharge standard, properly applied, does not guarantee a workplace free from the usual ebb and flow of power relations and inter-office politics.”

A separate “demotion” line of cases provides an alternative means for a plaintiff-employee to establish a constructive discharge without having to show intolerable conditions imposed by the employer. Under this theory, when an employee is engaged to fill a particular position in the service of his employer, a demotion or a material loss of status or authority of a managerial or supervisory employee may be tantamount to an involuntary discharge (assuming the employee quits).

Since the theory was first recognized, plaintiff-employees have attempted to push those boundaries, often receiving a sympathetic ear from courts and our Commission Against Discrimination. Bucking that trend, the Massachusetts Appeals Court decided the case of Priscilla Flint v. City of Boston on October 24, 2018, holding the line on what facts could support a claim of constructive discharge under the “demotions” precedents.

In Flint, the plaintiff had been informed that she was going to be promoted to manage two departments. She was also informed that a pay raise of $5,000-10,000 per year would follow. In reliance, the plaintiff undertook the substantially increased workload, part of which included management of several additional staff members. A year after undertaking the increased duties, the plaintiff asked where her raise was and received further promises that she was going to get it. Additional unmet promises were made over the next several months.

The pay raise never materialized. Eighteen months after the plaintiff had begun the new job, the City finally informed her that she would not be getting a raise for “budgetary reasons.” After unsuccessfully attempting to file a grievance, the plaintiff then “retired.” In the litigation that followed, the plaintiff asserted that her retirement was not voluntary, but was rather a constructive discharge.

The underlying tenet behind both the “working conditions” and “demotions” lines of constructive discharge cases is that an employee has been subjected to materially less favorable conditions of employment that compelled the employee to quit. Citing the second line of cases, the plaintiff argued that non-payment of the repeatedly-promised raise was the equivalent of a material reduction of her rank or a material change in her duties. It is hard to contest that working much harder in a higher position without being paid the substantial increase that was repeatedly promised was materially unfavorable.

The court held otherwise noting that Ms. Flint received additional responsibilities and increased authority. Against that material increase in her responsibilities and authority, however, the court held that the determination not to give her the raise could not fit within the “demotions” line of cases. As a result, her claim that she was constructively discharged was dismissed.

Because this was an intermediate appellate court, there is the possibility that the Massachusetts Supreme Judicial Court will review it and take a different view. In the meantime, however, this case stands for the proposition that decreased responsibilities and authority can provide the basis for a constructive discharge claim, but a failure to pay a promised raise for those increased responsibilities cannot.

Although for now employers can take solace in knowing that facts such as presented in the Flint case will not support a claim of constructive discharge, there can be little doubt that a plaintiff facing similar facts in the future may also assert a claim of promissory estoppel based on the refusal to honor the promise of a raise. Because the plaintiff in such a case will appear sympathetic in the eyes of a jury, employers are well advised to avoid the kind of monetary promises that will prove difficult to keep.

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New Federal Background Notice Form

In September of 2018, the Consumer Financial Protection Bureau of the United States issued an update of the Agency’s model Federal Fair Credit Reporting Act notice which must be provided to applicants and employees that are subject to a background check undertaken by an outside party on behalf of an employer. Applicants and employees need to be advised of their rights under the Fair Credit Reporting Act, where adverse action is to be taken against the applicant or the employee.  Failure to do so may result in financial liability to the employer.  A copy of the form that employers must now use is accessible at, and the old form should be destroyed.  The new form now includes information on the individual’s right to get a security freeze for fraud on their “credit report.”

Significantly, there are additional requirements to be followed when employers seek to take adverse action, besides providing a notice of the applicant’s or employee’s rights, including providing a copy of the consumer investigative report being relied upon by the employer and an opportunity for the applicant or employee to dispute the information contained in the report. Also, no background check can be performed for the employer by an outside party without the applicant’s or the employee’s prior written authorization.

If you have any questions on the Fair Credit Reporting Act, please feel free to contact us.

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