A number of employment-related developments are likely to impact the construction industry. This article is intended to briefly summarize some of these developments.
The Overtime Rule
Most notably is the impending change to the Fair Labor Standards Act (“FLSA”) commonly referred to as the new “Overtime Rule.”
As a brief background, the FLSA states that all employees must be paid at least minimum hourly wage and overtime for every hour in excess of 40 hours. There are some exceptions to this basic rule, the most common of which are the “white collar exemptions,” which include the Executive
Exemptions. In order to treat an employee as exempt under one of these exemptions, an employer must meet a two-part test: (1) a duties test, i.e., the employee must perform certain primary duties; and (2) they must be paid a minimum salary.
The Overtime Rule focuses on the second prong of these exemptions - the minimum salary that must be paid. Under the current law, the minimum salary necessary to meet any of these exemptions if $23,660. However, beginning the first pay period after December 1, 2016, the minimum salary will increase to $47,476. This amount will increase automatically every three years.
At present, there are likely employees in your organization – Project Foreman, for example who likely satisfy the applicable “duties test,” but once the new law takes effect will not be able to remain exempt because their salary will not meet the new minimum salary of $47,476. You will either need to increase their pay to meet the minimum salary threshold of $47,476, or you will need to convert those employees to hourly employees and begin tracking their time.
Employers should be planning now for how to implement the new Overtime Rules in their organizations. Planning should include auditing the affected persons to identify how much overtime they are likely to work and determining how to address their pay. These changes must be implemented by the first pay period after December 1, 2016, which in effect will require the employer to be up-to-speed by the last two weeks of November.
There are currently legal
efforts to challenge and/or delay the law, but it is not expected that these efforts will be successful prior to the December 1 implementation date.
With the impending new Overtime Rule, employers might be tempted to convert all their employees to independent contractors. Do not be tempted
. The Department of Labor (“DOL”) has been cracking down on employer misclassification of employees as independent contractors. In a 2015 Administrator’s Interpretation available here, the DOL indicated that use of independent contractor status should be the exception, not the rule.
Moving forward, the DOL will focus on the “economic realities” of the relationship, i.e, who controls the work, the extent to which the individuals uses employer-supplied tools, is dependent on the employer, and the duration of the relationship, among other factors. The takeaway is that if they work for you they are more likely than not
your employee, which will obligate you to track their hours, pay them a minimum wage and overtime.
Following close on the heels of the Administrator Interpretation concerning independent contractors was a January 20, 2016 opinion on the subject of Joint Employment. This opinion seems highly relevant to the construction industry because one of the examples used in the opinion concerned how a general or up-line subcontractor can become the joint employer of a subcontractor or its employees. When a joint employment relationship exists, the joint employer becomes liable for all employee wages, which can mean the general contractor is liable for the wages of its subcontractors.
Again, the focus here is on the economic reality of the relationship, which looks at the extent to which the subcontractor or individual is “economically dependent” on the contractor or up-line subcontractor for wages. To avoid liability here, up-line contractors and subcontractors will need to have proper contracts in place with their subcontractors. Maybe more importantly, however, is the need to maintain that relationship on the job site, meaning general contractors and up-line subcontractors must avoid the temptation when at the job site to exert control over the subcontractor or its employees and should instead direct all communications through the subcontractor’s designated representative or site foreman.
Executive Order 13706
The next recent development is on that will only affect those who apply for/accept Davis-Bacon contracts. Starting January 1, 2017, all federal contractors (and their subcontractors) on Davis-Bacon construction contracts, i.e., where the federal government is the contracting party, will need to provide their employees with seven days of paid sick leave. This change does not apply to contracts under “related acts,” or where all the government does is supply funding.
Equal Employment Opportunity Commission Strategic Enforcement Plan
Every three years, the Equal Employment Opportunity Commission (“EEOC”) issues what known as its Strategic Enforcement Plan (“SEP”), which details its priorities for the next three-year period. While it will not stop the normal charge procedure, it will help identify where the EEOC intends to focus its efforts.
The current plan
expires in December 2016, and a new plan effective through 2020 should be issued in approximately December 2016. Based on recent EEOC activity, we would expect to see the EEOC focus on its expansive view of gender discrimination, which it has interpreted to include gender identity and transgender issues (think the dispute with the State of North Carolina over HB-2). We also think gender pay disparity and pregnancy discrimination will continue to be hot button topics. Finally, we also think religious discrimination will be a priority under the new plan.
These are just some of the most recent labor and employment issues that are expected to affect the construction industry. Should you want more information on these or other labor & employment law
topics, please contact us