2019 Mid-Year Employment Law Update Part II: Federal

Employers should be aware of recent changes and developments in Virginia and federal laws affecting employment and payroll practices. In this two-part series, we summarize key developments from 2019 so far, and identify steps employers should consider to ensure compliance. This installment focuses on developments under federal law.

EEO-1 pay reporting
The federal Equal Employment Opportunity Commission (EEOC) requires large employers and federal contractors to file annual "EEO-1" reports regarding the ethnic and gender composition of their workforces by establishment and job category. In general, EEO-1 reporting is required from employers with 100 or more employees and from federal contractors with 50 or more employees and at least $50,000 per year in federal contracts. Employers are required to visually classify the sex and race or ethnicity of employees who choose not to self-identify. Reports are based on a single payroll from the fourth calendar quarter of each year.

In 2016, EEOC under the Obama administration amended EEO-1 requirements to include a new "Component 2" that would include pay data, in 12 pay bands, effective for the 2017 reporting year. However, in 2017, the federal Office of Management and Budget, now under the Trump administration, stayed the new requirements pursuant to the Paperwork Reduction Act of 1995. This action was challenged in a lawsuit brought by the National Women's Law Center in federal court in the District of Columbia and resulted this spring in a ruling that EEOC must collect the "Component 2" pay data after all. This ruling has been appealed, but the appeal does not stay the order under which EEOC is required to act.

Pursuant to the court order, EEOC is now requiring that applicable employers and federal contractors submit Component 2 pay data for both 2017 and 2018 by September 30, 2019. There is no indication that the appeal will be decided or any stay issued in time to change this requirement. Filers can monitor the EEOC's EEO-1 website (available here) for updates. The EEOC has opened a helpdesk, which can be reached at (877) 324-6214 and EEOCcompdata@norc.org, to assist filers with the new requirements. Just last week, EEOC opened a web portal for submission of the required data at https://eeoccomp2.norc.org, and announced the availability of the portal by email to prior EEO-1 filers.

Higher FLSA salary requirement
As we anticipated in a recent article, this spring the U.S. Department of Labor announced a proposed rule that would increase the salary required under the federal Fair Labor Standards Act (FLSA) for employees to be treated as exempt under the so-called "white collar" exemptions from overtime requirements. Under the proposed rule, executive (supervisory), administrative (policy-making), and professional employees must be paid at least $679 per week or $35,308 per year in order to be exempt. This amount will be required as a condition of overtime exemption anywhere payment on a salary basis is required for exemption (this excludes certain administrative and professional employees who may be paid on a fee basis, and outside salespeople who may be paid on a commission basis). Payment of the required salary amount is necessary but not sufficient for exemption, as employees must also qualify under relevant duties tests. The salary amount currently required for FLSA exemption is $455 per week or $23,660 per year, set in 2004. The new, higher salary amount is still potentially subject to revision, but DOL expects that it will take effect on January 1, 2020. Before that date, employers should review any employees being treated as exempt who are paid salaries between the old and new required amounts, and decide whether, going forward, to treat such employees as non-exempt and pay them overtime, or to increase their salaries as required to maintain exemption. Virginia has no state overtime requirement.

Anti-Poaching
A recent settlement reminds employers that it is generally improper under federal anti-trust laws for employers to enter into "no poaching" agreements with competitors. Duke University and the University of North Carolina, being less than 10 miles apart, are rivals not just on the basketball court, but also in faculty hiring. This spring, Duke filed for approval of a $54.5 million settlement in favor of a class of 5,000 faculty members. The case was brought in 2015 by a Duke radiology professor who had sought employment at UNC, and was allegedly told that she could not be considered because of a no-poaching agreement between the two schools. (UNC settled with the professor last year.) The U.S. Department of Justice simultaneously intervened in the suit, seeking a five-year injunction against both schools. The Justice Department contends that "naked" no-poaching and wage-fixing agreements (those not arising from other legitimate collaboration) are per se illegal because they interfere with competition in the market for labor. Employers who enter into such agreements may suffer severe legal consequences.

LGBTQ cases to Supreme Court
Employers should watch for possible developments in the coming year on LGBTQ protections in the workplace. In April, the U.S. Supreme Court granted certiorari to hear three cases involving potential protection of gay and transgender employees under existing Title VII law, which prohibits discrimination on the basis of "sex." Two of the cases, from New York and Georgia, involve alleged discrimination against on the basis of being gay, and led to different results between the federal Second and Eleventh Circuit courts of appeals. The Second Circuit found that sexual orientation is already a protected class under Title VII, reasoning (as summarized by the American Bar Association) that it is "doubly delineated by sex because it is a function of both a person's sex and the sex of those to whom he or she is attracted." However, the Eleventh Circuit rejected that reasoning, and found that Title VII does not currently protect sexual orientation, by a vote of 9-2. The third case, arising out of a Michigan funeral home, involves alleged discrimination against a transgender employee. The Michigan case could involve a question of religious motivation, but the Supreme Court's writ grants review only to decide "whether Title VII prohibits discrimination against transgender people based on (1) their status as transgender or (2) sex stereotyping." Consideration of these cases will begin in October, which would normally result in decisions by June 2020 – although cases are sometimes returned without decision, if the court finds its writ was "improvidently granted."

Look for additional updates here, on the above issues and others.