Joint Employment, Wage and Hour Changes are on the Regulatory Horizon

Employers will face fewer significant regulations in the coming year, according to the Trump administration's Unified Agenda of Regulatory and Deregulatory Actions ("regulatory agenda"). Released on October 17, 2018, the fall regulatory agenda outlines each agency's rulemaking efforts at any stage in the process—from requests for information to final regulations—and gives estimated timelines for completion. This regulatory to-do list provides insight into the administration's upcoming priorities.

While a number of key rules are on the horizon—including regulations addressing joint employment, overtime, regular rates of pay, and H-1B visas—the current agenda is noteworthy for being less ambitious than it had been in prior years. In rolling out the fall regulatory agenda, the administration highlighted its efforts to deregulate industry.  Administration officials claim that deregulatory efforts in the new agenda will result in $18 billion in cost savings in fiscal 2019, and that regulatory costs were down $23 billion relative to fiscal year 2017.  Since taking office, the administration stated that it had taken 176 deregulatory actions, including 57 “significant” deregulatory cuts to regulations.

The following highlights some of the more notable items on this season's regulatory agenda from the Department of Labor, National Labor Relations Board, Equal Employment Opportunity Commission, and the Department of Homeland Security.

Department of Labor

Wage and Hour Division

Joint Employment.  Several notable regulatory developments will involve the DOL's Wage and Hour Division (WHD). By the end of 2018, the agency intends to issue a proposed rule to "clarify the contours of the joint employment relationship to assist the regulated community in complying with the Fair Labor Standards Act."  Last year, Labor Secretary Alexander Acosta withdrew DOL guidance that had established new standards for determining joint employment under the FLSA and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA). Under the prior administration, the DOL had taken the position that “[t]he concept of joint employment, like employment generally, should be defined expansively under the FLSA and MSPA.” In that withdrawn guidance, the WHD for the first time differentiated between “horizontal” joint employment and “vertical” joint employment.1 The much-anticipated proposed rule will hopefully provide meaningful direction on when two or more employers are considered joint employers for purposes of FLSA compliance.

White Collar Overtime Exemption. The unveiling of a proposed re-vamped "white collar" overtime rule has been pushed back to March 2019. The controversial 2016 final rule, permanently enjoined by a Texas District Court, would have more than doubled the minimum salary level for exempt white collar employees from $455 per week ($23,660 annually) to $913 per week ($47,476 annually).  On July 26, 2017, the WHD sought public input regarding the minimum salary level required for exempt status so the WHD could prepare a new set of proposed overtime exemption regulations. The comment period for that Request for Information (RFI) ended in September 2017. In September and October 2018, WHD held a series of “listening sessions” to gather additional information from the public.  Employers have been eagerly awaiting the new proposal, but will have to wait a few months longer than expected.  The additional delay could push publication of a new final rule into 2020.

Regular Rate. The FLSA requires employers to pay covered employees at least one and one half times their regular rate of pay for hours worked in excess of 40 hours per workweek. The WHD plans to issue another proposed rule by the end of the year "to clarify, update, and define basic rate and regular rate requirements" under the FLSA. According to the WHD, changes in the modern workplace are not reflected in the agency's current regulatory framework. The proposed rule aims to help employers determine whether their "more modern" forms of compensation and benefits should be excluded from, or included in, the regular rate for purposes of calculating overtime pay.  According to the WHD, "clarifying this issue will ensure that employers have the flexibility to provide such compensation and benefits to their employees, thereby providing employers more flexibility in the compensation and benefits packages they offer to employees."

Tip Regulations. The omnibus budget bill signed into law on March 27, 2018, amended the FLSA by addressing rules affecting tipped employees and tip ownership. A week later, the DOL issued Field Assistance Bulletin No. 2018-3 to address this change and provide additional guidance.2  At that time the DOL announced it would proceed with rulemaking to fully address the impact of the 2018 FLSA amendments. To this end, according to the regulatory agenda, the DOL will issue a proposed rule on the amendments this month.

Office of Federal Contract Compliance Programs

Religious Protections. Two items on the DOL's regulatory agenda will be issued by the Office of Federal Contract Compliance Programs (OFCCP) in the coming months. One proposed rule, slated for publication by the end of 2018, would update OFCCP's regulations "to comply with current law regarding protections for religion-exercising organizations." This rule appears to be an outgrowth of a directive the agency's acting director issued in August of this year. That directive instructs staff to take into account in their affirmative action and equal employment opportunity enforcement activities recent Supreme Court opinions and Trump administration executive orders addressing the freedoms and anti-discrimination protections that must be afforded religion-exercising organizations and individuals under the U.S. Constitution and federal law.3

TRICARE. A second proposed rule seeks to implement the nondiscrimination and affirmative action provisions of Executive Order 11246, section 503 of the Rehabilitation Act, and the Vietnam Era Veterans’ Readjustment Assistance Act of 1974 concerning the obligations of TRICARE or certain other healthcare providers as federal contractors and subcontractors.  The proposal, to be issued in June 2019, would "include limiting and otherwise altering the obligations of TRICARE and other healthcare providers covered by these authorities." In May 2018, OFCCP provided a two-year extension of the current moratorium on enforcement of federal contractor obligations based on TRICARE participation through May 7, 2021.4

Occupational Safety and Health Administration

Electronic Reporting. On July 30, 2018, the Occupational Safety and Health Administration (OSHA) issued a proposed rule to abolish much of the existing electronic reporting obligations for establishments with 250 or more employees.5  The proposal called for the elimination of the requirement for establishments with 250 or more employees to electronically submit injury and illness data on Form 300 (Log of Work-Related Injuries and Illnesses) and Form 301 (Injury and Illness Incident Report).  As explained in the DOL's statement of priorities, the proposed rule addresses concerns about the release of private information in the electronic submission of injury and illness reports by employers. The agency has determined that because it cannot guarantee the non-release of private information, it is proposing that only summary data be submitted via OSHA Form 300A. OSHA notes that if this rule is finalized, it would permit the agency "to continue to use the summary data to make targeted inspections, while better protecting worker privacy." OSHA projects a final rule will be ready in June 2019.

Beryllium. OSHA lists as another priority proposed revisions to certain provisions in the general industry standard for beryllium. According to the agenda, the revisions are designed "to clarify the standard in response to stakeholder questions or to simplify compliance, while in all cases maintaining a high degree of protection from the adverse health effects of beryllium exposure." The proposal is scheduled to be published in the Federal Register in December of this year.

Employee Benefits Security Administration

Fiduciary Rule. On April 8, 2016, the Employee Benefits Security Administration (EBSA) redefined who is rendered a "fiduciary" of an employee benefit plan under the Employee Retirement Income Security Act (ERISA) by providing investment advice to a plan or its participants or beneficiaries.  The issuance of a final rule to address conflicts-of-interest in retirement advice had been a priority under the prior administration. The rule was subject to intense criticism, and eventually vacated by the Fifth Circuit in Chamber of Commerce v. Department of Labor, 885 F.3d 360 (5th Cir. 2018).  In light of this decision, the EBSA is considering its regulatory options. The agency intends to issue a final rule on this matter by September 2019.

Employment and Training Administration

Apprenticeships. By the end of the year, the DOL's Employment and Training Administration (ETA) is slated to issue a proposed rule to establish guidelines for third parties to accredit high-quality, industry-recognized apprenticeship programs.

National Labor Relations Board

Joint Employment. The regulatory agenda recognized that the National Labor Relations Board (NLRB or the Board) is in the process of issuing its own rule related to joint-employer status under the National Labor Relations Act.  On September 14, 2018, the NLRB published a proposed rule for public comment that would overturn the broad test for joint employer-status set forth in the Board’s 2015 Browning-Ferris, Inc. of California decision.  The proposed rule would restore prior law and make clear that an employer will be considered a joint employer of a separate company’s employees only where that employer possesses and exercises “substantial direct and immediate control” over the essential terms and conditions of employment (such as hiring, firing, discipline, supervision, and direction), and that direction is more than “limited and routine.”6  The comment period ends November 13, 2018; comments replying to submitted comments are due November 20, 2018.

Representation Elections. The NLRB has placed proposed changes to its representation election regulations on the backburner. The Board adopted significant changes to the rule in December 2014. Last December, the Board issued a Request for Information, and has twice extended the comment deadline. The agency has not set an anticipated deadline for issuing a new proposed rule on the matter.

Equal Employment Opportunity Commission

The Equal Employment Opportunity Commission (EEOC)’s regulatory agenda contained no new items, instead featuring a number of limited rules addressing federal sector processes and procedures, electronic filing, and internal matters.  Of substantive interest to employers, EEOC indicated in its agenda that it was pushing back the dates for proposed rules addressing permissible incentives in workplace wellness programs under the Americans with Disabilities Act (ADA) and Genetic Information Non-Discrimination Act (GINA) from January 2019 to June 2019.  In December 2017, in response to a lawsuit filed by the AARP, the U.S. District Court for the District of Columbia vacated the EEOC’s prior regulation, which generally would have permitted employers to offer wellness plan incentives of up to 30% of the cost of coverage under a group health plan.  Those rules are vacated as of January 1, 2019, leaving employers with little guidance as to what the EEOC will consider “voluntary” participation in wellness plans under the ADA and GINA going forward.  We expect little action on these rules until a Republican majority is confirmed at the EEOC.

Department of Homeland Security

The Department of Homeland Security's U.S. Citizenship and Immigration Services (USCIS) is working on 21 separate rules in various stages of development according to its regulatory agenda. Among them is a proposed rule governing the H-1B visa program. The stated purpose of this proposed rule is:

to revise the definition of specialty occupation to increase focus on obtaining the best and the brightest foreign nationals via the H-1B program, and revise the definition of employment and employer-employee relationship to better protect U.S. workers and wages. In addition, DHS will propose additional requirements designed to ensure employers pay appropriate wages to H-1B visa holders.

The parameters of this rule are not yet known, but a proposal is slated for publication in August 2019. The DHS's complete agenda can be found here.

What's Next?

The regulatory agenda sets up a basic roadmap to where the agencies are headed in the coming months. Although completion dates in the regulatory agenda tend to be more aspirational than fixed, they can be used as a guide in determining which items the administration considers priorities.

We will continue to monitor regulatory developments, and report on those of significance.

See Footnotes

1 See Ilyse Schuman and Michael J. Lotito, DOL Withdraws Joint Employer and Independent Contractor Guidance, Littler ASAP (June 7, 2017).

2 See David Jordan and Eli Freedberg, DOL Clarifies Amendment to the FLSA's Tip Pool Rules, Littler ASAP (Apr. 12, 2018).

3 See Meredith C. Shoop and David Goldstein, OFCCP Orders Staff to Respect Contractors' Religious Freedoms, Littler ASAP (Aug. 14, 2018).

4 See Meredith Shoop and David Goldstein, OFCCP Extends Moratorium on TRICARE Enforcement for Two More Years, Littler ASAP (May 21, 2018).

5 See Thomas Metzger and Ben Mounts, OSHA Proposes to Rescind Major Portions of its Electronic Reporting Rule, Littler ASAP (Aug. 2, 2018).

6 See James A. Paretti, Jr., Michael Pedhirney, and Michael J. Lotito, Proposed Joint-Employer Rule Would Reverse NLRB's Controversial Browning-Ferris Case and Restore "Substantial Direct and Immediate Control" Standard, Littler ASAP (Sept. 13, 2018).

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.