The Herrick Law Alert

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Pending further legal developments, employers are not required to abide by the revised federal regulations, which raised the minimum salary requirement to $913 per week. On November 22, 2016, a federal court in Texas issued a nationwide preliminary injunction (“Injunction”) blocking the U.S. Department of Labor (“DOL”) from implementing and enforcing its revised white collar overtime regulations which were set to take effect on December 1, 2016. The regulatory revisions would have more than doubled the minimum salary requirements for the major white collar exemptions to the Fair Labor Standards Act (“FLSA”).

The Court’s decision stems from a lawsuit filed by 21 states earlier this year, arguing that the DOL had overstepped its authority when drafting the overtime rule by focusing on employees’ compensation, instead of the work they perform.

Although the Injunction is not a final order and is subject to revision or appeal, it is a strong indication that the regulation may be stricken by the Court. The Injunction is nationwide and takes effect immediately. It suspends the DOL’s implementation and enforcement of the revised regulations until the Court can issue a ruling on the merits, and will remain in effect until further order of the Court or a Court of Appeals.

What This Means For You

The Injunction preserves the status quo and prevents the revised overtime regulations from becoming effective on December 1. Pending further legal developments, employers are not required to abide by the revised regulations, which raised the minimum salary requirement to $913 per week ($47,476 annually). Employers are only required to abide by the minimum salary requirement established by the current regulations of $455 per week ($23,660 annually) until further legal developments mandate otherwise. Employers should, however, take the following into consideration:

  • Accurate Recordkeeping is Key: If the regulations are later upheld, they may be enforced retroactively, in which case employers could be liable for overtime payments to employees who were classified as exempt under the current regulations, but who are not exempt under the revised regulations. In the event of litigation attempting retroactive enforcement of the overtime rule, it will be difficult for employers to defend against claims if they do not have accurate records of the hours worked by employees. Accordingly, we recommend that employers who decide to hold off on complying with the revised regulations keep accurate records of the hours worked by any employee who is now considered exempt, but could be considered non-exempt under the revised regulations.
  • State White Collar Thresholds Still in Effect: For now, employers are only required to abide by the minimum salary requirement established by the current FLSA regulations of $455 per week ($23,660 annually), however employers must also consider applicable state law that may set  “white collar” salary thresholds higher than $455 per week. For example, the current salary threshold for the administrative and executive exemptions in New York is currently $675 per week ($35,100 annually).

Special thanks to Daniella M. Muller, Senior Attorney in the Employment Practice Group, for her assistance preparing this alert.

Election Day Reminder for New York Employers: Your Employees May Be Entitled to Time off to Vote

October 2016

New York law requires employers to provide their employees with two (2) hours of paid time off to vote as follows:

  • New York employers must allow employees to take up to two (2) hours of paid time off, at the beginning or end of their shift, to vote if they do not have sufficient time outside of their work hours to vote. “Sufficient time” is defined as four (4) consecutive hours either between the opening of the polls and the beginning of an employee’s shift or between the end of an employee’s shift and the closing of the polls.
  • Employees must notify employers of the need for time off not more than 10 days and not less than two days before Election Day.
  • New York employers are required to post a notice setting forth these rights at least 10 days prior to every election, in accordance with the New York State Election Law. New York employers should post the notice in a conspicuous place immediately, if they have not already done so. Such notice can be removed after the polls close on Election Day.

Special thanks to Daniella M. Muller, Senior Attorney in the Employment Practices Group, for her assistance preparing this alert.


For more information on this issue or other employment matters, please contact:

Mara B. Levin at mlevin@herrick.com or +1 212 592 1458
Carol M. Goodman at cgoodman@herrick.com or +1 212 592 1465

© 2016 Herrick, Feinstein LLP. This alert is provided by Herrick, Feinstein LLP to keep its clients and other interested parties informed of current legal developments that may affect or otherwise be of interest to them. The information is not intended as legal advice or legal opinion and should not be construed as such.

May 2016
DOL Releases Final Rule Amending Overtime Regulations 

 

The Department of Labor has released its highly anticipated final rule on overtime regulations under the Fair Labor Standards Act’s (“FLSA”) white collar exemptions. The new regulation will take effect December 1, 2016, giving employers approximately 200 days to prepare for compliance with the new regulations.

Key Provisions of the New Rule:

  • The Minimum Salary Threshold is More than Doubled. Under the new rule, the minimum salary threshold for exempt status is increased from $455 a week to $913 a week ($47,476 per year).
  • Increase to the Salary Threshold for the “Highly Compensated” Exemption. The minimum salary threshold for the “highly compensated” exemption is increased from $100,000 to $134,004 per year.
  • Nondiscretionary Bonuses and Other Incentive Payments can Meet Up to % 10 of the Salary Threshold. Employers can count nondiscretionary bonuses and other incentive payments, including commissions, paid on at least a quarterly basis, for up to 10% of the salary threshold. If an employee does not earn enough of a nondiscretionary bonus or incentive payment in a given quarter to meet the threshold salary level, an employer may make a “catch-up” payment no later than the next pay period after the end of the quarter. Any such “catch-up” payment counts only toward the prior quarter’s salary.

The new rule also provides for automatic increases in the salary levels every three years (beginning January 1, 2020).

Importantly, the new rule does not make any changes to the “duties test” for executive, administrative, or professional employees that determines whether an employee who is earning more than the salary threshold is eligible for overtime.

What This Means To You

The new rule will have a significant impact, especially with respect to entry level managerial and professional positions. Employers should take the following steps to ensure they are in compliance with the new rule by December 1, 2016:

  • Conduct an internal audit of exempt employees to determine whether employees who are currently classified as “exempt” will still qualify for the exemption under the new rule.
  • Consider options for compliance with the new rule, including reclassification of formerly “exempt” employees as “non-exempt” or salary increases to bring exempt employees above the new threshold.
  • Consult with legal, accounting and payroll professionals to ensure compliance with the new rule and to develop a plan for implementing changes and communicating with impacted employees.
  • Review and update existing employment policies and procedures to make sure they accurately reflect changes to employee classification.

Special thanks to Daniella M. Muller, Senior Attorney in the Employment Practices Group, for her assistance preparing this alert.


For more information on this issue or other employment matters, please contact:

Mara B. Levin at mlevin@herrick.com or +1 212 592 1458
Carol M. Goodman at cgoodman@herrick.com or +1 212 592 1465
Jonathan Adler at jadler@herrick.com or +1 212 592 5936

© 2016 Herrick, Feinstein LLP. This alert is published by Herrick, Feinstein LLP for informational purposes only. Nothing contained herein is intended to serve as legal advice or counsel or as an opinion of the firm.

Corporate Alert

March 2016
Authors: Edward B. Stevenson, Daniel A. Etna

Delaware Court of Chancery Clarifies Indemnification and Advancement Rights for Current and Former Directors and Officers

The Delaware Chancery Court ruled that transactions between a corporation and an entity affiliated with a controlling stockholder will be reviewed under the heightened entire fairness standard in the absence of certain procedural safeguards being implemented. Read more >>

Second Circuit’s Application of the Supreme Court’s Liability Standard for Statements of Opinion

The U.S. Court of Appeals for the Second Court in In re Sanofi Securities Litigation, AG Funds, L.P. v. Sanofi, applied the Supreme Court’s new standard for determining whether a statement of opinion is “materially misleading” and actionable under Federal securities laws.Read more >>

Delaware Court Finds 26% Equity Owner to Be “Controller” Due to Affiliations with Board Members

The Delaware Court of Chancery found in Calesa v. American Capital that it was reasonably conceivable that American Capital, Ltd. and its affiliates, a 26% stockholder in Halt, Inc. at the time of the transaction at issue, was a controller of Halt. Read more >>

For more information on the issues in this Alert, or corporate matters generally, please contact:

Edward Stevenson at + 1 973 274 2025 or estevenson@herrick.com or

Daniel Etna at +1 212 592 1557 or detna@herrick.com

ERISA Alert

February 2016

Authors: Fred R. Green, Edward B. Stevenson

IRS Allows Mid-Year Changes to Section 401(K) Safe Harbor Plans

On January 29, 2016, the Internal Revenue Service issued Notice 2016-16 (the “Notice”) which provides guidance on mid-year changes to safe harbor plans under Section 401(k) of the Internal Revenue Code.

How Does This Guidance Affect Plan Sponsors?

1. Mid-year changes now permitted: Plan sponsors with safe harbor 401(k) plans now have the opportunity to make adjustments to their plans during the course of the year as circumstances warrant without having to wait until the next year.

2. A safe harbor plan may now be the appropriate choice: By eliminating the uncertainty about the ability to make mid-year changes, plan sponsors who were reluctant to adopt safe harbor plans because they wanted to retain flexibility to make mid-year changes to their plans should revisit whether a safe harbor plan design may now be appropriate.

Safe Harbor Plans and Notices

In order to avoid performing the costly and time-consuming nondiscrimination tests required for a 401(k) plan to remain qualified, many plan sponsors design their 401(k) plans to satisfy the safe harbor rules under the Code. Under these rules, the 401(k) plan could provide:

i. a non-elective contribution to non-highly compensated employees of at least 3% of compensation,

ii. a matching contribution equal to 100% of an employee’s contribution up to 3% of compensation, and

iii. 50% of an employee’s contribution in excess of 3% of compensation up to 5% of compensation, or

iv. a qualified automatic contribution arrangement which requires employees to opt out of making specified levels of contributions.

With limited exceptions, the safe harbor rules must be adopted before the beginning of a plan year and continue for an entire 12-month period.  Employees must also be provided notice within a reasonable period before the beginning of the plan year about the rights and obligations of the safe harbor arrangement (a “Safe Harbor Notice”).

Under the Notice, routine changes in the Plan or the Safe Harbor Notice are permitted without violating the Code and the safe harbor rules. For example, under the Notice it would be possible to increase future safe harbor contributions or change the plan’s default investment fund mid-year. In making a mid-year change, within a reasonable period before the effective date of the change, employees must be provided with an updated Safe Harbor Notice. Whether the timing of the updated Safe Harbor Notice is reasonable is based on all of the relevant facts and circumstances. However, it is deemed satisfied if it is distributed at least 30 days but not more than 90 days before the effective date of the change. In addition, each employee must be given a reasonable opportunity to change the employee’s contribution election before the effective date of the change.

Prohibited Mid-Year Changes:

The Notice identifies the following mid-year changes as prohibited for a safe harbor plan, unless the mid-year change is required by applicable law:

i. a change to increase the vesting requirement attributable to an employee’s account balance for safe harbor contributions under a qualified automatic contribution arrangement,

ii. a reduction in the number or the narrowing of the group of employees eligible for safe harbor contributions,

iii. a change in the type of safe harbor plan, and

iv. a modification to the formula used to determine matching contributions if the change increases the amount of matching contributions or permits discretionary matching contributions.

For more information on the issues in this alert, or ERISA matters generally, please contact:

Fred R. Green at fgreen@herrick.com or 212.592.5910 or
Edward B. Stevenson at estevenson@herrick.com or 973.274.2025.

Copyright © 2016 Herrick, Feinstein LLP. This alert is published by Herrick, Feinstein LLP for informational purposes only. Nothing contained herein is intended to serve as legal advice or counsel or as an opinion of the firm.

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Employment Alert



EMPLOYMENT REMINDERS FOR 2016

The new year brings several important changes to New York City and State employment laws. In this alert, we will analyze New York City’s new requirement that most private employers will now have to offer pre-tax transit benefits, the Caregiver Discrimination Bill passed by New York City Council and the status of minimum wage in New York and New Jersey.


New York City’s Affordable Transit Act Went Into Effect January 1, 2016

Effective January 1, 2016, under New York City’s Affordable Transit Act (the “Act”), Intro 295-A, most private employers with 20 or more full-time employees in New York City are required to offer their full-time employees the opportunity to use pre-tax earnings to purchase certain transportation fringe benefits that are qualified under the Internal Revenue Service (other than qualified parking). Such transportation fringe benefits include: MTA subway and bus, Long Island Railroad, New Jersey Transit, Metro North, Amtrak, eligible van pooling services, eligible commuter bus services and Access-A-Ride.

The law defines “full-time employees” as those who work an average of 30 hours or more per week for the employer in New York City.  The Act exempts certain employers from coverage, namely:

(1)   government employers;

(2)   employers that are not required by law to pay federal, state and city payroll taxes;

(3)   employers that are party to a collective bargaining agreement, except where the number of full-time employees not covered by the collective bargaining agreement is 20 or more, in which case those full-time employees not covered by the collective bargaining agreement must be eligible for the benefit; and

(4)   employers who demonstrate that offering qualified transportation benefits would cause financial hardship.

Once a covered employee becomes eligible for these benefits, the employee remains eligible throughout his or her employment, even if the employer subsequently falls below the 20-employee threshold.

Employers are required to provide their covered employees with a written offer of the opportunity to use pre-tax income to purchase these qualified transportation benefits by January 1, 2016, or four (4) weeks after an employee begins full-time employment, whichever is later.  Employers also must maintain records demonstrating that they have made such offers and their employees’ responses for two (2) years.

Violations of the law may result in an assessment of civil penalties by the NYC Department of Consumer Affairs (DCA), the agency charged with enforcing the Act. Although the Act goes into effect on January 1, 2016, employers will have a six (6) month grace period — until July 1, 2016 — to establish a commuter benefits plan before being subjected to penalties.  Moreover, the new law includes a 90-day cure period whereby an employer in violation will have 90 days to cure a first violation before a penalty is actually imposed.

An employer found to be in violation of the Act can be liable for a civil penalty ranging from $100 to $250 for the first violation.  After the expiration of the 90-day cure period, every 30-day period that the employer fails to offer the benefit will constitute a subsequent violation and a civil penalty of $250 will be imposed for each subsequent violation, limited to 1 penalty per 30-day period.

What This Means To You

New York City employers that are subject to the Act should determine whether current employee benefit programs offer full-time employees the opportunity to use pre-tax earnings to purchase qualified transportation fringe benefits in accordance with federal law. If that opportunity is not offered, employers should amend or establish such a benefit plan or program to take effect immediately, ensuring that all employees who work an average of 30 hours or more per week in New York City are eligible for the benefits.

New York City Council Passes Bill Banning Discrimination Based On Caregiver Status

On December 16, 2015, the New York City Council voted in favor of Int. No. 108-A, legislation that amends the New York City Human Rights Law (NYCHRL) to include “caregiver status” as a protected class. The amended NYCHRL will now prohibit discrimination on the basis of an employee’s actual or perceived status as a caregiver.  The legislation is awaiting Mayor Bill de Blasio’s signature.

Under the NYCHRL, it is an unlawful discriminatory act for an employer to refuse to hire, terminate or discriminate against an employee in compensation or in relation to terms, conditions or privileges of employment, based on an employee’s actual or perceived status as a member of a protected class.  The NYCHRL defines several protected classes, including, but not limited to, “age,” “race,” “gender,” “sexual orientation,” “partnership status,” “national origin” and “disability.”

The newly passed bill adds “caregiver” as a protected class, thereby prohibiting employment discrimination based on an individual’s actual or perceived status as a caregiver.  The amended NYCHRL defines “caregiver” as anyone who provides direct and ongoing care for a child under the age of 18 or for a care recipient.  A “care recipient” is defined as an individual with a disability who:

(1)   Is a covered relative or a person who resides in the caregiver’s household, and

(2)   Relies on the caregiver for medical care or to meet the needs of daily living.

The amended NYCHRL further defines “covered relative” as a caregiver’s child, spouse, domestic partner, parent, sibling, grandchild, grandparent, child or parent of the caregiver’s spouse or domestic partner or any other individual in a familial relationship with the caregiver.

The legislation will take effect 120 days after enactment, although the City Commission on Human Rights is authorized to take any action necessary, prior to the effective date, to implement the amended law.

What This Means To You

New York City employers covered by the NYCHRL should review and update their policies and procedures. Covered employers should also update their training materials for employees, managers and supervisors.

New York Increases Minimum Wage—No Change To New Jersey’s Minimum Wage For 2016

New York

Beginning December 31, 2015, the minimum hourly wage rate for employees in New York State increased from $8.75 per hour to $9.00 per hour.

Moreover, the minimum salary amounts that must be paid to New York employees who are exempt from New York’s overtime requirements as administrative or executive employees will increase from $656.25 per week to $675.00 per week on December 31, 2015.

Employers should be aware that the New York State minimum wage exceeds the federal minimum wage.  Thus, although an employee’s hourly wages may comply with federal law, such wages may not comply with New York law.

Similarly, an employee paid a salary between the federal minimum of $455 per week and the New York minimum of $675.00 per week may qualify as “exempt” from overtime under federal law, yet may not qualify for the same exemption under New York law.  In such circumstances, the employee is entitled to overtime and must be paid at a rate of at least one and one-half times the minimum hourly rate of $9.00 per hour for any hours worked in excess of 40 per week.

New Jersey

New Jersey’s minimum wage remains at $8.38 an hour in 2016.  The wage has been tied to the consumer price index for all urban wage earners and clerical workers since January 2014.  The New Jersey Department of Labor and Workforce Development, Division of Economic and Demographic Research (DOL) recently announced that there was no increase to the consumer price index in the past year and therefore the state’s minimum wage will remain unchanged for 2016.

What This Means To You

Employers should review the compensation paid to their employees in New York to ensure compliance with the new minimum wage and salary obligations and should take the following steps:

(1)   Confirm the necessary payroll adjustments have been made and that they are in compliance with the new minimum wage laws

(2)   Update their minimum wage posters at the workplace

(3)   Ensure that their employees who are classified as “exempt” under the administrative or executive exemptions are being paid a salary of at least $675.00 per week in order to avoid violation of New York State’s overtime laws


Special thanks to Daniella M. Muller, an associate in the Employment Practice Group, for her assistance in preparing this alert.

For more information on this issue or other employment matters, please contact:

Mara B. Levin at mlevin@herrick.com or 212.592.1458 or
Carol M. Goodman at cgoodman@herrick.com or 212.592.1465 or
Avery S. Mehlman at amehlman@herrick.com or 212.592.5985.

Herrick is a prominent, mid-sized law firm providing a full range of legal services to businesses and individuals around the world. Based in New York City, with offices in Newark and Princeton, New Jersey, Washington, D.C. and Istanbul, Turkey.

Copyright © 2016 Herrick, Feinstein LLP. This alert is published by Herrick, Feinstein LLP for informational purposes only. Nothing contained herein is intended to serve as legal advice or counsel or as an opinion of the firm. Reprinted with permission. For more Herrick publications, please visit Herrick.com.

ERISA Alert

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