Rich Meneghello
BridgeTower Media Newswires
They say March comes in like a lion and goes out like a lamb; employers certainly heard a roar from workplace law developments this past month. A stunning decision from a federal court in Washington, D.C., could change the manner in which every employer in the country handles its compensation systems, and a long-awaited announcement from the Department of Labor finally sheds light on the way employers will soon need to handle overtime pay. Combined, these two developments are worth noting and will require immediate attention.
—————
Pay data reporting resurrected
The month began with a shocker – a federal court judge reinstated a revised version of the EEO-1 report, which is now once again set to gather compensation information from employers across the country. As most employers know, those businesses with 100 or more employees, and federal contractors with 50 or more employees, have long been required to submit Employer Information Reports (EEO-1 reports) disclosing the number of employees in their employ by job category, race, sex and ethnicity on an annual basis. In 2016, the EEOC announced changes to require employers to include pay data and the number of hours worked for their workforces in their EEO-1 reports in the hopes of identifying pay gaps and investigating pay discrimination practices.
But before the first disclosures were to be submitted in March 2018, the White House scrapped the revised report, as the Office of Management and Budget (OMB) announced that it had significant concerns with the revised reporting requirements. Specifically, it identified that “some aspects of the revised collection of information lack practical utility, are unnecessarily burdensome, and do not adequately address privacy and confidentiality issues.”
On March 4, however, a judge determined that the OMB did not have good cause to change course because it could not demonstrate that any relevant circumstances warranting the action had occurred between the time the proposed rule was finalized and the time the revisions were cast aside. The judge noted that federal agencies are free to change their existing policies, but to do so they must “provide a reasoned explanation for the change.” Instead, in this case, she ruled that the OMB’s action in staying the EEOC’s collection of pay data was “arbitrary and capricious” because it “totally lacked the reasoned explanation” required by federal law.
What’s next is anyone’s guess. When the EEO-1 reporting portal opened on March 18, there wasn’t even a way for employers to provide pay data even if they wanted. The judge ordered the EEOC to inform employers about the status of the pay data disclosures by April 3, providing information about how the data will be collected, by what deadline, and how employers should prepare the data.
It’s likely that the EEOC or OMB will appeal the judge’s ruling, which could delay the pay data reporting requirement – but nothing is certain.
Because of the uncertainty, employers should make it a priority to review current pay systems and identify and address any areas of pay disparity. By conducting one’s own audit of pay practices, an employer will be able to determine whether any pay gaps exist that might catch the eye of the federal government if it’s eventually forced to turn over this information.
—————
USDOL releases overtime rule 2.0
Meanwhile, after waiting for years to see where the U.S. Department of Labor would land with its much anticipated revised “overtime rule,” the agency finally delivered on March 7. The USDOL released its long-awaited proposed rule which, if adopted, would set the minimum salary threshold at $679 per week, annualizing to $35,308 per year – an increase from the current $455 per week.
It seems like an eternity ago, but in May 2016, the USDOL (then a part of the Obama administration) released finalized rules that were designed to radically alter the federal compensation rules. The biggest changes in store for employers: the minimum salary threshold would increase to $913 per week (which would have annualized to $47,476, more than double the existing $23,660 annual threshold), and the amount would be “updated” every three years (meaning that it will likely increase with each “update”). The new minimum threshold was set to become effective on Dec. 1, 2016, and the “updating” would begin on Jan. 1, 2020.
But in a dramatic last-minute development, a federal judge in Texas blocked the overtime rule from taking effect just days before the Dec. 1, 2016, implementation date, handing an eleventh-hour victory to employers across the country. After Donald Trump was inaugurated and Alexander Acosta was installed as head of the USDOL, the new federal leadership indicated that it would instead unveil a revised rule, and we’ve been waiting for this news ever since.
While some employers might not like the increase, it is far better than the proposed doubling of the threshold that was on the table back in 2016. And even better: the proposal for an automatic update every three years has been set to the side for now, which means that whatever amount is formally adopted will most likely be in place for a sustained period of time.
What’s next? The proposed rule will now go through a formal notice-and-comment process before being finalized. But if we’ve learned anything from the saga that accompanied the release and subsequent controversy over Overtime Rule 1.0, it’s that this is a process. Many twists and turns might occur before any proposed rule is finalized. Do not run out tomorrow and make changes to your compensation structure based on what is simply a proposal. Instead, use this time to start evaluating what 2020 might look like for your compensation system if the USDOL’s proposal comes to fruition in its current form.
—————
Rich Meneghello is a partner in the Portland office of Fisher Phillips, a national firm dedicated to representing employers’ interests in all aspects of workplace law. Contact him at 503-205-8044 or rmeneghello@fisherphillips.com, or follow him on Twitter – @pdxLaborLawyer.
