Don't HR Alone #33 - The Most Common Wage Mistake that KILLS Businesses

Today we look into a new law in Washington state that will likely be used across the nation overtime for paid family leave, and do a deep dive into a wage and hour case that perfectly illustrates many of the most common pitfalls.

Washington enacts paid family and medical leave program — STATE LAW

Washington Governor Jay Inslee signed Substitute Senate Bill 5978 on July 5, 2017, to provide a paid family and medical leave program in the state. The new law, which was approved in the state Legislature on June 30, 2017, will be in place by 2020.

S.B. 5978 creates the Family and Medical Leave Insurance Program, which will provide everyone in the workforce with up to 12 weeks of paid medical leave, and up to 12 weeks paid time off to care for a new child or an ailing family member. That leave is capped at 16 weeks if the employee needs both types of time off in a one-year period. Women who experience pregnancy complications may receive an additional two weeks of leave.

Depending on earnings, employees will receive up to 90 percent of their wage or salary or up to $1,000 per week during their leave. Employees become eligible for the program after working 820 hours.

The new program will give workers more time to spend with their newborns, which research shows has long-term physical, emotional and social benefits for children, better preparing them for school, said paid family leave advocate Marilyn Watkins, executive director of the Economic Opportunity Institute. The program will also give people more time to care for an aging loved one, and give families more time to respond to unexpected medical crises.

“We really do expect there to be widespread benefits for everyone in our state,” Watkins said. “It’s portable as people move between jobs. The benefit structure is designed to make sure it’s affordable for people on every income level. ... There are ways to help businesses continue to thrive and do well and prosper with this program in place.”

The cost of the new program will be shared between the employer and the employee through a payroll tax. Workers will pay 63 percent and employers will pay 37 percent of the premiums, but the employer could decide to pay more. For example, a full-time worker earning $15 dollars an hour would contribute $1.51 a week toward the benefit while the employer would pay 89 cents.

Businesses with fewer than 50 employees will not be required to pay the employer share of the premium, but those businesses can still opt in. Businesses with fewer than 150 employees who pay into the program are eligible for grants of $1,000 to $3,000 each to cover the cost of an employee on leave.

According to the Association of Washington Business, chambers of commerce representing businesses from across the state supported the paid family leave bill.

Washington lawmakers attempted to create a paid family leave program in 2007; a bill passed out of the Legislature, but its funding was never approved and subsequent laws sidelined the program. It would have required many businesses to offer five weeks of paid time off to workers who were new parents.

The bill signed into law today [July 5] “is a much better policy” than the 2007 bill, Watkins said. The push for paid family leave was revived in 2015, when Inslee secured a federal grant to begin designing a new program. He has pointed out that the U.S. is the only industrialized nation that does not offer paid leave for workers.

“All too often, new parents and those with aging or sick loved ones face no-win decisions pitting the need for a paycheck against the need to be there for their family,” Inslee said. “Our nation should not be the outlier in helping families navigate these difficult situations.”

Source: State of Washington, Office of the Governor, News Release, July 5, 2017, https://medium.com/wagovernor/washington-is-5th-state-in-nation-to-get-paid-family-leave-program-40085cc2c532; S.B. 5978, L. 2017, http://lawfilesext.leg.wa.gov/biennium/2017-18/Pdf/Bills/Senate%20Passed%20Legislature/5975-S.PL.pdf#page=1.

Veteran could proceed with claim employer reduced his salary by disability benefits amount — FEDERAL NEWS

Refusing to dismiss a former marine’s USERRA discrimination claim, a federal district court in Florida found that he sufficiently alleged that the employer reduced his pay by the amount of disability benefits he received from the Department of Veterans Affairs (VA), which was the same as claiming that military service was the "motivating factor" for the adverse decision. The employee’s FLSA overtime claim also advanced. As to both claims, the court rejected the owner’s assertion that he could not be individually liable, because the employee claimed the owner exercised control over the terms of employment and was the individual who made the adverse pay decision

Pay reduced due to VA benefits. The employee, a disabled military veteran, was hired by Mucky Duck as a nonexempt, hourly paid parking lot attendant. He also received disability benefits from the VA. According to the employee, before he was paid, the company owner asked how much he received in VA benefits and then made the decision to reduce his pay by that same amount.

Not paid for all overtime worked. Although the employee’s title never changed, he was later given additional duties, including maintenance work, grounds keeping, plumbing, and electrical work. His duties did not change when he was eventually made a salaried employee. From October 2013 to January 2015, while an hourly employee, he received most of his overtime, though the employer deducted one hour daily for a lunch break that the employee never received. That resulted in six hours of unpaid overtime per week. He also occasionally was not paid one and one half times his regular rate of pay for hours he worked in excess of 40 in a week. When he was made a salaried employee, the employer stopped paying him overtime at all.

USERRA claim. Denying the employer’s motion to dismiss the employee’s USERRA discrimination claim, the court rejected its argument that wages or salary are not considered a "benefit of employment" under the Act. As the employee pointed out, a 2010 amendment modified the definitional language to specifically include wages and salary as a "benefit of employment." Also rejected was the employer’s argument that he failed to plead his military service was a "motivating factor" in the decision to reduce his pay. To the contrary, the employee clearly alleged that the employer reduced his pay because of his military benefits, which sufficiently alleged that his military service was a motivating factor for the adverse action.

FLSA overtime claim. The motion to dismiss was also denied as to the employee’s FLSA overtime claim. Though the employer argued that he did not specify which time period or the number of hours he was allegedly denied overtime compensation, the court disagreed. The employee plausibly claimed he was not paid proper overtime from at least October 2013 through November 2016, and that the employer failed to pay six hours of overtime per week during that period. Additional amounts might be revealed through discovery, but this allegation was enough to defeat the employer’s motion.

Owner could be individually liable. The court also denied the company owner’s motion to dismiss the FLSA and USERRA claims against him. The FLSA defines "employer" as "any person acting directly or indirectly in the interest of an employer in relation to an employee" and under Eleventh Circuit authority, an owner who is "involved in the day-to-day operation" of the company and has "some direct responsibility for the supervision of the employee" can be held liable as an employer. Likewise, USERRA’s definition of "employer" includes any "person" who "pays salary or wages for work performed or that has control over employment opportunities including . . . a person . . . to whom the employer has delegated the performance of employment related responsibilities."

Here, the employee claimed the owner regularly exercised authority to hire, fire, and discipline employees, and he supervised and controlled the employee’s schedule, conditions of employment, and rate of pay. He also alleged that the owner was his supervisor and actually made the adverse decision to reduce his pay in the amount of his military benefits. That was enough to support his FLSA and USERRA claims against the owner individually.

SOURCE: Rimbey v. The Mucky Duck, Inc., (DC FL), No. 2:17-cv-103-FtM-99MRM, June 29, 2017