We all know what the new DOL salary numbers are, but what happens next?

The US Department of Labor’s March 7, 2019 Notice of Proposed Rulemaking reset the salary requirements for the Fair Labor Standards Act’s white-collar exemptions. By now we all know the new numbers: the minimum salary threshold will increase from US$455 per week (US$23,660 annually) to US$679 per week (US$35,308 annually) for the executive, administrative, professional, outside sales and computer employee exemptions. The 2019 Proposed Rule also increases the total annual compensation required for the highly compensated employee exemption from US$100,000 to US$147,414 per year. It does not, however, modify any of the duties tests. The DOL anticipates that the 2019 Proposed Rule will affect more than one million workers nationwide.

It will be several months before we know whether the Proposed Rule will become law, and even then, additional legal challenges are possible. First comes a 60-day comment period. After the comment period, the DOL will then issue a Final Rule. Meanwhile, there is a case pending in the US Court of Appeals for the Fifth Circuit with respect to the Obama Administration’s 2016 rule with even higher salaries, a rule many employers reacted to by reclassifying employees to non-exempt and/or raising salaries. How does all this fit together and what should employers do in the interim? Uncertainty is never good for business, but that is where we are.

How does the 2019 proposed rule impact the 2016 rule?

You all no doubt remember the 2016 Proposed Rule that would have increased the minimum salary threshold to US$913 per week (US$47,476 annually). For the highly compensated employee exemption, the 2016 Proposed Rule would have increased the annual total compensation from US$100,000 to US$134,004. These salary thresholds would have automatically increased over time.

This rule was set to go into effect on December 1, 2016, but the US District Court, Eastern District of Texas granted emergency injunctive relief that blocked it in Nevada v. U.S. Department of Labor. Because the 2016 Proposed Rule changed the salary test so significantly, the Court concluded that the DOL exceeded its authority and implemented a rule that was an impermissible construction of the FLSA. In its opinion, the Court made clear that it was the increase in the salary threshold that caused it to issue the emergency injunction. The Court emphasized that the 2016 Proposed Rule made an employee’s “overtime status depend predominately on a minimum salary level,” and that “because the [2016 Proposed Rule] would exclude so many employees who perform exempt duties,” it was unlawful.

The ruling barring the new salary changes from going into effect was appealed to the US Court of Appeals for the Fifth Circuit, but the Fifth Circuit never decided the case. Instead, it granted the DOL’s request to hold the appeal in abeyance—which effectively means the appeal is paused—pending the outcome of new rulemaking, and required the DOL to make periodic reports. We now have the new rulemaking. The DOL’s new update to the Fifth Circuit is due on April 16, 2019.

The future of Nevada v. U.S. Department of Labor

What is likely to become of Nevada v. U.S. Department of Labor as a result of the 2019 Proposed Rule? We anticipate that the Fifth Circuit may ultimately find the appeal to be moot in light of the new rulemaking. This is most likely because the 2019 Proposed Rule formally proposes to “rescind” the 2016 Proposed Rule and goes to great lengths to address the concerns raised by the District Court in Nevada.

In particular, the 2019 Proposed Rule abandons the methodology used in 2016 and returns to the methodology used by the DOL in 2004, which is the last time the salary threshold was successfully changed. In a confusing move, the DOL only returned to the 2004 calculations to determine the new US$679 weekly threshold. The DOL continued to use the 2016 methodology for the highly compensated employee exemption. In fact, the 2019 Proposed Rule actually proposes a larger increase for the highly compensated employee exemption (to US$147,414) whereas the 2016 Proposed Rule only proposed an increase to US$134,004. As a result, it is unclear whether the District Court’s reasoning will still call into question the legitimacy of the 2019 Proposed Rule. It is also not clear whether a new lawsuit will be required to challenge the 2019 Proposed Rule when it is finalized, or whether the Fifth Circuit could simply send the case back to the District Court to consider a 2019 Final Rule instead of dismissing the case as moot. In short, even if the Proposed Rule becomes a final rule, its legal status will remain uncertain.

Next steps for employers and unanswered questions

What does this uncertainty do for employers? During the 60-day comment period, there is certainly no harm in examining your company’s salary levels to determine which employees might be impacted, what the cost of increasing those salaries might be, and whether it makes more sense to reclassify certain positions as non-exempt if overtime can be managed for those positions. However, it is certainly premature to start making changes now. Particularly because we know that reclassification decisions always come with an employee relations cost associated with moving exempt salaried employees to non-exempt hourly status. Likewise, if you made changes anticipating that the 2016 Rule was going to be the law, there is no need to reverse or modify those changes based on the Proposed Rule. That too would be counterproductive.

And it is never a bad time to consider auditing positions that you know may not satisfy the duties tests. A comprehensive legal review of how your employees are classified will always be beneficial, particularly when a regulatory change is on the horizon. Norton Rose Fulbright’s employment and labor team will continue to closely monitor every development in this area and provide additional updates.

There’s a BEAR in there…

What is BEAR?

The Banking Executive Accountability Regime (BEAR) is set out in Part IIAA of the Banking Act 1959 and took effect in February 2018.

BEAR establishes accountability obligations for authorised deposit-taking institutions (ADIs) and their senior executives and directors. The regime also establishes deferred remuneration, key personnel and notification obligations for ADIs.

An ADI is a financial institution which is authorised by the Australian Prudential Regulation Authority (APRA) to accept deposits from the public.

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Ontario Court of Appeal Decides Against Recognizing Tort of Harassment

On March 15, 2019, The Ontario Court of Appeal released its decision in Merrifield v. Canada (Attorney General), reversing a trial decision in which the Ontario Superior Court of Justice had recognized the existence of a common law “tort of harassment”.

The plaintiff’s claim was based on conduct that he had experienced during his employment with the Royal Canadian Mounted Police (RCMP), which he claimed amounted to bullying and harassment. He complained about several unit reassignments, an investigation into his work-related expenses, and an assessment of a potential conflict of interest.

The Court of Appeal found that the trial judge erred in recognizing a free-standing tort of harassment, which had not previously been available as a cause of action in Canada, noting:

“Common law change is evolutionary in nature: it proceeds slowly and incrementally rather than quickly and dramatically…” .

In determining whether or not to recognize the tort of harassment, the Court of Appeal looked to Bhasin v Hrynew, which affirmed the duty of good faith contractual performance in 2014, and Jones v Tsige, which recognized the tort of “intrusion upon seclusion” in 2012. However, the Court of Appeal determined that the usual factors supporting a common law development were not present, including, among others:

  • An existing degree of recognition of the tort or duty among trial courts
  • Support in the content or underlying principles of Canadian or provincial legislation
  • Support in academic scholarship
  • Similar concepts being accepted in jurisdictions outside of Canada
  • Changing societal circumstances that compel sudden action (e.g. the threats of new technology)
  • The presence of societal needs that require vindication, or facts that “cry out for a remedy”, but would otherwise be left without recourse

Not only did the Court of Appeal in Merrifield determine that the facts did not cry out for a remedy, but also, it found that the tort of harassment was merely a less onerous version of the tort of “intentional infliction of mental suffering” (IIMS), as is plain in a comparison of some of their factors:

IIMS Harassment
Requires flagrant and outrageous conduct Would require only outrageous conduct
Requires a subjective intention to cause harm Would require an intention or objectively-defined reckless disregard to cause harm
Requires conduct that is the proximate cause of a visible and provable illness Would require conduct that causes severe or extreme emotional distress

However, despite its clear rejection of the tort, the Court did not close the door on its future development, if such could be supported by the factors noted above.

Apart from the tort of IIMS noted above, Ontario employees already enjoy protections against workplace harassment under human rights legislation and occupational health and safety legislation. Moreover, many Ontario employees may seek compensation for the effects of workplace harassment, so long as in accordance with the terms of worker’s compensation legislation and policy or applicable disability insurance policies.

In our view, the Merrifield decision should therefore not be seen as a huge setback for employee rights. Nor should it lead to complacency on the part of employers in matters of workplace harassment, which must continue to be treated seriously and in compliance with existing laws.

Model terms for annualised wages clause to be included in Modern Awards

As part of the Fair Work Commission’s (Commission) four-yearly review of Modern Awards[1], the Commission recently handed down a decision on 27 February 2019 (Decision)[2], to insert new model clauses for annual wages into Modern Awards.

The Decision applied to 17 Modern Awards that currently contain annualised wage entitlements, and 2 Modern Awards that previously did not contain annualised wage arrangements.

We set out below some background, the new obligations imposed on employers, and the impact of the model clauses for employers.

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Two jobs, one employer: Australia Post not liable for overtime pay

The recent Federal Court decision of Lacson v Australian Postal Corporation [2019] FCA 51 has reaffirmed the position than an employer is not liable for cumulative overtime and allowances where their employee performs different duties at two different locations and two different times. Justice Mortimer dismissed an appeal by an employee of Australia Post, who argued he was entitled to overtime, rest relief and meal allowances over a 4 year period while he worked two jobs for the same employer.

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Representations no longer required before precautionary suspension

On 19 February 2019, the Constitutional Court upheld the Labour Court’s finding that an employer need not afford an employee an opportunity to be heard before implementing a precautionary suspension. This important development arose from the following facts.

The employer, the South African Breweries (Pty) Ltd (SAB) employed a district manager for the Border region. The employee was responsible for the operations in that region, which included ensuring that SAB’s fleet of vehicles, met all legal requirements. In December 2012, SAB came to know of fraudulent activities in respect of the licensing of its vehicles, and that certain vehicles were being operated without licences and the requisite maintenance. In response, the employee instructed SAB’s fleet and depot managers to rectify the irregularities. It would appear, however, that this was not attended to because on 10 May 2013, one of SAB’s trailers, which was unlicensed and “in a state of disrepair” was involved in a collision which resulted in a fatality. As a result, on May 15, 2013, SAB informed the district manager that he was suspended, on full pay, pending an investigation into allegations of dereliction of duty and gross negligence. The suspension was precautionary not punitive.

Ultimately, SAB convened a disciplinary hearing. The employee was found guilty of various charges, including dereliction of duties, gross negligence and bringing the employer’s name into disrepute. He was found guilty of those charges and dismissed. He referred an unfair labour practice dispute to the CCMA pertaining to his suspension, and an unfair dismissal dispute to the CCMA. In respect of the unfair suspension dispute, the CCMA found that while there was a fair reason to suspend the employee, SAB had committed an unfair labour practice by failing to give him an opportunity to make representations as to why he should not be suspended. The unfair dismissal dispute culminated in a finding that the dismissal was substantively unfair but procedurally fair. SAB was ordered to reinstate the employee with retrospective effect. SAB applied to the Labour Court to review and set aside both arbitration awards.

Both review applications were successful. The Labour Court substituted the unfair dismissal award with an award that the dismissal was substantively fair. In respect of the unfair suspension award, the Court held

  • There is no requirement that an employee be given an opportunity to make representations before an employer institutes a precautionary suspension.
  • The precautionary suspension must be linked to a pending investigation and serve to protect the integrity of that investigation.
  • The prejudice to the employee is ameliorated by the employee being paid while suspended.

The Constitutional Court, in considering whether to grant leave to appeal considered the issue of a pre-suspension hearing. It found that the Labour Court’s findings could not be faulted. The Constitutional Court accepted that a precautionary suspension does not constitute disciplinary action, and as such the requirements for fair disciplinary action are not applicable, i.e. there is no right to be heard before a precautionary suspension is implemented.

Further, the Constitutional Court found that it was correct that in determining whether or not a precautionary suspension was permissible, the decision-maker must first determine whether there is a fair reason for suspension. If the reason for suspension is an investigation, it cannot be said to be unfair. The next consideration is whether there is any prejudice to the employee. Prejudice to the employee is cured by full pay for the duration of the suspension.

Therefore an employer, who wishes to suspend an employee pending an investigation into allegations against the employee, need not give the employee an opportunity to make submissions as to why he or she should not be suspended. If the suspension is a precautionary measure, and not a disciplinary action, full pay will usually address any prejudice to the employee. The employer must still be able to show that there is reason to remove the employee from the workplace during the investigation, e.g. that there is a reasonable apprehension that the employee’s presence or conduct may hinder the investigation in some way. The judgment is a welcome development in employment law, which may be seen to be overly laden with purely procedural requirements.

This article was written by Verushka Reddy, Director, Norton Rose Fulbright South Africa Inc

Marie Boland’s Review of the model Work Health and Safety laws – industrial manslaughter, enhancing the Category 1 offence, and what it might mean for statutory safety duty holders

Since the start of this year, two directors have been sentenced to custodial terms for safety offences in relation to separate fatal incidents. In February this year,  Marie Boland’s Review of the model Work Health and Safety laws – Final report (Report) was released  which recommends including a new offence of industrial manslaughter in the model Work Health and Safety (WHS) Act.

In this article, we examine two of the Report’s key recommendations which reflect the changing health and safety regulatory environment, and what it might mean for statutory safety duty holders, including individuals and persons who conduct a business or undertaking.

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BC Court of Appeal affirms BC approach to “family status” discrimination cases

The British Columbia Court of Appeal (the “BCCA”) recently issued an important decision about family status discrimination. In Envirocon Environmental Services, ULC v. Suen (“Envirocon”), a unanimous BCCA affirmed the existing legal test for adverse discrimination on the ground of family status under the BC Human Rights Code (the “Code”). For BC employers, this is a welcome decision.

In Envirocon, Mr. Suen was fired when, shortly after the birth of his daughter, he refused a work assignment that would have required him to work outside of BC for eight to ten weeks. Mr. Suen alleged discrimination on the basis of “family status”. After the BC Human Rights Tribunal (the “Tribunal”) refused to dismiss the claim, Envirocon appealed the decision to the Supreme Court of British Columbia, which refused Envirocon’s application for judicial review, and then to the BCCA.

To understand the impact of the Envirocon decision, one must first understand the 2004 BCCA decision of Health Sciences Assoc. of B.C. v. Campbell River and North Island Transition Society (“Campbell River”), where the BCCA established the test for adverse discrimination (on the basis of family status) as a change in employment “imposed by an employer” which “results in a serious interference with a substantial parental or other family duty” of the employee.

The Campbell River test has been the subject of scrutiny as it arguably imposes a different, less stringent standard in family status cases compared to other grounds of discrimination. As a result, courts and tribunals across Canada have declined to follow Campbell River in other jurisdictions. The central issue in Envirocon was whether the Campbell River test remained intact.

The Tribunal held that Mr. Suen’s “required absence from his wife and four‐month‐old infant for consecutive 24‐hour periods over a number of weeks could be found to constitute serious interference with a substantial parental or other family duty or obligation”. Despite applying the Campbell River test, the Tribunal questioned whether the Campbell River test remained “good law”.

At the BCCA, Mr. Suen argued that the Court should reconsider the Campbell River test and that it should only be “necessary for a complainant to show that a change in a term or condition of employment interferes with a parental or other family duty or obligation”. The BCCA declined to embark on any such analysis, stating simply that it was “bound by Campbell River”.

The BCCA then overturned the Tribunal’s decision that the company discriminated against Mr. Suen.  The BCCA held that the Tribunal had incorrectly applied the Campbell River test to the facts of the case:

While Mr. Suen’s desire to remain close to home to be with his child and to assist his wife in caring for the child outside of his normal weekday working hours and on weekends is understandable and commendable, he is no different than the vast majority of parents.  There are many parents who are required to be away from home for extended periods for work-related reasons who continue to meet their obligations to their children…

The effect of this decision, for now at least, is that BC employers have some certainty about what will constitute discrimination on the basis of family status in BC. By upholding the Campbell River test requiring “serious interference with a substantial parental or other family duty”, the BCCA unequivocally endorsed the high threshold set out in Campbell River. To demonstrate “serious interference” with a “substantial” family duty, an employee must show how his or her circumstances are somehow distinct from all other workers who balance the demands of their employment with their family lives.

We are monitoring whether Envirocon will be appealed to the Supreme Court of Canada, so stay tuned for further updates.

Ralentissement de travail : l’enfer est pavé de bonnes intentions

Perturbations du réseau d’autobus, vitrines vandalisées, courrier accumulé dans les centres de tri … Ces derniers mois, nous avons pu constater que les moyens de pression ne cessent de s’inviter sur la scène médiatique québécoise. À cet égard, le ralentissement de travail demeure un moyen de pression fréquent mais illégal utilisé par les salariés pour manifester leur désaccord. La bonne nouvelle? Lorsqu’un employeur craint un tel ralentissement, il peut rester calme pendant la tempête. Tout est question d’attitude et voici nos deux mots d’ordre : vigilance et justice.

  • Être vigilant

Tout n’est pas noir ou blanc. Les ralentissements de travail sont de véritables caméléons. Essentiellement, il s’agit d’une action concertée de la part des salariés, perpétrée dans le but de perturber les opérations. D’ailleurs, les salariés font parfois preuve d’une grande imagination, proche de l’expertise en matière de camouflage : en passant par des vérifications exagérément minutieuses, une mise en application trop stricte d’une politique ou d’un règlement interne d’entreprise, un refus d’effectuer du temps supplémentaire, en prenant le double de temps pour réaliser les tâches … Les exemples sont aussi variés que ce que l’imagination permet. Cependant, note à tous les employeurs : ne pas voir le mal partout. Le fait est que toute baisse d’activité n’est pas nécessairement synonyme de ralentissement d’activité illégal. Il faut apporter certaines nuances. Par exemple, une cadence de production au ralenti du fait d’un climat d’affaires en berne ne constitue pas un ralentissement de travail.

  • Être juste

Chaque ralentissement de travail, bien que prohibé en toutes circonstances, est unique en son genre : la prudence est de mise dans la sanction qui lui est appliquée. Pour le meilleur et pour le pire, il n’existe pas de règle absolue en la matière. Cependant, à l’image de toute sanction, celle imposée dans ces cas doit demeurer juste. Il n’est donc pas surprenant que de simples participants à un ralentissement de travail doivent être sanctionnés moins sévèrement que ceux ayant incité, voire provoqué un tel ralentissement. De la réprimande écrite à une suspension de longue durée, les exemples de sanctions sont innombrables puisqu’il s’agit essentiellement d’une question de faits. Un ralentissement de travail pourrait d’ailleurs justifier, dans certaines circonstances, l’émission d’une ordonnance de sauvegarde afin de forcer la prestation de travail sans ralentissement.

Morale de l’histoire : la fin ne justifie pas toujours les moyens. Des moyens de pression légaux sont offerts à vos salariés pour manifester leur mécontentement. Un ralentissement de travail illégal ne saurait donc, en aucun cas, être toléré.

What to expect in 2019

Following a Government-commissioned review of employment working practices in the UK which was published in 2017, a number of developments in employment law reform are expected over the coming months.

The Government published its latest proposals in December, covering a number of areas for change, some intended to improve the enforcement of employment rights, some to increase transparency and clarity of rights between employers and workers (including issues relating to employment status) and others to improve the rights of atypical workers. This post highlights some of the key areas for change.

Employment status

A key area for change is in relation to the employment status of individuals.

In the UK there is currently a three-tier approach to employment status for employment purposes. Individuals are either employees; workers; or self-employed contractors and their employment status determines the level of employment protection rights to which they are entitled.

Employees enjoy the full range of employment rights including protection from unfair dismissal and redundancy rights, workers enjoy a more limited set of rights which include the right to the national minimum wage and paid holiday, whilst self-employed contractors enjoy none of these rights.

Although there is no statutory definition of a self-employed contractor, definitions of “employees” and “workers” are set out in UK employment legislation. However, an individual’s employment status is determined by a range of criteria which has been established over the years through case law. The review recommended that these criteria be clarified and set out in legislation so that individuals would be provided with more certainty about their status and related rights.

The UK Government has now confirmed that it intends to legislate to clarify the test but has not yet given any detail as to how or when precisely this will be done. However, detailed proposals are promised and are likely to make significant changes to the current law.

Enforcement of rights

The UK Government accepts that the process for enforcement of workers’ rights should be more straightforward. Pending the outcome of the ongoing court and tribunal reform programme which is currently underway, they have introduced a scheme for the naming and shaming of employers who fail to pay tribunal awards which applies to all tribunal awards registered on or after 18 December last year.

In addition, with effect from 6 April this year the maximum financial penalty for employers’ aggravated breaches of employment rights will be increased from £5,000 to £20,000. This penalty is imposed in addition to any compensation awarded to the worker.

Transparency

In order to increase transparency and clarity of rights and obligations between workers and employers, the right to a written statement of key terms and conditions of employment, which is currently enjoyed by employees only, will be extended to all workers with effect from 6 April 2020.

In addition, it, must be provided from the first day of employment, rather than after two months as is currently the case, and must contain more information, such as details of all benefits in addition to pay, and all entitlements to paid leave.

Atypical workers

The Government proposes to make a number of changes to the law to improve the rights of atypical workers, such as agency workers and seasonal workers.

With effect from 6 April 2020, employment businesses must provide all agency workers with a “Key Information Document” setting out key information such as details of the type of contract they are engaged under, who is responsible for paying them and details of their pay and any fees or other deductions which will be made.

In addition the “Swedish derogation” (which currently allows agency workers to exchange their rights to be paid equally to their permanent counterparts for a contract which guarantees pay between assignments) is to be repealed from the same date.

In order to address the difficulties faced by some atypical workers (particularly those whose weekly earnings vary week to week or season to season), in receiving holiday pay which is a true reflection of their average weekly pay, the holiday reference period (which is currently the 12-week period before the holiday is taken) is to be increased to 52 weeks. This change also comes into effect on 6 April 2020.

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