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The Legislative Report blog provides timely information on federal and state legislation and regulations and state trends as well as the myriad issues affecting the private club industry. A companion to CMAA's Legislative website, this resource should be your first stop for any information regarding legal, tax or legislative club-specific issues.

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DOL Withdraws Independent Contractor Guidance

(Dept of Labor) Permanent link

On Wednesday, June 7, Department of Labor (DOL) Secretary Alexander Acosta announced the withdrawal of the independent contractor guidance first issued in July 2015. 

The July 2015 guidance offered an expanded application of the multi-factor “economic realities” test, specifically focusing on the individual worker’s economic dependence on the employer. 

1.    Is the work an integral part of the employer’s business?
2.    Does the worker’s managerial skill affect the worker’s opportunity for profit or loss?
3.    How does the worker’s relative investment compare to the employer’s investment?
4.    Does the work performed require special skill and initiative?
5.    Is the relationship between the worker and the employer permanent or indefinite?
6.    What is the nature and degree of the employer’s control?

The withdrawal does not negate an employer’s responsibilities under the Fair Labor Standards Act but instead demonstrates the Trump Administration’s commitment to rescinding onerous regulations and changing interpretation. It is yet to be seen but it may be the start in a shift in the Administration’s enforcement priorities including the joint misclassification initiative with 37 states and the Internal Revenue Service. 

For clubs who made changes to existing employee/independent contractor relationships since July 2015, it is best to review these agreements annually in concert with legal counsel to ensure they meet all applicable local, state and federal law. 

DOL Moves to Rescind Persuader Rule

(Dept of Labor) Permanent link

As expected, Department of Labor (DOL) Secretary Alexander Acosta has taken steps to officially rescind the Persuader rule. This is the latest in the Trump administration’s ongoing efforts to roll back regulations on employers.

The Persuader Rule was released by the Department of Labor in March 2016 and requires full public disclosure on the use of labor relations consultants by employers. In short, the rule requires employers and their hired consultants to report when the consultants directly persuade workers or when the consultants participate in four “indirect” categories in relation to labor organization or disputes. The Persuader rule was first introduced in 2011, but has been on hold since 2014. 

The reporting requirements were slated to become effective July 1, 2016 but a preliminary nationwide injunction stopped it as of June 27. In November 2016, the US District Court for the Northern District of Texas struck down the rule citing irreparable harm that the rule would pose to the tenets of attorney-client privilege between an employer and their legal counsel and prevent employers from receiving effective representation by legal counsel.  

The good news for clubs is that this rule was never effective or enforceable. 

 

H-2B Visa Cap Met for First Half of FY2017

(Dept of Labor, Immigration) Permanent link

H-2B Visa Cap Met

On January 10, US Citizenship and Immigration Services (USCIS) announced that the H-2B visa cap for the first half of the 2017 fiscal year had been reached. Currently, the H-2B visa cap set by Congress is 66,000 per fiscal year, with 33,000 to be allocated for employment beginning in the first half of the fiscal year (October 1 - March 31) and 33,000 to be allocated for employment beginning in the second half of the fiscal year (April 1 - September 30). Any unused visas from the first half of the fiscal year will be made available for use by employers seeking to hire H-2B workers during the second half of the fiscal year. However, there is no carry over to the next fiscal year.

This announcement does not impact any H-2B worker petitions received by the USCIS prior to January 10 or any employees with a start date of April 1, 2017, or later. As well, USCIS will continue to accept H-2B petitions that are exempt from the congressionally mandated cap including current H-2B workers who are petitioning to extend their stays and, if applicable, change the terms of their employment or change their employers.

In FY2016, Congress had enacted the returning worker provision which exempted H-2B visa workers who had previously used the program to be exempt from the cap. However, Congress opted not to extend this provision for FY2017.

Court Strikes Down Persuader Rule

(Dept of Labor) Permanent link

Court Strikes Down Persuader Rule - Gavel

On Wednesday, November 16, the US District Court for the Northern District of Texas struck down the Department of Labor’s Persuader rule, extending a preliminary nationwide injunction that was previously issued on June 27.

The final Persuader Rule was released by the Department of Labor in March 2016 and requires full public disclosure on the use of labor relations consultants by employers. In short, the rule requires employers and their hired consultants to report when the consultants directly persuade workers or when the consultants in four “indirect” categories in relation to labor organization or disputes. The Persuader rule was first introduced in 2011, but has been on hold since 2014. The reporting requirements were slated to become effective July 1, 2016.

In his opinion, Judge Sam Cummings cited the irreparable harm that the rule would pose to the tenets of attorney-client privilege between an employer and their legal counsel and prevent employers from receiving effective representation by legal counsel.  

It is unlikely that this ruling would be appealed or revived under the incoming Trump administration. 


Overtime Litigants Ask for Expedited Review

(Legal Issues, Dept of Labor) Permanent link

In September, two separate challenges were filed against the Department of Labor’s overtime rules. In the first challenge, 21 states have joined together to object to the rule, based on its impact on state funds and budgets. In a separate action, the US Chamber of Commerce and more than 50 other national and Texas business groups challenged the rule for violating the Administrative Procedure Act. 

On October 12 and 14 respectively, attorneys for both litigants filed motions for expedited summary judgement in the cases. In layman’s terms, this means that they are requesting a verdict from the judge without the benefit of a full trial. 

Both challenges are under review by the same court and judge, Judge Amos Louis Mazzant III of the United States District Court for the Eastern District of Texas. 

The final overtime rules are slated to take effect December 1, 2016. Stay tuned for any impact from these latest legal challenges. In the meantime, clubs and all employers should be preparing to comply with the final regulations.

House Passes Bill to Delay Overtime Rules for Six Months

(Congress, Dept of Labor) Permanent link

On Wednesday, September 28, the House of Representatives passed HR 6094, The Regulatory Relief for Small Businesses, Schools, and Nonprofits Act.  Championed by Representative Tim Walberg (R-MI), this bill was fast-tracked for consideration and reported favorably the House Rules Committee on Tuesday. 

The final overtime rules are slated to become effective and enforceable on December 1, 2016, drastically increasing the salary threshold for exempt employees. This legislation would delay the enactment of the final overtime rules by six months until June 1, 2017.

However, this legislation is unlikely to become law. The Senate is currently most concerned with passing a budget before the end of the fiscal year, September 30, and unlikely to take up consideration of the measure. In addition, the current Administration who has championed the rule changes through the Department of Labor has indicated that the President would veto the measure if it came across his desk.

Understanding Worker Misclassification and Independent Contractors

(Legal Issues, Dept of Labor) Permanent link

Understanding Worker Classification - Gardener ImageGiven the current changes to the overtime regulations, businesses may be considering how reclassifying employers to independent contractors could ease the costs of compliance.

However, in 2015, long before the Wage and Hour Division Department of Labor (DOL) finalized the new overtime rules, it issued new guidance on the misclassification of workers focusing on the application of the Fair Labor Standards Act (FLSA) and the multi-factor “economic realities” test. 

This test explores whether an employee is economically dependent upon the employer through six specific questions:

  • Is the work an integral part of the employer’s business?
  • Does the worker’s managerial skill affect the worker’s opportunity for profit or loss?
  • How does the worker’s relative investment compare to the employer’s investment?
  • Does the work performed require special skill and initiative?
  • Is the relationship between the worker and the employer permanent or indefinite?
  • What is the nature and degree of the employer’s control?

This guidance was shared through the DOL’s Misclassification Initiative. Through this initiative, more than 35 states and the Internal Revenue Service are working closely with the DOL to share information and resources in an effort to curb misclassification. North Carolina is the newest state to join the initiative. 

Based on this DOL guidance, clubs should review existing independent contractor relationships and seek external review by legal counsel when establishing new relationships to ensure they fall within the bounds of the updated FLSA guidance.