Employer Policies Unlawful Under Obama May Be Lawful Again

Employer Policies Unlawful Under Obama May Be Lawful Again

Trump Administration Rolling Back Certain Obama-Era DOL and NLRB Interpretations


The Trump Administration has begun to roll back some of the prior administration’s policies which reinterpreted decades of US Department of Labor and National Labor Relations Board decisions and enforcement policies.  Many employers had revised long standing payroll practices, handbook policies, and internship programs to comply with these interpretations.   As the Trump-era DOL and NLRB are beginning to restore many of the prior interpretations, including under the Fair Labor Standards Act and the National Labor Relations Act, employers might reconsider similarly restoring prior policies and practices when updating employee handbooks for 2018.

Making it Easier, Again,  to Sponsor Unpaid Internship Opportunities.


Many private employers ended unpaid internship programs for students during the Obama Administration. Internships often provide important practical experience and real world training for students, including clinical and other learning opportunities.  Due to a recent announcement by the US DOL on January 5, 2018, private employers who ended internship programs may wish to reinstate these opportunities for students.


In 2010, the Obama DOL began using a six part test to evaluate misclassifications of “employees” under the FLSA who were hired as “interns.” Subsequently, there were many lawsuits filed by unpaid “interns” who later claimed to be employees and who sought to be paid for their internship experiences.  Many private employers, as part of risk management strategy seeking to avoid costly litigation, stopped offering internships that were intended to provide practical experience to students.


The Obama DOL required that all six factors be established by a private employer to prove that the intern was not an employee.   The six factors of the Obama test included: (1) whether the internship was similar to training that would be offered in an education environment; (2) whether the internship experience was for the benefit of the intern; (3) that the intern did not displace a regular employee, but worked under close supervision of existing staff; (4) that the employer providing the training derived no immediate advantage from the activities of the intern, and on occasion its operations were actually impeded; (5) that the intern was not necessarily entitled to a permanent position at the conclusion of the internship; and (6) that both the employer and the intern understood that the intern was not entitled to wages for time spent in the internship.


In Glatt v. Fox Searchlight Pictures, Inc., 811 F.3d 528 (2d Cir. 2015), the Second Circuit overturned the decision of a lower court which had found the intern entitled to wages under the FLSA, and articulated the “primary beneficiary” test.  That test was later adopted by several courts.  On January 5, 2018, the USDOL announced that it also would use the “primary beneficiary” test to determine whether interns are “employees” under the FLSA entitled to pay for “hours worked.”  See US DOL Fact Sheet #71.   The primary beneficiary test is intended to be flexible, with no one factor being dispositive.


The Glatt factors, adopted by the DOL include: (1) the extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa; (2) the extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions; (3) the extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit; (4) the extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar; (5) the extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning; (6) the extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern; and (7) the extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.


The primary beneficiary test will allow private employers to restore more unpaid internship opportunities for students to obtain practical skills and experience.  Some employers, however, may wish to continue to pay interns at least the minimum wage, particularly if the above primary beneficiary test analysis does not clearly weigh in favor of the intern as a non-employee.


NLRB Reversing Course: Time to Reevaluate Handbooks and Joint Employer Liability


Under the Obama administration, the NLRB aggressively challenged employer handbooks, policies and work rules which it alleged chilled employees’ Section 7 right to engage in concerted protected activity in the non-union workplace.    In addition, the NLRB under the Obama Administration broadly defined “joint employer,” making it easier to hold related employers liable for violations committed by their contractors or franchisees.  In December, we began to see the NLRB issuing several decisions overturning the Obama-NLRB interpretations.


With a Republican majority on the NLRB for the first time in over nine years, the Board issued The Boeing Co., 356 NLRB 154 decision on December 14, 2017.  In Boeing,  the NLRB overturned the 2004 Lutheran Heritage decision which held that an employer violated the NLRA by maintaining facially neutral policies that could be “reasonably construed” by employees to prohibit the exercise of NLRA rights.  During the Obama administration, the NLRB had broadly defined the “reasonably construe” element and found that many typical employee handbook policies chill employee rights in violation of the NLRA.  In Boeing, the Board adopted a balancing test of two factors: (1) the nature and extent of the potential impact on NLRA rights; and (2) legitimate justifications associated with the rule.  Employers will be allowed to revive many standard handbook policies including workplace conduct, confidentiality and civility standards which were found unlawful by the prior Board.


Similarly, in Hy-Brand Industrial Contractors, Ltd., 365 NLRB No. 156 (December 15, 2017), the NLRB reversed course on the joint employer standard outlined in its 2015   Browning-Ferris Industries decision.  Under the Browning-Ferris standard, joint employer status could be found based on indirect or potential control over terms and conditions of employment, even if such control was not exercised.  In Hy-Brand, the Board reverted to the pre-Browning-Ferris standard. To be considered a joint employer liable for another employer’s conduct, the employer must exercise “direct and immediate control” over the terms and conditions of employment.  This restoration will allow employers to again avoid being drawn into litigation for acts of franchisees and subcontractors.


New FLSA Overtime Rule On the Horizon?


We all recall the scramble in 2016 to comply with the DOL overtime rule which made many mid-level managers and other exempt employees eligible for overtime by raising the salary threshold from $455 per week ($23,660 annually) to $913 per week ($47,476 annually).   The rule was enjoined in late 2016, and challenges to the rule wended their way through the courts.   The Trump DOL withdrew its appeal regarding the enjoined overtime rule.  On July 26, 2017, the DOL published a Request for Information soliciting feedback related to the salary level test, the duties test, inclusion of non-discretionary bonuses and incentive payments to satisfy a portion of the salary level, the salary test for highly compensated employees, and automatic updating of the salary level tests.  The comment period expired on September 25, 2017. Although no “official word”, it appears that the Trump DOL will reissue a new overtime rule, but with a lower salary threshold relating to overtime eligibility than in the Obama administration.


In view of these recent developments, employers should review handbook policies and other practices which were changed to comply with Obama-Era labor policy.  Many employers revised what had been common and long-standing practices and policies to avoid violations of the Obama-Era interpretations of such legitimate employer business and management practices.   If NELGPC can be of assistance in reviewing policies and practices, please contact any member of the firm.



© January 31, 2018



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