Department of Labor Service Writer Update!

August 27, 2012

In April 2011, President Obama’s Labor Department (DOL) announced that it was reverting to a position it had abandoned back in 1987. The DOL is again saying that service writers and service advisors are not exempt from overtime. The only problem with their “new” position is that it has been rejected by every federal court that has considered the question and, of course, the courts make the law, not the DOL.

However, favorable court decisions exist in only about fifteen states and those decisions are not binding on the other states. In an effort to prevent the DOL from attempting to enforce their position in those jurisdictions where courts have not yet ruled, Congress added a provision to the DOL’s funding legislation for 2012 which stated that the DOL could not use any of the appropriated money to enforce their new position on service writers. Will DOL actually listen?

Yes, they actually did! We are aware of one investigation where the DOL investigated a service writer’s complaint that he was not paid overtime. The DOL initially sided with the service writer. However, after checking with “higher ups” in the DOL, they closed their investigation and took no action. That’s the good news.

The bad news is that all bets are off after December, 2012. So a prudent dealership will use this time to get its house in order. All you need to do to protect your dealership is to make sure that your service writers receive the majority of their compensation in the form of “commissions,” ideally a percentage of the parts and labor hours they sell. Many service advisors are already paid that way and many others can qualify by just tweaking their pay plans a little. Then even if the service writer exemption is challenged at your dealership, your service writers will still be exempt from overtime under the other exemption.

Dealerships should also recognize that “internal” service writers are not exempt from overtime and never have been because they are not selling parts and service to customers. So for those employees, it is critical that they be set up as “commission-paid” employees or paid overtime.

Judge Rules “At-Will” Statement Violates The National Labor Relations Act

August 20, 2012

I have continually expressed to employers that they should ignore the “at-will” provision in terms of its concept. Meaning, it is a misunderstood concept in many respects. Employers believe that it can be used as a “catch all” for ending the employment relationship. No! The reason for termination should always be based upon violation of a company policy, practice, or procedure unless they simply cannot do the job. In either case, terminations should be based upon a valid documented reason and not simply that the employer has an “at-will” policy.

Now the National Labor Relations Board (NLRB) has issued an administrative decision holding that standard at-will language in a non-union Employee Handbook violates section 7 of the National Labor Relations Act. The Employee Handbook stated “I further agree that the at-will employment relationship cannot be amended, modified or altered in any way.” This is standard language in many employee handbooks (some employers write that it can only be modified by a writing signed by the employee and chief executive of the employer). The NLRB administrative law judge found that the language violates section 7 because employees who read it are very likely to believe that they cannot alter the at-will employment policy through collective bargaining or other forms of concerted activity. Subsequent to this decision, the NLRB issued a complaint against Hyatt Hotels on similar grounds. That complaint was resolved when Hyatt agreed to modify the at-will language in its handbook. From the author’s view, this decision and the NLRB’s position appears to be a stretch. However, right now it appears to be the only decision by the NLRB (or any other court or agency) on the issue. In addition, NLRB Acting General Counsel Lafe Solomon is reported to have publically commented in June that he believes that at-will handbook provisions prohibiting any change in the terms and conditions of employment except in a written document with a company executive violate the NLRA’s Section 7 right to participate in union-organizing activities. Thus, at a minimum, employers with standard at-will language like this in their employee handbooks should continue to monitor this situation and consider contacting their legal counsel to determine if any changes should be made to the at-will language in the handbook.

The NLRB decision was issued by Gregory Meyerson, an administrative law judge with NLRB Region 28 in Arizona in the matter of American Red Cross Arizona and Lois Hampton and Hyatt Hotels Corporation and United Here International Union. Take heed, we know that the NLRB is being controlled by the Obama administration who does not appear to favor business. I will keep you informed if any drastic changes need to be made.

Arbitration Provision in Employee Handbook Is Not an Enforceable Contract

August 13, 2012

Arbitration Agreements have been upheld, thrown out, and upheld. Back and forth and here we go again! A California state court decision issued another unfavorable decision that reminds California employers that arbitration policies set forth in employee handbooks generally do not amount to an enforceable agreement to arbitrate claims. In Sparks v. Vista Del Mar Child & Family Services, the employer had an employee handbook containing, among many other policies, a policy requiring arbitration of employment disputes. The handbook (like most) elsewhere included language making clear that the handbook was not an express or implied contract. Employees were required to sign a form acknowledgement indicating they had received the handbook. However, the acknowledgement did not specifically allude to the arbitration policy or separately include any agreement to arbitrate. A former employee filed an employment-related claim against the employer, and the employer moved to compel arbitration, arguing that the employee had agreed to arbitrate the dispute by virtue of his signed acknowledgement of receipt of the employee handbook. The court refused to compel arbitration, holding that there was no evidence that the employee had agreed to arbitrate. The court reasoned that the arbitration provision was buried in a lengthy employee handbook, the handbook itself stated that it was not intended to create a contract, the acknowledgement form made no specific mention of arbitration, and the handbook also stated that the employer could modify the policies therein at any time, making any agreement to arbitrate illusory. The court also noted that even if there was a valid agreement to arbitrate, it would be still be unenforceable due to unconscionability because the arbitration policy did not provide for adequate discovery and incorporated AAA arbitration rules that were not included nor provided to the employees.

The Sparks case is a good reminder that to be enforceable, employment arbitration agreements ideally should be free-standing agreements signed by employees. They may be included on acknowledgement forms or in broader agreements, but the arbitration provision should be a prominent provision, making the employee’s knowledge of the provision and agreement thereto unmistakable.

Healthcare Mandate: The Impact on Employers!

August 6, 2012

The U.S. Supreme Court has upheld, in a 5-4 decision, the healthcare reform law known as the Patient Protection and Affordable Care Act. The reasoning for the purpose of this article really doesn’t matter. What is of importance is the impact the decision will have on employers beginning January 1, 2014 and although the law doesn’t require employers to provide healthcare coverage, it imposes penalties for coverage that is deemed unaffordable.

More Specifically, employers with 50 or more full-time employees (30 hours or more per week) that don’t provide coverage will be assessed a penalty if just one of their employees receives a premium tax credit when buying insurance in a state-based “health insurance exchange.” The annual penalty equals $2,000 per full-time employee in excess of thirty workers. Do the math, if you have 55 full-time employees, and one receives the tax credit, the penalty would be $50,000.

Employers that do provide coverage could also face penalties if:

1. The coverage doesn’t provide at least 60% of the covered healthcare expenses; or
2. the premium for the coverage exceeds 9.5% of a employees income. In such an example the employee can choose to obtain coverage in an exchange and qualify for a tax credit.

For each worker receiving the credit, the employer will annually pay the lesser of $3,000 for each employee receiving a premium credit or $2,000 for each full-time employee, excluding the first 30 employees.
In addition, employers that filed 250 or more 2011 W-2 forms must begin reporting the cost of employer-provided healthcare coverage on the forms beginning with the 2012 tax year. In 2014, employers with 200 or more employees must automatically enroll newly hired or newly eligible full-time employees into a default health plan that provides affordable coverage.

The above represents somewhat of a capsule outline of what employers can expect. For a more detailed explanation please discuss the matter with your insurance broker or healthcare provider.