President Obama to Expand Time and a Half Overtime Wages

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The Labor Department submitted a proposal for changes to the nation’s overtime rules on Tuesday. If adopted, the rules are expected to require businesses to pay ten million more people 1.5 times their hourly wage for overtime. The regulatory arm of the Office of Management and Budget will review the proposal before it is published and opened for public comment.

President Obama called for changes to the nation’s overtime laws last March when he signed an executive order directing the Secretary of Labor to raise the threshold pay for a business to declare an individual a manager or professional and avoid paying overtime to them. The amount was $455 a week, which was last updated in 2004.

Overtime law is governed by the Fair Labor Standards Act and currently requires time and a half pay on work over 40 hours a week if the employee earns less than $23,660 annually. If an individual is a manager and making more than that amount, the law does not require the business to pay extra for overtime.

The amount is not currently adjusted for inflation. If the overtime rate set by the law in 1975 was inflation adjusted, it would require overtime pay for workers making up to ~ $51,000 a year. Some have speculated that the new amount will be approximately $50,000 a year.

In the meantime, a small city in the Bay Area, Emmeryville, has given initial approval to a minimum wage of $16 an hour by 2019. The rate would be the highest in the country when it is fully implemented. There will be tiered increases over the next few years to reach that level. Seattle is currently phasing in a minimum wage hike to $15 an hour.

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SEC Chair White Provides Whistleblower Program Update

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The volume and quality of tips to the SEC whistleblower program is increasing. The frequency and size of rewards is expected to grow. And the SEC is concerned about severance agreements that require whistleblowers to forgo awards or represent that they have not previously reported misconduct.

These were among the remarks made by SEC Chair Mary Jo White in her introduction to the Corporate and Securities Law Institute at Northwestern University School of Law yesterday. Her complete remarks are available on the SEC website here.

The speech offers both an interesting history of incentives for securities whistleblowers – dating back to a Dutch law in 1610 prohibiting naked short selling that predates the Tulip bubble of 1636-1637 by more than 25 years – and insight into the Dodd-Frank whistleblower program, which White calls a “game changer.”

The speech primarily discusses four areas in relation to the SEC program:

Initial Success

The securities regulator has now received tips from all 50 states and sixty foreign countries. It has made 17 awards totaling approximately $50 million. White also gave us a quick look at the first quarter of FY2015. Apparently, the number of tips has increased by more than 20 percent over the first quarter in the last fiscal year. Even with the increase in tips, they have been of even higher quality and have helped put enforcement actions on a faster timetable.

Whistleblowers have alerted the government to highly technical fraudulent schemes, explained the meaning of documents to SEC staff, and testified at TRO or asset freeze proceedings to stop fraudulent schemes.

Compliance Programs

During the debate over the Dodd-Frank rules, the effect of the program on internal compliance programs was a key concern of many. White reports that internal compliance programs are vibrant and that most whistleblowers still report internally first. The program also incentivizes companies to investigate and self-report misconduct because of concerns that someone else will report them.

Retaliation

The SEC will continue to make enforcement of anti-retaliation protections a high priority, according to White. The speech recaps some of its efforts, including taking its first enforcement action against retaliation and intervening in several private cases to argue that individuals internally reporting violations are protected from retaliation in addition to those filing a Form TCR.

Open Channels of Communication

White spent a significant portion of her speech discussing the recent enforcement action against KBR under Rule 21F-17, without naming the company. She downplayed concerns regarding the use of confidentiality agreements to protect trade secrets or confidential information but indicated that it was not permissible for companies to prevent employees from reporting securities violations or take other actions (like the clause requiring pre-approval of government reporting) that might chill potential whistleblowing.

The SEC is also looking at employment agreements that require employees to forgo any whistleblower award as a condition of a severance payment. White hints that these contracts are looked upon unfavorably by the Enforcement Division. I would not be surprised if we see additional rules developed by the agency in order to cover this contingency, if it is not prohibited within the scope of the current rules.

Our SEC whistleblower attorneys can provide you with additional information about the program if you have evidence of a securities law violation or a question about an employment agreement. Please contact us or call 1-800-590-4116 to speak to a lawyer at McEldrew Young Purtell Merritt.

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An International Workers’ Day to Celebrate

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One of today’s Google doodles recognizes “Labour Day 2015” or “Labor Day” depending on where you are in the world. Although we celebrate Labor Day in September here in the United States, much of the world chooses today to recognize the contributions of workers. Regardless, we definitely have something to celebrate today. Yesterday, the Wall Street Journal reported that workers in the first quarter received their biggest annual gain in pay since 2008.

The May 1st date is believed to have started in Chicago, with a call from the Federation of Organized Trades and Labor Unions, a predecessor to the AFL-CIO, that proclaimed eight hours a legal day’s labor starting on May 1, 1886. More than 300,000 workers across the United States walked off their jobs on that day. On May 4th, a confrontation between police and workers during a led to loss of life on both sides, and the incident is believed to have started the worldwide movement.

The struggle for an eight hour work day very much reminds me of the movement for a living wage today. The movement for $15 an hour so that no worker has to live in poverty has spread across the United States quickly and has seen success in a few different locations already. More can be expected as government and businesses realize that their attempts to maximize profits by minimizing pay simply aren’t sustainable. They externalize costs on the rest of society and don’t promote a stable and happy workforce.

I remember a few years ago during the financial crisis when union workers in the auto industry were lambasted for their salaries and benefits. Instead of bringing them down, the better goal should have been to find a way to bring everyone else up to a sustainable wage. We might be heading there today if the movement continues to have success.

Protests in the United States are nothing new. Our country was founded on them. The question is always whether they lead to meaningful change or fizzle out. The Occupy Wall Street movement was able to gain a lot of attention when it protested treatment of the common person in the United States. But very little real change was implemented as a result of all of the publicity. The calls for a living wage have been much more successful.

The next few years should be interesting as businesses implement wage increases in order to comply with the new government laws or simply satisfy their unhappy employees. Will they drive businesses to cut hours and raise prices? Or are the businesses opposing wage increases wrong and simply being greedy? Either way, it seems like we are living at a turning point in the power struggle between business and labor.

So I thought we would dedicate a post to the workers that we help today. We spend a lot of time discussing corporate misconduct and the technical rules of whistleblowing here. But we do so to help the individuals that bravely walk into our door to change the world for the better. To them and the other people working to make society better for employees:

Happy International Workers’ Day!

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Democratic Senators Push for Living Wage By Senate Contractors

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Democratic Senators sent a letter to the Chairman of the Senate Rules Committee urging the adoption of a requirement that Senate Office building contractors pay their employees a living wage. The letter does not call for a specific amount but does object to the low wages paid food and restaurant workers that must be subsidized by taxpayer-funded benefits. The letter sent by the Senators is available on Senator Sherrod Brown’s website.

Last week, federal contract workers engaged in a one-day strike to urge President Obama to allow workers to unionize and give preference to contractors that pay $15 an hour.

The living wage movement has spread around the country and has successfully changed practices in several areas, including Seattle. Implementation of Seattle’s $15 minimum wage started this month. The law will incrementally increase the minimum wage in the city over a period of years determined by the businesses number of employees. Large employers were given three to four years and small employers (less than 500 employees) were given five to seven years.

Last year, President Obama issued Executive Order 13658 establishing a minimum wage of $10.10 for workers on Federal construction and service contracts. The order applied to new contracts and replacements for expiring contracts resulting from solicitations issued on or after Jan. 1, 2015 or contracts awarded outside this process from that date as well. The order covers four major categories of agreements, including construction contracts covered by the Davis-Bacon Act, service contracts covered by the Service Contract Act, concessions contracts, and contracts in connection with Federal property or land relating to services offer to government employees and the general public.

Last week, we discussed the possibility that living wage measures such as the one called for by the Senators and the President’s Executive Order could be the subject of qui tam lawsuits under the False Claims Act in addition to the standard case by employees for wage and hour violations. This story reinforces that belief. We expect to see more employers may decide to circumvent wage and hour laws as the minimum wage increases and that there will be more lawsuits brought by employees as well as whistleblowers.

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Living Wage Whistleblowers Could Be Next For False Claims Act

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There could be more whistleblowers under state and city False Claims Act in the coming years if recent initiatives to tie the payment of a living wage to government contracts and business subsidies takes hold in other jurisdictions.

A Hudson Yards office tower in New York City is the first in the Big Apple to strike a deal for construction tax breaks since Mayor Bill de Blasio raised the hourly wage to $13.13 and expanded the living wage law to include employees of commercial tenants on construction projects receiving more than $1 million in subsidies.

Because New York City has a whistleblower law which rewards individuals for reporting false claims against the local government, whistleblowers may be able to report companies which do not follow the terms of deals like this and earn a reward. Of course, more research would be necessary into the specific terms of the law, because tax enforcement actions are sometimes excluded from versions of the False Claims Act.

Although we have used New York City in this example, it similarly apples to the Philadelphia False Claims Act and the living wage law here. The executive order issued by Mayor Michael Nutter requires contractors receiving government contracts from the City of Philadelphia to pay a specified minimum wage to its employees working on the contract. If the individuals are paid less, the submission of a payment request is a false claim.

As with any law, there are exclusions which limit the application of the rules to certain parties and certain employees. For example, individuals in summer job programs and bona fide student internships are excluded from the coverage of the law in Philadelphia. So any particular case will require careful review by an attorney to determine whether the law applies to the individual.

In the past, minimum wage laws have typically been enforced by employees bringing collective claims for their unpaid wages. However, the Federal False Claims Act has been applied in several cases where federal contractors or subcontractors are not paying the prevailing wage required by the law.

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Labor Dept. Proposes Best Interest Contracts for Retirement Brokers

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Labor Secretary Tom Perez unveiled the Department’s plan to address conflicts of interest by brokers when offering retirement advice. The best interest investor contracts are meant to address problems with brokers steering customers to high-fee products when alternatives better address their client’s financial needs.

The best interest contracts require brokers to pledge they are upholding the best interests of their clients and put their clients’ best interest ahead of their own personal gain when recommending investments for 401(k) plans. Clients would be able to enforce a breach through a private right of action. The IRS could also impose an excise tax on transactions recommended because of a conflict of interest.

President Obama urged the Department of Labor to act on this issue in February when he said that billions of dollars are drained from retirement savings every year on hidden fees. A change to the current standard toward a fiduciary duty has been under consideration for about five years. In 2011, the DOL decided to table their proposal due to widespread industry criticism.

The Securities and Exchange Commission is also considering changes to unify the fiduciary standard among brokers and investment advisors, according to SEC Chair Mary Jo White. The industry has previously criticized changes that would impose different standards by different regulators. The Department of Labor regulates retirement account brokers. The SEC regulates other investment brokers.

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Workers Fight Wage Theft Despite Fall in Class Actions

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Wage theft has been huge a topic in employee rights over the past year. But class action lawsuits addressing employment issues are falling and more employees must give up their right to file a lawsuit in court, according to a Wall Street Journal article published yesterday.

The number of employers requiring workers to sign arbitration agreements has more than doubled since the Supreme Court ruling in AT&T Mobility v. Concepcion approved them on a 5-4 decision. Only 16% of companies used arbitration clauses in 2012. That number has now grown to 43% last year according to the survey.

The validity of class action waivers is still in dispute as the Supreme Court has so far declined to address the issue. The National Labor Relations Board has twice ruled that class action waivers violate the National Labor Relations Act. Companies, on the other hand, feel increasingly confident that the Supreme Court will uphold their point of view.

The survey found that the increasing use of arbitration clauses and waivers of the right to bring a class action are decreasing the amount of lawsuits that are filed in court. Only 23 percent of class-action suits in 2014 addressed an employment law issue, down from 28% in 2011.

The publication of the survey comes at an interesting time. Employees actually seem to have been making inroads against employers with their push for higher minimum wages and opposition to wage theft outside of the courtroom. McDonald’s has just said it plans to increase wages on its company-owned stores (not including franchisees) to more than $1 above minimum wage. Walmart made a similar promise in February – it plans to raise its minimum pay to $10 an hour next year.

Seattle will start raising the minimum wage in the city to $15 an hour starting this month. Small employers must follow a seven year schedule of mandatory pay raises. Large employers have three to four years, depending on whether they pay toward an employee’s medical benefits plan, to reach the new higher minimum.  Los Angeles is also considering an increase in its minimum wage to $13.25 or $15.25 an hour.

The Secretary of Labor also promised additional efforts against employers committing wage theft, citing a UCLA study that $1 billion is lost by low-wage workers each year due to wage theft. Wage theft occurs when an employer withholds earnings or benefits required by state or federal law. This can include skipping mandated meal breaks, failing to pay overtime wages or otherwise failing to pay employees for money that is due to them.

In March, a Papa John’s pizza franchise in New York was ordered by a judge to pay more than $2 million as a result of their failure to pay delivery workers what they were owed. The lawsuit was filed by New York Attorney General Eric Schneiderman’s office.

The push by employers for these clauses in employment agreements stands in stark contrast to yesterday’s enforcement fine levied by the SEC against KBR for inhibiting the right of its workers to report potential violations of the law to the securities regulator.

Congress and the Department of Defense have also taken a stand against employment agreements prohibiting government contractors from reporting fraud, waste and abuse to the U.S. Government. The Cromnibus spending bill contains a requirement that no money from government spending in FY2015 go to companies with agreements that prohibit reporting of fraud, wast and abuse. The DoD now requires a certification by its contractors that they do not require employees or subcontractors to sign or comply with such agreements.

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