The Fifth Circuit Court of Appeals issued a ruling on Thursday vacating the controversial “fiduciary rule” enacted by the Labor Department during the Obama administration, which would have required financial advisors to act in their clients’ best interests when advising them about retirement. The ruling overturned a February 2017 district court decision upholding the regulation, with a three-judge panel ruling 2–1 that its implementation had violated the Administrative Procedure Act. Politico’s Morning Shift newsletter called Thursday’s decision “a victory for the financial services industry,” whereas labor activists were dismayed:
A range of business associations — including the U.S. Chamber of Commerce, a plaintiff in the case — said in a joint statement that the court “ruled on the side of America’s retirement savers.” The groups have thrown their weight behind an effort by the Securities and Exchange Commission to draft a separate standard for advisers, which they say should “not limit choice for investors.” On the other hand, Christine Owens, executive director of the National Employment Law Project, said the ruling “threatens the Labor Department’s very ability to protect retirement investors now and in the future” — and encouraged an appeal.
Thursday’s decision was handed down just two days after another federal court, the Tenth Circuit, issued a ruling in a separate case concerning the treatment of fixed indexed annuities under the rule. That court found that the Labor Department had satisfied its obligations under the Administrative Procedure Act in amending the rule to make sales of such annuities ineligible for Prohibited Transaction Exemption 84-24 (Proskauer attorneys outline the particulars of the ruling in more detail at JD Supra).
In agreeing with the department’s decision to amend one facet of the fiduciary rule, the Tenth Circuit’s ruling could be interpreted to implicitly uphold the regulation as a whole, although that was not at issue in the case. Yet another fiduciary rule case is still pending in federal court as well, so industry experts are advising retirement plan sponsors to remain compliant with the rule for the time being, Paula Aven Gladych notes at Employee Benefit News:
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The US Department of Labor’s Wage and Hour division announced last week that it would soon begin a six-month pilot of the Payroll Audit Independent Determination (PAID) program, which will give employers an avenue for resolving potential overtime and minimum wage violations under the Fair Labor Standards Act by self-auditing and voluntarily reporting these violations to the division:
This program will ensure that more employees receive back wages they are owed—faster. Employees will receive 100% of the back wages paid, without having to pay any litigation expenses or attorneys’ fees. The program requires employers to review WHD’s compliance assistance materials, carefully audit their pay practices, and agree to correct the pay practices at issue going forward. These requirements improve the employers’ compliance with their minimum wage and overtime obligations and further protect the rights of workers. …
It is purely the employee’s choice whether to accept the payment of back wages due, and employers are prohibited from retaliating against the employee for his or her choice. If the employee chooses to not accept the payment, the employee will not release any private right of action. Additionally, if the employee chooses to accept the payment, the employee will not grant a broad release of all potential claims under the FLSA. Rather, the releases are tailored to only the identified violations and time period for which the employer is paying the back wages.
Wage and hour disputes already being litigated or investigated by the Labor Department will not be eligible for resolution through the PAID program. Employers also cannot use the program to repeatedly resolve the same violation. The six-month pilot is expected to launch in April; once it concludes, the department will assess its effectiveness and decide whether to maintain it going forward.
A recent wave of state laws legalizing medical or recreational marijuana use has created a new compliance quandary for employers in these states, who don’t always know whether their own drug policies are compliant with state law. While marijuana remains outlawed at the federal level, its legalization in 30 states plus Washington DC means many employers are unsure of what they can and can’t do to police employees’ use of marijuana, such as whether medical users are protected under the Americans with Disabilities Act or how marijuana use affects employees’ eligibility for workers’ compensation.
Now, some business associations are urging the Trump administration to issue some guidance or rules to clarify how employers should handle this sticky situation, the Washington Examiner reports:
“We’d like to see [the Department of Labor] issue something just for clarity’s sake,” said a source for one major Washington trade association speaking on background, adding that they aren’t pushing for any particular direction. They just want the administration to say where the lines are drawn.
The National Labor Relations Board has vacated a recent decision to limit the liability of companies for labor violations by their franchisees and contractors under the “joint employer doctrine,” after one member of the board who participated in that decision was found to have a conflict of interest, the New York Times reports:
A report released in early February by the agency’s inspector general found that the member, William J. Emanuel, should have recused himself when the case came before the board in December, shortly after the Republicans gained control. That would have left it split at two votes apiece and preserved the status quo.
On Monday, three other board members, including its Republican chairman, Marvin E. Kaplan, voted to vacate the December decision, citing a determination that Mr. Emanuel “is, and should have been, disqualified from participating in this proceeding” because his former law firm had handled a related case. That opens the door for the more expansive, Obama-era standard to remain in place for several more months, perhaps even years.
The December ruling overturned a decision made by the board under the Obama administration in 2015 that defined “joint employer” to include entities with which a business has indirect control, or a “horizontal” relationship, making them responsible for franchisees’ or contractors’ compliance with the Fair Labor Standards Act and other employee protection laws. Previously, organizations were only considered joint employers in the case of a “vertical” relationship, wherein an organization exerted direct control over its subordinate entity’s employees or the terms of their employment. The Labor Department also adopted an expansive view of joint employer doctrine under the Obama administration, which current Labor Secretary Alexander Acosta rescinded last June.
Federal, state, and local minimum wages are a perennial point of contention in American politics, with conservative politicians and employers saying they suppress employment and hurt small businesses, while unions and labor activists say higher pay floors are necessary to ensure that low-wage employees are able to meet their needs. Less discussed is the matter of how strictly minimum wage laws are enforced in the first place. The answer? Not well, according to a recently concluded investigation by Politico, which found that “workers are so lightly protected that six states have no investigators to handle minimum-wage violations, while 26 additional states have fewer than 10 investigators,” Marianne LeVine writes:
Given the widespread nature of wage theft and the dearth of resources to combat it, most cases go unreported. Thus, an estimated $15 billion in desperately needed income for workers with lowest wages goes instead into the pockets of shady bosses.
But even those workers who are able to brave the system and win — to get states to order their bosses to pay them what they’re owed — confront a further barrier: Fully 41 percent of the wages that employers are ordered to pay back to their workers aren’t recovered, according to a POLITICO survey of 15 states.
The EU’s General Data Protection Regulation (GDPR), which is scheduled to come into force on May 25, represents a massive overhaul of data privacy law throughout the bloc. The GDPR expands the reach of existing privacy regulations, applying not just to European organizations but to all companies processing the personal data of EU residents, no matter where the company is located. It also requires organizations to request users’ consent for data collection “in an intelligible and easily accessible form,” while granting EU citizens a number of new rights, including the right to access data collected about them and the “right to be forgotten,” or to have that data erased. Organizations caught violating the regulation will be fined as much as 4 percent of their annual global turnover or 20 million euros.
With the enforcement date of this massive new regulation just months away, “data protection officers are suddenly the hottest properties in technology,” Reuters’ Salvador Rodriguez reports:
More than 28,000 will be needed in Europe and the US and as many as 75,000 around the globe as a result of GDPR, the International Association of Privacy Professionals (IAPP) estimates. The organization said it did not previously track DPO figures because, prior to GDPR, Germany and the Philippines were the only countries it was aware of with mandatory DPO laws.
The UK government on Wednesday announced a series of planned labor market reforms to improve the working conditions and protect the rights of the millions of Britons employed in the gig economy and other flexible or contingent models of work, based on the findings of the Independent Review of Employment Practices in the Modern Economy, led by Matthew Taylor, which were published last July. The government says is intends to adopt almost all of the Taylor Review’s recommendations, the BBC reports:
The changes include stricter enforcement of holiday and sick pay rights, and higher fines for firms that breach contracts or mistreat staff. … The government says it is going further than the Review’s recommendations by:
- Enforcing holiday and sick pay entitlements
- Giving all workers the right to demand a payslip
- Allowing flexible workers to demand more stable contracts
The quantity and quality of jobs in the gig economy will be monitored and steps will be taken to make sure flexible workers are aware of their rights. The government is also asking the Low Pay Commission to consider a higher minimum wage for workers on zero-hour contracts, and says it may also repeal laws that allow agencies to employ workers on cheaper rates.
The reforms have not yet been fleshed out in much detail, while some of the plans announced on Wednesday involve not changing laws or regulations, but rather more strictly enforcing those already on the books. “The government’s plan will make sure that everyone knows what they’re entitled to when they start working for a company and the rules will now be enforced by HMRC, so people actually get what they’re owed,” BBC Business Correspondent Theo Leggett explains.