Quick Hits

• On January 14, 2025, the DOL issued an opinion letter reiterating that managers and supervisors cannot keep tips unless they “solely and directly” provide service to the customer, regardless of whether a tip credit is taken.
• The DOL clarified that even if a manager or supervisor works an entire shift in a nonsupervisory role, they cannot participate in a tip pool, as the primary duty test is based on duties performed over at least the workweek, not shift-by-shift.

The opinion letter responded to two questions from the quick service restaurant. The first question focused on whether the assistant team lead and the team leaders, whom the quick service restaurant deemed were supervisors or managers under 203(m)(2)(B) of the Fair Labor Standards Act (FLSA), can receive tips when they work a shift in a nonmanagerial or nonsupervisory role.

Without analyzing the functions of the assistant team lead and team leaders, the DOL explained in the opinion letter that the regulations define a manager or supervisor who may not keep tips as one who meets the executive employee duties test, which is the same duties test used to determine whether an employee is exempt under the FLSA. “To meet this duties test, an employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent; the employee must have the authority to hire or fire other employees, or their suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight; and the employee must have a primary duty of managing the enterprise or a customarily recognized department or subdivision of the enterprise. 29 C.F.R. §§ 541.100(a)(2)–(4).” Determining an employee’s “primary duty” is a fact-intensive inquiry but requires an analysis of the employee’s duties worked in at least a workweek. Performing some nonmanagerial work does not make the employee a nonmanager or nonsupervisor.

In fact, the opinion letter explains in response to the quick service restaurant’s question that even where a supervisor or manager clocks in and works an entire shift in a nonsupervisory capacity, that employee may not participate in a tip pool because the primary duty test is based on the employee’s duties performed in the workweek (or longer period of time) and not shift-by-shift. The DOL also noted in a footnote that even if shifts are staffed exclusively by managers and supervisors, the regulations “do not permit tip pools composed solely of managers and supervisors, as this would by definition result in managers and supervisors keeping portions of employees’ tips, since managers and supervisors themselves are employees under the FLSA.”

Conversely, the opinion letter explains in response to the second question that a nonmanagerial and nonsupervisory employee who does not meet the executive duties test is not converted to a manager or supervisor simply because the employee is the most senior or highest-ranking employee on a particular shift. As a result, employees in these circumstances are not prohibited from receiving tips from a tip pool.

The opinion letter does not offer any surprising guidance but does emphasize there are only rare circumstances in which a manager or supervisor can receive tips.

Ogletree Deakins’ Wage and Hour Practice Group will continue to monitor developments and will provide updates on the Hospitality and Wage and Hour blogs as additional information becomes available.

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Quick Hits

• The NLRB GC issued a memorandum addressing potential employer concerns about complying with EEO laws prohibiting discrimination and harassment in the workplace and the NLRA’s protections for employees engaging in concerted activity.
• The memorandum emphasizes the GC’s view that the NLRA and EEO laws are complementary and “both can and should be given full effect.”
• The memorandum was issued just days before a changeover in the presidential administration, which likely will affect the general counsel of the NLRB.

On January 16, 2025, the GC issued Memorandum GC 25-04, titled, “Harmonization of the NRLA and EEO Laws.” The memo is focused on potential conflicts between employers’ compliance with the NLRA and EEO laws in the context of (1) employer civility rules, (2) investigation confidentiality, and (3) employees’ use of offensive language and conduct.

While EEO laws, such as Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act (ADEA), and the Americans with Disabilities Act (ADA), seek to protect workers from discrimination and harassment in the workplace, the NLRA protects workers’ rights to engage in concerted activity, which can, in some circumstances and subject to certain restrictions, include employee use of hostile language or conduct.

The memo emphasizes the GC’s view that the NLRA and EEO laws provide legal frameworks that are “complementary,” meant to “work in tandem,” and that “both can and should be given full effect.”

Workplace Civility Rules

The memo addresses the potential risk that enforcement of workplace “civility rules,” which seek to regulate language and conduct beyond what is covered by an employer anti-harassment policy, may be found to chill employees from exercising their NLRA rights. The memo notes that NLRA-protected activity “may be adversarial in nature” and critical of the employer, whether directed at “fellow employees, the public, or government agencies like the NLRB.”

Still, the memo states that employers “can avoid implicating potential EEO and NLRA concerns by maintaining and consistently enforcing an EEO anti-harassment policy or rule that specifically prohibits harassment based on EEO-protected characteristics.” Further, “workplace rules that are narrowly tailored, focused, and precise are most likely” to comply with both the NLRA and EEO laws, such as “a rule that specifically prohibits harassment based on EEO-protected characteristics would not raise any concerns under the NLRA,” the memo states. Stated differently, workplace civility rules and policies that focus on unlawful harassment and discrimination based on EEO-protected classifications should not violate the NLRA.

Investigative Confidentiality

Many employers have long had rules or practices concerning confidentiality in the context of workplace investigations. Such rules serve to encourage individuals to come forward with complaints or to participate in investigations as fact witnesses without fear of retaliation or internal conflict with coworkers. Nevertheless, such rules have been in the crosshairs of the NLRB for several years. The memo states that overbroad “investigative-confidentiality rules” may be unlawful if the rules make employees “think twice” before exercising their rights to communicate or “dissuade[s] employees from reporting unlawful conduct to the NLRB.” In particular, the memo states that “rules that preclude any communication about the allegations and investigation or that are applicable to any employee—victim, witness or third party—could be problematic for a number of reasons.” (Emphasis in the original.)

According to the memo, employers can design investigations to satisfy the NLRA and EEO laws without “imposing broad-based confidentiality rules on employees” by “maintaining strong anti-retaliation policies and ensuring that employees are aware of them.” Instead of demanding confidentiality, “an employer can advise interviewees of the specifics of its anti-retaliation policy and make clear the steps that it will take should it determine that there has been retaliation, and thus a violation of that policy,” the memo states.

The memo further states that employers should “consider the context of the particular investigation before requesting or requiring confidentiality.” If confidentiality is “truly needed,” the memo advises employers to “clearly identify the scope of the confidentiality requirement to interviewees, including the information and matters it covers and how long it lasts, so that employees do not misunderstand the breadth of information covered and the applicable length of time.”

Further, the GC also recognizes that the “employer itself” can keep information confidential by requiring confidentiality of supervisors and management, who are “not typically covered by the NLRA.” While these recommendations may not be practical in all situations, they provide useful guidance for human resources professionals as they conduct future investigations.

Offensive Language or Conduct

The memo recognized that employers may have concerns about balancing, on one hand, the NLRA liability risk from disciplining an employee for offensive language or conduct, and, on the other, EEO concerns from not taking disciplinary action.

The GC states that while protected speech and conduct connected with the exercise of Section 7 rights may be hostile in nature, including the use of “insults, obscenities, or other vulgar language or mannerisms,” the NLRA does not necessarily conflict with EEO protections.

First, conduct “not based on or motivated by a protected characteristic” likely does not implicate EEO laws, according to the memo. Second, for EEO laws to apply, the speech or conduct must be “sufficiently severe or pervasive” and “both objectively and subjectively offensive.”

At the same time, the memo emphasized that disciplining employees who exercise their NLRA rights may be unlawful, and the fact that an employee may have engaged in offensive language or conduct in exercising those rights “does not necessarily permit an employer to impose what would otherwise be unlawful discipline.”

However, language or conduct that does not violate EEO protections “may still weigh towards loss of NLRA protection when the nature of the conduct is assessed,” according to the memo. That assessment may look at whether an employee “persist[s] in using certain language or conduct after being advised not to do so pursuant to a lawful anti-discrimination or anti-harassment policy” and the impact on other employees, including whether the “language or conduct reasonably would negatively impact” other employees’ terms and conditions of employment or their exercise of NLRA rights based on their EEO-protected characteristics.

Ultimately, employers may need to evaluate employee offensive conduct and use of profanity on a case-by-case basis, balancing the risks of NLRA litigation with workplace culture concerns and EEO obligations.

Key Takeaways

The memorandum comes just days before President-elect Donald Trump takes office with the apparent goal of providing guidance regarding workplace rules on civility, confidentiality during investigations, and offensive language and conduct following the NLRB’s 2023 Stericycle, Inc. decision.

With the changeover in presidential administrations, it is quite likely that GC Memo 25-04 will be rescinded in the coming weeks. Still, NLRB regional directors will continue to apply the Stericycle case, and employers could face the risk of unfair labor practice (ULP) charges until (and unless) the new Trump Board overrules the Stericycle decision. As a result, the memo provides useful guidance for employers assessing ULP concerns and modifying their policies to mitigate legal risks.

Ogletree Deakins’ Traditional Labor Relations Practice Group will continue to monitor developments and will provide updates on the Diversity, Equity, and Inclusion, Employment Law, and Traditional Labor Relations blogs.

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Quick Hits

• On January 14, 2025, the DOL released new rules for the Voluntary Fiduciary Compliance Program (VFCP), introducing a self-correction feature for retirement plan sponsors to address common operational failures.
• The VFCP rules allow plan sponsors to self-correct late deposits of participant contributions and loan repayments without filing a formal application.
• The DOL also amended Prohibited Transaction Exemption 2002-51 to extend excise tax relief to self-corrections of participants and loan repayment features.

Most significantly, the final rules create a self-correction feature for retirement plan sponsors to address delinquent transmittal of participant contributions and loan repayments, which are two of the most common retirement plan operational failures. In addition, the final rules provide that the self-correction procedures also apply to certain participant loan failures that are eligible for correction under the Internal Revenue Service’s (IRS) Employee Plans Compliance Resolution System (EPCRS). The SECURE 2.0 Act of 2022 (SECURE 2.0) greatly expanded the ability of plan sponsors to self-correct “eligible inadvertent failures,” including certain plan loan failures. SECURE 2.0 also directed the EBSA to implement new rules approving self-correction of loan failures.

The Voluntary Fiduciary Compliance Program

The VFCP permits plan fiduciaries, including plan sponsors, to correct certain fiduciary breach violations under the Employee Retirement Income Security Act (ERISA) by formally applying to EBSA for relief. The VFCP specifies nineteen enumerated categories of fiduciary violations that are eligible for correction. Plan sponsors may submit corrections to EBSA using the VFCP for approval. If the plan sponsor’s correction is approved, EBSA will issue what is referred to as a “no-action” letter to the employer. The no-action letter provides that EBSA will not take any civil enforcement action against the plan sponsor with respect to the corrected fiduciary breach, including foregoing legal action and assessment of civil monetary penalties. VFCP applicants may also obtain relief from payment of excise taxes for certain transactions.

Self-Correction of Delinquent Transmittals of Participant Contributions and Loan Repayments

Among the fiduciary breaches that are eligible for correction using the VFCP are delinquent transmittals of participant contributions and loan repayments. Late deposits of participant contributions and loan repayments are a common occurrence for plan sponsors and, according to EBSA, are the most commonly corrected failures using the VFCP. In general, an employer must transmit employee contributions (including loan repayments) to a plan as soon as they can be segregated from the employer’s general assets, but in no case later than the fifteenth business day of the month immediately following the month in which the contribution is either withheld or received by the employer. For plans with fewer than one hundred participants, a safe harbor rule provides that contributions to a plan are deemed compliant if those amounts are deposited within seven business days of withholding or receipt.

Under the new rules, plan sponsors can self-correct late deposits of participant contributions and loan repayments, regardless of the number of plan participants or the amount of plan assets, without the need to file a formal VFCP application. In order to be eligible for self-correction, the general rules for participation in the VFCP must be met, including that the plan and plan sponsor are not “under investigation” by EBSA. In addition, the self-correction rules require that:

• The lost earnings associated with the principal portion of the delinquent participant or loan repayments contributions must be less than $1,000. EBSA maintained this $1,000 threshold from the proposed rule despite comments to increase the cap in order to preserve guardrails for this self-correction component.
• Delinquent participant contributions or loan repayments must be remitted to the plan within 180 calendar days from the date of withholding from participants’ paychecks or receipt by the employer.
• The correction amount must include both the principal amount of the delinquent contribution as well as any associated lost earnings based on the EBSA’s VFCP online calculator.
• The plan sponsor must prepare and electronically file a self-correction notice, which requires that the plan sponsor provide the name and an email address for the self-corrector, the plan name, the plan sponsor’s nine-digit employer identification number and the plan’s three-digit number, the principal amount and amount of lost earnings and the date of withholding or receipt, and the number of participants affected by the correction.
• The plan sponsor must complete a “Record Retention Checklist” and execute a penalty of perjury statement attesting to the facts of the self-correction.

Unlike a formal VFCP submission, plan sponsors will not receive a no-action letter. Instead, plan sponsors will receive an acknowledgment email from EBSA following submission of the self-correction notice. Notably, there is no limit as to the frequency with which a plan sponsor can make use of self-correction. However, plan sponsors are not relieved from the requirement that they report delinquent participant contributions on the plan’s annual Form 5500.

Self-Correction of Plan Loan Failures Eligible for Correction Under EPCRS

As indicated above, the new rules extend self-correction under the VFCP to certain loan failures that are eligible for self-correction under the IRS’s EPCRS. This includes failures involving the loan amount, duration, level amortization, or loans that defaulted due to a failure to withhold loan repayments from the participant’s wages. If a plan loan failure is determined to be eligible for correction under EPCRS, then the plan sponsor can use the VFCP’s self-correction procedures to correct the failure. Notably, the final rules provide that a self-corrector may be eligible to correct a loan failure even if the self-corrector is under investigation, as long as the loan failure is still eligible for self-correction under EPCRS.

Other Revisions to the VFCP

The new rules also make several other clarifying changes to the VFCP, including additional corrections for prohibited loan transactions and prohibited purchase and sale transactions involving plans and relief for prohibited sale and leaseback of real property to affiliates of a plan sponsor.

Excise Tax Relief Under Prohibited Transaction Exemption 2002-51

In addition to the final rules, EBSA has also amended Prohibited Transaction Exemption (PTE) 2002-51. PTE 2002-51 is a class exemption that provides for excise tax relief in connection with certain transactions corrected pursuant to the VFCP. Specifically, the amended PTE 2002-51 extends the general excise tax relief available under the VFCP to self-correction of failures to timely remit participant contributions or participant loan repayments to plans. In order to rely on PTE 2002-51, self-correctors must receive an acknowledgment email from EBSA following submission of the self-correction notice.

PTE 2002-51 also clarifies and expands coverage of the exemption to six of the transactions identified in the final rule as eligible for correction using the VFCP.

Lastly, EBSA has eliminated the requirement that relief under PTE 2002-51 is not available to VFCP applicants that had taken advantage of the exemption for a similar type of transaction within the previous three years.

Conclusion

The official ability to self-correct delinquent participant contribution transmittals and loan repayments is a welcome development for retirement plan sponsors. The new rules complement the recent expansion of EPCRS under SECURE 2.0 and underscore a new approach by the IRS and DOL to streamline their remedial programs, which emphasizes self-correction of plan errors.

Ogletree Deakins’ Employee Benefits and Executive Compensation Practice Group will continue to monitor developments and will provide updates on the Employee Benefits and Executive Compensation blog as additional information becomes available.

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Day One Predictions. Monday, January 20, 2025, is Inauguration Day (as well as Martin Luther King Jr. Day). At the Buzz, we are well stocked with coffee and protein bars, as it is expected to be a busy day. We will obviously have a lot to discuss next week, but here are some policy issues that are on our radar.

• Immigration. This is obviously a priority issue for Republicans, and President-elect Donald Trump could issue multiple executive orders on the topic. For example, establishing new policies relating to the southern border, travel restrictions, temporary protected status, and “Buy American, Hire American,” could all be the subject of executive orders next week.
• Diversity, Equity, and Inclusion (DEI). President-elect Trump and Vice President-elect J.D. Vance, as well as other members of the incoming administration, have been critical of DEI. The Buzz expects an executive order targeting DEI offices and programs within the federal government that could also implicate similar programs for federal contractors.
• National Labor Relations Board. President Biden established a new precedent by firing former National Labor Relations Board (NLRB) general counsel Peter Robb on his first day in the White House. In turn, President-elect Trump is expected to fire the current National Labor Relations Board (NLRB) general counsel, Jennifer Abruzzo. Who will step up as acting general counsel in Abruzzo’s place remains to be seen.

Dates and Deadlines We Are Watching. Inauguration Day isn’t the only date we are watching here at the Buzz, and we already have our eyes on the following key dates and deadlines:

• OSHA—Proposed Heat Standard. As the Buzz noted last week, January 14, 2025, was the deadline for stakeholders to submit comments in response to the Occupational Safety and Health Administration’s (OSHA) proposed heat standard. The Buzz does not expect to hear much anytime soon about the fate of the standard under the incoming Trump administration. Of course, a final rule may never issue during the next four years, and it is possible that the new administration could issue a much narrower, more flexible version of the proposed standard at some point in the future.
• New provisions of the Biden administration’s H-1B modernization rule became effective on January 17, 2025.
• Subminimum Wage for Individuals With Disabilities. The comment docket for the U.S. Department of Labor’s (DOL) proposal to eliminate the subminimum wage for individuals with disabilities closed on January 17, 2025. Former chair of the House Committee on Education and the Workforce, Virginia Foxx (R-NC), has blasted the proposal as “misguided and irresponsible.”

Trump Nominates Employment Policy Veteran. This week, President-elect Trump announced that he will nominate Keith Sonderling as deputy secretary of Labor. Sonderling most recently served as commissioner on the U.S. Equal Employment Opportunity Commission (EEOC), where he led the Commission’s artificial intelligence policy efforts. Prior to his role on the Commission, Sonderling served as acting and deputy administrator of the DOL’s Wage and Hour Division. As such, Sonderling is well-attuned to the employment policy issues facing the business community.

Republican Senator Pushes Labor Reform. Senator Josh Hawley (R-MO) is circulating a framework for labor reform legislation on Capitol Hill. The unusual move would codify some of the much-maligned labor reform ideas that both Democrats and labor union bosses have pushed over the last several years. While no legislation has actually been introduced, according to the framework that is being circulated, the bill would:

• require employers to post a notice of National Labor Relations Act (NLRA) rights. The NLRB tried doing this via regulation in 2011 (at the time, Hawley worked as both a law professor and an attorney at a religious nonprofit organization). The uproar from the employer community was incredible, and the regulation was struck down;
• prohibit “unsafe work speed quotas” in warehouses. This is taken from the ill-conceived Warehouse Worker Protection Act;
• prohibit mandatory employee meetings during which the pros and cons of unionization are discussed;
• require an “ambush election” in less than twenty days;
• require contract negotiations to begin within ten days after a representation election; and
• enact civil penalties, increased damages, and allow for a private right of action.

Even if a bill is introduced, its chances of passage in this congressional session are slim. Still, that a Republican senator from a state that voted twice for President-elect Trump is pushing such changes to federal labor law is a sign of the populist influence in today’s Republican Party.

OSHA Withdraws Proposed COVID-19 Standard. Three years and two days after the Supreme Court of the United States effectively put an end to the Occupational Safety and Health Administration’s (OSHA) COVID-19 vaccination and testing emergency temporary standard (ETS), OSHA announced that it is withdrawing its proposed COVID-19 rule (that would have been permanent, as opposed to temporary). A final version of the rule sat at the White House’s Office of Information and Regulatory Affairs since December 2022. In an accompanying press release, OSHA stated it withdrew the proposed rule “because the most effective and efficient use of agency resources to protect healthcare workers from occupational exposure to COVID-19, as well as a host of other infectious diseases, is to focus its resources on the completion of an Infectious Diseases rulemaking for healthcare.”

DHS Extends TPS. Late last week, the U.S. Department of Homeland Security (DHS) extended Temporary Protected Status (TPS) designations for individuals from El Salvador (from March 10, 2025, to September 9, 2026), Venezuela (from April 3, 2025, through October 2, 2026), Ukraine (from April 20, 2025, through October 19, 2026), and Sudan (from April 20, 2025, through October 19, 2026). The secretary of Homeland Security can terminate TPS designations by providing notice in the Federal Register at least sixty days prior to expiration.

Cut to the Chase. On January 13, 1808, Salmon P. Chase was born in Cornish, New Hampshire. Chase was an attorney and anti-slavery activist who helped establish both the Free Soil Party (which fought against the expansion of slavery in the territories) and then the Republican Party. Chase served as senator from Ohio from 1849 to 1855 and then served as governor of Ohio from 1856 to 1860. He was elected to the U.S. Senate again in 1860, but soon resigned to become President Abraham Lincoln’s treasury secretary. After the 1864 death of Supreme Court Chief Justice Roger B. Taney (who authored Dred Scott v. Sanford), Lincoln nominated Chase to take his seat, and he was confirmed by the Senate on the same day. With this resume, Chase is one of a handful of politicians to have served in all three constitutional branches of government and as a state governor. Some other facts about Chase:

• Paper currency first appeared during Chase’s tenure as treasury secretary. He—rather immodestly—put his own picture on the $1 bill. Chase is also often given credit for ordering the phrase “In God We Trust” to be engraved on U.S. coins.
• Chase’s visage later appeared on the $10,000 bill, which was publicly circulated between 1928 and 1946. It is the largest denomination of U.S. currency ever circulated.
• Chase presided over the impeachment proceedings of President Andrew Johnson in 1868.

Chase died of a stroke in 1873 while still serving as chief justice. The Court subsequently draped his chair and the bench with a black wool crêpe—a tradition that has since been followed at the Court following the death of a sitting justice.

Quick Hits

• Maryland’s Family and Medical Leave Insurance (FAMLI) program provides most Maryland employees with up to twelve weeks of paid leave, with some eligible for an additional twelve weeks, starting July 1, 2026, funded by contributions from both employers and employees beginning July 1, 2025.
• The Maryland Department of Labor has released two sets of proposed regulations for the FAMLI program.
• Under the FAMLI program, employees in Maryland will be eligible for paid leave for various family and medical reasons, and if they take leave for their own medical reasons, they will be eligible for an additional twelve weeks for parental bonding purposes.

There is much that employers may need to do to prepare. That preparation will depend on regulations issued by the Maryland Department of Labor (MDOL) to implement the law. Thus far, the MDOL has released two sets of proposed regulations, with more to come. The first set, released in October 2024, covers general provisions, contributions, equivalent-private insurance plans, and claims, while the second set, released on January 13, 2025, and currently open for public comment, covers dispute resolution. Part one of this multipart series explains the law, with parts two and three summarizing the proposed regulations, as well as employer concerns.

The law sets forth a general framework for the program, consisting of the following elements:

Leave Amount and Reasons for Leave

Effective July 1, 2026, all employees who have worked at least 680 hours in Maryland over the prior twelve months will be eligible to receive up to twelve weeks of paid leave for their own serious health condition, to care for a family member’s serious health condition, for parental bonding (including kinship care), to care for an injured or ill military servicemember who is next of kin, or for certain qualifying exigency reasons related to a servicemember’s active duty. If an employee has taken FAMLI leave for their own serious health condition, they may receive an additional twelve weeks for parental bonding purposes (and vice versa). The law requires employees to take leave in a minimum of four-hour increments.

Family members include the child of the employee or their spouse, the parent of the employee or their spouse, the employee’s spouse or domestic partner, and the employee’s grandparent, grandchild, or sibling. These include biological, adopted, foster, step, legal guardian, and in loco parentis relationships.

Contributions

The benefits will be administered through a state program, which will be funded through contributions from employers and employees, starting July 1, 2025. The rate of contribution will be determined annually by the Maryland secretary of labor, but is capped at 1.2 percent of an employee’s wages, up to the Social Security wage base (which will be $176,100 in 2025). The law splits contributions 50-50, unless the employer elects to make the employee share of the contribution as well. The law does not require small employers (those with fewer than fifteen employees) to submit the employer portion of the contribution (although employee contributions are still required), and the Maryland Department of Health will reimburse certain licensed/certified community health providers for up to the full amount of their share of the premium.

Employer Notice to Employees

The law requires covered employers to provide written notice to employees of their rights and duties under the law upon hire, annually, and within five days when leave is requested or when the employer knows leave may qualify.

Employee Notice to Employers

If the need for leave is foreseeable, the law requires employees to provide employers with at least thirty days’ written notice of their intention to take leave. If it is not foreseeable, they must provide notice as soon as practicable and generally comply with the employer’s absence-reporting requirements. If intermittent leave is required, the employee must make a reasonable effort to schedule the leave to not unduly disrupt business operations.

Employee Application for Benefits

Employees may apply for benefits up to sixty days before and sixty days after the anticipated start date of the leave, although the MDOL may waive the filing deadlines for good cause. Employers have five days to respond to an application.

Interaction With Other Benefits

FAMLI leave will run concurrently with federal Family and Medical Leave Act (FMLA) leave. Employers may not require employees to use vacation, sick leave, or other paid time off before or while receiving FAMLI benefits, although employers may permit employees to use such leave to bridge the difference between FAMLI benefits and full pay. However, if an employer provides paid leave specifically for purposes of parental bonding, family care, military leave, or disability, the employer may require employees to use such leave concurrently or coordinated with FAMLI leave. Employees receiving unemployment insurance benefits or workers’ compensation benefits (other than for a permanent partial disability) are not eligible for FAMLI benefits.

Job Protection and Health Benefits

During FAMLI leave, the law states that employers may discharge employees only for cause. They must otherwise be reinstated to their job, unless the employer determines that reinstatement will cause “substantial and grievous economic injury” to their operations and has notified the employee of that fact. In addition, the law requires employers to maintain the employee’s health benefits during FAMLI leave.

Private Employer Plans

Employers may establish their own plan or utilize a certified third-party insurance plan that meets or exceeds the rights, protections, and benefits provided to employees under the law. For such private employer plans to be valid, the MDOL, which is directed to establish “reasonable criteria” for such plans, must approve the plan.

In parts two and three of our series of articles on the Maryland FAMLI program, we will cover the proposed regulations intended to implement the program. Once the regulations are final, these will set out the rules that employers will need to follow to comply with the FAMLI law.

Ogletree Deakins’ Baltimore office will continue to monitor developments and will post updates on the Leaves of Absence and Maryland blogs as additional information becomes available.

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Quick Hits

• The DOL recently fined a Minneapolis pizza restaurant for multiple wage and hour violations, including failure to pay overtime and improper tip pooling practices.
• The DOL found the restaurant in violation of the FLSA for actions such as not combining hours worked at multiple locations, allowing employees to clock in with false identities, and employing a minor outside permitted hours.
• The restaurant was penalized for retaliating against an employee who cooperated with DOL investigators, resulting in more than $100,000 in back wages, liquidated damages, and civil money penalties.

Under the Fair Labor Standards Act (FLSA), employees must be paid for all hours they work and must receive overtime of one and one-half times their regular rate of pay for all hours worked in a workweek in excess of forty hours. According to the DOL, the restaurant failed to do that, and further, dismissed an employee who spoke with DOL investigators. Based on those findings, the DOL found the restaurant to be in violation of the FLSA for the following actions:

• “Not combining hours employees worked at more than one location, which denied employees overtime wages when they worked more than 40 hours in a workweek.”
• “Allowing at least four workers to routinely use other names and identification numbers to clock-in to avoid paying overtime.”
• “Paying two employees straight-time rates for overtime hours, instead of time and one-half their regular rate of pay as required.”
• “Not maintaining accurate employment records with employee start and stop dates and contact information and allowing individual workers to use others’ names to clock-in.”
• “Failing to distribute tips to workers or provide records showing that tips were paid to workers properly.”
• “Including managers and shift supervisors in a tip pool for servers and others allowed to receive tips, which [under the FLSA] invalidated the tip pool.”
• Allowing a “15-year-old to work outside permitted hours.”

The DOL assessed the restaurant damages and penalties as follows: $44,915 in back wages and an equal amount ($44,915) in liquidated damages, and $15,954 in civil money penalties for child labor and tip-retention violations. As a result, the restaurant will have to pay a total of $105,784 in back wages, damages, and penalties to resolve the violations.

Wage and Hour Considerations

Navigating wage and hour laws, especially in the restaurant industry, is no easy feat. Indeed, the hospitality industry, by its nature, with a high volume of part-time or temporary employees who are eligible for tips, does not make compliance any easier. Nonetheless, employers can better navigate these laws by keeping in mind several points.

First, employers may want to invest in a reliable and easy time recording system, train employees on proper time recording, and have policies in place that prohibit overtime work without proper authorization. While employees themselves may be willing to forgo the rules and work “under the table,” employee consent in this context does not cure a violation, and an employer would still be subject to assessments for noncompliance. Having a proper time recordkeeping system can prevent many wage and hour violations and ensure that employees are properly compensated in accordance with the law.

Second, employees must be paid properly for all hours worked. For example, if an employee works overtime without proper authorization, the employer can address the policy violation as a disciplinary action, but the employer must still comply with the overtime laws.

Third, federal law prohibits managers and supervisors from keeping employees’ tips, whether directly or through a tip pool. In addition, while not an issue in this case, it is important to remember under Minnesota state law, employees who perform direct services to customers must be the direct beneficiaries of any gratuities paid by customers. Thus, mandatory tip pooling—requiring employees to share tips with other employees—“may not be a condition of employment” in Minnesota. While many employers in the hospitality industry, as well as employees, may feel that tip pooling treats employees more fairly, Minnesota law does not permit employers to require employees to do so.

Restaurant operators may want to ensure they have clear policies in place that no one at the restaurant, including management, can require employees to share their tips. Direct service employees may engage in tip pooling voluntarily, but employers may want to proceed with caution, as the “voluntariness” of a policy may be difficult to prove. In addition, Minnesota law provides that gratuities received through cards or electronic payment must be paid in full to employees by the next pay period.

Finally, employees who report wage and hour violations to employers or government agencies, or who participate in wage and hour investigations, are protected from retaliation. Employers may not dismiss or otherwise retaliate against employees who engage in such protected conduct. Employers in Minnesota may want to be especially careful, as the state’s whistleblower statute protects all employees who make good-faith reports of violations of law (including wage and hour), and the statute provides for additional damages for employees.

Key Takeaways

Employers may want to ensure they have a good time-recording system in place and make sure that employees are paid for all hours worked and paid at the overtime rate when appropriate. In addition, the recent matter may serve as a reminder of several points:

• Employers would be well served to remain cognizant of laws that limit the hours and duties of employees who are minors.
• Hospitality businesses may not allow managers to keep employees’ tips, including participation in tip pools.
• Minnesota law prohibits employers from requiring employees to share their tips or contribute to tip pools.
• Minnesota law requires that gratuities received through cards or electronic payment be paid in full to employees by the next pay period.

Ogletree Deakins’ Minneapolis office and Hospitality Practice Group will continue to monitor developments and will provide updates on the Hospitality, Minnesota, and Wage and Hour blogs as additional information becomes available.

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Quick Hits

• The DOL’s Wage and Hour Division clarified that in the same way employers cannot require the substitution of accrued employer-provided paid leave benefits when employees receive compensation from disability plans and workers’ compensation programs, employers may not unilaterally require employees to substitute accrued employer-provided paid leave benefits when employees receive compensation from state or local paid family or medical leave programs.
• The Wage and Hour Division also reiterated that the substitution provision would apply that if an employee’s FMLA-qualifying leave is unpaid.

The DOL Opinion Letter

On January 14, 2025, the WHD issued an opinion letter regarding the FMLA “substitution rule” applicability when employees are receiving state paid family leave benefits. The WHD concluded that the substitution rule did apply and that employers could not require employees to use accrued paid leave when employees were receiving paid family leave benefits. The WHD recognized in its opinion that FMLA regulations did not address the issue directly.

The FMLA provides unpaid job-protected leave for eligible employees for qualifying reasons like childbirth, personal health conditions, or caregiving for a sick family member. Under the FMLA substitution regulation, an employee may elect or an employer may require the employee to “substitute” accrued employer-provided paid leave benefits for any part of the unpaid FMLA leave. Allowing an employee to substitute accrued paid leave helps mitigate an employee’s wage loss.

The WHD consistently has taken the position that neither the employer nor the employee unilaterally can require or elect substitution of employer-provided accrued paid leave during a FMLA absence in which the employee receives disability or workers’ compensation benefits because the employee is on paid, not unpaid, leave. However, an employee and employer mutually may agree, subject to state law requirements, that employees may supplement or “top off” benefits from a disability or workers’ compensation program so that employees receive up to 100 percent of their normal wages.

Because the FMLA only provides unpaid leave, several states have implemented their own paid family and medical leave programs. These programs vary from state to state, but generally provide employees with partial income replacement benefits during their leave for qualifying reasons that often overlap with the qualifying reasons for leave pursuant to the FMLA.

The WHD drew a parallel between paid family leave programs and employer-provided disability and workers’ compensation programs. The opinion letter explained that the FMLA substitution provision does not apply for compensated leave designated as FMLA-qualifying leave regardless of whether an employee receives compensation from either an employer-provided disability or workers’ compensation program, or a state or local family and medical leave program. Accordingly, an employer cannot require that employees use accrued employer-provided paid leave benefits during a FMLA leave when the employee is receiving state or local family and medical leave program benefits.

The WHD’s position is consistent with many states’ approaches to the required substitution issue. For example, California prohibits employers from forcing employees to use PTO/vacation when receiving California Paid Family Leave benefits. Similarly, the Colorado Paid Family and Medical Leave Insurance (FAMLI) program prohibits employers from requiring employees to use or exhaust any accrued vacation leave, sick leave, or other paid time off prior to or while receiving FAMLI benefits, although they mutually may agree to do so. In Massachusetts, employers must allow, but may not require, employees receiving Paid Family and Medical Leave (PFML) benefits to supplement or “top off” their PFML benefits with available employer-provided accrued paid leave.

Ogletree Deakins’ Leaves of Absence/Reasonable Accommodation Practice Group will continue to monitor developments and will provide updates on the Leaves of Absence blog as additional information becomes available.

In addition, the Ogletree Deakins Client Portal provides subscribers with timely updates on state paid sick leave requirements. Premium-level subscribers have access to updated state policy templates. Snapshots and Updates are complimentary for all registered client users. For more information on the Client Portal or a Client Portal subscription, please reach out to clientportal@ogletree.com.

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Quick Hits

• A new law in Massachusetts requires employers to report their workforce demographic data to the state each year.
• The state just opened the online portal for submitting the data.
• The deadline to file the data is February 3, 2025.

The federal government requires certain employers to submit workforce demographic data in a report, called an EEO-1 form, each year. Under a new state law, the Francis Perkins Workplace Equity Act, Massachusetts employers with one hundred or more employees (and which are subject to EEO-1 reporting obligations) must send their most recent EEO-1 report to the state each year.

The state recently opened a new portal that employers must use to submit their data.

The site does not require login information, but it allows the direct upload of the reports through the provided link. The instructions direct filers to make sure the uploaded file name contains the legal name of the filing entity and the type of report being filed, such as EEO-1 reports.

The instructions provide contact information for several agencies that can answer questions concerning the implementation and interpretation of the filing requirement.

The Massachusetts Executive Office of Labor and Workforce Development (EOLWD) recently published guidance in the form of frequently asked questions (FAQs) to help employers comply with the workforce demographic reporting requirements.

Although this notice shows the filing deadline is February 1, 2025, the EOLWD has said that filings will be accepted through February 3, 2025. Employers do not need to include pay data this year.

Next Steps

Massachusetts employers may wish to make the necessary preparations to file the required reports with the state before the deadline using the newly opened online portal. As a reminder, EOWLD has stated that employers need only file the most recent EEO-1 reports they have. The filing platform for the 2024 EEO-1 reports has not opened yet.

Ogletree Deakins will continue to monitor developments and will provide updates on the Massachusetts, Multistate Compliance, OFCCP Compliance, Government Contracting, and Reporting, and Pay Equity blogs as new information becomes available.

Mark H. Burak is a shareholder in Ogletree Deakins’ Boston office.

James A. Patton, Jr., is a shareholder in Ogletree Deakins’ Birmingham office.

This article was co-authored by Leah J. Shepherd, who is a writer in Ogletree Deakins’ Washington, D.C., office.

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Quick Hits

• The U.S. Department of Education released a fact sheet that provides guidance on educational institutions’ Title IX obligations with NIL compensation for college athletes.
• The guidance confirms the Department of Education’s view that NIL compensation from schools constitutes “athletic financial assistance” covered by Title IX’s equal opportunity requirements.
• The guidance comes amid a changing landscape in college sports with NIL compensation and the prospect of potential revenue-sharing between schools and college athletes.

On January 16, 2024, the Department of Education’s Office for Civil Rights (OCR) released a nine-page fact sheet, titled, “Ensuring Equal Opportunity Based on Sex in School Athletic Programs in the Context of Name, Image, and Likeness (NIL) Activities,” providing long-awaited guidance on schools’ obligations with respect to Title IX in the context of NIL.

The fact sheet confirms that the department views NIL compensation provided by a school as “athletic financial assistance,” which Title IX requires to be distributed in a nondiscriminatory manner under Title IX.

The guidance comes years after the NCAA lifted restrictions on college athletes’ ability to earn compensation for their NIL. This has led to the formation of so-called NIL collectives, organizations typically comprised of boosters, fans, alumni, and businesses, to facilitate NIL deals for athletes.

Further, the NCAA and major conferences have reached a proposed settlement in litigation that will pay nearly $2.8 billion in back pay to former athletes over the next ten years and establish a revenue-sharing framework in which schools will be allowed to share more than $20 million annually with their athletes.

Title IX regulations require schools to provide equal athletic opportunity, regardless of sex, including with “athletic financial assistance” that schools award to college athletes.

According to the OCR fact sheet, the Department of Education “does not view compensation provided by a third party (rather than a school) to a student-athlete for the use of their NIL as constituting athletic financial assistance awarded by the school.” However, the fact sheet warns that the OCR has “long recognized that a school has Title IX obligations when funding from private sources, including private donations and funds raised by booster clubs, creates disparities based on sex in a school’s athletic program or a program component.”

“The fact that funds are provided by a private source does not relieve a school of its responsibility to treat all of its student-athletes in a nondiscriminatory manner,” the Department of Education said in the fact sheet. “It is possible that NIL agreements between student-athletes and third parties will create similar disparities and therefore trigger a school’s Title IX obligations.”

The department noted the variety and evolving nature of NIL agreements in college athletics and specified that the application of Title IX “is a fact-specific inquiry.” Further, and in recognition of the continued evolution of college athletics, the department noted that “Title IX regulations assume that the receipt of financial assistance does not transform students, including student-athletes, into employees,” and the fact sheet, thus, operates under the same assumption. The Department of Education stated that it would “reevaluate” this position should the legal landscape around that issue change.

Next Steps

The fact sheet comes just days before the presidential administration changeover, which is anticipated to impact the federal government’s response to NIL pay and make systemic changes to college sports, including regarding the question of employee status. Still, the fact sheet indicates that schools may face risks under Title IX with the distribution of NIL compensation even if third parties are providing that money.

Ogletree Deakins will continue to monitor developments and will publish updates on the Higher Education, Pay Equity, and Sports and Entertainment blogs as additional information becomes available.

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Quick Hits

• On September 26, 2024, New York City released updated FAQs for the Earned Safe and Sick Time Act (ESSTA) to address the October 2023 amended rules and the January 2024 law allowing private rights of action for ESSTA violations.
• The updated FAQs clarify and provide guidance regarding the amended rules, processes, and procedures in pursuing a private right of action, while also leaving some questions unanswered.
• The updated FAQs provide guidance on additional topics regarding written safe and sick leave policies and additional uses of leave for weather-related health conditions and funerals.

Telecommuting and Remote Employees

With the advent of remote work and telecommuting, the amended rules clarify that an employee who is based outside of New York City is eligible to use safe and sick leave if the employee is “expected to regularly perform work in New York City during a calendar year” but only hours worked by such an employee in New York City will count toward the accrual of safe and sick leave. Additionally, the employee can only use accrued safe and sick leave while performing work in New York City.

While the amended rules provide some examples of how this will apply, the FAQs leave unanswered what “regularly perform work” means for purposes of determining eligibility.

Written Safe and Sick Leave Policies

For employers that have general paid time off policies, the FAQs clarify that employers must maintain written safe and sick leave policies in a single writing. Policies are not in a single writing “if they are split up across multiple documents or locations. An employer may supplement a national policy with an NYC-specific policy, provided that the national and local policies are not confusing or contradictory.”

Despite this guidance, the FAQs do not expound on the meaning of “confusing or contradictory.”

DCWP Investigations and Private Right of Action

As employees can now file a civil action in court and file a complaint with the DCWP, the FAQs provide guidance regarding those processes and procedures. As an initial matter, the FAQs clarify that there are no prerequisites to filing a lawsuit in court for ESSTA violations, and are not required to file a complaint with the DCWP first. Should an employee decide to file complaints in court and with the DCWP for the same alleged violations, the DCWP will stay its investigation until it is notified that “such a civil action has been withdrawn or dismissed without prejudice.” After a final judgment or settlement, the DCWP will then dismiss the complaint unless it “determines the complaint alleges a violation not resolved by such judgment or settlement.”

Additional Uses: Health Conditions Related to Weather Events and Funerals

The FAQs provide that employees may be able to use safe and sick leave for weather-related events, when, for example, weather-related conditions impact the health of employees or their family members such as extreme heat or poor air quality or if exposure to certain weather would pose a risk to the employee or family member due to an underlying medical condition.

In addition, the FAQs state that an employee may use safe and sick leave to attend a funeral if an employee is experiencing anxiety or depression or if a family member needs care for a mental or physical health condition.

Exhausting Available Safe and Sick Leave

Under the ESSTA, generally, it is the employee who decides whether to use safe and sick leave and how much accrued safe and sick leave to use. In reaffirming this rule, the FAQs provide that employers are “prohibited from deducting from an employee’s leave bank when the employee does not wish to use safe and sick leave to cover an absence.” Notwithstanding, the FAQs clarify that the ESSTA “does not require an employer to provide unpaid time off when an employee does not wish to use safe and sick leave to cover an absence and is not eligible for other paid leave.” However, the FAQs note that other laws may require an employer to grant unpaid time off.

Pay Statement Requirements and Unlimited Paid Time Off

The ESSTA requires employers to inform employees on their paystubs of the amount of safe and sick leave used during the pay period and the balance of accrued time remaining.

For those employers that offer unlimited safe and sick leave or unlimited paid time off, the FAQs state that “in very limited circumstances,” an employer will not be required to provide documentation showing accrual, use, and balance information each pay period. Whether this exception applies will depend on “the nature of the employer’s written safe and sick leave policy, including whether any restrictions apply, and whether in practice leave is truly unlimited.”

Even if an exception applies, the FAQs clarify that employers must still keep records showing compliance with the ESSTA.

Next Steps

Employers based in or with remote employees in New York City may wish to review their current policies and make any necessary revisions based on the updated FAQs. Employers may also want to review with and train supervisors and human resources professionals to ensure compliance and update existing practices to align with the above updates to minimize the potential for enforcement actions by the DCWP or for lawsuits by employees.

Ogletree Deakins’ New York office will continue to monitor developments and will provide updates on the Leaves of Absence and New York blogs.

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