The Fair Labor Standards Act sets national standards for wage and hour issues related to employees. The law empowers the Department of Labor to set eligibility standards for overtime pay as well as a series of exemptions for it. On March 7th, 2019, the Department of Labor issued a Notice of Proposed Rulemaking that will change those eligibility standards significantly.
The Fair Labor Standards Act sets national standards for wage and hour issues related to employees. The law empowers the Department of Labor to set eligibility standards for overtime pay as well as a series of exemptions for it. Employees who qualify for overtime under the law receive time-and-a-half pay for hours worked more than forty hours a week. Time-and-a-half pay is a 50% increase to the employee’s “regular rate of pay.”
Many regulations put into place during the past few years have faced the potential for roll-backs under the current administration. This holds especially true for some controversial rules issued by the Department of Labor. These roll-backs, though, have introduced their levels of uncertainty into the marketplace, placing companies at considerable risk of unwittingly acting against their own interests.
As part of a series of decisions issued by the National Labor Relations Board at the end of 2017, a new ruling overturned an Obama era policy related to defining bargaining units for unions. The previous policy had represented a significant departure from National Labor Relations Board cases in terms of determining appropriate bargaining units when employees seek to unionize by creating an “overwhelming community of interest” standard. The case announcing that previous policy, known as Specialty Healthcare, had sparked a good deal of controversy in the business world but had survived appellate review in eight different federal circuit courts.
On March 15, 2018, the United States Court of Appeals for the Fifth Circuit dealt Obama era regulations their most recent defeat. In the wake of numerous other overturned rules by regulatory action or executive order, a federal court struck down the Department of Labor’s fiduciary rule. The rule revised the definition of who constituted a fiduciary of retirees under the Employee Retirement Income Security Act (“ERISA”) and changed the exemptions available to advisors who sought to earn commissions for investment advice.
In 2016, the same law firm started twelve different lawsuits against twelve different universities alleging violations of federal retirement law. Schlichter, Bogard, and Denton is often credited with starting the trend of filing lawsuits over excessive fees charged to retirement plans and has apparently moved on to 403(b) plans offered by nonprofit organizations. The university lawsuits alleged similar violations of the Employee Retirement Income Security Act (“ERISA”), claiming that the universities violated their obligation to their employees by failing to take steps to keep fees low while maximizing returns. The trouble for these organizations is that 403(b) plans and 401(k) plans have the same obligations under ERISA. The naming distinction comes from how such plans are treated under the tax code.
Litigation related to retirement plans continues to be a major issue facing businesses in the United States. Companies must offer recruits and employees some form of retirement plan in order to attract and retain quality employees in a competitive labor environment. At the same time, the fiduciary duties places on companies by the Employment Retirement Income Security Act (“ERISA”) and the regulations promulgated by the Department of Labor (“DOL”), and the Security Exchanges Commission (“SEC”) to enforce it can expose employers and the parties whom they hire to manage those plans to expensive litigation. A wave of recent cases highlight both the cost of these cases and some pitfalls to avoid.
ERISA, the federal Employee Retirement Income Security Act, sets standards that govern the management of private retirement plans such as 401(k)s, defined benefit plans (more commonly called pensions), employee stock ownership plans, and profit sharing plans. Generally speaking, the appellate courts across the US have generally adopted standards that make it more difficult for employees to sue under allegations of mismanagement for these plans.
As more and more companies face litigation related to their retirement plans, executives naturally wonder how they can best protect themselves and their company from expensive and time-consuming litigation. Over the past few years, total settlements from retirement plan related litigation have averaged approximately one billion dollars a year. While this number may pale in comparison to the almost twenty seven trillion dollars held in various retirement assets within the United States, it represents a substantial threat to bottom line of many businesses.
The Employee Retirement Income Security Act, more commonly known by its acronym ERISA, places a number of requirements on companies that seek to implement retirement plans for their employees. These requirements generally aim to ensure that such plans are managed in the best interests of the employees and that those managing such plans fulfill their duties as fiduciaries for those employees. Lawsuits under ERISA have targeted companies for failing to move away from high fee investment funds or failures to sufficiently diversify. Recently, a number of lawsuits have also targeted retirements plans using a slightly different focus: the acquisition and holding of company stock.