AGC's Human Resource and Labor News - April 12, 2018 / Issue No. 04-18 (Print All Articles)

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DOL Issues Three New Wage and Hour Opinion Letters

On April 12, 2018, the U.S. Department of Labor (DOL) issued 3 new opinion letters addressing compliance under the Fair Labor Standards Act (FLSA) and other laws. The DOL issued the letters as part of its commitment to protect employees, enforce the law, and ensure employers have the tools for compliance.

On April 12, 2018, the U.S. Department of Labor (DOL) issued 3 new opinion letters addressing compliance under the Fair Labor Standards Act (FLSA) and other laws.  The DOL issued the letters as part of its commitment to protect employees, enforce the law, and ensure employers have the tools for compliance.  These particular opinion letters address the following:

  • What counts as work time under the FLSA when employees travel for work (found here)
  • Whether 15-minute rest breaks required every hour by an employee’s serious health condition must be paid or may be uncompensated (found here)
  • Whether certain lump-sum payments from employers to employees are considered “earnings” for garnishment purposes under Title III of the Consumer Credit Protection Act (found here).

An opinion letter is an official document authored by WHD on how a particular law applies in specific circumstances presented by the person or entity requesting the letter.  Opinion letters represent official statements of agency policy.  In June 2017, U.S. Secretary of Labor Alexander Acosta announced that the DOL was resuming its longstanding practice of issuing opinion letters. The DOL had issued opinion letters for more than 70 years before ceasing the practice in 2010.

For more information, contact Claiborne Guy at claiborne.guy@agc.org or 703-837-5382.


DOL Activates Pilot Wage Violation Self-Reporting Program; Releases Supplemental Details

On April 3, the U.S. Department of Labor’s (DOL) Wage and Hour Division (WHD) began officially accepting applications for the Payroll Audit Independent Determination (PAID) program and provided supplemental information about participation on the program’s website. The PAID program website includes information for an employer to determine the criteria for participating in the program, a brief description of compliance assistance materials, and the required elements of a self-audit. The site also includes details on how the program works and the process for the payment of wages. WHD will conduct a public webinar on Tuesday, April 10, 2018 at 1:00 pm Eastern time to provide an overview of the PAID program.

On April 3, the U.S. Department of Labor’s (DOL) Wage and Hour Division (WHD) began officially accepting applications for the Payroll Audit Independent Determination (PAID) program and provided supplemental information about participation on the program’s website.  The PAID program website includes information for an employer to determine the criteria for participating in the program, a brief description of compliance assistance materials, and the required elements of a self-audit.  The site also includes details on how the program works and the process for the payment of wages. WHD will conduct a public webinar on Tuesday, April 10, 2018 at 1:00 pm Eastern time to provide an overview of the PAID program.

As previously reported, in March 2018, WHD announced the new nationwide pilot PAID program, which intends to facilitate the resolution of potential overtime and minimum wage violations under the Fair Labor Standards Act (FLSA). According to WHD, the program's primary objectives are to resolve such claims expeditiously and without litigation, to improve employers' compliance with overtime and minimum wage obligations, and to ensure that more employees receive the back wages they are owed—faster.

WHD will implement this pilot program nationwide for approximately six months. At the end of the pilot period, WHD will evaluate the effectiveness of the pilot program, as well as potential modifications to the program, to determine its next steps.

For more information, contact Claiborne Guy at claiborne.guy@agc.org or 703-837-5382.


OFCCP Lowers VEVRAA Hiring Benchmark

On March 30, the U.S. Department of Labor’s (DOL) Office of Federal Contract Compliance Programs (OFCCP) announced the Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA) hiring benchmark for 2018. Effective March 31, 2018, the hiring benchmark will be 6.4 percent, down from 6.7 percent in 2017. This benchmark is an annual goal for the percentage of hires who are veterans at each affirmative action plan (AAP) establishment.

On March 30, the U.S. Department of Labor’s (DOL) Office of Federal Contract Compliance Programs (OFCCP) announced the Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA) hiring benchmark for 2018. Effective March 31, 2018, the hiring benchmark will be 6.4 percent, down from 6.7 percent in 2017.  This benchmark is an annual goal for the percentage of hires who are veterans at each affirmative action plan (AAP) establishment.

VEVRAA requires contractors with written affirmative action programs (AAPs) to either establish hiring benchmarks for protected veterans each year or to adopt the OFCCP’s annual national benchmark. As a result of this requirement, contractors must compare the percentage of their employees who are protected veterans in each of their establishments to whichever hiring benchmark they use. Contractors can use these comparisons to assess the effectiveness of their veteran outreach and recruitment efforts.

For further resources and information, visit OFCCP’s VEVRAA information page.

For more information, contact Claiborne Guy at claiborne.guy@agc.org or 703-837-5382.


Tour New Operating Engineers International Training Center June 5

International Union of Operating Engineers Pres. Jim Callahan has invited AGC members and staff to tour the union’s brand new International Training & Conference Center in Crosby, TX, on June 5.  AGC is in the process of arranging hotel accommodations at a hotel at Bush Intercontinental Airport in nearby Houston for June 4 and will host a breakfast on June 5.  Transportation to the Center will also be provided.  The tour will begin around 10:00 a.m., followed by lunch hosted by the Operating Engineers. 

International Union of Operating Engineers Pres. Jim Callahan has invited AGC members and staff to tour the union’s brand new International Training & Conference Center in Crosby, TX, on June 5.  AGC is in the process of arranging hotel accommodations at a hotel at Bush Intercontinental Airport in nearby Houston for June 4 and will host a breakfast on June 5.  Transportation to the Center will also be provided.  The tour will begin around 10:00 a.m., followed by lunch hosted by the Operating Engineers. 

There is no charge to attend, but registration is required.  Registration and hotel information will be distributed via the Union Contractors eForum (list server) soon.  To join the Union Contractors eForum, visit your  AGC.org profile or send a request to Crystal Yates at yatesc@agc.org.

For more info, contact Denise Gold, associate general counsel, at goldd@agc.org or (703)837-5326.


Court Rules Use of “Segal Blend” Method to Calculate Withdrawal Liability was “Mistake”

The use of the “Segal Blend” interest assumption to calculate a withdrawing company’s multiemployer pension liability was a “mistake” and unsupported by the record, according to the decision in The New York Times Co. v. Newspapers & Mail Deliverers’-Publishers’ Pension Fund, No. 1:17-cv-06178-RWS (S.D.N.Y. Mar. 26, 2018). This decision may have broad consequences for multiemployer pension plans and contributing employers, because the Segal Blend method is used by many of the largest multiemployer plans in the United States. It will most likely be appealed to the Second Circuit federal court of appeals.

The use of the “Segal Blend” interest assumption to calculate a withdrawing company’s multiemployer pension liability was a “mistake” and unsupported by the record, according to the decision in The New York Times Co. v. Newspapers & Mail Deliverers’-Publishers’ Pension FundNo. 1:17-cv-06178-RWS (S.D.N.Y. Mar. 26, 2018).  This decision may have broad consequences for multiemployer pension plans and contributing employers, because the Segal Blend method is used by many of the largest multiemployer plans in the United States.  It will most likely be appealed to the Second Circuit federal court of appeals.

The Segal Company is a well-known and distinguished actuarial firm that provides services to multiemployer plans.  The Segal Blend method is a proprietary method of valuing a plan’s unfunded vested benefits to calculate withdrawal liability by blending the plan’s investment-return interest rate assumption with the lower risk-free rates published by the Pension Benefit Guaranty Corporation (PBGC). 

Use of the Segal Blend method currently may result in a greater withdrawal liability number for the pension plan to collect, because the blending of the two rates (the investment-rate of return with the PBGC rate) results in a lower interest rate for calculating withdrawal liability.  A lower interest rate assumption in calculating withdrawal liability will result in higher withdrawal liability calculations.

Background

The case involved a series of alleged partial withdrawals by The New York Times Company (NYT) from the Newspapers and Mail Deliverers’ Publishers Pension Fund.  The Fund assessed withdrawal liability in excess of $33 million, which was calculated using the Segal Blend.

An arbitrator generally upheld the Fund’s assessment of partial withdrawal liability.  The Fund and the NYT each brought action in the U.S. District Court for the Southern District of New York to enforce and vacate the arbitrator’s award, respectively.  The parties then cross-moved for summary judgment.

Segal Blend Method was Impermissible Because it was not the Actuary’s “Best Estimate.”

The NYT argued that the Segal Blend method was impermissible as a matter of law, relying upon the U.S. Supreme Court precedent Concrete Pipe & Prods. Of Cal., Inc. v. Construction Laborers Pension Trust Fund for Southern Cal., 508 U.S. 602 (1993) and the requirements of the § 4213(a) of ERISA.  The district court rejected this argument, finding that ERISA §4213(a)’s requirement that a withdrawal liability actuarial assumption be reasonable “in the aggregate” means that a different assumption may possibly be used for determining withdrawal liability.

Section 4213(a) of ERISA also requires, however, that the actuarial assumption used to calculate withdrawal liability “offer the actuary’s best estimate of anticipated experience under the plan.”  The evidence established that the Segal Blend was not the actuary’s “best estimate” for withdrawal liability, because the actuary stated in her testimony that the investment-return assumption of 7.5%  was her “best estimate of how the Pension Fund’s assets . . . will on average perform over the long term.”  This contradicted the use of the lower Segal Blend 6.5% rate derived by blending the 7.5% “best estimate” assumption with the lower, no-risk PBGC bond rates.

The district court found that “the actuary’s testimony, combined with the untethered composition of the Segal Blend…create ‘a definite and firm conviction that a mistake has been made’ in accepting the Segal Blend…”  The district court reversed the Arbitrator’s decision, and indicated the withdrawal liability should be recalculated using the 7.5% assumption, unless additional evidence established a more appropriate rate.

Other Holdings of Note in the Decision

The decision has other holdings of note that are beyond the scope of this comment, but are noted briefly here. 

There is construction of the collective bargaining agreement to establish the proper definition of “Contribution Base Unit” for purposes of calculating withdrawal liability.  (The court adopted the Fund’s position.  The Contribution Base Unit was a shift-period, as opposed to wages.)

The calculation of successive partial withdrawals is also discussed.  The NYT’s arguments were adopted, resulting in a larger offset in successive partial withdrawals.

Case Impact

For pension funds that use the Segal Blend method for calculating withdrawal liability – or any method with rates that differ from investment-return rate, such as using PBGC rates – an examination as to whether this approach is the actuary’s “best estimate” may be in order.  If the assumptions and rates are not the actuary’s “best estimate,” the investment-return rate may govern.

This case also provides guidance in calculating partial withdrawal liability and in construing CBAs for determination of “contribution base unit” standards.

Editor’s Note:  This article was written by Ruth S. Marcott, a partner in the law firm Felhaber Larson in Minneapolis, MN. 

Additional information about withdrawal liability is available in AGC’s Labor & HR Topical Resources library under the main category “Wages and Benefits” and subcategory “Multiemployer/Taft-Hartley Benefit Plans & Trust Funds.”  You must  log in as an AGC member to view all resources.


NLRB Returns to Full Complement and Republican Majority

On April 11, the Senate confirmed John F. Ring’s appointment to the National Labor Relations Board for a term expiring on December 16, 2022. Once Ring is sworn in, the Board will return to a full complement of five members, with a three-to-two Republican majority. Ring is currently a partner at the law firm of Morgan Lewis & Bockius in Washington, DC, where he co-leads the firm’s Labor-Management Relations Practice representing employers in a variety of labor and employment matters. He has been with the firm his entire legal career, starting in 1988.

On April 11, the Senate confirmed John F. Ring’s appointment to the National Labor Relations Board for a term expiring on December 16, 2022.  Once Ring is sworn in, the Board will return to a full complement of five members, with a three-to-two Republican majorityRing is currently a partner at the law firm of Morgan Lewis & Bockius in Washington, DC, where he co-leads the firm’s Labor-Management Relations Practice representing employers in a variety of labor and employment matters.  He has been with the firm his entire legal career, starting in 1988.

Since late December, the Board has been operating with two Republicans and two Democrats, rendering it unable to issue decisions in cases changing case law and in other controversial cases.  For just three months prior to that, the Board had three Republicans and two Democrats.  During that period, the Board reversed several significant decisions considered to be unfair or unworkable for employers.  After Ring is seated and has time to get up to speed, the Board will likely resume such activity.


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