Minimum Wage Increase Effective 7/24

Minimum Wage Increase effective July 24, 2008

Just a reminder that, effective July 24, 2008, the federal minimum wage for covered non-exempt employees will rise from $5.85 to $6.55 per hour. The Fair Minimum Wage Act of 2007, which amended the Fair Labor Standards Act (FLSA), provides for phased-in increases ultimately reaching $7.25 per hour effective July 24, 2009. Prior to the law’s effective date, Maryland’s minimum wage of $6.15 governs. Thereafter, the federal law’s $6.55 per hour will govern unless or until Maryland’s minimum wage law is amended to exceed the federal minimum. Covered employers must comply with both. The youth minimum wage and tip credit provisions of the FLSA remain the same.

Please contact Nicole Windsor at 410-583-2400 if you have any questions.

Employer’s Must Pay Accrued but Unused Vacation Leave

Employers beware! You are now required to pay departing employees for their accrued, but unused, vacation leave. In a surprising reversal, the Employment Standards Service of the Maryland Department of Labor, Licensing and Regulation (DLLR), the agency responsible for administering Maryland's wage and hour laws, recently changed its long standing regulatory position that employees had no right to payment for accrued, unused vacation at termination, absent an employer policy entitling them to the same.

The DLLR’s new position is articulated in its revised "Maryland Guide to Wage Payment and Employment Standards" which states, in relevant part, that “[w]hen an employee has earned or accrued his or her leave in exchange for work, an employee has a right to be compensated for unused leave upon the termination of his or her employment regardless of the employer's policy or language in the employee handbook.” In addition, the guide warns employers that “use or lose” vacation policies requiring employees to use or forfeit their accrued paid leave by the end of the calendar year, are unlikely to pass legal muster. The DLLR has not changed its policy with respect to sick leave reasoning that the purpose of sick leave is to provide employees with “a contingency against illness” and “cannot be claimed at termination in the same manner as unused vacation leave, unless expressly allowed in a contract or an employer's policy.” Maryland Guide, § IV(H).

To comply with the DLLR's new interpretation of Maryland law, employers should take the following steps:

1. Pay employees for their accrued but unused vacation/paid time off when their employment ends (for any reason).
2. Amend your Employee Manual to reflect this change.
3. Review policies regarding the accrual of vacation and PTO leave and consider placing limits on accrual. This would reduce the amount of accrued leave that would have to be paid at termination.

New Changes to the FMLA Effective Immediately

On Monday, January 28, 2008, President Bush signed into law legislation that expands the Family and Medical Leave Act’s coverage for family members of employees called for military service. The expansion requires employers to offer up to 12 weeks of unpaid, job-protected leave to employees when a spouse, child or parent is on active duty or is called up for active duty. Leave could be for any “exigency” as defined by regulations to be drafted by the Labor Department. In addition, the new law allows employees who are the spouses, children, parents or next of kin of a service member to take up to 26 weeks of leave under the FMLA to care for a service member injured during military service to the point of being unable to perform his or her duties. The law became effective when it was signed.

Employees Returning from Military Service

New Labor Ruling applicable to employees returning from military service:

Employers must credit National Guard and reservists active duty time towards their eligibility for leave under the Family and Medical Leave Act. Contractors should know that the Department of Labor (“DOL”) recently issued a memorandum that clarifies its position on the rights of returning uniformed service members to family and medical leave, which is governed by the Uniformed Services Employment and Reemployment Rights Act (“USERRA”). USERRA entitles returning service members to all the benefits of employment that they “would have” obtained if they had been continuously employed.

Under ordinary circumstances, a worker becomes eligible for leave under the FMLA after working for a covered employer for at least 12 months, during which he or she completed at least 1,250 hours of work. The DOL has interpreted the protections afforded by USERRA and FMLA together to require employers to count the months and hours that reservists or National Guard members would have worked had they not been called up for military service, when determining the employee’s FMLA eligibility. Thus, the months and hours that the employee would have worked, but for his or her military service, should be combined with the months employed and the hours actually worked to meet the 12-months and the 1250 hours of employment required by the FMLA.

The bottom line is that contractors may hire individuals who are called to active duty within weeks of their hire date and return from active duty eligible for FMLA protected leave from their civilian jobs.

For more information on this subject or other employment law matters, please contact Nicole Windsor at 410-583-2400 or windsor@bowie-jensen.com.

UPDATED - Maryland's New Prevailing Wage Law

Maryland’s new living wage law becomes effective October 1, 2007. The law applies to all contractors or subcontractors that have state contracts for services valued at $100,000 or more. Nonprofits are exempt. Employers with fewer than 10 employees are also exempt on contracts that do not exceed $500,000.

All contractors covered by the new legislation must post a notice advising their employees of their rights under the new law and the name, address, and telephone number for the Commissioner of Labor and Industry. Failure to post the notice can result in a civil penalty not exceeding $50 per violation.

The law requires government contractors and subcontractors to pay their employees either $11.30 or $8.50 per hour, depending on where the work is performed. In Montgomery, Prince George's, Howard, Anne Arundel and Baltimore Counties as well as Baltimore City (“Tier 1 areas”), employees must be paid an hourly rate of at least $11.30. Employees performing work in all other parts of the state (on government contracts) must be paid an hourly rate of at least $8.50.

If a government contractor provides health insurance to its employees, it may be entitled to a credit against the legally required wage for the hourly cost of its share of the employee’s health insurance premium. Specifically, if a Tier I employer pays $1 per hour for an employee's health insurance, it is entitled to a $1-per-hour credit toward the payment of the mandated $11.30 hourly wage.

Violation of the new law is a misdemeanor punishable by a fine not exceeding $500 or imprisonment not exceeding one year or both. In addition, employers may be required to pay restitution to affected employees along with liquidated damages to the State in the amount of $20 per day for each employee paid in violation of the law. The law also gives employees a private right of action to recover the difference between the amount they were paid and the amount they should have been paid under the law.

Maryland’s new living wage does not apply to state-funded construction projects where workers are paid the prevailing wage for each locality. In addition, it only applies to employees who work at least 13 consecutive weeks on a particular government contract and is at least 18 years old.

For more information contact J. Nicole Windsor at Windsor@bowie-jensen.com or 410-583-2400. Ms. Windsor concentrates her practice on employment law.

Prevailing Wages on Government Contracts

Certain federal laws require contractors and subcontractors to pay some employees wages in excess of minimum wage. Most notably, the Davis-Bacon Act (“DBA”) and the McNamara-O'Hara Service Contract Act (“SCA”) impose wage requirements related to nearly all construction and service contracts with the U.S. or District of Columbia governments.

The DBA requires contractors to pay laborers and mechanics prevailing wages as determined and published by the Department of Labor (“DOL”). The Act applies to contracts with the U.S. government and District of Columbia for the construction, alteration, or repair of public buildings or public works (provided that the contract sum is at least $2,000). The term “prevailing wages” means the locally prevailing wages and fringe benefits paid on similar projects as determined by the DOL. In addition to the Act, there are approximately 60 other statutes whose intent is to assist construction projects through grants, loans, loan guarantees, and insurance include prevailing wage requirements. These "related Acts" involve construction in transportation, housing, air and water pollution reduction, and health.

The SCA applies to every contract entered into by the United States or the District of Columbia, the principal purpose of which is to furnish services to the United States through the use of service employees. The definition of "service employee" includes any employee engaged in performing services on a covered contract (other than a bona fide executive, administrative, or professional employee who meets the exemption criteria).

The SCA requires contractors and subcontractors performing services on covered federal or District of Columbia contracts in excess of $2,500 to pay service employees in various classes no less than the monetary wage rates and to furnish fringe benefits found prevailing in the locality, or the rates (including prospective increases) contained in a predecessor contractor's collective bargaining agreement. Safety and health standards also apply to such contracts.

The DOL maintains a website, http://www.wdol.gov/, that provides a single location to use in obtaining appropriate SCA and DBA wage determinations for each official contract action.

For more information contact J. Nicole Windsor at Windsor@bowie-jensen.com or 410-583-2400. Ms. Windsor concentrates her practice on employment law.