Changes in U.S. Overtime Rules

The U.S. Department of Labor will be issuing new regulations in July 2016 that will bring an additional 13.5 million workers under the overtime requirements of the Fair Labor Standards Act. Labor Secretary Thomas Perez claims the new rules could add as much as $1.3 billion nationwide to workers’ pockets.

The proposed changes will more than double the salary threshold for overtime eligibility to $970 a week. This means that employees earning a yearly salary of $50,440 or less will automatically be eligible for overtime pay. Currently, the threshold for a salaried worker is $23,660 a year.

As of now, all hourly employees are automatically eligible for overtime pay. Salaried white collar workers, labeled by the U.S. Department of Labor as Executive, Administrative, and Professional Employees (EAP), are generally exempt from the requirement to pay overtime as long as they are paid at least $455 a week.

The DOL finds two major problems with the current rules. One, the salary level has not kept pace with the general increase in salaries since 2004. Additionally, employers have taken liberty with the definitions of EAP, and many workers who should not be exempt from overtime are classified as exempt. For example, under the DOL’s current rules, an administrative employee is one who exercises individual judgment or discretion in matters of significance to the company. However, administrative assistants, who do not exercise this judgment, if making more than $23,660 a year, are often classified as an exempt employee.

The DOL has decided on one solution: raise the minimum exempt salary for EAP workers. This means that when implemented, employers will have to begin paying overtime to all employees making less than $970 a week. The DOL believes salary is the only true objective measure of exempt vs. non-exempt staff, because job duties can vary so much from employer to employer. Thus, no matter what the employee’s job duties are, if the salary falls under the threshold, the employee is eligible for overtime.

Interestingly, the new overtime rules will not fix the minimum EAP exempt salary at a stated dollar amount. Rather, the minimum EAP exempt salary will be indexed at the 40th percentile of all salaries in America. The DOL will use the Bureau of Labor’s annual statistical data on salaries to reset the minimum FLSA exempt salary each year. This means that employees may be eligible for overtime one year and not the next (or vice versa) without any change in their salary.

Before the new rules take effect, employers should take advantage of the time to collect data related to each employee’s work week. By determining the work habits of employees, employers can consider the best classification for each. For example, if during the data collection period an employer sees that an employee is working an average of 47 hours a week at $42,500 a year, it may become more cost effective to raise the individual’s salary to $50,440. By increasing the salary rather than paying overtime, the employer may save money. With the DOL not issuing the rule until July 2016, employers have enough time to collect data on employee work habits and come up with a strategic, cost-effective plan to manage their employee’s salaries and overtime.


Eligibility For Unemployment Benefits

In a recent case regarding unemployment benefit eligibility, the plaintiff, Petrovic, was fired from defendant American Airlines after she gave a gift and a first class upgrade to a passenger without authorization.

Petrovic filed a claim for unemployment benefits with the Illinois Department of Employment Security. The Board of Review denied her claim on the ground that she was discharged for misconduct, so she filed a complaint for administrative review, where the trial court reversed the Board’s decision. The Board then appealed.

On appeal, the Board argued that Petrovic was employed as a tower planner for the airline. On the date in question, she left her work area without her manager’s approval to secure an undocumented upgrade for a “friend of a friend.” She had been issued a performance discussion less than a year earlier regarding being out of her work area.

The Board claimed that Petrovic received PC based training where she was made aware of the policies that only authorized employees may issue upgrades, and that employees are expected to remain in their work areas during their shifts unless given permission by their managers. Petrovic did not receive permission for any of her actions and admitted to receiving the PC based training.

Petrovic’s supervisor testified that along with the approximately $7,100 loss to the airline, the procedure for moving a passenger also affects the load audit necessary for an accurate weight and balance number, causing safety concerns.

The Illinois Unemployment Insurance Act denies benefits to employees discharged for misconduct. Under the Act, three elements must be proven to establish misconduct: “(1) there was a deliberate and willful violation of a rule or policy of the employing unit, (2) the rule or policy was reasonable, and (3) the violation either harmed the employer or was repeated by the employee despite a previous warning or other explicit instruction from the employing unit.” 820 ILCS 405/602(A).

There is plenty of Illinois case law stating that a rule or policy does not need to be written or otherwise formalized in order to be applied. The court may find the existence of a reasonable rule “by a commonsense realization that certain conduct intentionally and substantially disregards an employer’s interests.” Willful conduct stems from an employee’s awareness of, and conscious disregard for, a company rule.

Here, Petrovic admitted that she left her work area to procure an unauthorized upgrade. Though she claimed she was unaware of any rule or policy, the record indicated otherwise. Further, Petrovic admitted to being aware that she did not have authority to perform the actions she took.

The appellate court ultimately ruled that Petrovic’s actions resulted in financial loss to the employer, making her termination rightfully based on misconduct. They reversed the decision of the trial court that reversed the denial by the Board of Review, leaving Petrovic ineligible for unemployment benefits.

Influencer Marketing

In this digital age, a new kind of advertising that feeds on social influence via social media has emerged. Marketers now use bloggers and other social media “celebrities,” effectively called influencers, to advocate and advertise their products. Coined as influencer marketing, companies are using these influencers to increase market awareness amongst target markets.

But are these hired influencers FTC Compliant? At the heart of the Federal Trade Commission’s Endorsement Guides lies their truth-in-advertising principle. Truth in advertising is important in all media whether old or new. It is law that influencers must disclose their relationship with the companies or brands they are endorsing clearly and conspicuously. This means that the disclosure should appear at the beginning of the post or, with visual content, sometimes directly on the picture itself. Honesty and transparency by influencers is key, as today’s consumers are savvy and will easily spot deception. They will gladly consume content, even sponsored content, as long as it is useful and truthful.

As long as the influencer is acting on behalf of an advertiser, what they say is usually going to be considered commercial speech, and commercial speech violates the FTC Act if it is deceptive. The FTC does conduct investigations and will bring cases involving deceptive advertising under Section 5 of the FTC Act. 15 U.S.C. §45. While the FTC is not generally monitoring bloggers, concerns may be brought to the attention of the FTC, who will then evaluate them case by case. Their focus will usually be on the advertisers or their ad agencies and public relations firms, though influencers are not exempt from any legal action.

This is not to say that the FTC holds online endorsers to a higher standard than paper-and-ink publications. The issue is that the audience must understand the relationship between the reviewer and the company. On paper, where a reader will generally know it is your job to provide personal opinion on behalf of the brand, personal blogs or social media pages may not provide such a clear understanding of that relationship. This is when a disclosure is necessary and particularly important. To be clear, a blogger only needs a disclosure if they are paid or otherwise reimbursed for their endorsement.

Marketers must be especially careful if they choose to utilize this developing field of influencer marketing. The first and most important question to ask is, “how can I ensure my influencers will be FTC compliant?”

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Implied Warranty of Habitability

A condominium association claims that various parties involved in the design, construction, and sale of a condominium complex breached the implied warranty of habitability by incorporating latent defects into the units via the design, material, and construction.

The theory of implied warranty of habitability initially arose because the application of the common law principles of caveat emptor and merger meant that a new home buyer had little or no recourse against a builder that constructed a defective residence. Caveat emptor prevented a new home buyer from suing the builder if he failed to discover any defects before taking possession. However, the doctrine of caveat emptor is based on the expectation that the buyer and seller possess comparable skill and experience and could use their own judgments to come to a conclusion. The implication of a warranty of habitability came as a judicial response to the fact that in the twentieth century, new home buyers and sellers were no longer in an equal bargaining position. As the ordinary home buyer no longer had the skill or training to make a meaningful inspection and discover latent defects, caveat emptor fell out of favor.

In this case, the record demonstrates that each Condominium Purchase Agreement disclaimed implied warranties on behalf of the developer-seller and its agents. Though the condominium association argues that the language in the purchase agreement was not called to the buyers’ attention or worded properly, a seller is not required to specifically point out a disclaimer in a written contract or use a particular method to bring it to the buyer’s attention. A disclaimer is deemed legally effective if it (1) is a conspicuous part of the agreement, (2) refers to the warranty by name, and (3) discloses the consequences of its inclusion. The court rules that the included provision meets the criteria of an effective disclaimer.

Generally speaking, only builders or builder-sellers warrant the habitability of their construction work. Engineers and design professionals – such as the defendant architectural firm in this case – provide a service and do not warrant the accuracy of their plans and specifications. Breach of implied warranty of habitability claims against design professionals have consistently been rejected in Illinois and most other jurisdictions. This court holds that the designer’s role did not subject it to a claim for breach of the warranty of habitability of the builder’s work. The developer-seller is also dismissed from these proceedings due to the effective waiver.

The court then must consider whether the wording of the Agreement encompasses the other defendants. The contract defines the seller, but does not define officers, agents, or other representatives. An agent is commonly understood to be a person “who is authorized to act for or in the place of another.” The allegations that the contractors provided development services and held themselves out as knowledgeable developers and contractors do not allege that the contractors were authorized to act on behalf of the developer-seller. Therefore, they do not fall under the scope of “agents” and were improperly dismissed at the trial level. The case is affirmed in part, reversed in part, and remanded for further proceedings.
Board of Managers of Park Point at Wheeling Condominium Association. v. Park Point at Wheeling, LLC, 2015 IL App (1st) 123452 (December 31, 2015).

Having A POA For Healthcare Is A Good Start, But Might Not Be Enough

A Power of Attorney For Healthcare tells the doctor who should make medical decisions in the event you are unable to do that yourself. The problem is that there could be a gap between your medical emergency and the healthcare provider’s ability to contact your POA. What if your POA isn’t around or reachable when you stop breathing or in that moment of a heart attack when a decision has to be made? What then? A delay in treatment can make a big difference in how you spend the balance of your days on earth.

That’s why in addition to your POAs (and your will), you need to take one more step to make sure your wishes are followed in the event of a medical emergency. You need an “Advance Directive,” also called a POLST (Physician Orders for Life Sustaining Treatment). The Illinois POLST is designed to help a person with an advanced illness and his or her physician craft a plan of action in the event of an emergency. The Illinois POLST identifies a person’s healthcare wishes prior to a life-threatening emergency and acts as a physician order. It protects a person’s wishes in all settings (i.e. hospital, home, nursing home.) By Illinois law, healthcare providers must do what your POLST says.
Having a prepared and signed POLST puts you in charge of the kind of treatment you want and fills the gap between your ability to verbally express your will to a medical provider and the moment when it becomes necessary for your POA for Healthcare to take over.

Landlord/Tenant Litigation

Here is a recent case regarding landlord/tenant litigation:

Plaintiff landlord had entered into a five-year lease with SSM and that SSM later assigned this lease to defendant with plaintiff’s consent. Defendant acknowledged that, upon assuming the lease and during the remaining term of the lease, defendant paid both the rent and the monthly payment for the HVAC improvements. However, defendant claimed that it was not obligated to pay the remaining cost of the HVAC improvements after the lease ended.

The court said, Plaintiff alleges that defendant’s predecessor agreed that certain improvements to the property would be paid over a 15-year amortization schedule, in addition to the rent payments due during the 5-year term of the lease. Defendant then assumed its predecessor’s obligations when it was assigned the lease. Plaintiff alleges that it fully performed its HVAC obligation under the lease when it improved the HVAC units on the property. If plaintiff fully performed this requirement as it alleges, then the alleged debt to repay for these improvements had matured prior to the sale of the property. Our holding is similar to the holding in Metropolitan Trust, where the tenant’s rent debt had matured because the landlord had fully performed prior to the cancellation of the lease. Since defendant’s debt had allegedly matured, it did not pass on to the subsequent owners of the property.

A.M. Realty Western, LLC. v. MSMC Realty, LLC., 2012 IL App (1st) 121183 (November 30, 2012) Cook Co.,6th Div. (R. GORDON) Reversed and remanded