Tag Archives: DOL

U.S. Department of Labor Issues Final Overtime Rule

In March 2019, the U.S. Department of Labor (“DOL”) announced a Notice of Proposed Rulemaking that, if passed, would increase the minimum salary thresholds to qualify for the Executive, Administrative, and Professional Exemptions, often referred to as the “white collar exemptions.”  Following public comments and listening sessions on the proposal, the DOL has issued a Final Overtime Rule.  Although announced on September 24, 2019, the Final Overtime Rule will not take effect until January 1, 2020.

The Final Overtime Rule updates the standard salary thresholds necessary to exempt Executive, Administrative, or Professional employees from the minimum wage and overtime requirements set forth in the Fair Labor Standards Act (“FLSA”) by:

  • raising the “standard salary level” from the currently enforced level of $455 per week to $684 per week (which is equivalent to an annual salary of $35,568 for a full-time worker);
  • raising the total annual compensation level for “highly compensated employees (“HCE”)” from the currently-enforced level of $100,000 to $107,432 per year; and
  • allowing employers to use nondiscretionary bonuses and incentive payments (including commissions) that are paid at least annually to satisfy up to ten percent (10%) of the standard salary level, in recognition of evolving pay practices.

The DOL stated that these changes are intended to account for and reflect growth in employee earnings, since the currently enforced standard salary thresholds were set in 2004.

Although the Final Overtime Rule does not take effect until January 1, 2020, employers should begin planning now for the change.  Employers should analyze whether increasing a certain employee’s salary is feasible in order to maintain the applicable exemption, or if their business is better served by reclassifying the employee as non-exempt and paying the employee overtime when required.  If you have any questions about the Final Overtime Rule and how it will affect your business, give us a call.

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DOL May Change Its Approach to Joint Employers

This week the United States Department of Labor announced a proposed rule to revise and clarify its  joint employer test.

The Department proposes a clear, four-factor test that would be used to consider whether the potential joint employer actually exercises the power to:

  • hire or fire the employee;
  • supervise and control the employee’s work schedules or conditions of employment;
  • determine the employee’s rate and method of payment; and
  • maintain the employee’s employment records.

The proposal also includes a set of examples for comment that would further help clarify joint employer status.  I have set forth two of the examples below which illustrate when joint employer status will and will not exist under the proposed new rule:

    Example:  An office park company hires a janitorial services company to clean the office park building after hours. According to a contractual agreement with the office park and the janitorial company, the office park agrees to pay the janitorial company a fixed fee for these services and reserves the right to supervise the janitorial employees in their performance of those cleaning services. However, office park personnel do not set the janitorial employees’ pay rates or individual schedules and do not in fact supervise the workers’ performance of their work in any way. Is the office park a joint employer of the janitorial employees?

    Application:  Under these facts, the office park is not a joint employer of the janitorial employees because it does not hire or fire the employees, determine their rate or method of payment, or exercise control over their conditions of employment. The office park’s reserved contractual right to control the employee’s conditions of employment does not demonstrate that it is a joint employer.

 

    Example:  A country club contracts with a landscaping company to maintain its golf course. The contract does not give the country club authority to hire or fire the landscaping company’s employees or to supervise their work on the country club premises. However, in practice a club official oversees the work of employees of the landscaping company by sporadically assigning them tasks throughout each workweek, providing them with periodic instructions during each workday, and keeping intermittent records of their work. Moreover, at the country club’s direction, the landscaping company agrees to terminate an individual worker for failure to follow the club official’s instructions. Is the country club a joint employer of the landscaping employees?

    Application:  Under these facts, the country club is a joint employer of the landscaping employees because the club exercises sufficient control, both direct and indirect, over the terms and conditions of their employment. The country club directly supervises the landscaping employees’ work and determines their schedules on what amounts to a regular basis. This routine control is further established by the fact that the country club indirectly fired one of landscaping employees for not following its directions.

 

The proposed rule will be available for public comment for a period of time before it, or any version of it, takes effect.  Here’s hoping the clear test that is set forth above is adopted, and employers get the clarity they need to accurately assess whether they are or are not joint employers due to the amount of control exercised.

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DOL Issues Notice Of Proposed Rule to Increase Overtime Threshold

The U.S. Department of Labor (Department) announced a Notice of Proposed Rulemaking (NPRM) that, if passed,  would make more than a million more American workers eligible for overtime. The NPRM would increase the minimum salary threshold to qualify for the Executive, Administrative and Professional Exemptions, often referred to as the “white collar exemptions”.

Under the current law, employees with a salary below $455 per week ($23,660 annually) must be paid overtime if they work more than 40 hours per week. This salary level was set in 2004.

This new proposal would update the salary threshold using current wage data, projected to January 1, 2020. The result would boost the standard salary level from $455 to $679 per week (equivalent to $35,308 per year).  The NPRM does not call for automatic adjustments to the salary threshold.

Importantly, the NPRM is not yet law.  Once the rule is published in the Federal Register the public will be able to submit comments for 60 days.  But, given that this increase is approximately $12,000 less than the Obama DOL’s proposed increase enjoined by the U.S. District Court for the Eastern District of Texas in November 2016, it likely has a very strong chance of becoming law.

Employers should prepare accordingly by auditing  exempt positions to ensure that the “duties test” is met.  Remember, if the duties test is not met it does not matter what amount of salary is paid.  Employers should also assess whether an increase to the employee’s salary in order to maintain the exemption is feasible, or if the better business approach is to reclassify the employee as nonexempt and pay overtime when it is required.

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DOL Announces Voluntary Payroll Audit Program

On March 6th the Wage and Hour Division (WHD) of the U.S. Department of Labor announced a new pilot program called the Payroll Audit Independent Determination  ( PAID) Program.  According to the DOL PAID is designed to expedite the resolution of “inadvertent overtime and minimum wage violations under the Fair Labor Standards Act “(FLSA).

Participation in PAID is voluntary.  If an employer chooses to participate in the program and FLSA violations are discovered the WHD will not impose penalties or liquidated damages as part of any settlement.  Instead, the employer will only pay the backpay owed to the employee or employees.

Employers may not participate in the program if they are in litigation (presumably involving the FLSA but the press release does not specify) or currently under investigation by the WHD for the wage and hour practices at issue.  Participation in PAID also requires employers to review the WHD’s compliance assistance materials, carefully audit their pay practices and agree to correct the pay practices at issue going forward.

WHD will implement PAID nationwide for approximately six months and will then evaluate the program and consider future options.  More information about PAID is available at http://www.dol.gov/whd/paid

For employers who believe they may have “inadvertent” violations of the FLSA participation in PAID may be a good option.  But before you agree to invite the WHD into your place of business I recommend that you conduct your own audit of your compensation practices to identify any potential violations or areas of concern.  We assist clients with self-audits frequently.   Remember, an ounce of prevention is worth a pound of cure!

 

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Prepare For Upcoming FLSA Changes Now

Last month the Department of Labor announced that the final rule changing the Executive, Administrative and Professional Exemptions under the FLSA, the so called white collar exemptions, is expected to be released in July 2016. After the final rule is released the changes will likely become law 60 to 90 days later. The proposed changes will increase the annual minimum salary for these exemptions from $23,660 to $50,440. And, while there has been no announcement yet, it is still possible that the final rule will change the duties test for these exemptions which could greatly impact what employees qualify as exempt.

Now is the time for employers to begin planning on how to deal with these changes. Certainly, if there is a change to the duties test the change will likely be to narrow the exemption. Employers should conduct an analysis to determine whether it is more economically beneficial to increase the salary of some exempt employees, or reclassify them as nonexempt and pay them overtime. If the decision is made to continue to treat the employees as exempt employers should analyze whether any of that increase in salary can be passed on to their customers and if so, how much.

The analysis should also focus on the duties of every employee that is currently classified as exempt. If there is doubt about whether a particular employee is properly qualified as exempt the employer should determine whether that employee can be given additional duties and responsibilities to remove doubt about the exemption. If that is not possible the employer should consider how to best go about reclassifying the employee.

Reclassification may be viewed as an insult to some employees, so this must be considered in determining how to approach and resolve the issue. Also, employers must determine whether they will increase the pay of reclassified employees, in an effort to soften the blow of reclassification.

Proactive employers who conduct these analyses now will save themselves headaches in the future and be well positioned to comply with the new law as soon as it takes effect.

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Tennessee Eliminates Private Suits For State Wage-Hour Law Violations

On April 23, 2013 Governor Haslam signed an amendment to Tennessee’s Wage Regulations Act  (Act) which eliminates private suits for state wage and hour law violations.  The amendment gives the Tennessee Department of Labor the exclusive power to enforce state wage and hour law.  The amendment also provides for an award of reasonable expenses, including attorneys’ fees and disbursements for claims brought under the Act.

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