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More of your employees may be eligible for overtime pay under a new rule that is likely to be finalized in April 2024 and could take effect soon. As proposed in August, the Labor Department intends to significantly raise the exempt salary threshold from about $35K to about $55K – meaning your workers will need to earn at least the new threshold to even be considered exempt from OT pay. The White House budget office recently announced that it is reviewing the rule, which is the final step before it is shared with the public. Although the final rule will likely face legal challenges, you can’t bank on a court halting its implementation. Moreover, the higher exempt salary threshold is expected to impact 3.6 million workers, which means you should start planning now. Here’s an eight-step action plan to help you prepare as the rule is finalized.
1. Review Pay Practices and Prepare for Compliance
Under the federal Fair Labor Standards Act (FLSA), employees generally must be paid an overtime premium of 1.5 times their regular rate of pay for all hours worked beyond 40 in a workweek — unless they fall under an exemption. One of the criteria to qualify for an exemption is earning a weekly salary above a certain level.
Currently, the salary threshold for exempt employees is $684 a week ($35,568 annualized). The DOL’s proposal, if finalized in its current form, would raise the rate to $1,059 a week ($55,068 annualized) or high depending on cost-of-living adjustments. The proposed rule would also automatically update the salary threshold every three years, which means you’d have to adjust your budget accordingly. These are big changes that will require some planning if you have exempt employees who earn less than the proposed amount.
2. Work Through Your Decision Tree
Start by creating a list of your exempt employees who currently earn between $35,568 and $55,068 a year. You will have to decide whether to raise their salary to meet the new threshold or convert them to non-exempt status. If you decide to convert them, there are many considerations to take into account and you should work with legal counsel to review:
Additionally, you may want to start tracking their actual hours worked now to help you understand the potential impact of converting to non-exempt status as those individuals will need to be paid overtime.
3. Consider the Impact on Employee Morale
Reclassifying employees to non-exempt could have a negative impact on morale. Many employees associate prestige with being classified as an exempt-salaried employee, they like the flexibility that comes with being salaried, and they don’t want to track and record their hours worked. Therefore, employees may view a switch to non-exempt status as a demotion.
4. Plan to Provide Advance Notice of Changes
In addition to developing communications focused on employee relations and morale, you’ll want to provide a written communication to each employee about the specific changes to their compensation and what new responsibilities come with the changes, such as timekeeping and record keeping.
5. Review Your Policies on Company Equipment and Personal Devices
Do you have different policies for exempt and non-exempt employees when it comes to issuing company equipment and using personal devices? Exempt employees may have more leeway to use company laptops or their own personal devices – such as smartphones – to conduct business while traveling or outside of their regular office hours. You will have to determine how to address these policies moving forward.
6. Develop a Training Plan for Managers and Newly Non-Exempt Employees
It is recommended that you provide detailed training to newly reclassified employees and their managers prior to the changes taking effect. There’s a lot to learn. The specifics may vary from business to business, but you’ll want to cover scheduled hours, OT approval policies, timekeeping procedures, rules about meal and rest breaks, and more.
7. Ensure Exempt Employees Meet the Duties Test
Besides the salary test, exempt employees also need to satisfy certain duties requirements. Neither their job title nor job description alone determines whether an employee qualifies for a white-collar (or any other) exemption. This is a good opportunity to ensure they meet these standards as well.
8. Review Applicable State Laws
It is important to remember that other jurisdictions can have higher, stricter, or different wage and hour requirements. For example, some states already have a higher salary threshold for the white-collar exemptions than the FLSA’s $684 per week.
Conclusion
You can click here for a more detailed compliance plan and background about the federal overtime rule courtesy of Fisher Phillips LLP.
The U.S. Department of Labor (DOL) has issued guidance on the application of the Fair Labor Standards Act (FLSA) and Family and Medical Leave Act (FMLA) to employees who telework from home or from another location away from the employer’s facility.
The Field Assistance Bulletin (FAB) 2023-1, released on February 9, 2023, is directed to agency officials responsible for enforcement and provides employers a glimpse into how the DOL applies existing law and regulations to common remote-work scenarios. FAB 2023-1 addresses FLSA regulations governing “hours worked,” rules related to break time and privacy for nursing employees, and FMLA eligibility factors.
Hours Worked
In the FAB, the DOL reviews the rules governing compensability of work time, explaining that, regardless of work location, short breaks (typically, 20 minutes or less) generally are counted as compensable hours worked, whereas, longer breaks “during which an employee is completely relieved from duty, and which are long enough to enable [the employee] to use the time effectively for [their] own purposes[,] are not hours worked.” Examples of short breaks, whether at home or in the office, include when an employee takes a bathroom or coffee break or gets up to stretch their legs.
Longer rest breaks and periods of time, when employees are completely relieved from duty and able to use the time for their own purposes, are not considered work time. Just as would be the case when an employee is working in the office, if during remote work an employee’s 30-minute lunch break is interrupted by several work-related phone calls, that 30-minute period would be counted as hours worked. Conversely, if an employee working from home takes a three-hour break to pick up their child or to perform household chores, that time does not count as work time under the FLSA. In short, the FAB reiterates the telework guidance set forth by the DOL in a Q&A series published during the height of the COVID-19 pandemic.
The FAB emphasizes that, regardless of whether an employee performs duties at home, at the worksite, or at some other location, if the employer knows or has reason to believe that work is being performed, the time must be counted as hours worked. Importantly, the FAB notes that an employer may satisfy its obligation to exercise reasonable diligence to acquire knowledge regarding employees’ unscheduled hours of work by providing a reasonable reporting procedure for employees to use when they work non-scheduled time and paying employees for all hours worked. This guidance was addressed in greater detail in FAB 2020-5.
Guidelines for Nursing Employees
The FAB further clarifies that, under the FLSA, an employer’s obligation to provide employees “reasonable break time,” as well as an appropriate place to express breast milk, extends to employees who are teleworking or working at an off-site location. Just as an employer has an obligation to provide an “appropriate place” for an employee to express milk while working at a client site, the employer should ensure a teleworking employee has privacy from a “computer camera, security camera, or web conferencing platform” to express milk.
Employers are not required to pay employees for otherwise unpaid breaks simply because the employee is expressing breast milk during the break, but if an employee is working while pumping (or if the pumping occurs during an otherwise paid break), they must be paid for that time. For example, in most cases, if a remote employee attends a call or videoconference off camera while pumping, that employee would be considered on duty and must be paid for that time.
The recently enacted PUMP Act expanded existing employer obligations under the FLSA to cover exempt employees, as well as non-exempt employees. The DOL has published more guidance on breast milk pumping during work.
Eligibility Under FMLA
The DOL also addresses FMLA eligibility requirements for remote employees both in terms of hours worked (employee must work 1,250 hours in the previously 12 months) and the small worksite exception (employee must work at a worksite with at least 50 employees in a 75-mile radius).
As with the FLSA, it is important for employers to have a system to track their remote workers’ hours. With respect to hours worked, the FAB reiterates that the 1,250 hours determination for remote worker is based on compensable hours of work under FLSA principles.
With respect to the worksite size determination, the FMLA regulations explain that an employee’s personal residence is not a worksite. Instead, whether a remote employee is FMLA-eligible is based on the size of the worksite from which “they report to” or “their assignments are made.” If a remote employee reports into or receives assignments from a site with 50 or more employees working at that site (or reporting to or receiving assignments from that site) or within 75 miles, then that employee would meet that eligibility factor.
The DOL provided two examples of this rule:
Employers are reminded to review state and local wage and hour laws, paid and unpaid leave laws, and lactation accommodation laws. If you have any questions about applying the FLSA, the FMLA, or state and local laws to your remote workers or any other questions about remote work considerations, please reach out to any Jackson Lewis attorney.
One of the biggest trends that arose from the pandemic has undoubtedly been the “work from anywhere” mindset. Once both employers and employees realized that work could be performed effectively without sitting in a traditional office, things started to change. Some employers chose to close their brick-and-mortar worksites for good, while some workers decided to relocate to be closer to family or to live in a region with a lower cost of living.
Employers often wonder whether there are legal implications for allowing employees to work temporarily or permanently from a state in which their organization has no business presence. It comes as a surprise to many that allowing an employee to work remotely from a new state is not as simple as they originally thought.
When employers allow an employee to work remotely from a different state, the employer must register to do business in that state and comply with its labor laws. This includes employer payroll and income tax withholding obligations, as well as wage and hour laws and statutory benefits, just to name a few.
Tax Implications
Because income tax requirements are based on where income is sourced, rather than where an employer is headquartered, employers must determine their tax obligations based on the state in which their remote employee is performing work. This generally includes registering with the state as a new employer, withholding employee state income tax, and remitting employer state payroll and unemployment taxes.
Wage and Hour Laws
The Fair Labor Standards Act (FLSA) governs wage and hour requirements at the federal level. However, many states have enacted their own laws that are more generous to workers than the FLSA, and employers must comply with these policies, as well. For instance, some states require that meal and rest breaks be provided, where federal law does not. Minimum wage rates and overtime pay laws differ by state, as do final pay requirements. A handful of states also have minimum salary thresholds for exemption that exceed the federal requirements.
Paid Leave Laws
While not required at the federal level, many states and localities have passed laws mandating paid sick leave for employees. The laws vary by jurisdiction with respect to employer size and the amount of leave required, and they often include notice requirements.
Similarly, numerous states have laws regulating vacation leave when voluntarily offered by employers. These laws might require employers to pay out accrued vacation leave upon separation, prohibit use-it-or-lose-it provisions or impose other limitations on employer leave policies.
Additional state leave laws might also entitle employees to time off from work for other reasons, such as absences related to domestic violence, voting or jury duty, or family and medical leave.
Other Considerations
The nuances of state laws do not end there. Worker anti-discrimination protections vary at the state level, as do pay equity laws and sexual harassment training requirements. Some states require employers to reimburse employees’ business expenses; others have statutory disability benefits. The list goes on. Employers will need to examine their obligations under various state laws when determining how to manage their remote workforce.
The Department of Labor (DOL) has launched a new concentrated outreach initiative. For business owners, that means the DOL has promised to actively reach out via radio announcements, social media platforms and neighborhood posters informing employees of their rights under the Fair Labor Standards Act (FLSA).
You may now be thinking “What does that have to do with me? I pay my employees to work”. While this may be mostly true, often we (or our managers) inadvertently allow or encourage our employees to work off the clock. Before your internal defenses kick into high gear, let me provide a few examples of how this could occur:
Over the past year, business owners and managers have dedicated their time, energy and focus to keeping the essential business doors open or attempting to reopen and get employees back in the office. To allow employees to safely return to work, you have had to operate/reopen your business within CDC guidelines, transition your business to accommodate a remote workforce, follow OSHA’s recommendations, keep up with Federal Equal Employment Opportunity Laws related to the COVID-19 pandemic, as well as the interaction between the Americans with Disability Act (ADA), Title VII of the Civil Rights Act of 1964, and the Genetic Information Nondiscrimination Act (GINA). It is no wonder some of our focus on day-to-day compliance may have slipped.
My company’s mission is to be The Employer Advocate. Under the new administration, changes are happening at lightning speed and, as your advocate, we are here to help you navigate through changes as they occur. Administrators Advisory Group (AAG) is a benefits brokerage that works with small to mid-size businesses, specializing in human resources compliance. We work alongside your human resource team to keep you up to date with the latest workplace rules and regulations.
The Department of Labor (DOL) campaign is the first in our four-part series designed to let you know what changes have taken place that may affect your business. In the following weeks, we will cover changes regarding the Family First Coronavirus Response Act (FFCRA) as amended under the CARES Act, changes occurring within OSHA, and a new federal taskforce created whose goal is to unionize your employees.
While Wage & Hour rules have not changed, the informational outreach by the DOL has just begun. The biggest change comes in the form of visibility and accessibility of the information, beginning with the revamp of their website. The DOL has promised to proactively reach out to employees using radio public service announcements, national webinars, social media messages, and posters.
Reminding employers and employees alike that employees must be paid for ALL hours worked is the center of this outreach! Even if you don’t ask an employee to work overtime, even if it’s done remotely, and even if you aren’t aware (but should have been), the employee is entitled to be paid.
Wage & Hour rules can be one of the many landmines that employers have to navigate on a daily basis. With AAG on your side, we will help you ensure you are prepared in case the DOL shows up on your doorstep. Let us know if you have questions or would like to review some of your existing practices or policies.
Earlier this month, the DOL’s Wage and Hour Division issued new model forms for employers to use when administering employee leave under the FMLA. The revised model notice of rights, certification, and designation forms were immediately effective and are now available to assist employers and employees in meeting their FMLA notice and certification obligations.
The federal Family and Medical Leave Act (FMLA) covers private employers with 50 or more employees as well as public agencies and public and private elementary or secondary schools, regardless of the number of employees. The FMLA generally entitles eligible employees to take up to 12 weeks of unpaid, job-protected leave in a 12-month period for specified family and medical reasons and additional leave to care for a covered servicemember.
All covered employers must post a general notice about the FMLA (FMLA poster) in each workplace and distribute a notice to new hires. Additionally, covered employers who have FMLA-eligible employees must provide them with notices about: FMLA eligibility status, rights, and responsibilities; when specific leave is designated as FMLA leave; and the amount of time that will count against their FMLA leave entitlement. When an employee requests FMLA leave due to their own or a covered family member’s serious health condition, or for military family leave, the employer may require appropriate certification.
The DOL’s Wage and Hour Division (WHD) released revised versions in mid July of its model notice of rights, certification, and designation forms under the FMLA. According to the WHD, the new forms, which are effective immediately, are “simpler and easier for employees, employers, leave administrators and healthcare providers to understand and use.”
The following updated FMLA forms are now available to assist employers and employees in meeting their FMLA notification and certification obligations:
These optional-use forms can be used by employers to provide required notices and by employees to provide certification of their need for FMLA qualifying leave. The new forms are electronically fillable PDFs that can be saved and transmitted electronically. Employers may still use the agency’s prior model forms or they may use their own forms, as long as they provide the same basic notice information and require only the same basic certification information.
To some extent, the new model forms simplify FMLA administration by substituting check boxes for some previously required written responses. The revised Notice of Eligibility & Rights and Responsibilities form contains additional information on the substitution of paid leave and concurrent leave usage during a qualifying FMLA absence. The revised certification forms similarly include additional information on the circumstances in which employers may obtain follow-up information from health care providers and are reorganized to make it easier to determine whether a serious health condition exists. As the WHD made clear, an employee who already provided the required FMLA information using the old certification form cannot be required to provide that same information using the revised form.
Notably, the WHD did not revise the FMLA poster or issue a generic “Fitness-for-Duty” certification. Further, the new forms do not address the paid sick leave or expanded FMLA leave requirements of the Family First Coronavirus Response Act (FFCRA).
Courtesy of Fisher Phillips LLP
2018 has seen quite a few changes in labor and employment law. But with the New Year having just rung in, it’s time to look forward rather than backward. The question on the tip of everyone’s tongue is: what’s next? Here are our predictions for what to expect in 2019 when it comes to workplace law.
Expect More Class Actions
We’re going to start out with the bad news. Because of the potential for a big payout, class and collective actions are a favorite for plaintiffs’ attorneys. You should not expect that to change in 2019.
The California Supreme Court’s decision in Troester v. Starbucks Corporation has opened up even more avenues for potential wage and hour claims in the Golden State, and the trend could hit the rest of the country, too. In July 2018, the California Supreme Court narrowed the scope of the de minimus doctrine under state law and held that employees must be paid for off-the-clock work that regularly lasts several minutes per day. While the California Supreme Court refused to shut the door entirely on the de minimus doctrine, it noted that technological advances should help employers track small bits of time, and that employers can restructure work to avoid off-the-clock time.
Employers outside of California may see plaintiffs’ attorneys attempting to use the same rationale employed by the California Supreme Court to argue that the de minimus doctrine should not apply in the circumstances of their case. Moreover, with more employees having remote access to emails and other mobile platforms, the number of ways for employees to argue that they were working off the clock has increased.
The Ascendance Of Arbitration Agreements
One way for employers to avoid class actions is through arbitration agreements. Last May, the Supreme Court ruled in Epic Systems Corporation v. Lewis that mandatory class action waivers in arbitration agreements are enforceable. As a result, you can expect to see an increase in the number of companies rolling out updated agreements to include class action waiver language. (Note: if you have not had your arbitration agreement reviewed since May when Epic Systems came out, make it your New Year’s Resolution to do so.)
However, while popular with employers, arbitration agreements are decidedly not so with the plaintiffs’ bar. Expect to see plaintiffs’ counsel becoming more creative in challenging arbitration agreements on grounds related to unconscionability.
We may even be starting to see a backlash against arbitration agreements. Most recently, some law students have been pressuring big law firms to do away with them when it comes to their own hires. And last year, the California legislature passed a law banning mandatory employment arbitration agreements for claims arising out of alleged violations of the Fair Employment and Housing Act or California Labor Code. Although the bill was ultimately vetoed by outgoing Governor Jerry Brown, expect to see the fight continue in 2019.
Don’t Look To Congress To Lead The Way
With Democrats controlling the House, and Republicans controlling the Senate and Executive Branch, you can expect that most employment legislation will be dead on arrival. When it comes to innovative legislation impacting the workplace, you should look to the states to lead the way. This is not to say that there won’t be any changes to labor and employment law on the federal level in 2019. However, we expect the most significant changes to be made by agencies (such as the National Labor Relations Board, the Department of Justice, the Equal Employment Opportunity Commission, etc.) rather than Congress.
NLRB Will Narrow The Definition Of Joint Employer
One of those agencies—the NLRB—made noise last year when it published a proposed rule that would alter the definition of joint employment to make it more difficult to hold multiple businesses responsible for alleged labor and employment law violations by staffing companies, franchisees, and other related organizations. Expect to see continued movement and updates on this proposed rule in 2019.
But before getting too excited at any potential changes, you should keep in mind that states may have their own rules regarding joint employment that could differ from what the NLRB comes up with. Any new rules may not affect your organization’s liability under state law.
USDOL Has A Full Plate
Another agency you should keep an eye on is the U.S. Department of Labor (USDOL). Not only is the USDOL considering its own joint employment rule, but the agency has proposed regulations regarding the regular rate of pay and white collar exemptions (also known as the “overtime” rule).
The regular rate of pay is of particular importance to employers because it is used to calculate the overtime rate of non-exempt employees. While we know that changes to the proposed regulations are targeting sections 7(e)(2) and 7(g)(3) of the Fair Labor Standards Act, the USDOL has been rather vague about what the proposed regulations will look like. The USDOL states that they aim to “provide employers more flexibility in the compensation and benefits packages they offer employees” and “lessen litigation regarding the regular rate.”
The regulation relating to the white collar exemption is less opaque. As employers may recall, the minimum salary threshold for white collar exemptions was supposed to increase from $455 per week (or $23,660 annually) to $913 per week (or $47,476 annually), with the amount to be updated every three years. However, right before these changes were scheduled to take effect in December 2016, a federal court blocked their implementation. Under a new administration, we expect that we will see a more modest proposed increase in the white collar exemption in 2019—perhaps in the low $600s per week.
Paid Sick Leave Will Continue To Be On Trend
Although there are no federal laws mandating paid sick leave (yet), you can expect that paid sick and family leave will continue to be a big issues, with states and localities picking up the slack. Right now, 11 states and the District of Columbia require paid sick leave. Additionally, various cities and counties have stepped in where states have not provided for such leave or to give more generous benefits than the state.
You generally should anticipate an expansion of paid sick leave benefits in 2019. The New Jersey Paid Sick Leave Act went into effect October, while Michigan, Washington, and Westchester County (NY) have paid sick leave laws going into effect this year.
While some municipalities in Texas want to get in on this trend, a Texas appeals courtruled the Austin Paid Sick Leave Ordinance violates the state constitution because it preempts the Texas Minimum Wage Act. San Antonio passed its own sick leave ordinance in 2018, but it may only be a matter of time before it, too, is challenged in court.
Privacy Issues Remain Paramount
The EU General Data Protection Regulation (GDPR) went into effect in May 2018, ushering in sweeping reforms for companies that do business in the EU or employ EU residents. The GDPR threatens strict penalties for non-compliance—up to the greater of 20 million Euro or 4 percent of global annual turnover in the prior year. Having been in effect less than a year, it is still not clear how fines will be assessed and what the potential exposure will be for companies that are found to be non-compliant. As 2019 progresses, you can expect to see many investigations that began in 2018 come to a close, and we’ll begin to get a better idea of how regulatory authorities will assess fines for non-compliance—including whether the fearsome 4 percent penalty will be assessed.
Lest you think the major developments in privacy are safely across the ocean in Europe, you can be sure there will be plenty of action closer to home in 2019. The Illinois Supreme Court currently has a case before it over whether a technical violation of the Illinois Biometric Information Act (BIPA) gives standing to sue absent a person suffering a concrete injury. If the court answers in the affirmative, you can expect to see a continued proliferation of BIPA class actions.
Further, California passed the California Consumer Privacy Act (CCPA) in 2018, which goes into effect at the beginning of 2020. While the law is not as comprehensive as the GDPR, California employers will soon need to figure out this year if it applies to them. You should take compliance seriously: the CCPA allows consumers whose rights have been violated under the Act to bring suit for actual damages or statutory penalties (whichever is greater) under a mechanism somewhat akin to a California Labor Code Private Attorneys General Act. You can expect the proliferation of CCPA lawsuits will be on next year’s list of predictions.
It doesn’t usually sit well with employees, but they can be required to use their accrued paid time off (PTO) during inclement weather events, wage and hour attorneys say.
“Unless there is a state law restriction or a written policy to the contrary, employers may require employees to use their PTO to cover absences,” said Paul DeCamp, an attorney with Jackson Lewis in Reston, Va., and a former administrator of the Department of Labor’s Wage and Hour Division.
It’s important for an employer to have an inclement weather policy spelling out the rules that apply to exempt and nonexempt employees when the employer is open during inclement weather vs. when it is closed.
The rules for nonexempt employees are straightforward—they are paid only for the time worked. If the employer closes for some of a workweek due to inclement weather, it must pay an exempt worker their usual salary if the employee performs any work during the workweek, even if remotely.
A PTO policy might specifically reference the employer’s ability to require the use of PTO by employees to cover weather-related absences. If an employer closes the office and requires the use of PTO to cover the day, the impact on morale is likely to be negative—more so than if the office is open but the employer allows employees who can’t make it in to use a PTO day. If the employer decides in advance to shut down and it turns out that the expected inclement weather does not materialize, employees who are forced to use PTO on a day they could have made it in will almost certainly react negatively.
It is important that employees understand the expectations about working away from work ahead of time, along with employees being required to accurately report all time worked. Employers should also have policies about how employees can challenge the accuracy of paychecks and the consequences for not making timely challenges.
Courts have held that employees who claim to have worked off-the-clock but who have not notified the employer about that worked time are not entitled to pay for that time.
If an employer stays open despite inclement weather and an exempt employee chooses not to work, that is a personal decision and the day may be docked without jeopardizing the exempt status.
A written policy is an opportunity for an employer to underscore the importance of employees’ safety when determining closures or whether employees should attempt to report to work in inclement conditions.
Employers sometimes ask whether they may discipline employees for choosing to stay home during inclement weather. The employer does not want to allow employees to hinder operations or to force a closure, but the last thing an employer wants to see is a situation where a supervisor orders an employee to come to work in a snowstorm and the employee gets into a car accident. Employers should think very carefully before disciplining in this situation and to err on the side of employee and public safety.
One of the most common questions employers have during inclement weather is if they can force employees with insufficient PTO balances to go into a negative balance situation, or, in other words, whether they can advance the employee extra PTO and then recoup that advance over time.
Generally, an employer can do that, assuming the practice complies with state law and the employer’s written policies.
Another frequent issue that arises is how to treat PTO deficits upon an employee’s separation from employment. State law will dictate whether and when employers may deduct the negative PTO balance from the final pay of nonexempt employees.
For salaried exempt employees, whether the employer can deduct that balance from final pay depends on whether the employer could have deducted it from the employee’s pay at the time of the absence—the missed time that gave rise to the PTO deficit.
President Obama has proposed expanding the availability of overtime pay, which would cause the Department of Labor to do its first overhaul of Fair Labor Standards Act (FLSA) regulations in 10 years.
The President signed a memorandum on March 13, 2014, instructing the Department of Labor to update regulations about who qualifies for overtime pay. In particular, he wants to raise the threshold level for the salary-basis test from the current $455 per week in order to account for inflation. The threshold has been raised just twice in the past 40 years. The President did not specify the exact amount the threshold should be raised though.
“Unfortunately, today, millions of Americans aren’t getting the extra pay they deserve. That’s because an exception that was originally meant for high-paid, white-collar employees now covers workers earning as little as $23,660 a year,” Obama said in his remarks on overtime pay.
The memorandum also suggests that both the primary duties and pay of some exempted employees do not truly fit in the executive, administrative and professional employees exemptions, referred to as the white-collar exemptions under FLSA.
In a fact sheet on the President’s memorandum, the White House said: “Millions of salaried workers have been left without the protections of overtime or sometimes even the minimum wage. For example, a convenience store manager or a fast food shift supervisor or an office worker may be expected to work 50 or 60 hours a week or more, making barely enough to keep a family out of poverty, and not receive a dime of overtime pay.” The FLSA’s minimum wage would not protect a salaried worker because salaried workers’ pay must satisfy the weekly salary-basis test rather than the Federal hourly minimum wage, which is $7.25 per hour. The hourly minimum wage in Florida is currently $7.93 per hour.
The memo also pointed out that “only 12% of salaried workers fall below the threshold that would guarantee them overtime and minimum wage protections.“ The fact sheet also called the current FLSA regulations outdated, noting that states such as New York and California have set higher salary thresholds.
Small businesses will be hit particularly hard by a change in the FLSA regulations.
If the regulations shrink the current white-collar exemptions, employers would have two main options to hold down costs. They would have to either increase workers’ salary above the new salary-basis threshold (to avoid paying overtime) or leave employees in the nonexempt category and pay them overtime. Companies could also hire more employees, but the other two options are more likely.
Implications for HR
Once tightened white-collar exemptions are implemented, which is not likely to happen for months now, it could result in far-reaching implications for HR, including wage and hour audits and layoffs. The money to pay for increased overtime wages has got to come from somewhere which might mean layoffs, reducing overtime and taking a fresh look at the fluctuating workweek.
When asked at a press briefing about the burden on businesses if the Obama administration succeeds in efforts to both increase the federal minimum wage and revise FLSA regulations, Betsey Stevenson, a member of the White House’s Council of Economic Advisers, said, “We think these two items are very different, but, obviously, they do feed into the same thing, which is people should be rewarded for fair work.” She suggested that some workers in the white-collar exemptions aren’t even earning minimum wage for all the work they do at low salaries.
Even though the president did not assign a number for the minimum salary-basis threshold, Stevenson said the overtime “protections have been eroded over time. This threshold in 1975 was nearly $1,000 in today’s dollars; today it’s $455.” Stevenson believes that the rule should be modernized as a matter of the “basic principle of fairness.”
We will continue to keep you abreast of any changes to FLSA as well as other regulations that can impact your business. If you have any questions about the current or proposed FLSA regulations, please contact our office.
The topic this month focuses on identifying five of the stickiest Wage & Hour issues that employers face under the Fair Labor Standards Act (FLSA).
FLSA class actions are up approximately 70% since 2000 and more than half of all the FLSA lawsuites being filed in Federal courts nationwide are being filed in Florida.
Some of these issues covered include:
Please contact our office directly if you have any Wage & Hour or FLSA questions and how it could be impacting your business.