6-Month Compliance Delay for New FLSA Overtime Rule?

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There may be hope for employers who are having difficulty preparing for the upcoming mandatory new Fair Labor Standards Act (FLSA) Overtime Rule compliance. The House of Representatives passed a bill Sept. 28 that would give employers a 6-month compliance delay. That same day, Sen. James Lankford, R-Okla., introduced a bill in the Senate to delay the rule.

As it stands, employers must complete their job description audits before Dec. 1, 2016, to determine which positions are exempt and non-exempt from the overtime rule and adjust pay bands accordingly, so they can implement wage and salary adjustments effective Dec. 1, 2016.

If enacted, employers would have until June 1, 2017, to comply.

Information provided on this site is not legal in nature. All reviews and opinions are submitted and based upon extensive research, experience in the human resources and labor relations fields, and are not, in any way, legal opinions.

 

6-Month Compliance Delay for New FLSA Overtime Rule?

Don’t Halt Compliance Efforts Just Because of Legal Challenges to the New Overtime Rule

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On Sept. 20, 2016, Nevada and Texas led 21 states, including the Commonwealth of Kentucky, in filing a lawsuit to challenge the Department of Labor’s (DoL’s) new overtime rule changes set to go into effect Dec. 1 of this year. Right behind them, the U.S. Chamber of Commerce, National Automobile Dealers Association, National Association of Wholesaler Distributors and other groups filed their own appeal.

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“The DoL went too far in the new overtime regulation,” said Randy Johnson, senior vice president of Labor, Immigration, and Employee Benefits for the U.S. Chamber. “We’ve heard from our members, small businesses, nonprofits, and other employers that the salary threshold is going to result in significant new labor costs and cause many disruptions in how work gets done,” Johnson said in a press release. “Furthermore, the automatic escalator provision means that employers will have to go through their reclassification analysis every three years. In combination, the new overtime rule will result in salaried professional employees being converted to hourly wages, and it will reduce workplace flexibility, remote electronic access to work, and opportunities for career advancement.”

The  Chamber Suit

  • The Chamber suit charges that the rule departs from the intent established by Congress in the Fair Labor Standards Act (FLSA) 78 years ago in that:
  • It sets an excessively high threshold for determining which positions qualify as executive, administrative, and professional.
  • The DoL “ignored regional and industry differences that have been previously acknowledged,” which results in a one-size-fits-none salary threshold.
  • The automatic triennial update “with no rulemaking or taking input from affected parties is not authorized by the Fair Labor Standards Act or any other relevant statute.”

The  States’ Suit

The states’ suit notes:

  • The new rule disregards the actual requirement of the FLSA by doubling the minimum salary threshold (from $23.660 to $47,476) that applies regardless whether an employee actually performs white-collar duties.
  • The best first indicator of white-collar exempt status is if a person in the exempt position actually performs white-collar work, not whether the salary meets the minimum.
  • The triennial salary increase based on the 40th percentile of the weekly earnings of full-time salaried workers in the lowest wage Census region. The increase “not only evades the statutory command to delimit the exception from ‘time to time,’ as well as the notice and comment requirements of the Administrative Procedure Act, it also ignores the DoL’s prior admissions [in President George W. Bush’s administration] that ‘nothing in the legislative or regulatory history…would support indexing or automatic increases.”

The new rule unconstitutionally requires states to pay overtime to state employees that are performing white-collar functions when the employees earn less than an amount to be determined by the executive branch of the federal government.

Lawsuits Can Fail

As heartening as these lawsuits may be to businesses, there is always the possibility that the lawsuits fail. Nearly since the rule was proposed, there have been experts who have predicted that the rule would be challenged in the courts.

But as Lawrence Mishel, Ph.D., economist and president of the Economic Policy Institute, a nonpartisan, Washington, D. C., think tank said in a recent interview by Society for Human Resource Management, “The DoL fulfilled all of their obligations during the rulemaking proceeding. They crossed every t and dotted every i. The final overtime pay rule update should be implemented as planned starting Dec. 1.”

With that in mind, don’t stop preparations for complying with the new overtime rule. The deadline for having everything in place will be here sooner rather than later.

Information provided by writer, Diane Faulkner, is not legal in nature. All reviews and opinions are submitted and based upon extensive research, experience in the human resources and labor relations fields and are not, in any way, legal opinions.

Don’t Halt Compliance Efforts Just Because of Legal Challenges to the New Overtime Rule

Can You Cut an Employee’s Pay and Not Get Sued?

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Anytime you want to cut an employee’s pay, you run the risk of getting sued. It’s just that simple. This is especially true if the employee is in a protected class. Anyone can try to file a lawsuit for any reason. Let’s just get that out there.

That said, the reason and circumstances surrounding a cut in pay are key.

In the U. S., employers can cut pay as long as the employee isn’t covered by a collective bargaining agreement or some other agreement, like an employment contract. The cut also cannot reduce the pay to a level that’s less than the minimum wage. If the position is  exempt from the overtime laws, (Fair Labor Standards Act), then you must keep the salary above the minimum to maintain exempt status. Just know that there is the new minimum salary level of $47,476 that goes into effect December 1, 2016, and that if the person is to stay exempt, that test must still be met.

Note: the employee may be eligible for unemployment compensation for the pay that’s lost.

How Much Notice Must I Give?

In Florida, where I am, there are no laws that address when or how you may cut an employee’s pay or whether an employer must provide notice prior to the reduction. That said, the reduction can only apply to hours worked after the status change. (i.e. Salaried workers would be paid the new rate the following full workweek, as you cannot separate out hours without giving up exempt status). It’s up to you–in Florida– if you want to give notice and how far in advance you want to do so.

To check your state wage payment laws, check with your state Department of Labor or look up your state on The Lunt Group’s Employment Law Handbook.

When is it Illegal to Cut Pay?

  • When you don’t give notice (in some states). Pay cuts can’t be retroactive (in all states).
  • When you cut pay in response to protected activity. e.g. An employee files a sexual harassment complaint, and then you cut the employee’s pay as a result. (Title VII retaliation). An employee complains about working conditions or wages on social media, and you cut pay as a result. (NLRA retaliation–NLRA covers non-union employees, too).
  • When you only cut pay for specific classes. e.g. It’s discriminatory to cut all Asians’ pay, but no one else, or pay for everyone over 40, but no one else, etc.
  • When the cut drops pay below minimum wage, even if the employee agrees to the cut. Where federal and state minimums differ, the higher rate applies.
  • When there is a contracted amount or there is an employment contract. Most common in union situations where each job’s rate is clearly spelled out.
  • When the exempt employee pay cut is temporary. One requirement for exempt employees is that their pay rate remains the same, regardless of hours worked. A temporary cut is illegal, e.g. cut for a few weeks or months, but a permanent cut is legal.
Circumstances Matter

Circumstances are important when choosing to cut pay. If a business is foundering, then it’s critical that the CEO take the same pay cut as everyone else. To do otherwise would further decrease morale and set people off to find work elsewhere. Taking the cut would still be financially shocking, just not as emotionally devastating, because the pain would seem to be equally spread.

There are times, though, when an employee experiences a substantial job change–down, not up.  Demotions in jobs may also equate to demotions in pay. It all depends upon your wage/salary bands and  your position descriptions.

Say you have several different offices of different sizes, each managed by a branch manager. While the core management duties of each manager are the same, e.g. manage people, hire and fire, evaluate, etc., the size of each branch is different. Corresponding responsibilities would also be different. One manager may have 20 employees, while another has only three. The branch manager of the largest branch sits participates in meetings with the president and other department managers to make significant decisions for the enterprise, while the others do not. If each branch manager is working under the same position description and is paid within the same salary band as the others, demoting one and cutting pay could get tricky, especially if the one being demoted is in a protected class. There’s room for legal action.

The fix is to update position descriptions for each branch and denote them as level one, two, three, whatever. Next, you would update you salary bands to correspond with how each branch prices out. Broadcast the update throughout the enterprise and specifically communicate with each branch manager as to the new job titles and salary bands. Once you’ve done this, you’re better set in moving forward with the demotion as long as you have your documentation in order. (The updates should be done for all positions, especially if they haven’t been done in a while).

Once you have your ducks in a row, you should feel more comfortable proceeding with the demotion and pay cut.

As always, whenever you are unsure about the steps to take in tricky employment situations, a labor attorney can always help you make the right decisions to keep you out of court.

Information provided on this site is not legal in nature. All reviews and opinions are submitted and based upon extensive research, experience in the human resources and labor relations fields, and are not, in any way, legal opinions.
Can You Cut an Employee’s Pay and Not Get Sued?

5 Steps to Prepare for New Overtime Exemptions Rule

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It’s almost mid-year. Are you prepared for the impending changes to the overtime exemptions rule? This rule isn’t like the Affordable Care Act where the changes will be doled out over the course of a decade. No. Once the Department of Labor (DoL) makes its final ruling, you’ll likely have fewer than 90 days, if not fewer than 60 days, to comply. And, those days will be before the year’s end.

That means you need to start preparing now, if you haven’t already, because both your 2016 staffing and budget plans will be affected.

Even though the final rule hasn’t been handed down, there are things you can do to prepare, regardless the form the rules take:

1. Audit exempt employees’ work hours

The DoL has proposed to raise the minimum exempt employee salary threshold from $23,660 to $47,476, so the first step you need to take is to calculate the number of hours current exempt employees work who make less than the new minimum. You can’t assume exempt employees all work 40 hours a week. Many work 45, 50, or more. Many take meetings or conduct job interviews after hours. Others are checking and responding to emails and voicemails after hours and on the weekends. Don’t allow yourself to be blindsided.

The next thing to consider is whether to give raises to those who are below, but very close to, the threshold and who are most likely to work overtime to avoid the overtime obligations.

Note: Non-discretionary bonuses may be allowed to be counted, and possibly commissions, toward 10 percent of workers’ salary levels. That may help to move a few of those near the line over the threshold without having to give them a raise. But, no one knows until the final rules are issued.

2. Assess effects on benefits

Do you have certain benefits for exempt employees that non-exempt ones don’t have? That’s a question you’ll want to address. Once re-classifications are instituted, many people may be losing benefits they may have been enjoying for years.

If that’s the case, should you change your benefits plans to allow those reclassified workers to keep their benefits, or do you want to eliminate those benefits to make up for any costs as a result of now paying those workers overtime?

3. Expand time-tracking systems

Any way you look at it, the non-exempt population is going to swell. That means you need to expand your time-tracking systems to ensure proper overtime pay. A visit with the tech department now will go a long way toward implementing a workable system to handle the new load later in the year.

4. Look at remote work arrangements

What do the impending rule changes mean for remote work: checking and responding to work email and voicemail, taking off-site meetings and calls after work, etc.

You can make all the rules you want to prohibit employees from engaging in these activities, but some of them are just going to do it. And, whether you agree to the overtime or not, whether or not you approve it, you still have to pay for the time spent doing it. And, when that happens, you need to ensure you have a way to track that time so you can correctly compensate them. That’s another reason to get with your IT people now rather than later. They  need time to come up with tracking mechanisms for after-hours and at-home work.

It’s interesting to note that in the Spring 2015 DoL Regulatory Agenda,  the DoL said it is seeking information on “… [T]he use of technology, including portable electronic devices, by employees away from the workplace and outside of scheduled work hours …”

This means there could be  some rule-making on this subject as well — like perhaps a definition of what qualifies as “de minimis” work.

Currently, the FLSA says “de minimis” work (typically five minutes or less) done beyond the 40-hour workweek by non-exempt employees is not compensable.

The common practice of workers reading and responding to emails off the clock on their smartphones, though, has complicated the issue of “de minimis” work.

5. Create a communication plan

Believe it or not, (the DoL doesn’t), being reclassified from exempt to non-exempt feels like a demotion.

If you don’t plan to raise some (or all) of your currently exempt workers’ salaries to the new minimum, you need to have some sort of communication plan in place. If you’re not going to raise some workers’ salaries and they’re about to be reclassified as non-exempt, you need a plan in place for how you’ll break the news to them.

Biggest issues to cover:

  • Punching a clock. More workers will be doing it, and it will look and feel like a demotion. How will you explain why it’s now necessary?
  • Loss of flexibility. Taking time off to go to the doctor or attend a child’s event could result in less pay for newly minted hourly workers. How will you break this news to them?  Will you let them make up the time? If so, will the other hourlies be allowed to make up time?

Bonus: Potential duties test changes

The DoL may eliminate the “concurrent duties” rule and require employees to spend more than 50% of their time exclusively on exempt duties for them to maintain an exempt classification.

Assume those changes will be adopted and you could avoid costly surprises down the road.

Information provided by writer, Diane Faulkner, is not legal in nature. All reviews and opinions are submitted and based upon extensive research, experience in the human resources and labor relations fields and are not, in any way, legal opinions.

5 Steps to Prepare for New Overtime Exemptions Rule

Pay Transparency and You: OFCCP Issues Final Rule

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This month, the Office of Federal Contracts Compliance Programs (OFCCP) issued its final rule on Executive Order 13665, otherwise known as pay transparency. The regulations will become effective January 11, 2016.

What Does This Mean?

With the Order in place, federal contractors will be prohibited from discriminating against employees, and even applicants, who enquire about or discuss compensation. The requirements will apply to all contractors and subcontracts covered by the non-discrimination and affirmative action provisions of Executive Order 11246. This includes contractors who are not required to develop written Affirmative Action Plans.

Who Qualifies as a Federal Contractor?

According to federal guidelines, an organization meets the “federal contractor” criteria if it:

– has a single federal contract, subcontract, or federally assisted construction; or
– has federal contracts or subcontracts that, combined, are worth more than $10,000 in    any 12-month period; or
– has government bills of lading; or
– serves as a depository of federal funds; or
– is an issuing and/or paying agency for U. S. Savings Bonds and notes in any amount.

The Final Rule will apply to contracts entered into or modified on or after January 11th of next year. (Contracts are considered “modified” if there is any alteration in their terms and conditions, including supplemental agreements and extensions).

What is Protected?

Under the new rule, employees cannot be disciplined for asking about or discussing their own or other employees’ pay and benefits. Applicants cannot be discriminated against for asking about or discussing employees’ compensation.

Equal Opportunity Clause Changes

The Equal Opportunity Clause has been revised to include the following language:

“The contractor will not discharge or in any manner discriminate against any employee or applicant for employment because such employee or applicant has enquired about, discussed, or disclosed the compensation of the employee or applicant or applicant has enquired about, discussed, or disclosed the compensation of the employee or applicant or another employee or applicant . . .”

This non-discrimination provision does not apply if the employee has access to the employer’s compensation information as part of h/her job responsibilities.

Other revised language includes:

“This provision shall not apply to instances in which an employee who has access to the compensation information of other employees or applicants as part of such employee’s essential job functions discloses the compensation of such other employees or applicants to individuals who do not otherwise have access to such information, unless such disclosure is in response to a formal complaint or charge, in furtherance of an investigation, proceeding, hearing, or action, including an investigation conducted by the employer, or is consistent with the contractor’s legal duty to furnish information.”

Other Modifications

The OFCCP modified its proposed definition of “essential job functions” in a way that benefits contractors. Under the proposed definition, a contractor would have violated the provision if it had disciplined an employee who had authorized access to compensation information, but such access was not a “fundamental” part of the employee’s job responsibilities.

In response to concerns expressed by the contractor community, the Final Rule defines a job function as essential if:

– the access to compensation information is necessary in order to perform that function or another routinely assigned business task; or
– the function or duties of the position include protecting and maintaining the privacy of employee personnel records, including compensation information.

The Main Issue

The OFCCP recognized the main issue as whether an employee has authorized access to compensation information rather than the importance of that access in performing the job.

How is Compensation Defined?

Under this rule, compensation is defined as “any payments made to, or on behalf of, an employee or offered to an applicant as remuneration for employment, including, but not limited to, salary, wages, overtime pay, shift differentials, bonuses, commissions, vacation and holiday pay, allowances, insurance and other benefits, stock options and awards, profit sharing and retirement.”

Compensation information is defined as “the amount and type of compensation provided to employees or offered to applicants, including, but not limited to, the desire of the contractor to attract and retain a particular employee for the value the employee is perceived to add to the contractor’s profit or productivity, the availability of employees with like skills in the marketplace; market research about the worth of similar jobs in the relevant marketplace; job analysis, descriptions, and evaluations; salary and pay structures; salary surveys; labor union agreements; and contractor decisions, statements and policies related to setting or altering employee compensation.”

Can Contractors Defend Against Alleged Retaliation?

As long as the defense is not based on a policy that prohibits, or tends to prohibit, employees or applicants from discussing compensation, contractors do have a defense against claims alleging retaliation for discussing compensation. A contractor can take advantage of this defense by showing that it has consistently and uniformly disciplined similarly situated employees. Also, the “essential job functions defense,” which the OFCCP describes as a “complete defense,” provides protection to contractors who take adverse action against an employee who has access to compensation information and discloses the information to individuals who do not otherwise have access to it. The employee’s disclosure, however, would still be protected if it was “in response to a formal complaint or charge, in furtherance of an investigation, proceeding, hearing, or action, including an investigation conducted by the contractor, or is consistent with the contractor’s legal duty to furnish information.”

Must Contractors Provide Notice?

Contractor must use language prescribed by the OFCCP when notifying applicants and employee of their rights. This mandatory language must be included in existing employee handbooks or other manuals, and must be posted electronically or in conspicuous places. The OFCCP will also be updating the “EEO is the Law” poster to include this notice.

Disclaimer: I am not a licensed attorney. My blogs are based on my own experiences, interviews (where credited), and loads of research, and do not represent legal advice.

Pay Transparency and You: OFCCP Issues Final Rule