Wage & Hour

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.

justice-building

“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

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

15 Employment and Labor Resolutions for 2015, part 2 of 3

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In the second part of the series of resolutions everyone should make to keep their human resource department running smoothly — and legally, we have five more entries:

 6. Audit your wage-hour compliance. Unintentional overtime and wage-hour law violations have a new name in many quarters: “wage theft.” Federal and state agencies and plaintiff’s lawyers, sometimes encouraged by labor unions and their affiliate groups, are saying “show me the money” and finding it. In addition, the U.S. Department of Labor has said that it will attempt to narrow the white-collar exemptions this year. (Although the DOL says the changes will not be drastic, they are expected to be drastic). Among other things, a good wage-hour audit will include ensuring that lower-wage employees are getting at least the applicable minimum wage; that employees are not being required or “pressured” to work off the clock, or “winked at” when they do so; that the employees classified as “exempt” really are; and that any “independent contractors” really are (see also Resolution No. 1). Be sure that the review includes compliance with applicable state and local minimum wage laws, too. Many states now have a higher minimum wage than the Fair Labor Standards Act rate.

7. Update your EEO/no-harassment policies, and get that training done! In just the past year, the EEOC has taken the position that pregnancy and related conditions (including lactation) must be reasonably accommodated. The EEOC and the Office of Federal Contract Compliance Programs, which enforces the affirmative action laws that apply to federal contractors, both agree that “gender identity” is a protected category and that discrimination based on sexual orientation or gender identity violates Title VII. Do your policies reflect this? Do your employees know the new rules? Do victims of harassment and discrimination know that they have recourse?

8. Review your use of criminal background and credit information in hiring decisions. Many state and local laws prohibit employers from asking about criminal history on employment applications, and the EEOC has taken an aggressive position on the use of criminal or credit information in making employment decisions. You can still get this information, but are you getting it properly? If you find that an individual has a criminal or credit problem, are you making the required “individualized analysis” that takes into account, among other things, the nature of the conviction, the years that have passed, and the particular position for which the individual is applying? Did you grab some “canned” rules from a website, or are your rules customized to fit your industry, your workforce, and the people you serve?

9. If you’re a federal contractor, make sure you are up to date on all of the OFCCP’s new requirements. For example, the new requirement that you prohibit discrimination or harassment based on gender identity. The new minimum wage (applicable to some, but not all, federal contractors). The new scheduling letter and itemized listing. The proposed rule prohibiting employers from requiring that employees avoid discussing their pay. The rule requiring employers to “air their dirty linen” by disclosing certain violations of federal labor and employment laws. The new rule on disability discrimination/accommodation and veterans. (“Perform compensation analysis” is another good resolution if you haven’t done one lately).

10. Make sure you’re in compliance with the new injury and illness reporting requirements under the Occupational Safety and Health Act, which took effect on January 1. (Reported on this new rule back in September).

 Check back next week for the last installment of the 15 resolutions.

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.

15 Employment and Labor Resolutions for 2015, part 2 of 3

COMP ME! Comp-time and you . . or not

Diane Faulkner, , , , , , , , , , , , , Leave a comment

Compensatory time is a beautiful thing . . . but you may not be able to use it or grant it; and if you do, you could be setting up yourself – and your company – for major trouble.

What is Comp-time?

According to the Office of Personnel Management site at www.opm.gov, comp-time is:

“Time off with pay in lieu of overtime pay for irregular or occasional overtime work,

or

When permitted under agency flexible work schedule programs, time off with pay in lieu of overtime pay for regularly scheduled or irregular or occasional overtime work.”

Key phrase: Agency

All employers are not eligible to offer compensatory time, only government agencies as in actual government offices, not companies that simply do business under or have a government contract. Federal, state, county, city, township, village, as long as the IRS defines a payroll is defined as a government payroll, compensatory time may be granted if the agency has a defined flexible work schedule program.

. . . but, I own my own business

Uncle Sam doesn’t really care – at least, not in this instance. All businesses – private, public; small, large; government, utility, railroad – you name the employer type – each must follow the payroll rules outlined in the Fair Labor Standards Act of 1938 (FLSA).

Under the current rules, which were updated as recently as the first administration in the second Bush era, all positions that do not meet the overtime exemption rule (see later blog for definitions and explanations) are to be paid at no less than the prevailing minimum wage for up to forty work hours in a seven-day period. Any time worked over forty hours in a seven-day period must be paid at one-and-a-half times the employee’s regular hourly wage.

Key phrase: Any work

“Any work,” is defined as anything done to benefit the employer, whether or not the activity is described within a person’s job description.

Let’s say you’re an employer and you hold mandatory employee meetings of any kind every Wednesday during the lunch hour. You buy everyone pizza and have drinks available for everyone, but you don’t pay them for the lunch hour. Are you violating FLSA?

Oh, yeah.

The meeting, any meeting, especially any kind of meeting, party, whatever, you make mandatory is considered “work suffered” under FLSA and is compensable at the same rate as regular “work suffered”.  If that meeting time adds an extra hour to the forty everyone has already put in during your policy-defined workweek, then you owe all your non-exempt staff time-and-one-half pay for that extra hour.

Let’s say your office needs to be painted, but you don’t have painters budgeted for this year and you ask for volunteers to help you paint over the weekend. You’ll provide the food and soft drinks, they need only come dressed to get dirty. Do you owe these “volunteers” time-and-one-half?

You bet you do: though the work is done on the weekend, it’s still work, and under FLSA, it’s work “suffered” for the benefit of the company. Do you owe overtime for both Saturday and Sunday?

Maybe not: Whether you owe overtime for both days depends upon how your policy book defines your work-week. If your workweek is defined as Monday through Sunday, then, yes, you would owe two days’ worth of overtime. If your workweek is defined as Sunday through Saturday, then you would only owe overtime for Saturday, but still owe regular wages for Sunday.

Companies that require employees to come in early to punch in, make coffee, open up, or whatever, as well as those that require people to stay after hours to close up in any way, must also pay people for their time.

On-call time is also compensated at the same rate as regular work time. If on-call time exceeds the forty-hours in one week timeframe, then they, too, are paid at the premium rate.

. . . but, I can’t afford to pay overtime

Again, I say: Uncle Sam doesn’t care; and let me just add: tough. The rules are clear. They’ve been around for a long time. Since 1938, in fact. You have the Internet. As a fully-grown human, capable of owning a business – or at least running a business – you are expected to have done your “due diligence”.

In other words, the OFCCP, DoL, or any other investigating agency will not accept excuses for what you didn’t know you should know. (I know this, because my first HR job was with an employer who was audited by the OFCCP — two weeks after I started — and let’s just say my predecessors were all let go for good reason).

Is there any way around the rule?

Well, of course there is.

Sort of.

The best way to “get around” this rule is to work within the rule. If you know you must have weekly meetings, one thing you could do is hold the same meeting at least twice and stagger the attendants. This, way, the office stays open, but you will be short coverage for the length of the meeting.

If you must have full coverage, you could have the meeting after hours, as in, immediately after closing, one day a week, and then allow the same amount of time off during the same seven-day work period as the meeting to all non-exempt employees.  Exempt employees are not paid by the hour, so no other compensation is needed for them — money or time, unless specified in the company’s policies.

Key phrase: seven-day work period

Notice I’ve never denoted a pay-period. I’ve always described a seven-day period, and this is because FLSA dictates seven consecutive days as a work period.

If you want to grant a form of comp-time, it must be done the same week during which the extra activity occurs. Technically, this is not comp-time as defined by FLSA, so I always advise not to refer to this time off as “comp-time”. If you’re ever audited by the government, know that employees are always interviewed. Their phrasing and understanding can get you into trouble. Save yourself at the start, and take my advice: don’t ever call this time off “comp-time”.

What if I break the rules?

Well, it’ll cost you, regardless your intent. According to the DoL site, the penalties are:

“Employers who willfully or repeatedly violate the minimum wage or overtime pay requirements are subject to a civil money penalty of up to $1,000 for each such violation.

Willful violations of the FLSA may result in criminal prosecution and the violator fined up to $10,000. A second conviction may result in imprisonment.”

Yikes!

The audit process is not fun, though I guarantee you’ll learn A LOT. I know I did. If you’re interested, take a look at the process on the DoL site. It is every bit as grueling as it reads.

If you’re starting a business, learn the rules and follow them. Teach everyone the rules and their rights and responsibilities, even if everyone is non-exempt and has no supervisory role.

If you’ve already started your business and you know you are in violation in some way, change what you’re doing N-O-W. Note when you learned what you were supposed to do. Note each phase of your correction. Note when the total correction is in place. Keep these notes in a special notebook along with your new policy, any training material, and training proof. Never lose a shred of this notebook and make certain it’s the first thing you hand an auditor if, by any chance, you get audited.

What are the chances of an audit?

Well, from what I’ve been able to find, the DoL hired five hundred auditors to keep up with all the new businesses. When I contacted my local federal DoL auditor, she told me that it may take years for her to get to a business, but once she’s there, she’ll return every two years for the life of the company; because rules change, and people generally cannot keep up with every change. The government always needs money, and fines are a wonderful way to generate some extra cash.

For more information on different employee statuses, audits, and fines, speak to a local labor attorney or go on-line to www.dol.gov/wage & hour.

Disclaimer I am not a licensed attorney or certified accountant. My blogs are based on my own experiences, interviews (where credited), and loads of research.

Copyright © 2009 Diane Faulkner

COMP ME! Comp-time and you . . or not

Contract employee, independent contractor…(part 3 of 3)

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When should I contract?

Well, if you know you want to have control over when and how work is done, as well as who does the work, then you should either hire an employee or do a temp-to-hire. Between the two, a temp-to-hire saves at least a contract’s worth of employment expenses, so if total cost is a factor, choose temp-to-hire, at least for non-managerial positions.

If you need to have specific skill sets and experience right away, a temp-to-hire is also less expensive if the contract is short enough. You have control over how work is done as well as a double-probationary period (the temp-time as well as your own period), which is plenty long enough to see if you have a good personality fit.

If you need a specific project completed that requires a specialized skill set not found in-house and not typically offered through an agency, then an independent contractor is the way to go. No employment costs, no unemployment costs, and you can terminate whenever you want for any reason.

Knowing the difference among these three classifications, should you ever have a government audit, can save your company thousands, if not millions, of dollars, and may even keep you in business. Many a company has felt the pinch of Uncle Sam to the tune of $10,000 as a flat fine for breaking the FLSA law and the additional $1000 for every other incident found during an audit.

For more information on different employee statuses, audits, and fines, speak to a local labor attorney or go on-line to www.dol.gov/wage & hour.

Disclaimer I am not a licensed attorney or certified accountant. My blogs are based on my own experiences, interviews (where credited), and loads of research.

Copyright © 2009 Diane Faulkner

Contract employee, independent contractor…(part 3 of 3)