Fair Labor Standards Act

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By A. Edward Hardin, Jr.

Under the federal Fair Labor Standard Act, employees are entitled to be paid time and a half their regular rate of pay for all hours worked over 40 in a workweek.  Private employees cannot elect, nor can private employers offer, “comp time” in lieu of overtime pay.  Private employers can offer (or may be able to require) time off within a single workweek to offset longer-than-normal hours or to prevent an employee from exceeding the 40-hour threshold in a single workweek, but private employers cannot not offer true comp time to employees to offset overtime.  Unlike the private sector, under some circumstances, public sector employees can elect “comp time” in lieu of overtime pay.  On May 2, in a vote along party lines, the U.S. House of Representatives voted to extend to private employers the ability to offer employees the option to elect comp time in lieu of overtime, something that has been in place for a number of years for public employers.  The Society for Human Resource Management (SHRM) and the White House both support the bill, but the bill may face a filibuster by Democrats in the Senate.   Here are links to an article from SHRM and an article from CNN on the bill and the House action.

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By Scott Huffstetler and Ed Hardin

In the wake of yesterday’s news that a Texas federal judge issued a nationwide injunction halting the FLSA overtime regulations, scheduled to become effective December 1, 2016, many employers are asking “what now.”  The answer will continue to develop.  For now, though, here are some initial things to keep in mind:

  1. Realize that the regulations scheduled to go into effect on December 1, 2016 are now halted nationwide.  This means that for the time being, the minimum salary threshold remains at $23,660 a year ($455 per week).
  2. Realize that this decision is not final and is subject to change.  The federal court only issued a preliminary injunction.  The next procedural step (if the parties choose to continue) is for discovery to be conducted, a trial on the merits, and a decision on whether a permanent injunction should be issued.  It is possible the judge could change his decision at the permanent injunction stage of the case.  Regardless of the outcome at that stage, appeals will be available to the U.S. Court of Appeals for the Fifth Circuit and the U.S. Supreme Court.  Although this scenario is less likely in the Fifth Circuit, with the passing of Justice Antonin Scalia, it is possible that the U.S. Supreme Court could ultimately rule in the U.S. Department of Labor’s favor.  Of course, that assumes the Department continues to pursue this matter and continues to pursue official enactment of the regulations.  Recall that the Department is an executive agency, which after January, will be under President-Elect Donald Trump.  Given the differences between President Barack Obama and President Trump’s labor initiatives, it is possible that President-Elect Trump will instruct the Department not to continue pursuing this case.  There are many variables and all of these scenarios will take months, or even years, to play out.  The point is the case needs to be monitored and employers need to be prepared for the different scenarios.
  3. Realize that not all the changes that may have been made in response to the new regulations related to the salary basis test.  Many employers used the change in the regulations to address other components of the FLSA that were not affected by the ruling, such as classifications.  To the extent changes like this were made, they were not altered by the ruling.

As is easily seen, the outcome of this saga remains to be seen.  For now, employers can be thankful this Thanksgiving for a reprieve from what was about to become a major change in the FLSA.

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By A. Edward Hardin, Jr., Erin L. Kilgore and Brian R. Carnie

As the flood waters begin to recede, and South Louisiana begins to dry out and recover from the recent flooding, Louisiana employers also face recovery issues, including how to address employee needs. Although there is no rule of thumb that applies to all situations, common sense, consistency, and compassion can go a long way. Flexibility, understanding, and empathy for those that have been affected are key. Some employees, even those who were not inundated with flood waters, were likely still affected because of losses sustained by family and friends. And still other employees likely have had difficulty even getting to work and navigating closed streets.

Impact on Duty To Pay Employees: Pay issues will generally depend on an employee’s exempt status under the federal Fair Labor Standards Act (“FLSA”); Louisiana does not have its own minimum wage/maximum hours law. There are always exceptions, but if an employee is not an exempt employee under the FLSA, he or she must only be paid for time actually worked. However, time worked includes both hours worked at the employer’s place of business and any hours worked away from the office. If you let them work from home or remotely from a computer or smartphone, you still must pay them for their actual time worked. Accurately tracking worked hours (especially hours worked remotely) is critical.

Exempt employees must generally be paid their full salary for any week in which the employee performs any work. If your business is open and an employee misses work because he or she cannot get to work due to transportation difficulties, flooding issues, or even states of emergency/travel bans, that is generally considered an “absence for personal reasons,” and the employee’s salary may be docked, but only for full-days’ absences during which the employee performed no actual work. Conversely, if the employer chooses to close the business for any reason for a portion of the workweek, it must pay the exempt employee’s entire salary for that week (assuming the employee performed some work during that week). Remember, an employee who works for even part of a day will trigger the requirement to pay the exempt employee’s full guaranteed salary for that week where the reason for not working the remainder of the week was due to a business closure and not personal reasons.

“Volunteer” Hours: If your business sustained heavy damage, many employees may offer to help rebuild and repair. The FLSA requires you to pay your employees for working time even if they volunteer to donate that time or work for free. Businesses should be very cautious about having employees “volunteer” to assist during an emergency. The best advice is to pay for this time. Unless otherwise prohibited by law, contract or your own company policies, you have the option of paying your non-exempt employees at a lower rate of pay for clean-up/recovery work, but they must be paid at least $7.25 per hour to avoid minimum wage exposure; you also must ensure that you properly calculate their overtime pay if they work more than 40 hours in the workweek, especially if they work at two different rates in the same week.

Leaves of Absence: Employers may provide employees with periods of unpaid leave to address recovery efforts from the recent floods, but many employees will likely feel a financial strain by any extended periods of unpaid leave. Employers may consider allowing employees to take forms of employer-provided paid leave in lieu of unpaid leave. You must also consider whether affected employees are eligible for FMLA leave (e.g., serious health condition of employee or employee’s child, spouse or parent) or even leave as a reasonable accommodation for employees who are physically or emotionally injured as a result of a catastrophe and their impairment qualifies as a disability under the ADA. An employee may not expressly request either form of leave, but employers must be attuned to circumstances and requests that may trigger follow-up with the employee. For example, if an employee’s absence is caused by the employee’s need to care for a family member who requires medical equipment which is not operating due to a power loss, that likely would be protected under the FMLA. In cases where employers provide employees with extended periods of leave, employers must also be cautious regarding the possibility that the leave may inadvertently trigger COBRA notice obligations.

Employee Assistance Professionals: Finally, in situations like this, when a distraught employee comes to an employer with a personal issue, employer-provided employee assistance programs are invaluable. Employers should not try to act as a counselor or mental health professional because an employer could run afoul of the ADA in these situations. It is best to leave these types of counseling, mental health, and other related issues to the trained professionals, and simply direct employees to resources that may be available to provide appropriate help.

These issues just scratch the surface. The key is to be flexible, exercise common sense, and seek legal help early on if needed so that the issues can be addressed moving forward, not repaired looking back.

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By Brian Carnie

The wait is over (for better or worse) – the DOL has released its final rule concerning  changes to the salary requirements to be exempt from the overtime pay requirement under the Fair Labor Standards Act (FLSA).

Under the final rule, the DOL has increased the minimum salary threshold that must be paid in order for most executive, administrative or professional employees to qualify for exemption from $455 per week ($23,660 annually) to $913 per week ($47,476 annually).  This new salary threshold does not apply to teachers, doctors, lawyers, or certain other exempt professionals who are not currently subject to the salary basis or salary level tests.  The final rule permits employers to use non-discretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level.  While the new salary threshold is $2,940 less per year than what was originally proposed in 2015, it still presents headaches for many employers who have exempt employees who are paid well below this new salary level.

The final rule also raises the amount paid to an employee to qualify for the highly-compensated employee exemption (from $100,000/yr to approximately $134,004/yr) and establishes mechanisms for automatic increases to the salary requirements every three years.  The final rule makes no changes to the duties requirements that these administrative, executive or professional employees must also meet in order to qualify for exemption, but those may come in the next wave from the DOL.

Covered employers have until December 1, 2016 to make necessary changes (which is when the final rule is effective), after which employers could be held liable for overtime pay violations in subsequent workweeks for up to 3 years after each violation (plus liquidated damages and attorneys’ fees).

What Employers Can Do

For any affected exempt employees who are not paid enough to qualify under the increased salary basis test, consider the following:

  1. Compute what their current weekly salary would be under a 40 hour workweek and then figure how much overtime s/he would have to work before hitting the new minimum salary level (this will determine whether and how much of a change will be needed).

Here is the formula:  [Weekly salary ÷ 40 hrs] x 1.5 = OT rate

[$913 – (current weekly salary)] ÷ OT rate = # of OT hours required before hitting new min. salary level of exemption

  1. Consider adopting the fluctuating workweek method which permits employers to pay non-exempt employees a fixed weekly salary regardless of the number of hours worked. If you implement this properly, employers only have to pay one-half (.5) the regular rate of pay for all hours that exceed 40 per workweek instead of the typical one and one-half (1.5) overtime rate.
  2. For employees whose hours are fairly consistent, consider translating their current weekly salary to an hourly rate where they would continue to receive approximately the same amount of compensation even if they are re-classified as non-exempt and are paid overtime.

 [current weekly salary] ÷ [40 + (1.5 x (expected OT hrs))] = New hourly rate

or if using fluctuating workweek method,

[new hourly rate] x [40 + (expected OT hrs)] = New weekly salary

Then make sure to pay them additional 1/2 rate [(new weekly salary ÷ total hrs) x .5] for all hours worked over 40 in workweek

For employees whose hours vary, consider setting a maximum hour cap beyond which they cannot work without prior management approval.  However, should one or more non-exempt employees exceed this cap in a particular workweek, you must pay them the required overtime for that workweek but you may discipline them for violating the cap.

  1. Take steps to manage off the clock work by employees who were previously treated as exempt, especially if they use electronic devices such as smartphones or laptops outside of the workplace (or outside of normal work hours) for work purposes.
  2. Implement a “safe harbor” policy that details your timekeeping requirements and prohibits off the clock work. Such a policy may provide a good faith defense to liquidated damages stemming from FLSA OT violations, and may also preserve an employee’s exempt status in the event impermissible deductions are made.

Over the next 30 days, Kean Miller will be conducting client briefings on this topic for our clients and friends of our firm.  Stay tuned for dates, times and locations.

WHD

By Erin L. Kilgore and A. Edward Hardin, Jr.

On June 30, 2015, the U.S. Department of Labor’s Wage and Hour Division, after being prompted by President Obama, announced proposed rule changes that would dramatically affect the salary requirements for employees who are exempt from the Fair Labor Standards Act’s overtime requirements.  For nearly 9 months, no action was taken to move the proposed rule change forward.  Then, on March 14, 2016, the DOL sent the proposed rule change to the Office of Management and Budget for final approval.

Generally, under the current rules, to be considered an “exempt” employee, an employee must perform certain exempt duties, or “white collar” duties, and be paid a salary of no less than $455 per week (which is not subject to reduction based upon the quality or quantity of the work – i.e., be paid on a “salaried basis”).  Under the proposed rule change, the amount required to satisfy the salary basis test would more than double.  Under the proposed rule, the amount required to meet the salary requirement for an exempt employee would rise to an amount equal to the 40th percentile of weekly earnings of full time salaried workers as determined by the DOL’s Bureau of Labor Statistics (an amount estimated to be $970 per week or an annual salary of $50,440).  The proposed rule would also raise the amount paid to an employee to qualify for the highly-compensated employee exemption and would also establish mechanisms for automatic increases to the salary requirements in order to meet the exemption’s requirements.  In this article, the Society for Human Resource Management (or SHRM) provides a link to important source documents regarding the rule change, including the DOL’s notice of the proposed rule change, a letter from Members of Congress expressing concern over the changes, and a link to the OMB site showing that the proposed rule has been forwarded to the OMB for approval.  The OMB review may take one to two months.  In the meantime, it is possible that Congress may take action.

Stay tuned.

 

By Mike GarrardDavid Whitaker and Terry McCay

Employers covered by the Fair Labor Standards Act should take note of references on the Web site of the U.S. Department of Labor (“DOL”) about the “We Can Help” nationwide campaign.

A “News Release,” dated April 1, 2010, on the DOL Web site refers to the “`We Can Help’ nationwide campaign” and states that “[t]he effort, which is being spearheaded by the department’s Wage and Hour Division, will help connect America’s most vulnerable and low-wage workers with the broad array of services offered by the Department of Labor.”  It goes on to state in part that “[i]t also will address such topics as rights in the workplace and how to file a complaint with the Wage and Hour Division to recover wages owed.”

The “News Release” also quotes the Secretary of Labor as stating that “I have added more than 250 new field investigators nationwide – an increase of a third – to help in this effort.”