Fair Labor Standards Act

By Chelsea Gomez Caswell

Yesterday, the Department of Labor (“DOL”) Wage and Hour Division released a preview copy of a request for information (“RFI”) before issuing revised proposed overtime exemption regulations under the Fair Labor Standards Act (“FLSA”). The RFI is scheduled for publication in the Federal Register today, July 26, 2017, which will start a 60-day public comment period.

According to the DOL’s news release, the RFI solicits feedback on questions related to the salary level test, the duties test, various cost-of-living information, inclusion of non-discretionary bonuses and incentive payments to satisfy a portion of the salary test for highly compensated employees, and automatic updating of the salary level test. Instructions for submitting comments and additional contact information are found in the RFI. A preview copy of the RFI, released by the DOL, is available online here.

The regulations at issue (often referred to as the “white collar” exemptions) apply to workers employed in an executive, administrative, or professional capacity that also meet certain criteria relating to salary basis, salary level, and job duties. The DOL released the RFI in contemplation of revising the final rule released by the DOL during the Obama administration  (“2016 Final Rule”), which attempted to raise the minimum salary required to be exempt from the FLSA’s overtime pay requirements, from $455 per week to $913 per week. The 2016 Federal Rule was enjoined by a federal district judge in Texas in November 2016  and remains in limbo. In fact, in briefing to the Fifth Circuit Court of Appeal recently filed last month, the DOL acknowledged that it intends to undertake steps and further rulemaking to determine what the salary level should be. It is now clear that these steps include the release of the RFI. The RFI states that in light of the pending litigation, the DOL decided to issue the RFI, rather than immediately proceed to a notice of proposed rulemaking (“NRPM”), in order to gather public input and aid in the development of a NRPM. The DOL expressly recognized that it released the RFI to address stakeholder concerns, including concerns that the standard salary level set in the 2016 Final Rule was too high and to address the Rule’s potential adverse impact on low-wage regions and industries.

Some of the specific questions posed in the RFI include but are not limited to the following:

  • Whether updating the prior 2004 salary level for inflation would be an appropriate basis for setting the standard salary level and, if so, what measure of inflation should be used;
  • Whether the regulations should contain multiple standard salary levels and, if so, how they should be set;
  • Whether different standard salary levels should be set for the executive, administrative, and professional exemptions;
  • Whether the standard salary level set in the 2016 Final Rule works effectively with the standard duties test;
  • To what extent employers increased salaries of exempt employee to retain exempt status, or otherwise altered employees’ hours or pay, in anticipation of the 2016 Final Rule’s effective date;
  • Whether small businesses or entities encountered any unique challenges in preparing for the 2016 Final Rule’s effective date;
  • Whether a test for exemption relying solely on duties performed, without regard to the amount of salary paid, would be preferable;
  • Whether the salary level set in the 2016 Final Rule excluded from exemption particular occupations traditionally covered by the exemption; (
  • Whether there should be multiple total compensation levels for the highly compensated employee exemption; and
  • Whether the standard salary level and highly compensated employee total annual compensation level should be automatically updated on a periodic basis.

Although the future of the FLSA overtime regulations is still uncertain, for employers the key takeaway is that, for the time being, nothing has changed. The RFI suggests that changes are on the horizon, but for now, the 2016 Final Rule is still enjoined, and the DOL will not issue any revised rules until after the 60-day public comment period lapses and an NRPM is issued. Until further notice, the minimum salary threshold remains at $23,660 a year ($455 per week), but it is important for employers to continually monitor this ever-changing issue.

For additional information, see the DOL’s July 25, 2017 news release, available here.

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By Zoe Vermeulen

In the recent case of Halle v. Galliano Marine Service, L.L.C., No. 16-30558, 2017 WL 1399697 (5th Cir. Apr. 19, 2017) the U.S. Fifth Circuit addressed for the first time whether ROV technicians, who are traditionally Jones Act seamen, qualify as seamen under the Fair Labor Standards Act (“FLSA”). The Court found that the plaintiff, an ROV technician assigned to an ROV support vessel, was not an FLSA seaman. In reaching its decision, the Court reiterated the important difference between a Jones Act seaman and a seaman for purposes of the FLSA.

Under the Jones Act, the term “seaman” is construed broadly to provide protection for a larger group of individuals. Seamen are exempt from the FLSA, so the term is construed narrowly, to ensure that more workers enjoy the benefits granted by the FLSA. The Court was clear that “the definition of ‘seaman’ in the Jones Act is not equivalent to that in the FLSA.”

The FLSA requires employers to provide overtime pay to any employee who works more than forty (40) hours in a workweek, unless the employee is subject to an exemption. Again, “seamen” are exempt from the FLSA’s overtime requirements. Under the FLSA, an employee is a “seaman” if: (1) the employee is subject to the authority, direction, and control of the master; and (2) the employee’s service is primarily offered to aid the vessel as a means of transportation, provided that the employee does not perform a substantial amount of different work. These criteria are very fact specific.

In Halle, there was a dispute as to whether the plaintiff was subject to the authority, direction, and control of the master of the ROV support vessel. Thus, the first factor was not dispositive. In analyzing the second factor, the Court found that the ROV technician plaintiff lived on the ROV support vessel and operated the ROV, which was attached to the support vessel, to perform industrial tasks in the water. He occasionally communicated GPS coordinates to the captain of the support vessel, but did not otherwise help ensure that the support vessel navigated safely or in any particular manner from point A to point B. The plaintiff did not control the vessel’s path to its intended target, steer, anchor, make any navigational decisions, or take any navigational actions. The plaintiff, and other ROV technicians, could not even see if there were navigational issues affecting the support vessel. Under these facts, the Court found that the plaintiff’s service was not “primarily offered to aid the vessel as a means of transportation.” As the plaintiff – a Jones Act seaman – could not meet the second prong of the test, he could not be a seaman for FLSA purposes.

This case provides valuable guidance to maritime employers in classifying employees for FLSA purposes. Employers should never assume that because a worker qualifies as a Jones Act seaman, he or she will automatically be exempt from the overtime requirements of the FLSA. While both the Jones Act and the FLSA employ the term “seaman,” Halle underscores the different tests for seaman status under these Acts. Litigants are cautioned not to borrow an analysis of this term under one Act for use in the other.

Misclassifying an employee as “exempt” can expose employers to back pay, liquidated damages, and attorneys’ fees. And with a recent increase in FLSA claims, correct employee classification is as critical now as ever.

time

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.

183060506

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.

clock1

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.”