Fair Labor Standards Act

By Brian R. Carnie

The Trump Administration has released the new proposed rule changes to the salary requirements to be exempt from the overtime pay requirement under the Fair Labor Standards Act (FLSA).

Under the new proposed rule, the U.S. Department of Labor wants to increase 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 approximately $679 per week ($35,308 annually).  This salary level is expected to change before the rule becomes final (which most likely will happen sometime in 2020), and the final threshold will be based on the 20th percentile of earnings of full-time salaried workers in the lowest-wage census region (the South) and in the retail sector once data for 2018 is released and adjusted for inflation. The new salary threshold would not apply to teachers, doctors, lawyers, or certain other exempt professionals who are not currently subject to the salary basis or salary level tests.  While the proposed new salary threshold is more than $12,000 less per year than what was sought by the Obama Administration in 2016, it still represents a 50% increase from the current minimum salary threshold and will present headaches for many employers who have exempt employees who are paid well below this new salary level.  Contrary to what many expected, the proposed rule also does not seek to phase in the increase over time.

The proposed rule also raises the minimum required salary paid to an employee to qualify for the highly-compensated employee exemption, which under the proposal would go from $100,000/year to $147,414/year.  This is significantly higher than the increase sought by the Obama DOL in 2016 (which was $134,000/year).

The proposed rule does not establish mechanisms for automatic increases to the salary requirements on a yearly basis, but the DOL said it will review the minimum salary threshold every four years and will seek public comment before changes are made.  The proposed rule makes no changes to the duties requirements that these administrative, executive or professional employees must meet in order to qualify for exemption.

The DOL will accept public comment on the proposed rule for a period of 60 days, and a final rule can be expected over the next 12 months.  Of course, this rule is likely to be subject to court challenge.

Stay tuned for further updates.

By A. Edward Hardin, Jr.

A recent story from New Orleans demonstrates that overtime violations can be costly.  In the case of a New Orleans bakery that paid employees for overtime at their straight time rate and paid some workers in cash, the issue cost the employer over $125,000 in back wages alone.  Pursuant to the federal Fair Labor Standards Act, non-exempt employees are entitled to a half-time premium for all hours worked over 40 in a workweek (i.e., employees must receive “time and a half” for overtime hours).  In the case of the New Orleans bakery, the employees were paid their regular rate of pay for the hours worked, but were not paid the half-time premium for their overtime hours, a major issue under the FLSA.  For more on the story, click here and here.

By Ed Hardin

On April 2, 2018, the United States Supreme Court issued its opinion in Encino Motorcars, LLC v. Navarro.  In a 5-4 decision, the Court ruled that automobile service advisors are not entitled to overtime under the federal Fair Labor Standards Act (“FLSA”).  In the Encino Motorcars case, the Court was asked to decide whether automobile dealership service advisors were exempt from federal overtime requirements based on an FLSA exemption for salesmen, partsmen, or mechanics primarily engaged in selling or servicing automobiles, trucks, or farm implements.  The Supreme Court held that the service advisors in question were exempt employees under the FLSA.  As Fox Business reported, the decision affects more than 18,000 dealerships and more than 100,000 service advisors.  However, the case has much broader implications, well beyond automobile dealerships.  In its decision, the five justice majority stated that pursuant to “a fair reading” of the exemption in question, service advisors were exempt from overtime because the service advisors sell goods or services.  Although the Court’s specific holding is somewhat narrow (applying to automobile service advisors), how the Court arrived at the holding represents a major shift in interpretation of the U.S. Department of Labor Wage and Hour Division’s regulations on the FLSA exemptions.  For decades, exemptions from overtime requirements were narrowly construed to provide overtime coverage under the FLSA.  In the Encino Motorcars case, the Supreme Court expressly rejected a narrow construction of the exemption “as a useful guidepost for interpreting the FLSA” in favor of a fair reading.  As the Court remarked, “We have no license to give the exemption anything but a fair reading.”  The door may now be open for employers and the courts to give less restrictive readings to FLSA exemptions in favor of a more “fair reading” of those exemptions, which may in turn lead to fewer employees being entitled to overtime, but may also certainly lead to more litigation.  For more on the decision see: https://www.foxbusiness.com/markets/supreme-court-rules-for-car-dealerships-in-overtime-case or http://www.latimes.com/politics/la-na-pol-court-autos-overtime-20180402-story.html

 

 

 

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.

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.

clock1

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.

dol

By Erin Kilgore, Ed Hardin, and Brian Carnie

A federal district judge in Texas has entered a nationwide injunction which prevents the U.S. Department of Labor’s new FLSA minimum salary level rule from going into effect on December 1, 2016.  Prior to today, the DOL’s new rule would have nearly doubled the minimum weekly salary required in order to be exempt under the so-called white collar exemptions (the executive, administrative and professional employee exemptions).

The court found that the Department of Labor exceeded its authority when it issued the final rule in May 2016.   The court also found that the Department of Labor ignored Congress’s intent by raising the minimum salary level such that it supplants the duties test.  The court’s preliminary injunction ruling will preserve the status quo until the court makes additional determinations related to the Department of Labor’s authority and the final rule’s validity.

Until further notice, the minimum salary threshold remains at $23,660 a year ($455 per week).  Stay tuned for further analysis.

FLSA

By Erin Kilgore, Ed Hardin and Brian Carnie

Could a decision on the challenge to the U.S. Department of Labor’s new salary basis rule be coming soon? Employment Law360, a national, daily legal news service, reported this morning that a Texas Federal Judge would decide by Tuesday, November 22, whether to stop the new overtime rules from taking effect on December 1.

The Judge is hearing a suit by several states and business groups who are collectively trying to stop the new rule that raises the minimum salary to qualify for the exemption from the Federal minimum wage and overtime requirements. Stay tuned.

 

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.

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.”