The Top 6 Highlights from the DOL’s New Overtime Pay Regulations

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After receiving and reviewing over 270,000 public comments, on May 18, 2016 the U.S. Department of Labor (“the DOL”) released its much anticipated Final Rule regarding overtime pay eligibility for certain “white collar workers” under the Federal Fair Labor Standards Act (“FLSA”).

The changes are dramatic – the DOL estimates some 4.1 million workers will become eligible for overtime pay, and another 100,000 will receive salary increases to meet the new minimum salary threshold.  Under the FLSA, non-exempt employees are entitled to overtime pay of 1.5 times an employee’s “regular rate of pay” for all hours worked over 40 in a workweek.

Below are the notable highlights of the Final Rule:

1. A Doubling of the Minimum Salary Threshold. The Final Rule for the Executive, Administrative, and Professional (“EAP”) Exemptions raises the minimum salary level from its current level of $455 per week ($23,660 annualized) to $913 per week ($47,476 annualized) in 2016. This new threshold represents the 40th percentile of full-time salaried workers in the “lowest wage Census region” (currently the South)

2. A 34% Increase to the Minimum Salary Necessary for the Highly Compensated Employee Exemption. The Final Rule raises the total annual compensation required to qualify for the Highly-Compensated Employee (“HCE”) exemption from $100,000 to $134,004 annually. This threshold represents the 90th percentile of full-time salaried workers nationally. Employers can still make one catch-up payment to satisfy the new HCE salary threshold “during the last pay period or within one month after the end of the 52 week period.

3. Automatic Updating of Salary Thresholds Every 3 Years. The DOL’s Final Rule will automatically update the salary threshold every three years beginning January 1, 2020. Each salary update will raise the minimum threshold to the 40th percentile of full-time salaried workers in the lowest wage Census region (currently the South). That threshold is estimated to rise to $51,168 in 2020. The HCE threshold will also automatically update to the 90th percentile of full-time salaried workers nationally, and is estimated to rise to $147,524 on January 1, 2020. The Final Rule requires the DOL to post the new salary levels 150 days in advance of their effective date, (i.e. on or about August 1, 2019)

4. Non-Salary Compensation and Catch-Up Payments can be Utilized to Meet the Salary Threshold. The Final Rule gives employers some flexibility by allowing them to include non-discretionary bonuses, incentive pay, and/or commissions to meet the new EAP salary threshold. However, in order to be included these payments must be made on at least a quarterly basis, and cannot exceed more than 10% of the required salary threshold. The Final Rule also permits employers to make a catch-up payment not exceeding the 10% limit once per quarter to meet the EAP salary threshold

5. No Changes to the “Duties Tests.” In order to classify an employee as exempt from the FLSA’s overtime pay requirements, an employer must establish that the employee satisfies both the minimum salary threshold and the “duties test” for the particular exemption. Each exemption has its own set of duties that an employee must perform. In its proposed rules the DOL had solicited public comment on whether to change any of the “duties tests” for the EAP Exemptions, but in the end made no changes. Of course, employers must still make sure that their exempt employees satisfy the current duties tests of the exemptions they rely on.

6. Effective Date of December 1, 2016. In somewhat of a surprise, the DOL has given employers over six months to come into compliance with the Final Rule – the new salary thresholds will go into effect on December 1, 2016. Employers were concerned that the DOL would give them as little as 60 days to come into compliance. Given the significance of the changes, however, this slightly lengthier implementation period is justified.

Justice is Blind? Fired Blind Barber Awarded $100,000 for Disability Discrimination

 

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“Beware of the young doctor and the old barber” – Ben Franklin

Although common sense may have been on his side at the time, if Ben Franklin voiced his sentiment in the workplace now, he would likely face and lose an age discrimination case.

Case in point – a legally blind barber sued his former barber shop claiming it terminated him because of his disability after he had tripped over a customer’s legs and tripped over a chair in the waiting room (all in the same day).  The Massachusetts Commission Against Discrimination awarded the “blind barber” (as his loyal customers called him) $100,000 in damages.

The case has many lessons for employers:

Don’t assume you will win every lawsuit.   There are no “slam dunk” legal cases.  You need to show up and put on a solid defense.  Here, the employer hurt his cause by not attending several hearings.

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The facts, not just “common sense,” matter.  Sometimes the law doesn’t seem to comport with common sense.  One would think eliminating the risk of having a customer’s ear cut off  (much less a horrible haircut) would be a legitimate reason to terminate.  Would you want this?

 

BUT the barber had passed his state board exam, worked for a year without incident, and had customers who knew he was legally blind and didn’t care.  Those facts mattered more than the “common sense” fear of a blind person wielding sharp objects.

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Don’t play doctor.  An employer dealing with an employee with a disability should not presume or make assumptions about the effects of a person’s disability on their ability to do the job.  Here, the employer’s defense would have been greatly bolstered if it had obtained a fitness for duty exam by a qualified medical professional that determined the employee could not safely perform his duties and there was no accommodation that would enable him to do so.

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Timing  and optics are critical.  The employer purportedly did not know until the “day of great tripping” that the barber  was visually impaired.  It then immediately fired the employee, claiming (after the fact) that the employee “had not been pulling his weight.”  The “optics” simply do not look good (pun intended).

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Get your ducks in a row.  An employer seeking to terminate the employment of an individual in a protected classification should, if at all possible, issue written progressive discipline beforehand.  Apparently there were no prior written warnings in this case.  As the employer had never previously fired another non-disabled barber for simply tripping over a chair or a customer’s legs, the whiff of discrimination in the blow dried (h)air was strong.

 

The $50,440 Question: When Will the New FLSA Overtime Regulations Become Final?

As most every U.S. based employer and “HR Genius” knows by now, the Department of Labor (“DOL”) has proposed major increases to the minimum salary level necessary for certain “white collar” employees to be deemed “exempt” from the Fair Labor Standards Act’s (“FLSA”) overtime pay requirements.  The DOL proposal more than doubled the current minimum  salary level  to $50,440 annually.

Despite this dramatic increase, and perhaps hoping to avoid an avalanche of “feedback,” the DOL gave the public a mere 60 days to file written comments.   Like a roomful of annoying moviegoers, however, the public spoke loudly and often, burying the DOL with almost 270,000 comments by early September of 2015.

This, of course, begs the question – when would the DOL finish wading through all of these comments and issue the final overtime pay regulations?   So here’s your first test, HR Geniuses:

When  has the DOL stated the proposed overtime pay regulations would be finalized and released:

  1. By the spring of 2016
  2. By July of 2016.
  3. By late 2016.
  4. All of the above.
  5. None of the above.

If you chose #4 – “All of the above” – you are a true HR Genius.   In public pronouncements two high ranking DOL officials  and the Wage and Hour Division (of the DOL) have offered up no less than three different deadlines for when to expect the final regulations to be issued.   At least the DOL avoided the problem Ralph Waldo Emerson noted of “consistency being the hobgoblin of little minds.”

Given this uncertainty, however, it is all the more important for employers to begin to prepare for the eventual changes sooner than later, so as to avoid being caught flat footed by an ambitious DOL.  Some steps to take now are discussed here.

“And on the Seventh Day … the Employee Worked” – Wisconsin Modifies its “One Day of Rest in Seven” Law

Wisconsin, like several other states, has a “One Day of Rest in Seven” law that, subject to certain exceptions, requires factory and “mercantile establishment” employers to provide their employees with “at least 24 consecutive hours of rest in every 7 consecutive days.” Wis. Stats. §103.85. 

Effective July 14, 2015 Wisconsin enacted a new exception to this requirement. Employers can now permit an employee to work seven consecutive days if the employee “states in writing that he or she voluntarily chooses to work without at least 24 consecutive hours of rest in 7 consecutive days.” Wis. Stats. §103.85 (2) (g) (at Section 3078bg). For those employees covered by a collective bargaining agreement with contrary provisions, the amendment does not become effective until “the day on which the collective bargaining agreement expires or is extended, modified, or renewed, whichever occurs first.” Id. at Section 9351.

The new exception has three key components: (1) the employee’s agreement must be in writing; (2) it must be voluntarily given; and (3) the writing must actually contain words stating that the employee voluntarily chooses to work seven consecutive days without 24 consecutive hours rest.

Of course, as the employee’s consent must be voluntarily given, an employer may not coerce an employee into providing it under the threat of discipline or some other adverse employment action. Nor may an employer discipline or discharge an employee for refusing to voluntarily agree to work 7 days straight.

Notably, the statute is silent on when the employer must obtain the employee’s written agreement. Thus, it is an open question whether an employee’s consent must be given prior to the first day worked, or just at some point prior to working the seventh day, or can actually be obtained after the employee has worked the seven days. Given the “voluntary” requirement and to avoid an allegation of coercion, it is recommended that an employer obtain the employee’s written consent at some point before the employee works the 7th consecutive day.

Technically, Wisconsin employers already had a method available to permit employees to work up to 12 days straight without a 24 hour break. To do so, an employer must merely schedule the employee’s “days of rest” on the first and last days of a two calendar week period; the employee can then lawfully work up to 12 consecutive days in-between. Wis. Admin. Code Ch. DWD §275.01(1).

Nevertheless, the new amendment gives employers further flexibility to meet changing production needs, while providing employees with additional opportunities to earn greater income at the time of their choosing.

The Cost of Doing Business Just Went Up (Again) – The DOL Proposes New Overtime Pay Regulations

“Money can’t buy you happiness, but it can buy you a yacht big enough to pull up right alongside it.”
 
– David Lee Roth (Lead Singer – Van Halen)

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The U.S. Department of Labor (“DOL”) just released proposed rules that will significantly increase the number of employees entitled to receive overtime pay under the Fair Labor Standards Act (“FLSA”). The highly anticipated changes will make an estimated 5 million currently “exempt” employees eligible for overtime pay for all hours worked over 40 in a workweek.

The major changes relate to the amount of salary required for the “executive, administrative, and professional” exemptions, and the amount of total annual pay required for the “highly compensated employee” exemption.

The proposed rule for the executive, administrative, and professional exemptions more than doubles the minimum salary level from its current level of $455 per week ($23,660 annualized) to approximately $921 per week ($47,892 annualized) in 2015, and $970 per week ($50,440 annualized) in 2016. The DOL has proposed automatically updating this salary amount so that it will increase without additional rulemaking.

The proposed rule also raises the total annual compensation required to qualify for the highly-compensated employee exemption from the $100,000 to at least $122,148. Like the base salary requirement, the DOL has also proposed updating the total annual compensation amount for this exemption so that it will increase without additional rulemaking.

Many stakeholders expected the DOL to propose changes to the “duties test” applicable to the executive, administrative, and professional exemptions. The DOL did not propose specific changes to any of the duties tests, but rather, solicited public comments on them, as well as on the proposed salary levels.

As the changes are “proposed,” they do not currently have the force of law.  They could also be modified after the public “comment period” and further DOL review.  When the final regulations are issued they will likely not take effect for several months after publication. These administrative steps will likely push the effective date of the legally binding “final” regulations into 2016.

In the interim, employers would be well served  to revisit their current “salaried exempt” classifications, as they will have some important decisons to make, including: (1) whether to increase certain job classifications’ salaries to meet the new salary thresholds; (2) whether to convert certain salaried employees to hourly non-exempt and track hours worked; (3) when to implement any changes; and (4) figuring out how to pay for the increased labor costs.

 

Four Recent HR & Employment Law Developments

As those working in human resources and my fellow employment lawyers can attest, the last few years have given us constant change.  New employment laws, new labor regulations, federal agencies aggressively enforcing both, and significant cases being issued almost daily make it tough for even the most seasoned “HR Genius” to keep on top of all of the developments.  I try to lighten the load through this Blog, but like you, only have so many hours in the day.

So,  this week I am going to lean on my management-side employment law colleagues at Michael Best & Friedrich.  Below are just a sampling of the recent articles and “client alerts” they have authored recently:

1.  Wisconsin just enacted its “Right-To-Work” Law.  What does this mean for employers in Wisconsin? Click here.

2.  The Department of Labor just issued its Final Rule revising and expanding the definition of “spouse” to include those from same sex marriages.  For more details, click here.

3.  Utah just enacted a new law prohibiting discrimination against employees on the basis of their sexual orientation and “gender identity.”  If you have operations there, then you should  click here.

4.  Do you know what constitutes a valid employment claim “release,” and when you can lawfully “require” employees to sign them?  For this information and more, click here.

Hopefully you will find these helpful in your quest to becoming (or remaining) an “HR Genius.”

Mitchell W. Quick, Attorney/Partner
Michael Best & Friedrich LLP
Suite 3300
100 E. Wisconsin Avenue
Milwaukee, Wisconsin 53202
414.225.2755 (direct)
414.277.0656 (fax)
mwquick@michaelbest.com
http://www.linkedin.com/in/mitchquick
Twitter: @HRGeniusBar
@wagelaws

 

 

 

Employees Behaving Badly – The Social Media Edition

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“Privacy is dead, and social media hold the smoking gun” – Pete Cashmore, CEO of Mashable   

It seems like every week there is another story gone “viral”  of an employee posting something colossally stupid or offensive on a social media site, getting fired, and the employer left scrambling to repair its damaged reputation.  Here are just a few of the recent gems:

1.  ESPN suspended outspoken anchor Keith Olbermann for engaging in a heated twitter debate with Penn State University (“PSU”) students.  After a PSU alum brought to his attention an annual fundraiser at PSU that raised $13 million for pediatric cancer, Olbermann tweeted “PSU students are pitiful  because they’re  PSU students – period,” and called another student a “moron.”  Olbermann later apologized (via Twitter of course), calling his comments “stupid and childish.”

2.  A school bus driver thought it was a good idea to take a “selfie” holding a full bottle of beer to her lips as she sat behind the driver’s wheel, and then post it on Facebook.  Nothing says “student safety” like a brewski and a 15,000 pound vehicle, right?  The school district promptly fired the driver  after concerned parents rightfully went ballistic.  Fun Fact:  the driver never actually opened the bottle.

3. A Texas teenager fired off an expletive filled tweet complaining about starting her new job at a local pizza joint the next day, complete with a string of “thumbs-down” emoji characters:

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The boss saw it and tweeted back: “no… you don’t start the ** job today! I just fired you! Good luck with your no money, no job life.” Not to be outdone in this social media throwdown, the boss added some crying emoji faces. Not surprisingly, his corporate ownership was none too happy with the public airing of the dispute (think angry emoji faces).

So how can employers reduce their legal and reputational risks from their employees’ social media abuses?  For starters:

1. Adopt and enforce a clear social media policy. (Easier said than done given the NLRB’s views on the subject).

2. Train employees to think twice before tweeting, posting or sharing. And then think a third time.

3.  Train employees to ask themselves:  is this tweet/post/share something that I would say or do in front of my boss, my spouse, my parents, or my kids?  If not, don’t tweet/post/share it.

4.  Train employees to further ask themselves: is this tweet/post/share something that I am comfortable explaining and/or defending to the individuals mentioned above, or to a judge,  jury, or the mainstream media? If not, don’t tweet/post/share it.

 5.  Train employees to remember that although “what happens in Vegas stays in Vegas,” what happens on Twitter/Facebook/Instagram will stay on the internet forever.  Or, as they used to say,  “this will go on your permanent record.”

6.   Bottom line –  Everyone (from the CEO to the rank-and-file worker) should recognize “you are what you tweet,” and that all must choose their words, videos, pictures, and yes, emojis, carefully.

Mitchell W. Quick, Attorney/Partner
Michael Best & Friedrich LLP
Suite 3300
100 E. Wisconsin Avenue
Milwaukee, Wisconsin 53202
414.225.2755 (direct)
414.277.0656 (fax)
mwquick@michaelbest.com
http://www.linkedin.com/in/mitchquick
 Twitter: @HRGeniusBar
 @wagelaws