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.

 

Wisconsin Modifies Wage Law’s Recordkeeping Requirements

Wisconsin employers recently received some good news from the Legislature: effective April 17, 2014 employers are no longer required to keep payroll records tracking the “hours worked” of their salaried employees who are “exempt” from Wisconsin’s overtime compensation laws.  This change brings Wisconsin’s payroll recordkeeping requirements in line with those of the Federal Fair Labor Standards Act (“FLSA”). Wisconsin companies no longer have to keep precise daily or weekly time records for their salaried exempt professional, executive (i.e. managerial and supervisory), administrative, and computer professional employees.  See Wis. Stats. §104.09.

Employers who previously struggled complying with Wisconsin’s recordkeeping obligations will obviously welcome the lowered administrative burden. But this lower burden may come at a higher price – what if an employee files an overtime pay claim in court or at the Department of Labor (“DOL”) alleging that the employer “misclassified” him/her as overtime exempt?

Often in these cases an employee claims to have worked substantial amounts of overtime hours each week, and offers as “evidence”: (1) a self-serving log or spreadsheet showing a huge number of overtime hours worked; and/or (2) self-serving testimony that he/she worked all hours of the day and night, including weekends. Employers who do not have time cards to refute the claimed amount of overtime hours worked are then forced to rely on anecdotal evidence such as: (1) observations of when the employee “typically” arrived at and/or left work; or (2)  the employee’s computer “log on” and “log off” times.  The DOL or jury then decides how many overtime hours the employee worked each week.

Given this risk, employers would be well served to re-examine whether the employees they classify as “salaried exempt” truly satisfy all of an applicable exemption’s requirements.

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

 

Don’t Show Them The Money

“In God we trust.  All others pay cash.”

Companies:  Want to avoid throwing your money away?  Then don’t lend your employees any.

Unfortunately, people get into “money troubles” from time to time.  For some, unexpected medical bills or car repairs cause a temporary “cash flow” problem.  But for others, constant overspending leads to a permanent state of financial crisis.

Regardless of the cause, employees facing a pinch sometimes ask their employer for a loan or an “advance” on their wages.  The request often falls to the Human Resources (“HR”) Manager.  The HR Manager likes the employee and wants to help out.

So, despite not being a bank, or asking for collateral, or charging any interest (which state laws usually prohibit employers from doing anyway), the HR Manager approves the loan/advance.  The parties sign a simple re-payment agreement after the employee swears on his (not yet dead) mother’s grave to repay the loan in full.  And sometimes the employee does pay the loan back in full.

But other times the promise goes unfulfilled.  As an old proverb cautions: “A hundred wagon loads of thoughts will not pay a single ounce of debt.”  Oftentimes the wagon hits a series of potholes, forcing the company to confront a number of difficult scenarios:

Pothole #1:  The employee asks for a second loan before the first is even paid off. Do you double down? Do you really know what the loan is for?  Or are you just enabling additional self-destructive behavior?

Pothole #2:  The employee asks to restructure the loan’s re-payment terms. Do you extend the payoff date, or reduce the amount of the installment payments?  If you do, you may just be delaying the inevitable default on the loan.

Pothole #3:  Word gets around and soon several employees are asking for loans/advances.  Some of these folks are marginal to poor performers, without a long-term future at your company.  Do you have to extend them the same loan terms? And if you don’t, will they allege discrimination?

Pothole #4:  The original employee quits or gets fired.  A sizable portion of the loan/advance is still owing even after the company offsets as much as it can against the employee’s last paycheck.

Now what?  Do you cut your losses?  Or do you send a “demand letter” asking the ex-employee to repay the debt?  And if the ex-employee ignores the letter, do you file a lawsuit in small claims court against a (likely) insolvent individual?

Let’s say you sue the ex-employee.  As we know, “the best defense is a good offense.” Are you prepared to deal with a counterclaim  from the ex-employee asserting a violation of some employment law (i.e. discrimination, harassment, retaliation)?  Are you able to handle the risk of the company owing the ex-employee money?

In short, providing a loan to an employee often results in myriad administrative and personnel headaches, capped off by a “good deed getting punished.”  To avoid this,  politely deny the loan request and advise the employee to go to a financial institution.

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