My colleague, Gabe Jiran, returns the blog today with this quick post updating us on where things stand on the DOL’s proposed changes to the overtime rules (and providing me with an excuse to link to one of the few songs to mention “overtime” in the title.)

As you may recall from some of the prior posts here, employers scrambled to address the Department of Labor’s changes to the salary threshold for white collar exemptions under the Fair Labor Standards Act.  That change would have increased the salary threshold from $23,360 to $47,476 annually in December, 2016.

However, several states challenged this increase, resulting in a federal court in Texas issuing a nationwide injunction stalling the increase.  Of course, many employers had already made changes to address the increase, but the injunction still stands.

Then the election happened. Which changed everything.

Now, the DOL under the new Trump administration has indicated that it will not advocate for a specific salary level under its regulations, but will instead gather information about the appropriate salary levels.

The DOL has thus issued a request for information to get feedback, which can be accessed here.

What does this mean for employers? While this process will most likely result in an increase in the salary levels, it seems that the DOL will do so based on responses to its request for information rather than arbitrarily setting a salary level.

For now, employers should continue to follow the current regulations and the $23,360 salary level while, of course, also following the Connecticut guidelines where applicable too.

But stay tuned here: Developments in this area now seem on the way.

Making Lemonade Out of Lemons
Making Lemonade Out of Lemons

Are you tired of lawyers commenting already on the new overtime rules?

(The answer should be no, of course, since you’re reading this blog and thus have room for one more view.)

But I think it’s fair to say that we haven’t seen a feeding frenzy like this on employment law in many, many years.  And with the massive publicity of this rule comes an opportunity, as I’ll explain too.

So, dear readers, deep breath time.   We’ll get through it together.

There’s already been lots of pixels spilled about how employers can “solve” their overtime issues that will arise under this rule by making various changes in their workplace.

For example, employers can increase an employee’s salary to $47,476 annually if that employee otherwise meets the duties test, to keep an employee “exempt” from overtime.

Or the employer can limit the overtime that the employee can work, explaining that it is concerned with controlling costs.

But in all the analysis, I think one big thing has been overlooked: Employers can use this announcement as an opportunity to review and re-classify all sorts of employees — even if they are not directly impacted by the new rule.

Too often, employers who discover that they have misclassified employees believe that they are in a conundrum. Keep their head down and hope no one notices, or properly classify the employee and keep their fingers crossed that they don’t get sued for back pay.  Neither option is a great one for employers who need to get into compliance. (I once proposed an amnesty proposal to solve this dilemma.)   Sometimes, employers have legitimate reasons why an employee has been classified as non-exempt but wants to avoid any future issues. Perhaps in other situations the employee isn’t working overtime anyways.

But here is where the opportunity comes in: As I highlighted at the start, the new overtime rule has received unprecedented amounts of publicity in the workplace. No doubt most of your employees have now heard something about it.  So, some won’t be surprised if they are notified that things are changing for their position as a result of the new rule.

While the rule doesn’t provide amnesty for employers who make such changes, the new rule does remove some of the suspicions employees may have about the changes — even when those changes are perfectly legal.  Employees may be more understanding.  Employers can explain truthfully that the new rule has required them to review the classification of all of its employees and the changes are as a result of the rule.

So, yes, the rule may be difficult to comply with. But don’t miss out on the opportunities that may arise from this rule as well.  Full compliance with the law will be so much cheaper than paying for a massive wage-and-hour suit.  And as I’ve said before, compliance is the ultimate goal. You should not be looking for ways to circumvent the law.

So ultimately, perhaps you’ll view the new overtime rule as more about lemonade than lemons, as the saying goes.

presentsIf you like to open your presents on Christmas Eve, the U.S. Department of Labor is for you. Last night, the DOL posted the final revised rule on overtime on its website ahead of its planned announcement this afternoon.

What a gift for employment lawyers!  Needless to say, I was up late unwrapping all my “gifts.”

Remember: These changes apply only to the so-called white-collar exemptions: Executive, Administrative and Professional.  So, if the employee falls within a different exemption, this rule does not apply.

And, as I’ll explain below, for Connecticut employers, the challenges are just beginning.  The rule applies to all employers covered by the FLSA (FLSA covers employers engaged in interstate commerce and gross volume of $500,000.00 in sales) but Connecticut employers will also have to worry about state law as well.

Here are the highlights (the DOL has released a chart comparing all the changes as well):

  • As expected, the new rule changes the salary basis to $47,476 annually ($913/week) — slightly less than the proposed rule last year. In plain English, anyone who makes less than this amount must be paid overtime for any hours over 40 in a work week — regardless of his or her duties.
  • This threshold will change every three years, and will be tied to the salary level at the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region, currently the South.
  • The new rule makes no changes to the duties test.   If an employee had duties that fell within the executive exemption, for example, they will still be exempt — that is, if their minimum salary now meets the threshold of $47,476.
  • The rule increases the “highly compensated employee” exception to the exemption to $134,004 – and that too will change every three years. (But note that Connecticut law does not have such an exception.)
  • The rule becomes effective December 1, 2016. Note that December 1 is a Thursday, so employers will have to make sure that the entire pay period is compliant with the new rule.
  • The new rule will now permits employers to use non-discretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level.  This is a brand new element and should help employers meet that threshold (a bit).

The USDOL also released guidance for non-profits and higher education to address concerns in those areas.  Those employers should review that guidance specifically.

For Connecticut employers, though, take a deep breath before jumping in.  Connecticut has its own state law and regulations that are now in conflict with this federal rule. And as the CTDOL notes in its guide to wage & workplace laws: “The laws that provide the higher or stricter standard shall apply.”

What does that mean here? We’ll have to wait and see if the Connecticut Department of Labor updates its guidance for starters.  It is challenging for Connecticut to update its regulations so, for now, we can only hope that the CTDOL might at least shed some light on how it might enforce the state rules. (There is a helpful chart that it has used in the past, for example, that could be updated.)

But here, on first glance, are three other items of concern I have for now:

  1. The salary test in Connecticut does not contain an allowance to consider nondiscretionary bonuses.  Will that change (at least as a matter of enforcement) now that the federal regulations allow employers to consider that? And how should the deduction rule be applied in such an instance? Would Connecticut recognize an increased salary basis but without such bonuses as the more “protective” of the law?
  2. The CTDOL has previously recognized a “no man’s land” (its words) where the interaction of the rules is confusing; how will it deal with a similar (and much larger) no man’s land where the salary is higher, but the duties test has been met?
  3. Connecticut does not have an exemption for highly compensated employees. The new federal rule does not change state law and thus the HCE exemption will still not apply here.  Will the CTDOL reconsider that in light of the increased threshold at a federal level?

What’s the Takeaway for Employers in Connecticut?

For employers in Connecticut, do not just blindly adopt the new federal rule into your workplace.

For example, increasing the base salary to avoid overtime obligations under the federal rule may not matter if the employee does not meet the duties test under Connecticut law for the same exemption.

This is one of those situations that will require a case-by-case look at specific positions and the interaction between state and federal law.  Unfortunately, you’ll probably want to consult heavily with various HR consultants or lawyers specializing in employment law.

So, as a said before, stay calm. You can do this.  You have until December.

 

One of the latest fads in employment law has become a peculiar side effect of this recession — the increase in the usEmpty officee of mandatory furloughs.

What are they? Well, in simple terms, they are orders from an employer to an employee that they take a day (or multiple days) off without pay. In doing so, the employee is to refrain from working.

An excellent post up this morning on the HR Daily Advisory site, runs through the risks of using furloughs, particularly for exempt employees.  Indeed, the title is particularly apt – "Attractive, but Legally Tricky".

There are plenty of traps for employers to fall into. An employer, for example, may decide to reduce salaries by 20% and then reduce workweeks by one day a week.  The post suggests that in general, this approach may not work because of the Department of Labor’s pronouncement that "reducing exempt employees’ work schedules with a corresponding reduction in salary because of lack of work violates the salary basis test."

The post does suggest a ray of hope, though:

The DOL further clarified that an employer may make a "fixed" and "permanent" decision to reduce the hours and corresponding pay for exempt employees. For instance, an employer could reduce the work schedule for the year from 52 five-day workweeks to 47 five-day workweeks and 5 four-day workweeks, and also reduce the pay of exempt employees as a result of the shortened workweeks.

The linchpin of the distinction between this permitted approach and the impermissible hours reduction is the permanence of the schedule reduction as contrasted to a temporary reduction in the normal scheduled workweek to address a short-term work slowdown or temporary economic conditions.

So, for employers considering using mandatory furloughs as a way to keep their workforce intact through this recession, be careful and cautious.

It’s FINALLY a nice spring day outside in Connecticut (see the picture of the Connecticut River taken this morning) so no need to spend a minute more than necessary to catch up on some other employment law-related items you might have missed during the week:View of Hartford, CT