U.S. Department of Labor Headquarters

A federal district court in Texas yesterday struck down (once and for all?) the changes to the overtime rules proposed by the Obama Administration.  Previously, those rules (affecting the white collar exemptions) had been stayed, but the Court’s ruling suggests that there is a fatal flaw to the proposed rules and barred its implementation.

In doing so, the Court said that the salary-level test that was proposed was too high to determine which workers were exempt from overtime compensation.

Of course, there was little chance that these rules were going to get the go-ahead anyways because the Trump administration has shown no desire to support them either politically or in court.  Indeed, in July, the Department of Labor sought public feedback on ways to revise the proposed rule.

The ruling applies to employers nationwide.

While you’ll see a round of headlines today about how this is a big decision, it really should come as no surprise for those of us who have been following this for many months.

So all that guidance last year about how to comply with the new rules? Forget about it for now.

Keep calm and carry on.

 

I had a lot of plans this week to do another deep dive into an employment law issue but then, well, let’s just say life happens.

Among the things? Lots of questions from clients about the new overtime rules.  While everyone has had months to plan, there are definitely a few procrastinators out there.

But this may (and I emphasize and underline MAY) work out to those procrastinator’s advantage.   Reports this week are that a Texas court is considering issuing an injunction that would stop the overtime rule in its tracks.  The court has indicated that it will consider the matter by November 22nd. And moreover, even if it doesn’t issue an injunction on that date, it will consider the entirety of the case by 11:59:59p on November 30th.

While I still think the lawsuit may be a reach, it doesn’t seem as far fetched as it did a few weeks ago. Earlier this week, a similar Texas court issued a permanent injunction prohibiting the implementation of the so-called “Persuader Rule” from the NLRB.  Government overreach seems to be a theme in Texas.

What should this mean for employers? Well, I still think planning is very much in order. But if employers haven’t yet flipped the switch on their plans, they may want to hold out for a few more days to see if this Texas case leads to anything.

Why? Because once you raise an employee’s salary, for example, it’d be very hard to roll it back.

So procrastinators take heart! Maybe, just maybe, your tardiness will pay off.

But I still wouldn’t count on it.

Author’s note: I will be proverbially “going fishing” for a few days, so don’t expect any late breaking posts until after Thanksgiving here.  I’ll be posting a few “From the Archives” posts in the interim.

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.

 

USDOL Headquarters in DC
USDOL Headquarters in DC

Late Monday, several reports on Twitter indicated that the Department of Labor would be announcing and releasing the final version of the revisions to the white-collar overtime regulations.  You can see my prior posts on the subject here and here.

This has been a long time coming. It was way back in 2014 (!) that the President indicated that he wanted the USDOL to revisit them.

And the anticipation on Twitter has been breathless with so-called experts predicting for months that the new regulations would be released any day. Or last week.  Or in July.  And speculation on what would be in the final overtime rule has run rampant.

So, rather than predict what will be in the final regulations, I want to highlight three areas that I’ll be looking at in my initial review of the regulation.

  1. Salary Test: The proposed rule last year raised the salary test to $50,440 from its current level of $23,660 (which the vast majority of employees meet in Connecticut due to minimum wage being high.)  The latest thinking is that the final rule will set that threshold at $47,000.  (UPDATED: News reports on Tuesday afternoon indicated that the threshold will be set at $47,476 and be updated every three years.)  What does that mean? It means that any employee who is paid less than that amount regardless of his or her duties would need to be paid overtime for any work over 40 hours.  That would indeed be a big change.  So, when we look at the new rule, first item to look at is the salary threshold set by the USDOL.  There is no question it will be high; it’s just a question of how high.  Bonus item to look at: Will the salary test be tied to inflation? In other words – will the threshold keep up with inflation automatically in future years? The proposed version tied it to the 40 percentile of income; will that remain in the final rule?
  2. Duties Test: The proposed rule did not explicitly change the duties test for overtime — meaning that the administrative, professional and executive exemptions would still apply as current framed — albeit at a higher salary threshold.  However, the proposed rule solicited input from the public about how best to alter the duties part of the test.  Would the USDOL be so bold as to introduce changes to the duties test without first floating it in a proposed rule? The prevailing wisdom is no, but keep an eye on that and any hints about future revisions to this rule. (UPDATED: News reports on Tuesday suggest that no changes to the duties tests will be forthcoming.)
  3. Timing: Another thing to look for in the final rule: How much time will employers have to comply? And how long until the rules go into effect? Back in November 2015, a government official suggested that employers would have 60 days to comply. Will that hold up? (UPDATED: News reports on Tuesday also indicated that employers will have until December 1, 2016.) 

For employers in Connecticut, the new rules will make things particularly challenging. For years, Connecticut’s stricter overtime rules have been the go-to source for employers. However, with the new federal rules being even stricter (or, more favorable to the employee) than the state rule, we may see a return to federal dominance.  So a bonus thing to look for in Connecticut: How will these rules interact with Connecticut’s rule? Don’t just read the federal rule in isolation.

And to be clear, there are other aspects of this rule that we will undoubtedly have to look for.  But I’m not going to make predictions about a rule we haven’t seen.

I will make one overall prediction, however: Publications, blogs and people on Twitter are going to be hysterical over the pronouncements of the new rule. My suggestion? Ignore them.  The hype is designed, in part, on scaring employers into a frenzy.

What to do instead? Employers should view this new overtime rules with a bit of detachment.  Get the facts.  Then, figure out what applies to your business and start work on a plan to meet those requirements.

U.S. Department of Labor Headquarters
U.S. Department of Labor Headquarters

Over the last few days, Twitter has been a-twittering with buzz that the Department of Labor has sent the final overtime rules to the OMB.

This is the equivalent of one department sending another one an e-mail with the new rules. Why? Because it’s just the next step in getting the rules approved.  But nothing more than that. Moreover, this step always happens in the issuance of regulations.

And here’s the really important point: We still don’t know what these final rules will be.

So ask yourself, is it really worth getting excited about one department sending the rules to another?

That said, SHRM had some additional information from a speaker at a conference this week about when we can actually expect to see the new rules:

At the SHRM Employment Law & Legislative Conference yesterday, Tammy McCutchen, an attorney with Littler in Washington, D.C., and a former administrator of the DOL’s Wage and Hour Division, advised attendees to keep an eye on reginfo.gov, which tracks government agencies’ regulatory actions as they are submitted for review to OMB. Sure enough, the rule appeared on the site late March 14.

At the conference, McCutchen told attendees she believed the rule would work its way quickly through OMB and most likely be published by July 7, and take effect on Labor Day, Sept. 5. Alternatively, she said, the rule would be published the Friday before Labor Day, Sept. 2, to take effect Nov. 1—just prior to Election Day.

If you recall, I first reported on the timing of this back in November 2015.  In that post, I reported on what I heard at the ABA Labor & Employment Law conference — “late 2016”.

Despite all the Twitter posts this week: Things are still on target.

For employers in Connecticut, this is really wait-and-see territory.  First, we don’t know what the new overtime rules are going to be. And second, Connecticut has it’s own rules and we will need to analyze the interaction between existing state laws and these new federal overtime regulations.

Remember: Keep Calm & Carry On.

USDOL Solicitor Smith speaks at ABALEL conference
USDOL Solicitor Smith speaks at ABALEL conference

Over the next few days, I hope to provide a few updates from attending last week’s ABA Labor & Employment Law Annual Conference in Philadelphia.  There were many good, substantive programs there and lots to be gleaned for employers.

One of the sessions focused on the proposed revisions to the white collar overtime exemptions that were released for comment earlier this year.  The Department of Labor Solicitor Patricia Smith provided some insights in a panel discussion about where things were headed.

(For more background on these proposed revisions, see my prior post here.)

The solicitor indicated that the DOL received over 270,000 (!) comments to the proposed revisions and that more than 3,000 of those were “substantive” in nature. That unprecedented number of comments means that a good deal of time must be spent by the DOL to review those comments. She indicated the DOL was still reviewing the comments.

As a result, she indicated that the final version of these white collar revisions would not come out until sometime in 2016.

You might be asking: When exactly?

Well, she didn’t indicate that other than to say that she hint opaquely that it might be “late” in the year.

My own speculation (and let me be clear that it is just that) is that the final revisions may not come out until after the 2016 Presidential election.  If they are released beforehand, it is possible, and perhaps probable, that they will become a campaign issue.

In any event, when the final revisions come out, the DOL solicitor indicated that employers will have 60 days to comply.  Thus, at this point, the very earliest employers can expect to implement these revisions is March or April 2016 – and again, that’s not likely.

So what are employers to do now? The usual things: Keep up to date on what is going on; review your existing positions for compliance and with an eye towards the revisions; consider your salary range for people that are close to the $50k proposed threshold.

DOLOn Monday night, details of the revised white-collar overtime regulations were released. But we’ll know more once the actual details get posted on the Department of Labor website on Tuesday. (Bloomberg was the first to report it Monday evening.)

(Update 6/30/15: The proposed regulations are now available online from the U.S. Department of Labor here.)

As you may know, in order to be exempt from overtime, typically two tests must be met: a “salary” test and a “duties” test. Employees who are paid below that threshold must be paid overtime even if the “duties” test is met.

But in recent years, the salary test has been very easy to meet. Enter the proposed changes to the regulations.

Among the details released tonight:

  • The regulations will raise the salary threshold from $23,660 per year to $50,440 – nearly $1000 a week ($970 a week if you’re really particular).
  • This threshold will not be linked to inflation but, according to Politico, will be tied to the 40 percentile of income (meaning, in essence, that 40 percent of the working population should be eligible for overtime pay)
  • Importantly, the regulations will NOT include changes to the duties test. Instead, it “solicits questions from the public about how best to alter it. As in the past, the new threshold will not affect teachers, lawyers, doctors and judges, who are all automatically exempt from overtime.”

What this means practically is that employers who have employees making less than $50k, need to review their practices now to see who may be impacted by these new regulations.

But don’t go revising all your policies yet. According to The New York Times, the new rules wouldn’t be implemented until at least 2016 — giving employers many more months to understand the changes.’

Taking advantage of new media, the President released his own op-ed on the subject on the Huffington Post Monday night.

This week, I’ll head to Wisconsin to discuss my plan to extend overtime protections to nearly 5 million workers in 2016, covering all salaried workers making up to about $50,400 next year. That’s good for workers who want fair pay, and it’s good for business owners who are already paying their employees what they deserve — since those who are doing right by their employees are undercut by competitors who aren’t.

That’s how America should do business. In this country, a hard day’s work deserves a fair day’s pay. That’s at the heart of what it means to be middle class in America.

Interestingly, some anticipate that employer will respond to these rules by actually lowering salaries:

Assuming the rule is put in place, economists believe that many employers will most likely reduce workers’ hours so as to save on overtime pay. Even so, the White House believes the rule could affect nearly five million workers in the short term. Meanwhile, any attempt to scale back hours could increase hiring.

Over the longer term, the effect of the rule could diminish substantially as employers offer new hires a lower base wage. This could make their overall pay, including the higher overtime wage, equivalent to what comparable employees make today in the absence of the overtime rule.

Again, we’re anticipating more details when the proposed regulations are now released as early as Tuesday morning.

 

Reading the Tea Leaves

Every year, I break out a crystal ball, or a magic 8-ball, or some tea leaves, and make some pronouncement about what will happen in the upcoming year.

It’s sort of a no-lose proposition. If I’m right, well, then I pat myself on the back. If I’m wrong, well, it’s just an educated guess.

So, continuing my series of outlook posts, here are three bold predictions on what we could see in the area of employment law on a national basis. In a post next week, I’ll look at Connecticut and make three more “bold” predictions.

1. A Battle Royale Over the NLRB: A new Republican-controlled Congress + a reinvigorated NLRB spells trouble.  We’ve already seen in the closing weeks of 2014 a renewed sense of vigor at the NLRB. It has taken aggressive stances in several cases and has now finalized “quickie” election rules that will disrupt the settled way that such elections have been held for years.  The Republicans who now control Congress will no doubt attempt to push back at such actions, but with President Obama wielding a veto pen, we’re unlikely to see such actions. Instead, look for lawsuits to be the continued mechanism by business interests to try to halt what they see as NLRB overreach.

2. The Supreme Court’s Makes No One Happy: The highest court has taken some interesting employment law cases over the years.  In Young v. UPS, I predict the court will punt on the issue of the extent of the Pregnancy Discrimination Act, deferring to the United States’ brief recommending the same thing.  In EEOC v. Abercrombie & Fitch, my sense is that the Court will find that actual knowledge of an employee’s religion is needed in order to find discrimination. (Argument set for February 25, 2015.) In Mach Mining v. EEOC, the Court will agree with the lower courts that have looked at the issue and find that the EEOC’s duty to conciliate before filing a charge cannot be the subject of an affirmative defense.  (That case is set for oral argument on January 13, 2015.)

3. Lots of New Regulations: There are a number of items that the EEOC and Department of Labor have on their regulatory agenda. Among the new regulations that are likely to come down the pike in 2015 are revisions to the “white collar” exemption for overtime purposes and guidance on “wellness plans”.

Bonus prediction: If I’m going to make one crazy prediction, here it is: Perhaps we will see consideration of the Employment Nondiscrimination Act as a way for Republicans to show that they can govern with their majorities in Congress.  Yes, I recognize this is a stretch but with both President Obama and Republican leaders talking about taking bold steps over Obama’s last two years, could we see a breakthrough on a compromise for this bill? Stranger things have happened.

Will these come true? Stay tuned.

The New York Times reported this morning that President Obama will ask the United States Department of Labor to revamp its regulations on the so-called “white collar” exemptions to the federal overtime laws.

Specifically, he will direct the DOL “to require overtime pay for several million additional fast-food managers, loan officers, computer technicians and others whom many businesses currently classify as ‘executive or professional’ employees.

The article also suggests that “he will try to change rules that allow employers to define which workers are exempt from receiving overtime based on the kind of work they perform. Under current rules, if an employer declares that an employee’s primary responsibility is executive, such as overseeing a cleanup crew, then that worker can be exempted from overtime.”

As of mid-morning, the order was still not available on the White House’s website but you can check here. 

However, based on the article, it seems that the executive and professional employee exemption would be most directly impacted, but it is unclear what the impact would be on the administrative exemption.

But before you start throwing out your position descriptions just yet, realize that the President’s direction is just the first step in a process, not the last.

The regulations still need to be drafted, proposed and then adopted by the United States Department of Labor. It is certainly possible that further revisions will occur during that process.  The timing of this is still unclear.

For employers in Connecticut, understand that if these new proposals do come into effect, it would provide a new “floor” for wage & hour laws in Connecticut and many employers would have to adopt them, even though Connecticut’s own rules would be different.  As I’ve noted before, when federal law provides more protection to employees than state law, federal law will control. (The vice versa also applies too.)

However, this suggests the most significant change we’ve seen in the wage and hour area in a decade and could potentially open up a new front on the wage & hour class action battles.

So stay tuned.