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.

 

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.

There are three major “white-collar” exemptions to the federal overtime rules that are, to some employers, a bit confusing to say the least.  One of them — the “executive” exemption — is mistakenly understood to just include, well, senior executives of a company.

A new case out by the Second Circuit (Ramos v. Baldor Specialty Foods — download here) last week shows that the executive exemption may be a bit broader than is conventionally understood. 

The case turns on whether the employee is managing a “department or subdivision”.  A subdivision must have “permanent status and continuing function, as opposed to a mere collection of employees assigned from time to time to a specific job or series of jobs.” 

In this instance, the court was asked to consider whether 20 or so “warehouse captains” each of whom performs the same job duties as other captains where exectuives.   Their duties include:

overseeing the work of a “team” of three to six “pickers,” the employees who retrieve food products from the warehouse shelves and load them onto trucks to be delivered to Baldor’s customers. Each captain is “in charge of” his team. He is responsible for making sure that his pickers arrive at work on time for each shift, retrieve the correct products from the warehouse shelves, and load the products onto the correct trucks. He is also responsible for improving his team’s performance and efficiency over time. Each captain has the power to assign slow pickers “easier work” so that they do not fall behind or hurt the team’s performance, and the captain can “give certain orders to certain pickers if [he] trust[s]” a particular picker “to get the right product.” It is the captain’s job to ensure pickers “have done their job right.” Supervising his team is the “main part” of a captain’s job.

The plaintiffs in this case disputed that each captain manages “a customarily recognized department or subdivision” of the company. They insisted that the teams of pickers do not constitute customarily recognized departments or subdivisions as defined in the regulations, because each team performs the same tasks as other teams at the same time and in the same warehouse, and that the executive exemption therefore does not apply to captains.

That argument was rejected by the court.  As noted by the Wage & Hour Litigation Blog:

The Second Circuit disagreed, stressing that there was no requirement that a department or subdivision operate in different locations, shifts, or have varied functions. While those characteristics may help define a department, they are not mandatory. The Court also held that “the job of supervising a team of employees becomes no less managerial merely because the team operates alongside other teams performing the same work in the same building.” Accordingly, the Court held that the teams of pickers were valid subdivisions under the FLSA, and thus the warehouse captains who supervised them were properly exempted as executives.

For employers, the case is an important reminder that you ought to be reviewing the way that you classify your employees.  If they are not being paid overtime, ensure that the employees fall within one of the commonly-recognized exemptions. The above example should help you think outside the lines too.

Those individuals who you may not thought of as “executives”, may just fall within that exemption after all.

Bringing back a recurring feature of the blog, today and tomorrow will feature an interview with Dr. Steven Lurie who heads Lurie Executive Development and is the author of a recently published book "Handbook for Early Career Success".  You can find his full bio here.

What has fascinated me about Steve is his role as an organizational psychologist.  Over time, he asked hundreds of executives across dozens of organizations not only about the lessons learned from their careers, but specifically, what qualities they see as most critical to early career success. He boiled these down to 8 factors or “Keys to Early Career Success” which he describes in great detail in his book. (You can even view a limited preview of the book here.)

A quick look at these success factors confirms what some of us know from our own experience – Technical-analytical excellence is necessary to getting in the door. But it is the quality of the connections you make with others that leads to being invited to play those higher impact managerial and leadership roles to which many of us aspire.

It’s easy to be jaded about the practical value of these “soft skill” books. Not because they don’t have lots to say, but getting the practical value that employees are looking for is almost impossible given how busy everyone is.

But what’s notable about this book is that it provides a relationship building roadmap with specific rules and tools you can apply to your day-to-day interactions in the workplace and it is written is a style that makes it easily accessible.

The interview with Steve was so enjoyable that I’ve broken up the interview in two parts: 

So Steve, welcome to my blog and thanks for giving us some of your time.

My pleasure Dan, and thanks for having me.

Steve, when you think about the lessons learned and advice you heard across all of these interviews you conducted, was there a “headline message” to entry-level employees?

People who recognize that the path to success is very different in the workplace than in school or and adjust to that reality have a big advantage over people who have no clue about where they are and what is expected.

Continue Reading Five Questions with…Dr. Steven Lurie, on the Attributes for Career Success