Tag Archives: non-exempt

Once More, With Feeling: Proposed Increase to Minimum Salary for Highly Compensated Employees

As previously reported, the U.S. Department of Labor issued a proposed rule addressing exemptions for bona fide executive, administrative, professional, and outside sales employees (the “white-collar” exemptions”) under the Fair Labor Standards Act. Presuming the rule goes into effect, the new minimum salary threshold for these employees will be $35,308 per year (or $679 per week).

Beyond changing the minimum salary threshold for the “white-collar” exempt employees, the DOL also proposed increasing the exemption threshold for a smaller category of employees: “highly-compensated” employees. Previously, any employee whose primary duty was performing office or non-manual work and who customarily and regularly performed at least one duty or had at least responsibility of a bona fide executive, administrative, or professional employee could be exempt–if the employee made at least $100,000 a year and received at least $455 each week on a salary or fee basis. In essence, the “highly-compensated” employees exemption combines a high compensation requirement with a less-stringent, more-flexible duties test in comparison to those used under the “white-collar” exemptions.

Like the DOL’s proposed changes to the “white-collar” exemption, the DOL’s proposed changes to the “highly-compensated” exemption does not alter the duties requirements. Rather, the DOL proposes an increase to the annual and weekly salary thresholds. But in this instance, the increase is substantial. The proposed new threshold jumps from $100,000 under the current rules up to $147,414, of which $679 must be paid weekly on a salary or fee basis. That is an approximate 50 percent increase, and it is about $13,000 higher than what had been previously proposed when changes were considered in 2016.

Now, despite the change raising eyebrows, one could question whether it would have significant impacts because most workers paid $100,000 or more often already fall into one or more of the other exemptions. The DOL itself acknowledges in the proposed rulemaking that it estimates only about 201,100 workers nationwide would become eligible for overtime due to this salary increase. In comparison, the DOL expects the “white-collar” salary change will impact approximately 1.1 million workers nationwide.

The common view remains that the new minimum salary thresholds will likely go into place later this year (2019) but likely no later than January 1, 2020. Although that later date is almost seven months away, that deadline is rapidly approaching. Hence, it is worth reiterating that employers should begin evaluating their staff to determine who, if anyone, may be affected and determine how to proceed. Similarly, this rule change provides employers an opportunity to audit all of their employees (even those unaffected by the proposed rule changes) to make sure each one is properly classified. And if they are not, employers can time any reclassifications with those made to meet the new rule changes to possibly minimize bringing attention to and potential liability for any past misclassifications.

In the meantime, the DOL will accept comments from interested parties until May 21, 2019 at 11:59 PM ET. The public will be able to provide electronic comments at regulations.gov (after searching for RIN no. 1235-AA20) or via mail to the address below (identifying in the written comment (1) the Wage and Hour Division, United States Department of Labor; and (2) RIN no. 1235-AA20).

Division of Regulations, Legislation, and Interpretation
Wage and Hour Division
U.S. Department of Labor, Room S-3502
200 Constitution Avenue, N.W.
Washington, D.C. 20210

John C. Getty
jgetty@williamsparker.com
(941) 329-6622

Let’s Try this Again: Department of Labor Proposes Salary Increases for White-Collar Exemptions

Please note: This post has been updated to reflect a corrected annual minimum salary threshold of $35,308 which represents a nearly $12,000 per year increase from the current salary requirement of $23,660.

The U.S. Department of Labor issued a much-anticipated proposed rule addressing the “white-collar” exemptions for the Fair Labor Standards Act. If the proposed rule is enacted later this year, the new minimum salary threshold will be $35,308 per year (or $679 per week). This represents nearly a $12,000 per year increase from the current salary requirement of $23,660 (or $455 per week). Thus, once this new rule goes into effect, for an employee to be exempt from the FLSA’s minimum wage and overtime rules, the employee’s salary will need to meet the new threshold.

Importantly though, the DOL will not be altering any other aspects of the “white-collar” exemption tests. It won’t be changing the various tests for executives, administrative staff, or professionals. Nor does the DOL’s new rule include periodic automatic increases to the minimum salary threshold as the Obama-era DOL had proposed before a district court stopped it in 2016.

Depending on how quickly the DOL moves through the rule-making process and issues the new rule, the new minimum salary threshold will likely go into place late summer or early fall of this year. For that reason, as they did in 2016 in response to the prior proposed increases, employers will want to begin evaluating their staff to determine who may be affected and determine how they want to proceed.  Additionally, because of this rule change, employers will also want to audit all of their employees to make sure each one is properly classified, and if not, take this opportunity to reclassify employees in a manner that tries to minimize liability for any past misclassifications.

John Getty
jgetty@williamsparker.com
(941) 329-6622

Another Business Resolution: Conduct a Pay Audit in 2019

Pay Audits are different from wage and hour audits. A wage and hour audit looks at whether employees are being paid in compliance with state and federal wage and hour laws. A pay audit reviews whether there may be discrimination in pay practices within an organization. With the #metoo movement and a renewed focus on pay gaps, an internal review of pay practices could save a business from liability under the primary statutes used to combat discriminatory pay gaps – Title VII, the Florida Civil Rights Act, and the Equal Pay Act.

As with other types of claims brought under state and federal discrimination statutes, a claim of disparate pay based on any protected characteristic is subject to the same administrative filing requirement and provides the same remedies as a wrongful termination case. On the other hand, under the Equal Pay Act (which only covers disparities based on gender), there is not an administrative filing requirement, and the definitions and statute of limitations for an employee to bring a claim is the same as those in place for the Fair Labor Standards Act. Further, Equal Pay Act claims do not require proof of intent to discriminate on the part of the employer. And, not having intent as a requirement makes it easier for an employee/former employee to establish a prima facie case. Under the Equal Pay Act, an employee need only show that she works at the same location, performs substantially equal work (regardless of job title), works under substantially equal working conditions, and is paid less than a male counterpart.

In a perfectly competitive labor market, the value an employee contributes to a business should determine that employee’s wage. However, in the real world, there are disparities of income that may be due to differences in labor productivity, and there are wage disparities across genders and ethnicities. When it comes to gender, disparities may be due to:

  • Compensating wage differentials: men may be employed in more dangerous or “dirty” jobs that pay more
  • Choice of college major and choice of career
  • Time constraints: mothers may have only limited time to pursue career advancement
  • Different negotiating skills of men and women
  • The number of years of work experience
  • The number of years in continuous employment
  • The number of hours spent at work
  • Employer discrimination

As set forth above, employer discrimination is only one of several reasons why a gap may exist and employers may have pay gaps that are based on non-discriminatory reasons.  Both the civil rights statutes and the Equal Pay Act provide several defenses to claims of discriminatory pay. Employers can avoid liability by proving the pay differential is due to one of the following reasons:

  • Seniority System
  • Merit Pay System
  • System that measures quality or quantity of work
  • Factor based on any factor other than sex  (this is considered a “catch all” defense)

It is good for employers to be aware of any gaps that exist in its pay practices and understand why they exist. When an employer does not have an explanation, that is when litigation and potential liability can ensue. Below are a few ways that businesses can help prevent (and if necessary defend) discrimination in pay claims:

  • Evaluate all forms of compensation (starting salary, benefits, bonuses, shift differentials, overtime, training opportunities, separation pay, etc.) at least annually for potential pay disparities based on race/ethnicity and gender
    • Evaluate how pay raises and bonuses are determined to ensure that decisions are made in a non-discriminatory manner.
    • Evaluate how you assign your employees to specific jobs.
    • Focus on job recruitment, placement and how pay is assigned to job classes.
  • In addition to an annual assessment, throughout the year conduct periodic “spot” checks for potential compensation problems.
  • Correct problems as soon as they are discovered.
  • Evaluate how women and minorities are placed in your workforce. Do not make assumptions about what they can or cannot do.
    • Does your hiring process seek diversity in the qualified applicant pool?
    • Do you offer career training or opportunities for both genders?
    • If starting salaries and signing bonuses are negotiated, ensure that such a practice does not have an adverse impact on women or minority workers.
    • Evaluate whether all workers have equal opportunity for advancement. Placing one gender in areas that lead to greater advancement could be a violation of law.
  • Periodically review your performance evaluation process and the ratings given to each employee to determine whether the process or the ratings unfairly disadvantage women, or any other protected classes.

This post is part of a series of business resolutions to consider for the new year. In case you missed them, our previous posts in the series discussed Florida minimum wageemployee performance management, and employee handbook/wage audits.

Jennifer Fowler-Hermes
jfowler-hermes@williamsparker.com
(941) 552-2558

Business Resolutions: Ensuring Your Business Starts the New Year Off Right

When was the last time that your business had a wage audit to evaluate whether your employees are properly classified under the Fair Labor Standards Act, or had your employee handbook reviewed and revised to bring it up-to-date with the law and current company practices? If it has been a few years, then this may be the year that your business resolves to invest in a wage audit and/or handbook review.

Wage audits include an evaluation of your job positions, pay and overtime policies, as well as payroll records of each position within an organization or department. Sometimes, audits can also include interviews with employees to ascertain if there are any issues that management should be aware of. Audits can reveal if a business has any issues with, not only misclassification of employees as exempt when they should be non-exempt, but whether managers are following the organization’s policies regarding overtime. As a company grows and changes, often the duties of its employees also change. Sometimes these changes are significant enough that a change in classification is in order and a failure to adjust the classification could result in liability. Further, a wage audit can often help to determine if an organization’s accountant or payroll company is calculating overtime in accordance with the applicable regulations. Many a lawsuit are filed against employers who believe that since they have enlisted the assistance of a third party, employee overtime is being calculated appropriately. That is not always the case.

Employee handbooks should be reviewed every couple of years, not only to ensure that the handbook reflects the current state of the law, but also that it reflects the actual practices of a company. Businesses grow and change, and actual practices can start to diverge from what is reflected in the handbook. It is always better to have a handbook that provides policies and procedures that the company is currently using and enforcing. It is never recommended for a company to have policies that it does not follow.

This post is part of a series of business resolutions to consider for the new year. In case you missed them, our previous posts in the series discussed Florida minimum wage and employee performance management.

Jennifer Fowler-Hermes
jfowler-hermes@williamsparker.com
(941) 552-2558

Another Business Resolution: Ensure Your Business Implements Florida’s New Minimum Wage

The next suggested resolution in our series of business resolutions is one that all businesses in Florida should implement, as it is legally required. On January 1, 2019, Florida’s minimum wage will increase from $8.25 to $8.46 an hour. Employers should be prepared to make appropriate pay adjustments for their minimum wage earners. Failing to pay non-exempt employees Florida’s statutory minimum wage can result in claims against employers pursuant to Section 24, Article X of the State Constitution and Section 448.110, Florida Statutes. The maximum tip credit ($3.02) that can be taken by Florida employers with tipped employees will remain the same, but the direct wage paid to tipped employees will increase from $5.23 to $5.44 an hour.

In addition to raising the minimum wage, Florida employers are required to post a minimum wage notice in a conspicuous and accessible location. You can download the 2019 Florida Minimum Wage Notice from the Florida Department of Economic Opportunity’s website. This notice requirement is in addition to the requirement that employers post regarding the federal minimum wage (which has not been increased). There will also be commercially available Florida-specific “all-in-one posters” that satisfy both the federal and state notice requirements.

In case you missed it, our first business resolution of this series covered employee performance management.

Jennifer Fowler-Hermes
jfowler-hermes@williamsparker.com
(941) 552-2558

Planning for the Next Hurricane: Employee Pay During and After a Storm

With the onset of the 2018 hurricane season and the effects of Hurricane Irma still being felt by many, employers have a number of concerns. These concerns range from preparing facilities to determining whether a business will stay open. At some point, after decisions have been made about whether a business will stay open and if goods or people need to be moved out of harm’s way, the questions relating to employee pay may arise.

One question that is frequently asked is “Should I pay exempt employees who miss work due to bad weather conditions?” When it comes to deductions from exempt employees’ salaries, it is easy to get into trouble. The general rule is that an exempt employee is entitled to receive his or her entire salary for any workweek he or she performed work. This means, if the work site closes for a partial week due to bad weather conditions (such as a hurricane) and the exempt employee has worked during that workweek, the employee is entitled to his or her full salary. However, if the employer has a leave benefit, such as PTO, and the employee has leave remaining, the employer can require the employee to use paid time off for this time away from work. If the employee does not have any remaining leave benefit, he or she must be paid.

If the work site remains open during inclement weather and an employee is absent (even if due to transportation issues), the employee can be required to use paid time off. If the employee does not have any paid time off remaining, the employer may deduct a full-day’s absence from the employee’s salary. For a more detailed explanation visit dol.gov.

Other issues that arise relate to what constitutes compensable time for non-exempt employees. The FLSA only requires that non-exempt employees be paid for the hours they actually work. However, those non-exempt employees on fixed salaries for fluctuating workweek(s) must be paid their full weekly salary in any week for which work was performed. Further, those businesses, such as hospitals and nursing homes that remain open during a storm and require employees to remain onsite during the storm may have to pay employees required to be onsite during a storm for all time they are at the employer’s place of business, as they may be considered to be “on call.”

It is important for businesses to start planning in advance for the next hurricane. Such plans should include evaluating which employees may be required to continue working during a storm and what portion of their time during a storm is considered compensable.

Heathcare employers also have new ACHA rules to comply with relating to storm preparation (not specifically related to employee compensation). For further information on these regulations see my colleague Steven Brownlee’s recent article, “Senior Living Providers: Are you ready for the Beryl, Chris, and Debby?

Jennifer Fowler-Hermes
jfowler-hermes@williamsparker.com
941-552-2558

Florida’s Minimum Wage Is Set to Increase: What Are You Doing New Year’s Eve?

It is only October and across the state, in department stores not named Nordstrom, holiday decorations are appearing. It may seem that, like these stores, reporting to you that on January 1, 2018, Florida’s minimum wage will increase, may be premature. But, like the holidays, the new minimum wage will be here before you know it. If you are not prepared, then you may be updating your payroll on New Year’s Eve.

Great, now I have Harry Connick Jr’s melancholy version of the 1947 classic by Frank Loesser stuck in my head (and it’s only October):

Maybe it’s much too early in the game
Ooh, but I thought I’d ask you just the same
What are you doing New Year’s
New Year’s Eve?

On January 1, 2018, Florida’s minimum wage will increase from $8.10 to $8.25 an hour. Employers should be prepared to make adjustments to their minimum wage earners. Failing to pay non-exempt employees Florida’s statutory minimum wage can result in claims against employers pursuant to Section 24, Article X of the State Constitution and Section 448.110, Florida Statutes. The maximum tip credit ($3.02) that can be taken by Florida employers with tipped employees will remain the same, but the direct wage paid to tipped employees will increase from $5.08 to $5.23 an hour.

In addition to raising the minimum wage, Florida employers are required to post a minimum wage notice in a conspicuous and accessible location. Before the beginning of 2018 you will be able to download the 2018 Florida Minimum Wage Notice from the Florida Department of Economic Opportunity’s website. This notice requirement is in addition to the requirement that employers post regarding the federal minimum wage (which has not been increased). There will also be commercially available Florida-specific “all-in-one posters” that satisfy both the federal and state notice requirements. The 2018 “all-in-one” posters should also be available in the near future.

Jennifer Fowler-Hermes
jfowler-hermes@williamsparker.com
(941) 552-2558

Should I Pay Exempt Employees Who Miss Work Due to Bad Weather Conditions?

As Florida prepares for a potential direct hit by Hurricane Irma, employers have many concerns. At some point, when decisions have been made about if a business will stay open and if goods or people need to be moved out of harm’s way, the following question will most likely be asked: “Should I pay exempt employees who miss work due to bad weather conditions?”

When it comes to deductions from exempt employees’ salaries it is easy to get into trouble.  The general rule is that an exempt employee is entitled to receive his or her entire salary for any workweek he or she performed work. This means, if the worksite closes for a partial week due to bad weather conditions (such as a hurricane), and the exempt employee has worked during that workweek, the employee is entitled to his or her full salary. However, if the employer has a leave benefit, such as PTO, and the employee has leave remaining, the employer can require the employee to use paid time off for this time away from work. If the employee does not have any remaining leave benefit, he or she must be paid.

If the work site remains open during inclement weather and an employee is absent (even if due to transportation issues), the employee can be required to use paid time off.  If the employee does not have any paid time off remaining, the employer may deduct a full-day’s absence from the employee’s salary. For a more detailed explanation see this opinion letter from the U.S. Department of Labor.

As for non-exempt employees, the FLSA only requires that employees be paid for the hours they actually work. However, those non-exempt employees on fixed salaries for fluctuating workweeks, must be paid their full weekly salary in any week for which work was performed.

Jennifer Fowler-Hermes
jfowler-hermes@williamsparker.com
941-552-2558

BREAKING NEWS: Overtime Rules Overruled

Employers, the wait is over. You finally have an answer regarding the 2016 overtime regulations. Yesterday afternoon, a Texas federal judge issued an order invalidating the U.S. Department of Labor’s overtime rules that had been set for implementation on December 1, 2016, but preliminarily stopped nationwide only days before by that same judge.

As noted in our earlier blog posts (“Breaking News: Federal Judge Halts Implementation of the DOL’s New Overtime Regulations” from November 23, 2016 and “2016 Overtime Regulations: They Are Still Out There” from June 13, 2017), the DOL had issued a final rule that was predicted to affect over 4.2 million workers, with Florida as the third most effected state. Those workers would no longer be exempt from overtime compensation due to increases in the minimum salary level for “white collar” exemptions from $455 per week ($23,660 annually) to $913 per week ($47,476 annually) and highly compensated employees from $100,000 to $134,000 annually.

The DOL quickly appealed the preliminary injunction to the Fifth Circuit Court of Appeals, which left employers wondering whether the hold would be lifted by the appellate court or the appeal withdrawn. The uncertainty increased on July 25, 2017, when the DOL published a formal Request for Information so the DOL could issue a new proposal related to overtime regulations.

In the order, the court granted summary judgment to the business group and other plaintiffs who had challenged the new overtime rules and issued a final judgment on their behalf. The court held that the white collar exemptions were intended to apply to employees who perform “bona fide executive, administrative, or professional capacity” duties, and that the DOL does not have the authority to use a salary-level test that will effectively eliminate the duties test or exclude those who perform the duties based on salary level alone.  Because the new overtime rules would have “exclude[d] so many employees who perform exempt duties” and are “not based on a permissible construction of [the law]”, the DOL did not carry out Congress’s unambiguous intent, exceeded its authority, and has “gone too far” with the rules.  In sum, the overtime rules have been overruled, and may be disregarded by employers.

Read the full order here.

Gail E. Farb
gfarb@williamsparker.com
(941) 552-2557