Tag Archives: fair labor standards act

Final Overtime Rules for Private & Public Sector Employers

 

Unknown(Post by Rick Dacri, June 1, 2016)

The Department of Labor’s (U.S. DOL) changes to overtime eligibility have been approved and are scheduled for a December 1, 2016 implementation. The waiting is over and all employers need to immediately prepare. No one will be able to avoid this.

I have outlined below a summary of the changes that apply to both private and public sector employees. Remember, this is a summary and does not constitute a complete review of all the changes to the rules nor should it be considered legal advice.

The Final Rule focuses primarily on updating the salary and compensation levels needed for Executive, Administrative and Professional workers to be exempt. Specifically, the Final Rule:

  1. Sets the salary threshold under which employees would be nonexempt—required to receive overtime pay (regular hourly rate x 1.5 for all hours worked beyond 40 hours per week) at $913 per week or $47,476 annually for a full-year worker, more than doubling the salary threshold from the current level of $23,660.
  2. Sets the total annual compensation requirement for highly compensated employees (HCE) subject to a minimal duties test, to $134,004; and
  3. Establishes a mechanism for automatically updating the salary and compensation levels every three years.
  4. Additionally, the Final Rule amends the salary basis test to allow employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level.

Earning above the $47,476 annual ($913 per week) salary level do not automatically classify an employee as exempt from mandatory overtime pay, as the duties test still comes into play.

This is a significant change to the law and all employers should review their plans now, before the December 1, 2016 implementation. Don’t wait, as changes will be complex and contain plenty of pitfalls.

To avoid problems with existing exempt workers currently being paid less than the new threshold, your options include:

  1. Reclassify affected workers as nonexempt, or
  2. Increase the employees’ salaries to at least $47,476, or
  3. Reduce the hours of these workers, or
  4. Pay a lower hourly rate so that, when multiplied by time-and-one half, weekly compensation remains unchanged

As I have noted in previous posts, none of these steps are ideal and are likely to result in employee relation issues and increased payroll costs. To make matters worse, the DOL has stepped up enforcement, expecting to dole of the law out fines, attorney fees and back pay for violations.

Rules for State and Local Governments:

The FLSA contains several provisions unique to state and local governments, including compensatory time off, under certain provisions.

  • Comp Time: State or local government agencies may arrange for their employees to earn comp time instead of cash payment for overtime hours.
  • Fire and police small-agency exemption: The FLSA also provides an exemption from overtime protection for fire protection or law enforcement employees, if they are employed by an agency that employs fewer than five fire protection or law enforcement employees, respectively.
  • Work periods rather than workweeks for fire protection or law enforcement employees: Employees engaged in fire protections or law enforcement may be paid overtime on a “work week period” basis, rather than the usual 40-hour work week of the FLSA.

Not Affected by Changes:

Many employees won’t be affected by the final rule:

  1. Hourly workers: The new threshold will have no impact on the pay of workers paid hourly.
  2. Workers with regular workweeks of 40 or fewer hours: To the extent that many salaried white-collar staff have jobs where they work no more than 40 hours, the changes to the overtime rules will have no effect on their pay.
  3. Law enforcement and fire protection employees who regularly work hours that conform to the longer work periods permitted for such employees, the changes will also not impact their pay.
  4. Workers who fail the duties test: Salaried workers who do not primarily perform executive, administrative, or professional duties are not eligible for the white-collar overtime exemption and therefore are not affected by the final rule.
  5. Highly compensated workers: White collar workers who fail the standard duties test but are “highly compensated”—earn more than $134,004 in a year—are almost all ineligible for overtime under the highly compensated employee exemption, which has a minimal duties test.
  6. Police and fire employees in small agencies: Fire protection or law enforcement employees in public agencies with fewer than five fire protection or law enforcement employees respectively will continue to be exempt from overtime.
  7. Elected officials, their policymaking appointees, and their personal staff and legal advisors who are not subject to civil service laws
  8. Public employees who have a comp time arrangement

To avoid problems and lawsuits:

  • Audit your compensation program and pay practices for compliance
  • Review the classification of all exempt workers, particularly those being paid under $47,476
  • Put in place a safe harbor policy, which states that if an employee feels he/she has been incorrectly paid, to bring it to your attention for review.

Develop a plan now to implement before the December 1 deadline. If you have questions, contact the Dacri HR HelpLine.

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4 Common & Expensive Wage & Hour Violations

images(This post was written by Rick Dacri, April 1, 2014)

McDonald’s is being investigated by state and federal authorities for alleged wage and hour violations. Specifically, allegations include forcing workers to clock out during times when the restaurants are slow, preventing workers from taking breaks, and failing to pay overtime. This case comes after similar claims were alleged against WalMart.

Big companies become big targets and generate front-page headlines. Yet, these practices are not confided to only these firms. All employers should be monitoring their pay practices, particularly those of supervisors, to minimize infractions and the resulting penalties. Too often I hear of budget conscious supervisors who implement operating practices, particularly “no overtime rules,” without fully understanding that hourly paid, nonexempt workers must be paid for all hours worked.

Here a 4 frequent wage and hour errors:

  1. Failing to pay for all time spent working. Hourly, non-exempt employees must be paid for all hours worked. This includes their actual time working, short rest breaks (not the 30 minute unpaid lunch breaks mandated under most state laws); time spent travelling on business (there are extensive rules around this); on-call time (when the employee is required to remain on company premises, or so close he or she cannot use the time effectively for his or her own purposes); and training time (unless the training is outside normal hours, is voluntary, is not job related, and no other work is performed). In addition, time spent running a quick errand on the way to or from work must be compensated and time spent checking and responding to email while at home, is also compensable.
  2. Permitting “off the clock” work. Employers are not permitted to ask or require a non-exempt employee to work “off the clock.” If an employee starts early or stays late, the time must be paid, even if an employee works overtime without prior authorization.
  3. Failing to pay for compensable breaks. As I pointed out above, you don’t have to pay workers for meal breaks that are at least 30 minutes long, but they must be completely relieved from work. If an employee is called back early, they must be paid. Also, some time and attendance systems automatically deduct time for meal breaks, even when employees perform duties. Finally, rest breaks of 5-20 minutes are compensable.
  4. Improperly computing overtime. Overtime is calculated at 1.5 times the regular rate of pay. The rate of pay includes shift differentials, nondiscretionary bonuses, commissions, on-call pay and other incentive payments.

There are many potential wage and hour errors, too numerous to list here. The regulations are complicated and the penalties are steep. Train your manager on the state and federal requirements. Regularly review all your pay practices.

And if you have questions or need some help, give me a call on the HR HELPLINE.

If this post was helpful, you may want to read these other posts:

  1. Off the Clock Work: Must I Pay?
  2. FLSA: Changes in law Means Employers Pay More
  3. Exempt Employees: Can You Dock Pay For Illness?

 

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FLSA: Change in Law Means Employers Pay More

 

(This post was written by Rick Dacri, March 15, 2014)

President Obama directed the U.S. Department of Labor to update the Fair Labor Standards Act (FLSA) to require employers to pay more of their salaried employees overtime.  As you may know, under FLSA, employers must pay non-exempt employees (hourly) overtime pay at a rate of one and a half their regular rate of pay for hours worked in excess of 40.  Exempt workers (usually salaried) are “exempt” from the overtime pay requirements as long as the individuals are employed in a bona fide executive, administrative, professional, or outside sales force capacity.  To qualify for this exemption, the employee must be paid at least $455 per week or $23,660 per year and meet certain other requirements under the FLSA.  

The President wants to significantly raise this pay threshold, making many exempt workers non-exempt and requiring employers to now pay them overtime.

 

While it is estimated that it will take the Department of Labor at least a year to finalize any changes, it is a good idea to begin reviewing all your exempt positions now. Positions should be “tested” to ensure they meet the current means test (paid at least $455 per week) and qualify under the duties test. This latter test is complicated, but that should not deter you. The penalties for misclassifications are significant.

 

If you need some assistance in testing your exempt positions, give me a call at 207-967-0837 or email me at rick@dacri.com.

 

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Breaks for Salaried Employees

This question came in from one of my HR HelpLine clients.

Question: Am I required to provide breaks for my salaried exempt employees? We are a Maine employer.

Advice: No. Maine law requires that you provide nonexempt employees an unpaid break of 30 minutes, after six consecutive hours of work. Exempt employees, such as executives, professional and outside sales people, are exempt from the law. As an employer practice, you may opt to give a break, but one is not required.

If you would like to learn more about Dacri’s HR HelpLine service, where you can get all your workforce questions answered, click HR HelpLine.

You may also want to read these posts:

  1. Pay Procedures: How to Avoid Wage and Hour Problems
  2. Exempt Pay: Can You Dock Pay for Illness
  3. Employee Classifications: When Must You Pay Overtime

 

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Exempt Employees: Can You Dock Pay for Illness?

Posted by Rick Dacri, August 5, 2013

 This question came in from one of my HR HelpLine clients.

 Question: I have a salaried exempt employee who has lost time due to illness. Are deductions from pay allowed for absences due to sickness or disability?

 Advice: Yes. Under the federal Fair Labor Standards Act (FLSA) employers may deduct from pay for full-day absences due to sickness or disability, but only “in accordance with a bona fide plan, policy or practice of providing compensation for loss of salary occasioned by such sickness or disability.” The same rule applies “if salary replacement benefits are provided under a state disability insurance law or under a state workers’ compensation law.” If there is no such plan or practice, employers cannot deduct for sickness absences. No pay is required for any workweek in which the employee performs no work. Employers also may deduct for full-day sick or disability-related absences for employees who are not yet eligible for the salary replacement plan or practice or who have exhausted their available leave.

If you would like to learn more about Dacri’s HR HelpLine service, where you can get all your workforce questions answered, click HR HelpLine.

 

Other posts you may want to read:

  1. Interns: Employers Obligation T0 Pay
  2. Off the Clock: Must I Pay?
  3. Employee Classifications: When Must you Pay Overtime?

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EPLI: Quick Hits In Employment Practices Liability Insurance

images(This guest post was written By Scott Simmonds, CPCU, ARM; July 18, 2013)

Hopefully your insurance agent has talked to you about employment practices liability insurance (EPLI). It’s the insurance protection against the financial consequences of job applicants, employees, and former employees who bring suit for discrimination, harassment, wrongful termination, failure to hire, and other workplace torts.

Here’s a partial list of issues your insurance agent may not have told you:

Dollar Limits of Coverage – The coverage limit usually includes the cost of defense. So, as you pay your attorney, the policy uses up the limit of coverage available to pay any award or settlement. Limits are also expressed as an aggregate for the total of all claims in a year. Buy enough insurance.

Sharing Limits – Having EPLI with your directors and officers insurance may be convenient.  It may not be a good idea though. Your directors will not want to hear that EPLI claims have eaten away at the limits available for D&O claims.  Ask your insurance agent if your policy separates claims for D&O and EPLI into separate “buckets” of coverage.

Low Deductibles – Low deductibles cost you premium dollars. Get quotes for higher deductibles to help pay for higher limits of coverage.

Definition of Harassment – Some policies still only cover “Sexual Harassment.” What about harassment based on race, ethnicity, disability. The policy should provide coverage for harassment, including sexual harassment.

Retaliation – Be sure your policy includes coverage for suits alleging that you have retaliated against an employee.

Choice of Attorney – Do you pick your attorney or does your insurance company? Using their attorney may be cheaper.  Is it what you want though?

Common Exclusions – Like all insurance policies there are exclusions:

-Workers’ compensation claims

-ERISA actions

-Employment wage disputes (Fair Labor Standards Act)

-Unemployment Insurance

-Disability benefits law

-National Labor Relations Act

-Occupational Safety and Health Act

Several insurers are now offering low-cost EPLI insurance as part of the workers’ compensation policy.  Talk with your insurance agent.  Is it time for a detailed review of your insurance?

Need more information about EPLI, contact Scott Simmonds.  Scott is an unbiased insurance consultant who offers insurance advice and coverage reviews without the conflict of insurance sales and commission payments.

Other posts you may want to read:

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6 New CEO Challenges Require Immediate Action

 

imagesPost Written by Rick Dacri, July 8, 2013

CEOs consistently tell me that the challenges of the business fill their plate and the ongoing people issues just make it worse. The last few weeks the Courts and government agencies have simply overwhelmed them. Let’s take a look at what has happened:

  1. DOMA: The Supreme Courts overturning the Defense of Marriage Act now extends to same sex couples, who were married and reside in the 12 states and the District of Columbia that recognize same sex marriage, all the federal benefits offered to heterosexual couples. That means employers must now make the changes to policies, benefits, and payroll taxes to comply with the changes. While this brings a consistency to the compliance between state and federal law, it leaves the question of what happens in the other 38 states.
  2. Independent Contractors: Both the federal and state government agencies (IRS and Labor) have both redefined their definition of an Independent Contractor and begin strict enforcement of the new standards forcing employers to change how they manage their workforce and quickly bring their company into compliance or face huge fines. For many companies, this will be s tremendous burden.
  3. Interns: Two high profile class-action lawsuits against NBC Universal and Fox Searchlight point to the perils of not paying summer interns. In both cases, the Court determined these companies violated the Fair Labor Standards Act for not paying their “workers” forcing employers nationally to rethink how they employ and compensate interns. These rulings will hurt valuable college internship programs.
  4. Affordable Care Act: The Obama administration gave small employers a welcome reprieve by extending the compliance deadline to 2014 for implementing the mandate for employers with 50 or more employees to provide insurance coverage. While on the surface this is good news, it brings further confusion to an already difficult implementation schedule.
  5. Immigration: As Congress wrestles with immigration reform, CEOs suffer with the inability to recruit badly needed skilled and unskilled foreign workers. With a growing skills gap and an aging workforce, foreign workers could fill the void. Without Congressional relief, CEOs must operate without essential workers.
  6. New Definition of Supervisor: The Supreme Court has clarified its definition of a “supervisor” and in doing so, provided employers with a bit of clarity in defending itself against claims of harassment. While this is a helpful decision, it still requires policy changes and education of managers to ensure compliance.

Running a business is always a challenge. The Courts and government made it a whole lot more complicated. Regardless, CEOs must begin to address the changes, make the adjustments to their policies and practices, and quickly get into full compliance, while continuing to lead their business.

If you want to know how I can help you with this, click Dacri & Associates.

If this has been valuable, you may also want to subscribe to our free electronic newsletter. Just Click The Dacri Report.

Other posts you may want to read:

  1. DOMA Overturned Means Changes for Business
  2. Independent Contractors in Labor’s Cross Hairs
  3. Interns: Employers Obligation to Pay or Not?
  4. Affordable Care Act: What Employers Need To Know
  5. Immigration: Tear Down Those Walls
  6. Harassment Claims: Courts New Definition of Supervisor

 

 

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