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DOL Publishes Final Rule Increasing Salary Thresholds for White Collar Exemptions
Following a court decision which struck down the prior regulations promulgated by the Obama administration, which would have rendered for more employees overtime eligible, the Trump has now increased the salary threshold for white collar exemption. This marks the first increase since 2004.
In addition to limiting the number of workers who will now receive overtime (versus the more expansive Obama-era rule), the current DOL rejected a provision automatically increasing the salary threshold over time, to ensure that another 15-20 years does not pass before the thresholds are re-examined and increased again.
The updated and revised the regulations issued under the Fair Labor Standards Act (FLSA) to allow 1.3 million workers to become newly entitled to overtime by updating the earnings thresholds necessary to exempt executive, administrative or professional employees from the FLSA’s minimum wage and overtime pay requirements.
The DOL has updated both the minimum weekly standard salary level and the total annual compensation requirement for “highly compensated employees” or HCEs to reflect growth in wages and salaries. The new thresholds account for growth in employee earnings since the currently enforced thresholds were set in 2004.
Key Provisions of the Final Rule
The final rule updates the salary and compensation levels needed for workers to be exempt in the final rule:
raising the “standard salary level” from the currently enforced level of $455 to $684 per week (equivalent to $35,568 per year for a full-year worker);
raising the total annual compensation level for “highly compensated employees (HCEs)” from the currently-enforced level of $100,000 to $107,432 per year;
allowing employers to use nondiscretionary bonuses and incentive payments (including commissions) that are paid at least annually to satisfy up to 10 percent of the standard salary level, in recognition of evolving pay practices; and
revising the special salary levels for workers in U.S. territories and in the motion picture industry.
Standard Salary Level
The DOL set the standard salary level at $684 per week ($35,568 for a full-year worker).
HCE Total Annual Compensation Requirement
In addition, the DOL set the total annual compensation requirement for HCEs at $107,432 per year. This compensation level equals the earnings of the 80th percentile of full-time salaried workers nationally. To be exempt as an HCE, an employee must also receive at least the new standard salary amount of $684 per week on a salary or fee basis (without regard to the payment of nondiscretionary bonuses and incentive payments).
Special Salary Levels for Employees in U.S. Territories and Special Base Rate for the Motion Picture Producing Industry
The DOL is maintaining a special salary level of $380 per week for American Samoa. Additionally, the Department is setting a special salary level of $455 per week for employees in Puerto Rico, the U.S. Virgin Islands, Guam, and the Commonwealth of the Northern Mariana Islands.
The DOL also is maintaining a special “base rate” threshold for employees in the motion picture producing industry. Consistent with prior rulemakings, the Department is increasing the required base rate proportionally to the increase in the standard salary level test, resulting in a new base rate of $1,043 per week (or a proportionate amount based on the number of days worked).
Treatment of Nondiscretionary Bonuses and Incentive Payments
The DOL’s new rule also permits employers to use nondiscretionary bonuses and incentive payments to satisfy up to 10 percent of the standard salary level. For employers to credit nondiscretionary bonuses and incentive payments toward a portion of the standard salary level test, they must make such payments on an annual or more frequent basis.
If an employee does not earn enough in nondiscretionary bonus or incentive payments in a given year (52-week period) to retain his or her exempt status, the Department permits the employer to make a “catch-up” payment within one pay period of the end of the 52-week period. This payment may be up to 10 percent of the total standard salary level for the preceding 52-week period. Any such catch-up payment will count only toward the prior year’s salary amount and not toward the salary amount in the year in which it is paid.
When Will the Current Thresholds Be Updated?
Although initially proposed, the Trump DOL inexplicably rejected a provision of the rule, overwhelmingly supported by workers and workers advocates which would have automatically raised the thresholds over time without the necessity of further rulemaking. As a result it is possible if not likely that there will be no further increase to the current thresholds for another 15 years if not more. In its final rule the DOL reaffirms its intent to update the earnings thresholds more regularly in the future through notice-and-comment rulemaking, but given the anti-worker sentiment of the current DOL, including the recent confirmation of a steadfast anti-worker advocate as the head of the DOL, this is most-likely best viewed as lip service.
The DOL’s final rule is available at Final Rule to Update the Regulations Defining and Delimiting the Exemptions for Executive, Administrative, and Professional Employees.
USDOL Announces the Reinstatement of Issuance of Opinion Letters
The U.S. Department of Labor announced today that it will reinstate the issuance of opinion letters, a practice that was widespread under some prior administrations, but which it elected to forego during the Obama administration. In an email announcement sent out today, the Department of Labor announced:
The U.S. Department of Labor will reinstate the issuance of opinion letters, U.S. Secretary of Labor Alexander Acosta announced today. The action allows the department’s Wage and Hour Division to use opinion letters as one of its methods for providing guidance to covered employers and employees.
An opinion letter is an official, written opinion by the Wage and Hour Division of how a particular law applies in specific circumstances presented by an employer, employee or other entity requesting the opinion. The letters were a division practice for more than 70 years until being stopped and replaced by general guidance in 2010.
“Reinstating opinion letters will benefit employees and employers as they provide a means by which both can develop a clearer understanding of the Fair Labor Standards Act and other statutes,” said Secretary Acosta. “The U.S. Department of Labor is committed to helping employers and employees clearly understand their labor responsibilities so employers can concentrate on doing what they do best: growing their businesses and creating jobs.”
The division has established a webpage where the public can see if existing agency guidance already addresses their questions or submit a request for an opinion letter. The webpage explains what to include in the request, where to submit the request, and where to review existing guidance. The division will exercise discretion in determining which requests for opinion letters will be responded to, and the appropriate form of guidance to be issued.
In the past, Republican administrations have often used the issuance of opinion letters to skirt the normal approval process for administrative regulation, which requires public comment. It remains to be seen, but this will likely be a boon for employers and another setback for employees under the Trump administration.
DOL Announces It Will Not Enforce New Regulations Regarding FLSA Rights of Home Health Workers for First 6 Months of 2015
The Department of Labor’s (Department) October 1, 2013, Final Rule amending regulations regarding domestic service employment, which extends the Fair Labor Standards Act’s (FLSA) minimum wage and overtime protections to most home care workers will become effective on January 1, 2015. However, by an announcement dated October 6, 2014, the DOL advised that it will not be enforcing the regulations for the first 6 months that the regulations are in effect.
Critically important, while the DOL will not be bringing enforcement actions—as it is able to do under the FLSA—this announcement does not effect home health workers’ rights to bring private enforcement actions themselves through private lawsuits.
In a thoughtful commentary regarding the importance of the new regulation, issued on his blog on the day of the DOL’s recent announcement, former Deputy Administrator of the Wage and Hour Division, Seth Harris, has this to say:
Home health workers are the people who care for people with disabilities and seniors so that they may live in the community rather than in nursing homes or other institutions. Their work is essential. They allow each of us to rest assured that we will be able to live in dignity in our homes if age, happenstance, or genetics result in physical, mental, or developmental disabilities. Yet, these workers have not been protected by the federal minimum wage or the requirement that workers who work more than 40 hours in a week receive overtime pay for those additional hours. These requirements are found in the Fair Labor Standards Act. Home health workers have been excluded from the FLSA. On January 1, that exclusion ends. Home health workers will be entitled to at least the federal minimum wage and time-and-one-half for overtime worked beginning New Year’s Day.
While Harris went further to explain that he thought that the new regulations would likely lack teeth, in light of this delayed enforcement policy—given the relatively small sums of money individuals stand to lose from unscrupulous employers who ignore the new regulation—that may not turn out to be accurate. While many smaller home health agencies will likely feel free to skirt the new regulation, at least initially, most of the larger national home health agencies have already put the wheels in motion to make the necessary changes to comply with the new law about to go into effect. However, if you are a home health worker, who is still being denied your rightful minimum wages and/or overtime pay, after the new law goes into effect on January 1, 2015, you should contact a wage and hour lawyer to investigate whether you have a claim to recover your rightful wages.
Click DOL Announcement to read the official announcement, and Harris Blog to read Seth Harris’ commentary on this issue.
Direct Care Job Quality Improvement Act Would Amend the FLSA to Include Basic Labor Protections for Home Care Workers
The Direct Care Job Quality Improvement Act [S. 1273/H.R. 2341] – a bill that would help create a more stable, valued direct care workforce was introduced on 6/23/2011, by Rep. Linda Sanchez (D-CA) and Sen. Robert P. Casey, Jr. (D-PA). Senator Tom Harkin (D-IA), Chairman of the Senate Health, Education, Labor and Pensions committee and Sen. Bernie Sanders (I-VT) were also original co-sponsors of the Senate bill. The House bill had twenty-one original co-sponsors. This legislation takes major steps towards ensuring the health, autonomy and well-being of more than 13 million Americans with long-term care needs today and an estimated 27 million by 2050.
The Direct Care Job Quality Improvement Act would amend the Fair Labor Standards Act (FLSA) to include basic labor protections for home care workers. Currently, FLSA covers domestic service workers and most direct care workers in institutional settings such as nursing homes; however, the law continues to exclude home care workers from basic minimum wage and overtime protections.
In addition to extending wage and overtime protections for home care workers, The Direct Care Job Quality Improvement Act would:
- Establish data collection and reporting requirements to monitor important workforce indicators such as size, compensation levels, turnover rates and vacancies.
- Improve the recruitment and retention of direct care workers by providing grants to states to expand and support efforts aimed at recruiting, training and retaining an adequate supply of direct care workers.
To read more about the proposed legislation click here.
DOL Debars Seattle-Based Federal Contractor for Violating Minimum Wage, Overtime and Record-Keeping Laws
The U.S. Department of Labor has debarred HWA Inc., President John Wood and Vice President Barbara Wood from future government contracts for three years, due to significant and repeated violations of the McNamara-O’Hara Service Contract Act and the Contract Work Hours and Safety Standards Act. Seattle-based HWA provided security services as a contractor to various federal facilities, government offices and public works projects in the states of Washington, Oregon, Idaho, Missouri and New York.
“The Labor Department will not allow federal contractors to misuse public funds and exploit hardworking laborers by denying their rightful wages,” said Secretary of Labor Hilda L. Solis. “Debarring violators such as HWA from future contracts ensures a level playing field, so that honest companies are not placed at a competitive disadvantage for playing by the rules, and paying their workers full and fair prevailing wages.”
According to a DOL press release:
“Most recently, in 2009, the company defaulted on seven federal contracts and failed to meet its payroll obligations, resulting in nearly $1 million in unpaid wages for 206 employees. The division ordered an emergency withholding of funds on several of the company’s federal contracts and secured the full payment of these wages. All SCA contracts held by the HWA were terminated shortly thereafter.”
The Service Contract Act (SCA) contract clauses, present in all Federal contracts, require contractors and subcontractors performing services under prime contracts in excess of $2,500 to pay service employees in various classes no less than the wage rates and fringe benefits found prevailing in the locality, or the rates contained in a predecessor contractor’s collective bargaining agreement, including prospective increases. The Labor Department issues SCA wage determinations for contracting agencies to incorporate into covered contracts, along with the required contract clauses. The fringe benefit requirements — usually vacation and holidays, known as “health and welfare” benefits — are separate and in addition to the hourly monetary wage requirement under the SCA. In addition, employers with prime contracts in excess of $100,000 under the CWHSSA must pay workers at least one and one-half times their regular rates of pay for all hours worked over 40 in a week.
Although violations of the primary federal wage and hour law, the Fair Labor Standards Act (FLSA), may be pursued by aggrieved employees in private lawsuits, alleged violations of the McNamara-O’Hara Service Contract Act and the Contract Work Hours and Safety Standards Act, may only be pursued by the DOL. Largely due to the fact that under the prior republican leadership, the employer-friendly DOL pursued very few of these cases, such violations are commonplace on Federal worksites, despite the various laws prohibiting them. Hopefully, as the current DOL pursues these cases more frequently, workers will once again be assured of the protections of the laws that are on the books.
Florida Sued For Failing To Raise Minimum Wage, In Accordance With The Florida Constitution, Miami Herald Reports
The Miami Herald reports that:
“Two legal groups sued Florida’s labor agency Monday, claiming the state failed to raise the state’s minimum wage by six cents per hour this year to keep up with inflation.
The lawsuit claimed the Agency for Workforce Innovation violated the Florida Constitution by keeping it at the $7.25 federal rate, where it was last year, instead of raising it to $7.31 on Jan. 1.
About 188,000 minimum wage workers could be effected. At stake is up to $128 this year for a full-time employee working a 40-hour week. If all those the minimum-wage employees worked 40-hour weeks the extra six cents would add up to $15 million.”
Go to the Miami Herald to read the entire story.
New Study Dispells The Fallacy That The Minimum Wage Is Bad For Workers, NY Times Reports
In what has turned into a hot-button issue in this year’s election cycle, the NY Times discusses the myth, often profferred by conservatives, that the minimum wage hurts workers.
The Times reports that:
“An important new study exploiting this opportunity will appear this month in The Review of Economics and Statistics. The economists Arindrajit Dube of the University of Massachusetts Amherst, T. William Lester of the University of North Carolina at Chapel Hill, and Michael Reich of the University of California, Berkeley, closely analyze employment trends for several categories of low-wage workers over a 16-year period in all counties sharing a common border with a county in another state where minimum wage increases followed a different trajectory.
They report that increases in minimum wages had no negative effects on low-wage employment and successfully increased the income of workers in food services and retail employment, as well as the narrower category of workers in restaurants.
The study successfully addresses a number of criticisms previously leveled at the case-study approach and points to flaws in all previous studies that have found negative employment effects.
The level of technical discussion is daunting, but if you don’t want to grapple with concepts like “spatially correlated fictitious placebo minimum wages” you can watch a video instead — Arindrajit Dube clearly explains the issues in a 12-minute interview. He emphasizes that higher minimum wages tend to reduce worker turnover, benefiting both workers and employers.”
Go to the New York Times website to read the entire article.
Pennsylvania Laborers Like New Law That Defines “Employees,” Pittsburgh Post-Gazette Reports
The Pittsburgh Post-Gazette reports that a new law defining who is an employee (versue independent contractor) is being greated enthusiastically by Pennsylvania workers:
“Union laborers are claiming victory now that Gov. Ed Rendell has signed a law aimed at curtailing construction companies’ ability to skirt taxes — and cut its own costs and liability — by labeling its workers independent contractors.
By classifying their workers as “independent contractors” instead of employees, companies can avoid paying unemployment compensation and workers’ compensation taxes.
Avoiding those taxes, according to labor groups, reduces employer costs and allows such companies to underbid contracting companies that are following the letter of the law.
The new law — formerly House Bill 400 and now Act 72 — is called the Construction Workplace Misclassification Act. Contracting companies that violate the act could be subject to fines and criminal prosecution. There’s also an “acting in concert” provision, which would penalize anyone who knowingly hires a contractor that is in violation of the act.
“It really will start to separate responsible contractors from irresponsible contractors,” said Jason Fincke, executive director of the Builders Guild of Western Pennsylvania, a labor management and contractor association group.
The point of the law isn’t to eliminate the use of independent contractors in the construction industry, he said.
“If there’s a service that you need that you don’t normally provide, you would get someone to do that for you,” Mr. Fincke said. “That’s a legitimate independent contractor.”
The law applies to the construction field only, to the regret of the Teamsters, who had hoped the law would be expanded to include truck drivers (and other kinds of workers) as well. The Teamsters have been fighting with Moon-based FedEx Ground, which classifies its drivers independent contractors. FedEx says its drivers are “small business owners” because they own their own equipment.”
To read the entire article go to Pittsburgh Post-Gazette.
Oregon State Minimum Wage To Rise By .10¢ Per Hour In January, Stateman Journal Reports
StatemanJournal.com is reporting that Oregon is set to raise the State Minimum Wage by .10¢ per hour in January.
“Oregon’s minimum wage will rise to $8.50 per hour on Jan. 1, State Labor Commissioner Brad Avakian said Monday.
The 10-cent increase mirrors a 1.15 percent increase in the Consumer Price Index since August 2009. Oregon’s minimum wage rate has been $8.40 per hour since January 2009.
Washington, where the minimum wage is currently $8.55 per hour, will announce its adjustment on Sept. 30.”
According to the story, “Ballot Measure 25, enacted by Oregon voters in 2002, requires a minimum wage adjustment annually based on changes in inflation as measured by the Consumer Price Index. The Commissioner of the Bureau of Labor and Industries is directed to adjust the minimum wage for inflation every September, rounded to the nearest five cents.”
To read the entire article, click here.
Two Boca Raton Business Owners Accused Of Slavery Plead Guilty, Palm Beach Post Reports
The Palm Beach Post reports that:
“Two Boca Raton business owners accused of pressing Filipino workers into slavery pleaded guilty to federal criminal charges, the U.S. Justice Department announced today.
Sophia Manuel, 41, and Alfonso Baldonado Jr., 45, owners of Quality Staffing Services Corporation, pleaded guilty to conspiring to hold 39 Filipino nationals in compelled service at country clubs and hotels in South Florida, a Justice Department news release stated. A sentencing date is pending.
Manuel also pleaded guilty to making false statements to the U.S. Department of Labor in an application to obtain foreign labor certifications and visas, the release stated.
Manuel and Baldonado pressed the Filipino nationals into work for little or no pay, forced them to sleep on kitchen and garage floors, fed them rotten vegetables and chicken innards, and threatened to have them deported, according to court documents.”
To read the entire article, click here.
Overtime Law Blog 