By: Scott J. Connolly and Sandra E. Kahn
On November 22, a federal judge in Texas issued a preliminary order that temporarily blocks the U.S. Department of Labor (DOL) from implementing changes to the salary basis for white collar overtime exemptions. The new salary rule, which was to become effective on December 1, 2016 would have required employers to increase exempt employees’ minimum salary from $23,660 to $47,476. The preliminary court order blocking the rule appears to apply to all public and private employers nationwide.
Find out how the judge’s order will affect the new salary rule, which was to become effective on December 1. Read this month’s Employment Law Alert.
By: Sandra E. Kahn
On December 1, 2016, any employees who earn less than $47,476 annually will be entitled to overtime and must be treated as non-exempt, as per the U.S. Department of Labor’s final rule (“Final Rule”).
Don’t wait any longer to address this critical change in the law.
Find out how the Final Rule will affect your current employee classifications and pay practices, and the consequences of not complying with the law.
Read this month’s Employment Law Alert.
By, Sandra E. Kahn
On May 18, 2016, President Obama announced the publication of the U.S. Department of
Labor’s final rule (“Final Rule”) updating the overtime regulations, and providing that employees who earn less than $47,476 annually will be entitled to overtime.
The federal Fair Labor Standards Act (“FLSA”) “white collar” exemptions are familiar to most employers. Under the FLSA, employees must be paid the minimum amount required by the statute on a salary basis, and the employee’s job duties must primarily involve executive, administrative, or professional duties. The Final Rule changes only the salary basis test, leaving in place the existing duties test.
But, is this practice legal? Generally, the answer to this question is no. Under state and federal law, employees must be paid at least the minimum wage in cash. Providing equity, no matter how much the equity is worth, does not fulfill this requirement.
An exception to this rule is made, however, if the employee comes within the exemption for executive-business owners provided for in the federal Fair Labor Standards Act (“FLSA”). An individual who comes within this exemption is exempt from the FLSA’s minimum wage and overtime requirements.
To be exempt as an executive-business owner under the FLSA, an individual must (1) be employed in a bona fide executive capacity, (2) own at least a 20% bona fide interest in the business and (3) be actively engaged in the management of the business.
Unless an employee meets each of these requirements, paying in equity alone will run afoul of wage laws, and could result in significant liability for the employer, as well as possible individual liability for the president, treasurer, and individual “officers and agents” of the employer’s corporate entity.
For further help in determining whether your employee comes within the executive-business owner exemption or questions about paying employees with equity, contact a member of our Employment Law Group.
Paid Sick Leave Law Creates New Employer Obligations for Intermittent, Temporary and Seasonal Workers, Including Interns
Employers who use temporary or seasonal employees including summer interns should already be aware of the importance of ensuring that those employees are paid in compliance with federal and state law. Massachusetts employers should also be aware that the new Massachusetts Earned Sick Leave Law (the “Law”) has created additional wage and hour obligations for some temporary and seasonal workers, including summer interns. (Generally, the Law requires that employers with more than 11 employees offer both full and part-time employees paid sick time; employees with fewer than 11 employees are required to offer unpaid sick time).
The Massachusetts Attorney General’s regulations addressing the Law include a provision which entitles temporary and seasonal employees like interns who work intermittently for an employer (e.g., work for the same employer for multiple summers) to sick time. The result of these regulations is that employers covered by the Law now need to track the accrual of sick time for temporary and seasonal workers, and permit those employees to take sick time once they have worked for the employer for more than 90 days.
Under the regulations, an employee with a break in service of fewer than four months will maintain the right to use any unused earned sick time accrued before the break in service. If the employee has a break in service of between four and 12 months, the employee will maintain the right to use earned sick time accrued before the break in service, but only if the employee’s unused bank of earned sick time equals or exceeds 10 hours. Employees with a break in service of greater than 12 months will not retain any accrued sick time.
Although temporary or seasonal employees are subject to the Law’s provision that employees are only entitled to use accrued sick time 90 days after the employee’s first day of work, employees with a break in service of fewer than twelve months will maintain vesting days from the employer and will not need to restart the 90-day vesting period upon their return to the employer before they can use earned sick time.
For example, an intern who works full time for an employer from June until August will likely have accrued more than 10 hours of sick time. If that intern returns to the employer the following June, he or she will (upon working 90 total days for the employer, including days worked before the break in service) be entitled to use that accrued sick time.
For more information on the use of temporary or seasonal employees including interns or the accrual of paid sick time, please contact a member of the Employment Law Group.
Last month’s Tip of the Month reminded employers that communicating and maintaining an overtime policy can minimize liability for unauthorized overtime hours. This month, we focus on a second way employers can protect against wage and hour liability: the inclusion of a payroll deductions policy to take advantage of the “safe harbor” protection against liability for misclassification of employees based on the failure to pay employees on a salary basis.
As you recall, to be exempt from overtime, an employee must be performing duties recognized as exempt under the Fair Labor Standards Act (“FLSA”) and must be paid on a “salary basis.” To be paid on a “salary basis” the employee must receive a predetermined amount of compensation each pay period (at least $455/week) which cannot be reduced due to variations in the quality or quantity of the employee’s work. An exempt employee must receive the full salary for any week in which the employee performs any work, subject only to certain limited deductions.
Employers jeopardize employees’ exempt status by making improper deductions from salaries. A payroll deductions policy which meets certain requirements provides employers with the opportunity to reduce overtime liability which might otherwise accrue under the FLSA if improper deductions are made and employees are therefore found to be inappropriately treated as exempt.
A payroll deduction policy only provides a safe harbor if the employer: (1) has a “clearly communicated” policy prohibiting improper deductions, including a complaint mechanism; (2) reimburses employees for any improper deductions; and (3) makes a good faith commitment to comply in the future. The safe harbor is not effective where the employer willfully violates the policy by continuing to make improper deductions after receiving employee complaints.
A good payroll deduction policy should include an explanation of how exempt employees will be paid on a salary basis, with only limited deductions for certain reasons permitted by law, including for social security, taxes, participation in company-sponsored benefit and retirement plans, absence from work for one or more full days taken in compliance with the company’s sickness or disability policy, absence from work which is covered by the Family and Medical Leave Act, absence due to certain types of suspensions, and full or partial days not worked during the initial or terminal week of employment.
For more information on implementing or reviewing a payroll deductions policy, contact a member of the Employment Group.
Both Federal and Massachusetts law require that employers pay their non-exempt employees overtime wages whenever employees work more than 40 hours in a workweek. The law requires that employers pay overtime when they knew or should have known that the employee worked more than 40 hours. As a result, employers can be liable for overtime hours which they did not specifically authorize. Employers can minimize this liability by establishing an overtime policy and a mechanism for requesting and reporting overtime.
Overtime policies should include: who is eligible for overtime; what, if any conditions apply to the authorization of overtime; a specific mechanism for employees to request authorization to work overtime; and a specific mechanism for employees to report overtime hours which have been worked. Any policy should be clearly and conspicuously communicated to employees, and consistently enforced. Managers should not, under any circumstances, instruct employees to falsely record time or avoid reporting overtime hours worked.
Maintaining an overtime policy will not only result in transparent workplace expectations but it could also help an employer defend against an expensive wage and hour claim. In Vitali v. Reit Management and Research, LLC, SUCV2012-00588-BLS1 (Mass Super. June 2, 2014), a Massachusetts employee claimed she had worked through her lunch regularly and as a result often worked more than 40 hours in a workweek, entitling her to overtime. However, her employer had an overtime policy in place which required advanced approval for working overtime, as well as mechanisms for reporting overtime hours, which the employee had not followed despite her familiarity with the policy. The employee presented no evidence that management knew that the employee was working through lunch. Because the employer had clearly communicated rules and policies in place, and because the employee had failed to follow them, the employee was not able to maintain her claim for unpaid wages and the employer escaped a potentially expensive claim.
For more information on overtime policies, please contact a member of our Employment Law Group.