Category Archives: Employee Classification

Washington Expands Equal Pay Protections

In a major revision of the state’s anti-discrimination law, Washington has passed amendments to its Equal Pay Act to address income disparities, employer discrimination and retaliation practices in the state.  The amendment will make it a misdemeanor for an employer to discriminate in providing compensation based on the gender of similarly employed employees.  With an effective date of June 7, 2018, employers should begin preparations to comply with these significant changes in the law.

What the New Law Does

Key amendments to Washington’s Equal Pay law include: Continue reading Washington Expands Equal Pay Protections

NEW GUIDANCE — DOL Issues New Guidelines Regarding Intern vs. Employee Question

On January 8, 2018, the US Department of Labor issued a revised Fact Sheet #71: Internship Programs Under The Fair Labor Standards Act, which sets forth an employer-friendly standard for determining whether an intern is considered an employee for purposes of the FLSA.

The new guidance materials were issued in response to the federal courts’ widespread rejection of the DOL’s former guidelines on this issue where the DOL had set forth 6 required factors that must be met before an unpaid intern could be categorized as such and excluded from pay requirements of the FLSA.  These old guidelines also emphasized that internships in the “for-profit” private sector “will most often be viewed as employment” unless all 6 required factors were met.

With the revised Fact Sheet #71, the DOL’s position now aligns with that of the Courts who had previously rejected the DOL’s more stringent 6-factor test.  Under these new guidelines, the DOL now instructs employers to consider the following 7 factors when determining whether an intern is an employee for purposes of the FLSA:

  1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa.
  2. The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.
  3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
  4. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
  5. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
  6. The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
  7. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

The DOL has clarified that “no single factor is determinative” and the ultimate answer depends on the “unique circumstances of each case.”

Take home for employers

With this new test, the DOL has made it easier for a private employer to create an unpaid internship program that is lawful under the FLSA provided that an analysis of the 7 factors shows that, on balance, the intern benefits more from the relationship than the employer does.  This means that employers need to try to structure their internship programs in such a way that all 7 factors lean toward an internship—rather than an employer-employee relationship.

Check to See if the Minimum Required Salary For Exempt Employees is Increasing In Your State

While the minimum salary requirements for “white collar” employees (executive, administrative, or professional employees) is not changing in 2018 (at least not until/unless the Department of Labor announces a new Overtime Rule), there are several states where the minimum salary requirements for exempt employees is increasing in 2018 (December 31st for New York employers).

These increases (i.e. in Alaska, California, Colorado, Maine, New York, and Oregon) are occurring because the minimum exempt salary rates for these employees (as established under state law) are scheduled to increase in 2018 (December 31st for New York employers).

Under the Fair Labor Standards Act (FLSA), the minimum salary requirements for white collar employees is as follows:

Payment Schedule Minimum Salary
Weekly $455
Bi-Weekly $910
Semi-Monthly $985.83
Monthly $1,971.66
Annual $23,660

Continue reading Check to See if the Minimum Required Salary For Exempt Employees is Increasing In Your State

NEW LAW: California Changes Nature of Commission Arrangements for Hair Stylists

With the passage of Senate Bill 490, California has dramatically altered how salon owners and barbershops can pay their stylists/barbers.  Under this new law, paying a stylist/barber on a commission-only basis or on a minimum wage plus commissions basis is no longer considered “commission-based pay” for the purpose of qualifying those employees for a “commissioned employee overtime exemption.”

Under the new law, a stylist/barber’s wages only qualify as commissions when both of the following requirements are met:

  1. the employee’s base hourly rate is at least two times the state minimum wage in addition to commissions paid; and
  2. the employee’s wages are paid at least twice during each calendar month on days designated in advance by the employer as regular paydays.

This means that starting January 1, 2018, a stylist/barber would need to earn an hourly rate of at least $22.00 per hour (2x the California minimum wage for large employers, or $21 per hour for small employers) in order for an “incentive pay” to qualify as commissions.  In addition, these employees must be paid the hourly rate for all hours worked – including nonproductive time and breaks.

The new law does not require that all stylists/barbers are paid in this fashion.  This is simply the only way these employees can qualify for the commissioned employee exemption.  Instead, these employees can simply be paid a flat hourly rate (with or without receiving any incentive pay), but the employee would be entitled to receive overtime pay in accordance with California law and would still need to be paid for nonproductive time and breaks.

If a salon/barber shop owner chooses to pay its stylists/barbers through an hourly rate and commissions, then there will need to be a written commission agreement that is compliant with California law.

This new law goes into effect on January 1, 2018.  It is recommended that all salon/barber shop owner review how their stylists/barbers are paid and verify that their compensation is compliant with California law.

Trick or Treat! DOL Treats Employers with the promise of a new Overtime Rule

On October 30, 2017, the US Department of Labor announced that it will soon “undertake new rulemaking with regard to overtime.”   This announcement comes after the public comment period on the DOL’s Request for Information (RFI) regarding the Overtime Final Rule (where the DOL was seeking public input on what changes should be made to the overtime rule) closed.

In addition to this announcement, the Department of Justice, on behalf of the Department of Labor, filed a notice to appeal the Court’s ruling on the motion for summary judgment challenging the Overtime Rule.  In this ruling (which was issued on August 31, 2017), the Court held that the Overtime Rule’s salary level exceeded the DOL’s authority, and concluded that the Final Rule is invalid.  The DOJ does not, however, intend to proceed with this appeal until the DOL determines what the new exempt salary level should be.

At this time, the DOL has not released any further information regarding the release of a New Overtime Rule.  However based on previous comments made by Secretary Acosta, it is expected the new salary level will be in the low $30,000 range.

The next step in the rulemaking process will be for the DOL to issue a proposed rule.  Once that proposed rule is published, there will be a public comment period followed by the issuance of a final rule.

It is recommended that all employers keep on the lookout for this new rule.  In addition, we will continue to report developments here.

NEW LAW: California MINIMUM PAY FOR EXEMPT COMPUTER PROFESSIONALS AND HOURLY-PAID PHYSICIANS TO INCREASE IN 2018

The California Department of Labor Standards Enforcement (DLSE) recently announced that the minimum pay requirements for exempt computer professionals and hourly-paid physicians and surgeons will increase effective January 1, 2018 as follows:

  • Exempt computer professionals must be paid at least $43.58 per hour, or a minimum salary of $7,565.85 monthly or $90,790.07 annually to be eligible for the professional exemption from overtime
  • Hourly paid physicians and surgeons must be paid at least $79.39 per hour to be eligible for the professional exemption from overtime

It is recommended that employers who employ these type of employees review the compensation levels of these employees and verify that their compensation meets the new minimum pay rates in order for any exemption from overtime to be retained.

NEW LAW – Illinois Online Employee Misclassification Complaint System

In compliance with the Illinois Employee Misclassification Referral System Act, the Illinois Department of Labor will be creating an online employee misclassification referral system on its website.

Once operational, this system will enable employees to file a misclassification complaint via an online form on the Illinois Department of Labor’s website with the Illinois Department of Labor and three other state agencies – the Department of Employment Security, the Illinois Workers’ Compensation Commission and the Department of Revenue. Based on the information provided, the system will refer the complaint to the appropriate agency (or agencies).

The launch date of this new system has not yet been set.  However, by creating this system, it will become easier for employees in Illinois to file these types of complaints.  Therefore, it is recommended that Illinois employers review their employee classifications and correct any improper classifications before the system is launched.

Further Clarification Regarding The DOL Overtime Rule

In its reply brief, filed June 30, 2017, the DOL has (somewhat) clarified its position with respect to the DOL Overtime Rule.

In this brief, the DOL has asked that the Court affirm the DOL’s continued ability to include a salary level test as a part of the “white collar exemption” FLSA test. The DOL has also requested that the temporary injunction against the DOL Overtime Rule be lifted.

While this latter request might cause employers alarm, the DOL also specifically asked that the Court not address the validity of the $913 per week salary level set forth in the current DOL Overtime Rule because the DOL intends to revisit the salary threshold through new rulemaking.

What Does This Mean for Employers?

Bottom line, the DOL Overtime remains “on hold” for the foreseeable future. It appears that the DOL may attempt to draft a revised rule, with a lower salary threshold. Employers must continue to “wait and see.”

For the time being, the minimum salary threshold for the white-collar exemptions remains at $455 a week. The salary threshold for the highly compensated employee exemption remains at $100,000 per year.

DOL Overtime Rule Update – R.I.P. Overtime Rule?

Since the injunction against the Department of Labor’s Overtime Rule was issued on November 23, 2016 (see FLSA Overtime Rule Blocked by Texas Federal Court), employers have been wondering when (if ever) the DOL Overtime Rule will go into effect.

Until recently, the Department of Labor has kept (relatively) silent about the fate of the Overtime Rule. However, last week (June 7, 2017) Secretary of Labor Acosta said that he will soon formally request the public’s input on new overtime regulations. Many experts believe this comment indicates that the DOL is considering dropping its defense of the litigation challenging the injunction against original rule.

When asked about the DOL’s plans concerning the Overtime Rule, Acosta said that the DOL plans to look at the overtime rule “as a general matter.”

I think that any rule that has a dollar amount that isn’t updated for as long as this … is a problem because life gets a lot more expensive,” he said. “But I also think that the way it was done created a shock to the system and the department is in the process of drafting a request for information that I think will be filed in … probably the next 2 to 3 weeks asking for public information and public comment on the overtime rule.

While these comments do not reveal the DOL’s ultimate plans for the Overtime Rule, they do indicate that the fate of the Rule will soon be revealed. Until such time, we recommend that employers who did not already take action to comply with the DOL Overtime Rule continue to delay any action until the status of the Overtime Rule is known. It is also recommended that employers take the opportunity to review their exempt positions against the duties tests.

UPDATE – DOL Overtime Rule

Since the injunction against the Department of Labor’s Overtime Rule was issued on November 23, 2016 (see FLSA Overtime Rule Blocked by Texas Federal Court), employers across the United States have been anxiously awaiting one thing – a final decision regarding this rule.

While the final fate of the Rule (still) has not been decided, there may be a light at the end of the tunnel.

The DOL recently requested (another) extension to file its reply brief to its appeal of the preliminary injunction.  This extension was granted and the DOL now has until June 30th to file a reply brief.

What this means for employers

Unfortunately, employers are still in the “wait and see” mode when it comes to the DOL rule.

To the extent that a company did not already take action to comply with the DOL Overtime Rule, we recommend that employers delay any action until a ruling has been issued on the appeal.  It is also recommended that employers take the opportunity to review their exempt positions against the duties tests.