Tag Archives: FLSA

NEW GUIDANCE: Department of Labor Publishes 6 New Opinion Letters

The US Department of Labor has certainly been busy as of late.  In addition to creating a new agency and developing two new websites, the DOL has also issued six new opinion letters, which interpret various issues under the federal Fair Labor Standards Act (FLSA) and Family and Medical Leave Act (FMLA).

FMLA Opinion Letters

#1.  Can organ-donation surgery qualify as a “serious health condition” under the FMLA?

In the first letter, the DOL addressed the question of whether an organ donor qualifies as an individual with a serious health condition for purposes of the FMLA.

The DOL concluded that organ donation does qualify as a serious health condition because the donor often will often require an overnight stay in the hospital.

#2.  Does this employer’s no-fault attendance policy violate the FMLA?

In the second letter, the DOL addressed the question of whether a no-fault attendance policy that “freezes” during an employee’s FMLA leave (i.e. remains at the number of attendance points that the employee accrued prior to taking FMLA leave) violates the FMLA. Continue reading NEW GUIDANCE: Department of Labor Publishes 6 New Opinion Letters

FLSA Requirements for Tip Pooling Quietly Changed

Buried in its 2,232 pages, the 2017 Omnibus Budget Bill contains a short provision making important amendments to the Fair Labor Standards Act as it relates to tip pooling arrangements. These amendments may have immediate and important ramifications for employers and may require changes to existing tip pooling arrangements in order to remain in compliance with the law.

The Long and Short of It

First, the bill makes it unlawful for employers, including managers and supervisors, to keep any portion of tips received by their employees, regardless of whether or not the employer takes a tip credit. Previously, the FLSA was vague on whether an employer could retain a portion of employee tips when the employer did not take a tip credit (i.e., when the employer paid the employee at least minimum wage not including tips). This update to the law brings the FLSA in line with previous Department of Labor (DOL) regulations that prohibited employers from sharing in employee tips at any time.

The second significant change brought about by the bill is that the FLSA now permits employers to require tipped employees to share their tips with back of house employees when the employer does not take a tip credit.  Thus, under the FLSA, employers who pay their tipped employees at least the full federal minimum wage may now require tipped employees such as severs and bartenders to share their tips with employees who are not customarily tipped, such as dishwashers, cooks, and bussers. This amendment invalidates previous DOL regulations prohibiting employers from requiring such tip sharing with non-tipped employees.

DOL Guidance Continue reading FLSA Requirements for Tip Pooling Quietly Changed

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

Fluctuating Work Week Method Of Compensation Is Permissible For Certain Nevada Employees

In a recently published Advisory Opinion, the Nevada Labor Commissioner has opined that Nevada employers may use the fluctuating workweek method to compensate certain types of nonexempt Nevada employees.

What is the fluctuating workweek method?

The fluctuating workweek method is a accept method of compensation under the Fair Labor Standards Act for nonexempt employees who are paid a fixed salary for all hours worked. Under this method, the employer and employee have come to an understanding that the employee will receive the fixed salary as straight time pay for whatever hours he is called upon to work in a workweek – no matter how few or how many.

If the employee works over 40 hours in a workweek, the employer then pays the employee overtime based on one-half the employee’s regular rate of pay. The regular rate of pay is calculated by dividing the employee’s weekly salary by the total hours the employee worked that week. That number is then divided in half to determine the overtime rate – because the employer and employee previously agreed that the salary compensated the employee for all straight time hours worked.

What did the Nevada Labor Commissioner opine?

The Labor Commissioner found that the fluctuating workweek method of compensation was permissible for fixed salary nonexempt employees. In addition, he also found that fluctuating workweek method of compensation is also permissible where a fixed salary employee is also paid commissions and bonuses provided that those commissioner and/or bonuses are included in the weekly amount of pay when determining the employee’s regular rate of pay.

Take home for employers

While the fluctuating workweek method is a accept method of compensation in Nevada, it is recommended that Nevada employers consult with an HR Professional or legal counsel before using this method of payment with their employees.

The New FLSA Overtime Rule – Challenges Abound

The new FLSA Overtime Rule is scheduled to go into effect on December 1st. This rule, as most employers likely already know, increases the FLSA’s minimum annual salary requirements for exempt employees to $47,476 per year ($913 per week).

In the face of this rapidly approaching deadline, there have been recent efforts to delay, if not entirely prevent, the new overtime regulations from going into effect. While this article will (briefly) discuss these challenges, it remains our recommendation that all employers continue to plan for and implement any necessary changes to ensure compliance with the new FLSA Overtime Rule come December 1st.

What are the challenges?

On September 20, 2016, two separate lawsuits were filed in federal court (the Eastern District of Texas) seeking an injunction to stop the new overtime regulations from going into effect. The first lawsuit was filed by the U.S. Chamber of Commerce in conjunction with a number of other business groups. The second lawsuit was filed by a coalition of 21 states (Nevada, Texas, Alabama, Arizona, Arkansas, Georgia, Indiana, Kansas, Louisiana, Nebraska, Ohio, Oklahoma, South Carolina, Utah, Wisconsin, Kentucky, Iowa, Maine, New Mexico, Mississippi, and Michigan). Both lawsuits were assigned to a District judge who was nominated by President Obama. As a result, it is not anticipated that the injunction will be granted. Moreover, while both groups have indicated that they will appeal a denial of the injunction, it could take longer than the available time (i.e. time before the December 1st effective date) for the Appellate Court to hear/rule on the appeal.

On September 21, 2016, House Subcommittee on Workforce Protections Chair Tim Walberg proposed legislation (The Regulatory Relief for Small Businesses, Schools, and Nonprofits Act (H.R. 6094)) that while it does not change the FLSA Overtime Rule, would delay the rule’s effective date by six months. This bill was passed by the House of Representatives on September 28, 2016 and has moved over to the US Senate for consideration.  However, even if Congress passes this legislation before the effective date, it is likely that President Obama will veto this bill.

What should employers do?

As stated above, employers should not rely on these challenges to stop the new FLSA Overtime Rule from going into effect. It is imperative that employers continue to work out their compliance strategy and plan to be in compliance with the new rule by December 1st.

Are your exempt employees really affected by the new FLSA Overtime Rule?

With the effective date of the new FLSA Overtime Rule just over two months away, there has been a lot of focus on how best to comply with the new requirements. While compliance with the new rule should definitely be a top priority for all employers, it is important to remember that not all exempt employees are affected by the new rule.

Specifically, the new rule does not affect those employees who are exempt from the FLSA’s minimum-wage and/or overtime provisions.

These employees include:

  • Certain “white collar” employees, like
    • Salespeople who fall within the “outside salesman” exemption;
    • Employees who qualify for the “teaching professional” exemption;
    • Employees who are authorized to practice law who are actually practicing law (i.e. practicing lawyers);
    • Employees who are authorized to practice medicine or any of its branches who are actually engaged in the relevant practice (i.e. practicing doctors);
    • Employees who have a medical degree and are working in a medical internship or residency;
    • Employees whose work meets the computer-employee exemption requirements who are paid on an hourly basis at a rate of at least $27.63.
  • Retail employees paid under a qualifying commission pay plan (who are already exempt from overtime under the FLSA)
  • Any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles, trucks, or farm implements, if he is employed by a nonmanufacturing establishment primarily engaged in the business of selling such vehicles or implements to ultimate purchasers (who are already exempt from overtime under the FLSA)
  • Employees who fall under the FLSA’s “Motor Carrier Exemption”

Take Away for Employers

When performing your FLSA compliance audit, first consider whether the employees you are auditing are actually affected by the new rule. However, it is recommended that you speak with qualified legal counsel or an HR Professional before making any determination with respect to FLSA exemptions.

It’s the Final Countdown!

The effective date of the Department of Labor’s new overtime rule is under 100 days away. Has your company decided its course of action?

Under the new overtime regulations, which go into effect on December 1st, the minimum salary requirements for exempt status under the FLSA will be changing to the following:

  • The minimum salary threshold for the FLSA overtime exemption is increasing from $23,660 per year to $47,476 per year (or $913 per week);
  • The total annual compensation requirement for highly compensated employees is increasing to $134,004 annually

For employers in states (like California and New York, to name a few) where the state minimum salary requirement was higher than the old FLSA minimum salary threshold, their current exempt employees will be required to meet the higher FLSA salary requirements in order to keep their exempt status.

It’s not too late to take action to comply with the new regulations. All employers should analyze the current salaries of their exempt workforce and identify those exempt employees who make less than $913 per week in salary. Once the affected employees have been identified, employers should determine the projected cost of maintaining the exemption as opposed to reclassifying the employee to nonexempt.

With the cost analysis completed, employers can determine the course of action that best fits the needs of the company. A company can take one of four potential actions:

  1. Increase the employee’s salary. Employers can increase the employee’s salary to meet the $913 per week salary threshold. Assuming that the employee in question also meets the duties test (which was unchanged), the employee will then remain exempt from overtime.
  2. Reclassify the employee and pay overtime. Employers can reclassify affected employees to nonexempt and pay overtime in accordance with state and federal law.
  3. Reclassify the employee and prohibit employee from working overtime. Employers can reclassify affected employees to nonexempt and prohibit the employees from working unauthorized overtime. If this course of action is taken, employers will be required to monitor time worked by these employees to verify that they do not work overtime. Be aware, though, that any time the employee does work overtime, the employer will be required to pay the overtime rate in accordance with state and federal law.
  4. Reclassify the employee and adjust the hourly rate of pay to avoid increased costs. Employers can reclassify affected employees to nonexempt and adjust (likely reduce) the hourly rate of pay so that the employee’s annual earnings (hourly plus overtime) remain the same). The potential downside to this course of action is that the employee will likely be unhappy with receiving a lower rate of pay.

Regardless of the course of action chosen by the employer, the employer should implement the change before the December 1, 2016 deadline.

Available guidance materials

the Department of Labor has released the following guidance materials:

In addition, the White House has released the following guidance:

‘Regular Rate of Pay’ Includes Cash In Lieu Of Benefits

According to the 9th Circuit Court of Appeals, the answer is yes. In a recent decision (Flores v. City of San Gabriel), the Court held that the Fair Labor Standard Act (FLSA) requires employers to include monetary payments made in lieu of benefits when calculating an employee’s regular rate of pay for purposes of determining overtime.

In this case, employees were subject to a Flexible Benefit Plan that provided employees with a set monetary amount to purchase various benefits. The employees were able to decline to use these funds for medical benefits and instead receive the funds as a cash payment that was added to their paychecks. The employer was not including these payments in its determination of the employees’ regular rate of pay and several employees filed a lawsuit claiming that their overtime payments were incorrect.

In this case, the Court agreed with the employees and found that cash in lieu of benefits payments are included in the regular rate of pay calculation, in addition to the following:

  • Commission payments,
  • Piece rate payments,
  • Non-discretionary bonuses (e.g. productivity bonus, performance bonus, attendance bonus, longevity bonus, cost-of-living bonus),
  • Awards or prizes won for quality, quantity or efficiency,
  • Shift differentials,
  • Premiums paid for hazardous, arduous or dirty work,
  • Non-cash wages in the form of goods, board, or lodging,
  • Pay for non-productive work hours (e.g. rest breaks, waiting time, attending meetings), and
  • Lump sum on-call payments.

Impact on Employers

While there is a possibility that the employer will attempt to appeal this ruling with the US Supreme Court, this decision is binding on employers who operate in the 9th Circuit. It is strongly recommended that employers add cash-in-lieu of benefits in their calculations of overtime payments for non-exempt employees.

Clarifying “Incentive Payments” Under the New FLSA Regulations

The new FLSA regulations went into effect on May 18, 2016. (see our previous article on the new regulations “It’s Here … The DOL’s New Overtime Rule is (Finally) Published”)

The new regulations increased the minimum salary threshold for the FLSA overtime exemption from $23,660 per year to $47,476 per year (or $913 per week).

Also, under the new regulations, employers will be permitted to use an employee’s non-discretionary bonuses and “incentive payments” (including commissions) to satisfy up to 10% of the new standard salary level — subject to certain restrictions.

While the term “incentive payment” is not defined in the new regulations, there are certain aspects of compensation that are clearly not considered “incentive pay”. Those items are those which the US Department of Labor has historically not allowed to be included in the calculation of the minimum salary amount, namely:

  • The value of medical, disability or life insurance or contributions to retirement plans or other fringe benefits, or
  • The value of board and lodging paid by an employer.

When determining whether an exempt employee’s salary is in compliance with the new overtime rules, employers may not consider the value of incidental benefits provided to the employee by the employer.