Tag Archives: overtime

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

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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 CASE: Fluctuating Workweek Prohibited for Certain Connecticut Employees

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In a recent decision (Williams v. General Nutrition Ctrs., Inc.) the Connecticut Supreme Court held that the fluctuating workweek method of calculating overtime may not be used to calculate overtime for three types of employees — retail employees paid by commission, delivery drivers, and sales merchandisers.

Under the fluctuating workweek method of calculating overtime, an employer can limit overtime costs by paying an employee whose hours fluctuate from week to week a fixed amount per week as straight time, regardless of the number of hours worked.  In addition, under this method, the payment for overtime hours is just one-half times the regular rate, instead of one and one-half times the rate because the straight time rate is understood to compensate employees for all hours actually worked.

While the Connecticut Supreme Court held that the Connecticut wage and hour laws do not prohibit employers from paying most employees under the fluctuating workweek method, the court found that employers are prohibited from using this method for certain employees due to state regulation (retail employees paid by commission) or state law (delivery drivers and sales merchandisers)

With respect to retail employees paid by commission a state regulation requires retail employers determine commissioned employees’ regular rate of pay by dividing their weekly pay by the hours they usually, rather than actually, work in a week.  Therefore, the fluctuating workweek method may not be used for these employees because it requires consideration of the hours they actually work.

Similarly for delivery drivers and sales merchandisers, a state statute requires employers determine delivery drivers’ and sales merchandisers’ regular rate of pay by dividing the total weekly pay by 40.  As a result, the fluctuating workweek method may not be used for these employees either.

Recommendations for employers

It is recommended that Connecticut employers of these types of employees review their method of calculating the regular rate of pay for these employees and verify that they are complying with Connecticut law.

Oregon Court Rejects BOLI’s Updated Overtime Guidance Materials For Oregon Manufacturers

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Earlier this year (in “New Overtime Guidance Materials For Oregon Manufacturers And Other Industries”), we reported that the Oregon Bureau of Labor and Industries (BOLI) had updated its overtime guidance materials for employers in mills, factories, or manufacturing establishments and stated that nonexempt employees who work in these types of establishments may be entitled to both daily and weekly overtime compensation.

An Oregon Court has reviewed these materials and recently issued an opinion rejecting the updated guidance materials. Instead, the Court held that BOLI’s original interpretation—i.e., that manufacturers are required to pay the greater of daily or weekly overtime hours worked by employees in a workweek (but not both)—was the correct way to construe manufacturers’ obligations under Oregon law.

According to the Court, in order to properly pay overtime to its nonexempt employees, Oregon manufacturing employers must calculate both daily and weekly overtime in a workweek and pay the greater of the two amounts. This method prevents “double-counting” of overtime hours and ensures all work performed in excess of 40 hours per week is paid at the rate of no less than one and one-half times the regular rate of pay.

Take home for employers

For the time being, Oregon manufacturing employers should follow the Court’s ruling on this issue and calculate their nonexempt employees’ overtime wages in accordance with the method described in the Court’s ruling. However, employers are also advised to pay attention to this issue, as the Court’s ruling is likely not the final word on this matter. The plaintiffs may seek review of the ruling and, more significantly, the Oregon legislature could pass Senate Bill 984, which is intended to eliminate any ambiguity as to the calculation of daily and weekly overtime in a manner consistent with the court’s ruling.

New overtime guidance materials for Oregon Manufacturers and Other Industries

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The Oregon Bureau of Labor and Industries (BOLI) recently updated its overtime guidance materials for employers in mills, factories, or manufacturing establishments. Under the new guidance (entitled “Manufacturing: Daily Overtime and Maximum Hours Restrictions”), nonexempt employees who work in these types of establishments may be entitled to both daily and weekly overtime compensation.

Under existing Oregon overtime law (ORS 653.261), employees who work over 40 hours in one week must be paid at a weekly overtime rate of one-and-one-half times their regular hourly rate.

Yet, under a separate law (ORS 652.020), certain employees who work in a mill, factory, or “manufacturing establishment” for more than 10 hours in one day must be paid at a daily overtime rate of one-and-one-half times their regular hourly rate. For purposes of this law, a “manufacturing establishment” is defined any place where machinery is used for manufacturing purposes, including making goods from raw or prepared materials.

In light of the apparent conflict between the two laws, the BOLI had previously advised affected employers “when employees who are entitled to daily overtime have worked more than 40 hours in the workweek and have also exceeded the maximum number of hours on one or more days, thereby earning daily overtime, the employer should calculate overtime hours worked on both the daily and weekly bases and pay the greater amount.”

However, in the updated guidance materials, the BOLI has changed its advice. Under the new guidance, the BOI advises that “that employers, when determining the amount of overtime earned by an employee who, during a work week, has worked more than 10 hours per day in a manufacturing establishment and more than 40 hours in the week, must calculate the amount of overtime earned by the employee under each regulation and pay both overtime amounts to the employee.”

There are certain manufacturing employers who are exempt from this requirement. This requirement does not apply to the following:

  • union employees where a collective bargaining agreement establishes different limits on the required hours of work and the payment of overtime.
  • Employees with certain duties (for example, daily overtime is not owed to any employee whose primary duty is that of supervising and directing work, such as supervisors, managers, foremen/women, and persons who are temporarily acting in these capacities
  • Employees of certain manufacturing establishments in the timber industry—sawmills, planing mills, shingle mills, and logging camps—remain exempt until daily overtime requirements are imposed in all of the surrounding states of California, Washington, and Idaho.

In addition, employers may be able to obtain a waiver from complying with this new interpretation. Specifically, a manufacturer who is able to demonstrate that (1) it has established regular work shifts in excess of 10 hours per day with the agreement of its employees; (2) the work schedule has not adversely affected the health and safety of the workers; (3) the workers receive rest and meal periods as required by law; and (4) the employer makes reasonable accommodations for employees who are unable to work over 10 hours in a day because of a health issue or physical disability may apply for a waiver from these requirements on an annual basis. A copy of the waiver application is available for employers.

Recommendation

It is recommended that all Oregon manufacturing employers review the new guidance materials and either make any necessary modifications to their payroll practices to ensure that daily overtime is paid to their employees or explore the possibility of applying for a waiver from the BOLI.

UPDATE: Hearing Date Scheduled for New Overtime Rule Lawsuits

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In an earlier article (The New FLSA Overtime Rule – Challenges Abound), we reported that two lawsuits had been filed seeking to halt (or delay) the implementation of the new overtime rule.

A hearing on both lawsuits is scheduled for November 16, 2016 in a Texas federal court.  At that time, the court will decide whether an injunction will be issued to block the new overtime rule, which is scheduled to go into effect on December 1, 2016.

While a hearing has been scheduled in these cases, it remains advisable that all employers continue their preparations to comply with the new overtime rule.

New Overtime Rules Coming To California Farmworkers

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On September 12, 2016, California Governor Jerry Brown signed AB1066 (the “Phase-In Overtime for Agricultural Workers Act of 2016”) into law. This new law amends California Labor Code section 554 as it relates to California’s agricultural workers and adds sections 857 through 864 to the California Labor Code. The new law dramatically affects how California’s agricultural employers will pay overtime to these workers.

Amendment to California Labor Code section 554

Currently, California Labor Code section 554 exempts “persons employed in an agricultural occupation” from sections 551 and 552 of the California Labor Code (the one day’s rest in seven provisions). Under the new law, this exemption is removed effective January 1, 2017.

Changes to Overtime Requirements for Farmworkers

Under the current law, California’s farmworkers are entitled to overtime after working 10 hours in a day or 60 hours in a workweek. However, with the passage of the Phase-In Overtime for Agricultural Workers Act of 2016 that will soon change.

Under the new law, a California agricultural employer’s obligation to pay overtime to its employee will gradually increase as follows:

Agricultural employers who employ more than 25 employees

  • January 1, 2019 — any person employed in an agricultural occupation who works more than 9½ hours in any one workday or work in excess of 55 hours in any one workweek is entitled to receive overtime;
  • January 1, 2020 — any person employed in an agricultural occupation who works more than 9 hours in any one workday or work in excess of 50 hours in any one workweek is entitled to receive overtime;
  • January 1, 2021 — any person employed in an agricultural occupation who works more than 8½ hours in any one workday or work in excess of 45 hours in any one workweek is entitled to receive overtime;
  • January 1, 2022 — any person employed in an agricultural occupation who works more than 8 hours in any one workday or work in excess of 40 hours in any one workweek is entitled to receive overtime

In addition, effective January 1, 2022, any person employed in an agricultural occupation who works more than 12 hours in any one workday is entitled to receive double time.

Agricultural employers who employ 25 or fewer employees

  • January 1, 2022 — any person employed in an agricultural occupation who works more than 9½ hours in any one workday or work in excess of 55 hours in any one workweek is entitled to receive overtime;
  • January 1, 2023 — any person employed in an agricultural occupation who works more than 9 hours in any one workday or work in excess of 50 hours in any one workweek is entitled to receive overtime;
  • January 1, 2024 — any person employed in an agricultural occupation who works more than 8½ hours in any one workday or work in excess of 45 hours in any one workweek is entitled to receive overtime;
  • January 1, 2025 — any person employed in an agricultural occupation who works more than 8 hours in any one workday or work in excess of 40 hours in any one workweek is entitled to receive overtime

In addition, effective January 1, 2025, any person employed in an agricultural occupation who works more than 12 hours in any one workday is entitled to receive double time

Other changes

Finally, effective January 1, 2017, agricultural employers will no longer be exempt from certain state law requirements regarding wages, meal breaks and other working conditions.

Impact on California Agricultural employers

It is recommended that California agricultural employers start preparing for these changes by doing the following:

  • Verify that their payroll practices are compliant with the changes in overtime;
  • Train managerial employees on the new daily and weekly overtime limits
  • Determine ways to effectively schedule employees to avoid overtime
  • Amend handbooks and policies to reflect these changes

Conformity Is King – At Least When Calculating A California Employee’s Regular Rate Of Pay On A Nondiscretionary Bonus

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Failing to correctly calculate an employee’s regular rate of pay can be incredibly expensive for an employer. Therefore, knowing how to correctly calculate an employee’s regular rate of pay is extremely important. Federal and California law require that overtime be paid at 1.5 time an employee’s regular rate of pay. In addition, the rate at which California’s paid sick leave benefits are paid is based on a nonexempt employee’s regular rate of pay.

The issue …

California employers have been long confused about how to properly calculate an employee’s regular rate of pay when the employee is paid a nondiscretionary bonus. However, a recent California Court of Appeal decision (Alvarado v. Dart Container Corp. of California) gives employers some much-needed guidance on this issue.

The problem …

The place an employer would normally turn for guidance, the California Labor Code, does not address how this calculation should be performed. Absent any statutory guidance, employers have two competing sources from which they can seek guidance – the US Department of Labor (DOL) (via the Fair Labor Standard Act regulations) or the Department of Labor Standards Enforcement (DLSE).

The DOL and the DLSE do not agree on how the regular rate of pay should be calculated and their different formulas provide incredibly different results.

The FLSA regulations state that an employer can calculate the regular rate of pay by simply adding the bonus to the other includable compensation paid and then dividing the sum by the total number of hours worked.

For example: An employee works 46 hours in a week, earns $12 an hour, and receives a $46 production bonus for the week. Under the FLSA formula, the regular rate of pay would be $13 an hour [(46 hours x $12/hour) + $46 bonus] / 46 hours].

Meanwhile, the DLSE has taken a different stance.  The DLSE opined that the regular rate of pay can only be determined from the straight-time hours worked. In other words, the regular rate must be the sum of all compensation divided by only the regular (non-overtime) hours worked.

 

Another example: Under the DLSE formula, the regular rate of pay would be $13.15 an hour [(40 hours x $12/hour) + $46 bonus] / 40 hours]

As shown above, the DLSE’s method results in a higher regular rate of pay and therefore higher overtime wages paid to the employee.

The question … which method should California employers use?

Absent any guidance, California employers were left to choose which method to use to calculate the regular rate of pay. In the Alvarado case, the employer chose to use the FLSA method and was sued by a former employee for unpaid wages. The employee’s claim was that the employer’s use of the FLSA method to calculate his regular rate of pay was improper and result in an underpayment of wages.

In a surprising (for California) decision, the Court of Appeal ruled that an employer’s use of the FLSA method to calculate an employee’s regular rate of pay when determining the overtime premium pay owed on a “flat sum” bonus was proper. Therefore, the employer did not owe the employee any unpaid wages.

This is an important victory for employers and proves that, at least when calculating the regular rate of pay, California will conform with federal regulations.

New Year’s Eve Brings Changes in Wage and Hour Laws for Certain New York Workers

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New York (City) is famous for its New Year’s Rockin’ Eve, but this New Year’s Eve, Hospitality Industry and Fast Food Industry workers throughout New York State have even more reason to celebrate. Why? The new Hospitality Industry Wage Order and the new Fast Food Industry Wage Order go into effect, which results in increased minimum wages for effective employees.

New York employers in the Hospitality and Fast Food Industries, are you prepared for the following changes effective December 31, 2015?

Changes Impacting Both Hospitality And Fast Food Industry Employers

  • Increase in the minimum salary requirements for exempt executive or administrative employees from $656.25 to $675

Changes Impacting Hospitality Industry Employers Not Covered By The Fast Food Industry Wage Order

  • Increase in minimum wage from $8.75 to $9.00 per hour
    • As a result, the minimum overtime rate increases to $13.50 per hour
  • Decrease in the maximum tip credit amount for tipped employees from $3.75 to $1.50 (in other words, the minimum cash wage that must be paid to tipped employees is $7.50 per hour)
    • As a result, the minimum overtime rate for tipped employees increases to $12.00 per hour
  • All tipped service employees (e.g. tipped food service workers, tipped delivery workers) are subject to the $1.50 tip credit not just food service workers (in other words, all tipped employees must receive $7.50 per hour)
  • Increase in the uniform allowance to:
    • $11.20 per week for those working over 30 hours;
    • $8.85 per week for those working between 20 and 30 hours; and
    • $5.35 per week for those working under 20 hours
  • Increase in the maximum meal credit for non-service employees to $3.10 per meal
    • NOTE: the meal credit for all service workers stays at $2.50 per meal
  • Increase in spread-of-hours pay from $8.75 to $9.00 per hour

Changes Impacting Fast Food Industry Employers

While the lawfulness of the new Fast Food Order is still being litigated, the New York Department of Labor has taken the position that the Order is effective December 31, 2016. Therefore, it is advisable that New York employers in the fast food industry implement the below-listed changes.

  • Increase in minimum wage to $10.50 per hour (New York City employers) and $9.75 per hour (New York employers outside of New York City)
  • Increase in overtime rates to $15.75 per hour (New York City employers) and $14.63 per hour (New York employers outside of New York City)

Please be advised, the new Fast Food Order does not address the uniform allowance, spread of pay, or tip credits. With respect to the uniform allowance, the best practice is to comply with the increases set forth in the Hospitality Industry Wage Order (since the Fast Food Industry is a subset of the Hospitality Industry). With respect to spread-of-hours pay, under New York law, spread-of-hours pay must match minimum wage; therefore, the spread-of-hours pay rate will increase to $10.50 per hour (New York City employers) and $9.75 per hour (New York employers outside of New York City). Finally, with respect to tip credit, since tip credits are not addressed, the best practice would be not to utilize a tip credit for any fast food industry employee.

 

Retail Employers Beware — The DOL Is Targeting Your Employees

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The US Department of Labor (“DOL”) has a new target in its sights – the retail industry. As part of a new initiative, the DOL has recently announced that it will be “”reaching out to retail workers to educate them about their rights” under the federal Fair Labor Standards Act by providing retail employees with copies of the DOL’s pamphlet entitled “Holiday Season Employment Information.”

What is the reason for this initiative?

DOL investigators have found that thousands of workers in the retail industry were cheated out of millions of dollars in the 2015 fiscal year. The common violations of retail employers:

  1. Failing to pay retail salespeople for the time spent prepping and/or closing out the cash register at the start and close of a shift;
  2. Requiring stockroom/warehouse personnel to work through breaks without compensating those employees for the time;
  3. Failing to pay employees who worked over 40 hours in a week overtime pay, as is required under the FLSA.

What can retail employers do to protect themselves from a DOL investigation?

Retail employers should take a look at their current practices and verify their practices are in compliance with not only federal, but any applicable state laws. Most importantly, employers should verify that: (1) all employees are being paid for all employment activity (i.e. no “off-the-clock work” is occurring) and (2) all employees are receive overtime pay when overtime is worked.

 

New York Employers Can Face Jail Time For Overtime Violations

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Failing to pay employees overtime wages can be an incredibly expensive mistake, but is this a mistake that can send you to jail? For New York employers, the answer is a surprising yes.

Recently, an owner of a chain of Papa John’s franchises in New York City was sentenced to 60 days in jail because falsified business records relating to the payment of overtime wages to his employees.

Specifically, the owner failed to pay overtime to his employees. Instead, the owner paid his employees the same, “straight time” regular rate of pay for all hours worked, including hours in excess of forty. In order to conceal this practice of intentionally not paying overtime, the owner created fictitious names for employees to use in the company’s computerized timekeeping system. The owner also filed fraudulent tax returns with the State of New York that omitted the cash payments made under fictitious names.

While this particular employer’s method to avoid paying overtime was extreme, the take-home message to New York employers is clear – wage theft is a crime and the New York Attorney General (who prosecuted this case) will do everything in his power to insure that New York employers pay their employees properly.

In addition, this ruling should serve as a warning for employers in California and Oklahoma, both of which have statutes imposing criminal liability for certain wage and hour violations. Like New York, these states may resort to the available criminal penalties in order to protect their workers from wage theft.