Tracking employee work time is a constant challenge for employers, especially when the employees are not physically working in one location. Unfortunately, at least one court has found that employers can’t use personal cell phone GPS data to establish employees’ hours of work.
A federal district court in Indiana recently held that an employer could not use sales representatives’ GPS data from their personal electronic devices — which were used for both work and personal purposes — to defend an FLSA overtime suit. In this case, the employer wanted to compel the sales representatives to disclose GPS and location data from their phones to show when they were and were not working. The court denied the employer’s request, expressing concern that disclosing GPS data from a personal device would result in tracking the employees’ movements well outside of their working time, which would violate personal privacy standards.
This case serves as a great reminder that employers need to find methods of accurately tracking employee work time without relying on data from personal devices.
This week twenty-one states filed an emergency motion for a nationwide injunction to block the new overtime regulations that are set to go into effect on December 1st. However, as we’ve previously reported, the success of this and other efforts to stop or delay the regulations is far from clear. Unless and until one of these efforts is successful, companies should move forward with their planning and make sure that they are prepared to be in compliance on December 1st.
This week, 21 states and over 50 business groups filed suit in the Eastern District of Texas challenging the Department of Labor’s new overtime regulations, arguing that the DOL overstepped its authority in establishing the new minimum salary level and the automatic increases to the minimum salary every 3 years.
The new regulations (which,as we have previously discussed
, more than double the minimum salary requirement for employees to be eligible for the administrative, professional and executive overtime exemptions) have been hotly contested — in Congress and now in the courts. But it is far from clear that any of the efforts to delay or stop the new standards will be effective.
We will continue to monitor these challenges and keep you apprised. However, unless and until a challenge is successful, employers should plan to be ready for the new regulations on December 1st.
Under final overtime regulations set to be published today, the new minimum salary for employees to be exempt from overtime under the “white collar” exemptions will more than double — to $913/week , which is $47,476/year — with further increases every 3 years thereafter, beginning on January 1, 2020. The new regulations will become effective on December 1, 2016.
In a positive development, according to the Department of Labor’s (DOL) overview and summary of the new rule, employers will be permitted to credit bonuses and incentive payments for up to 10% of the new required minimum salary.
According to the DOL’s summary, the new regulations contain the following changes:
- Increase of minimum salary for “white collar” exemptions from $455/week ($23,660/year) to $913/week ($47,476/year) — which is the 40th percentile for full-time salaried workers in the lowest-wage Census region (currently, the South).
- Increase in the salary threshold for the Highly Compensated Employee exemption from $100,000 to $134,000 — which is currently the 90th percentile for full-time salaried workers nationally (note that the Highly Compensated Employee exemption isn’t effective in a number of states, including Illinois).
- Automatic increases in the salary minimums every 3 years, with the first increase effective January 1, 2020. For the regular “white collar” exemptions, the minimum salary will increase the to the 40th percentile for full-time salaried workers in the lowest-wage Census region (estimated to be $51,168 in 2020). For the Highly Compensated Employee exemption, it will increase to the 90th percentile of full-time salaried workers nationally (estimated to be $147,524 in 2020).
- Up to 10% of the minimum salary for the regular “white collar” exemptions can be met with non-discretionary bonuses, incentive pay, or commissions, provided that they are paid at least quarterly.
- The job duties tests remain unchanged.
The Department of Labor estimates that 4.2 million workers will be impacted by the new regulations.
While December seems like a long time away, changes to compensation structures take time. In order to have all options available, companies need to start thinking now (if they haven’t already) about how the new regulations will impact their workforce and how they are going to react. We strongly recommend that you speak with your employment attorney to determine the best course of action for your company.
Two recent developments are a good reminder that companies who have independent contractors are under increased scrutiny and face a high bar in establishing that independent contractors are properly classified as such — and not employees.
On July 15th, the Department of Labor issued a guidance saying that most workers qualify as employees under the Fair Labor Standards Act (FLSA) regardless of what the worker and the company may have agreed to. The guidance doesn’t announce a new test for independent contractor status. Instead, it starts with the “economic realities” test for independent contrator status that courts regularly use and a reads it together with a broad view of the FLSA’s definition of employ to reach a conclusion that most independent contractors are misclassified and should, instead, be treated as employees.
The DOL’s guidance was close on the heels of a decision by the Seventh Circuit Court of Appeals, which reversed the lower court and ruled that FedEx delivery drivers are employees under Kansas state law, not independent contractors. In making its decision, the 7th Circuit certified the question of whether the drivers were employees under the Kansas Wage Payment Act to the Kansas Supreme Court. The Kansas Supreme Court, applying a 20-factor test, found that the drivers were employees because FedEx, among other things, assigns drivers their routes; requires them to check in with FedEx managers at the start of their day; regulates their appearance; and decides whether to hire a driver after the driver submits resumes and references like any other employee.
So what are the consequences of misclassification? Companies that misclassify employees as independent contractors face penalties for failing to pay employment taxes, for failing to withhold taxes from pay, for failing to comply with wage and hour requirements (such as overtime), for failing to contribute to unemployment compensation, and for failing to comply with other employment-related laws. In addition, the Affordable Care Act opens companies that misclassify workers to significant penalties — both based on failure to offer coverage to the required portion of the workforce and where a misclassified worker obtains coverage on an exchange.
In light of these developments, we strongly recommend that any company that has independent contractors work with counsel to determine if these workers are properly classified. A thorough review now could save you lots of money, time, and aggravation later.
This morning the Department of Labor announced that it is seeking to increase the number of employees eligible for overtime pay by increasing the minimum salary required if an employee is to be considered exempt under the administrative, executive and professional exemptions. The proposed increase would take the minimum annualized salary from $23,660 to $50,440. In addition, under the proposed rule the threshold for the FLSA’s Highly Compensated Employee exemption would rise from $100,000 to $122,148. Both the minimum salary and the Highly Compensated Employee threshold would be indexed for inflation. The DOL also suggested that it may seek other changes to limit the available overtime exemptions. If this change becomes a final rule, we would expect it to become effective in 2016.
Note that even if employees meet the higher minimum salary requirement, they still must meet the other requirements for exempt status — being paid on a salary basis and satisfying one of the duties tests — to qualify as exempt from overtime requirements.
No action is necessary at the moment as the proposed rule is not final. We will keep you updated on future developments.
The U.S. Department of Labor (DOL) has released its spring 2015 regulatory agenda, which provides a window into what we can expect from the agency over the coming months. The agenda provides updates on 70 rulemaking measures and suggests that — with President Obama’s term approaching its end — the DOL is putting its rule-making into high gear.
Here are some highlights from the agenda:
The DOL indicates that we should see the proposed rule redefining the white-collar exemption under the Fair Labor Standards Act (FLSA) in June. As we reported last year, President Obama has directed Labor Secretary Thomas Perez to “modernize and streamline” the regulations defining this exemption for executive, administrative, professional, outside sales, and computer employees. We expect that the proposed rule will narrow the white-collar exemptions, resulting in fewer employees qualifying as exempt from overtime requirements.
Use of Technology during Non-Working Hours
Also on the agenda is information seeking – in the pre-rule stage – on “the use of technology, including portable electronic devices, by employees away from the workplace and outside of scheduled work hours.” It appears that the DOL is seeking this information with an eye toward proposing a rule clarifying how this type of 21st Century off-the-clock work is compensated (likely to the benefit of employees). The request for information is expected in August.
Reporting under the Labor-Management Reporting and Disclosure Act
Lastly, the DOL agenda also indicates that we should expect a controversial final rule on the narrowing of the “advice” exception under the Labor-Management Reporting and Disclosure Act (LMRDA) in December. The LMRDA requires employers and labor relations consultants (or other similar individuals) to report any agreement or arrangement they have to engage in activities to persuade employees concerning the right to organize or bargain collectively. The LMRDA contains an exception for “advice,” stating that no employer or consultant has to file a report concerning services of a consultant if that consultant just gives “advice” to the employer. The proposed rule would limit the definition of “advice” to “oral or written recommendations,” so that any other activity would need to be reported. This proposed rule has been on the books for a number of years and continues to face serious opposition from many groups — including the American Bar Association — because it raises critical concerns about attorney-client privilege. We expect lengthy legal challenges to this rule.
It should be a busy second-half of the year for the DOL. We will keep you updated on any new developments.