The Department of Labor has (finally) issued its new proposed overtime rule — which sets the minimum salary for an employee to be eligible for the white collar exemptions at $35,308. You can read more about this development here. This is significantly higher than the $23,660 that is currently in place but much lower than the $47,476 that the Obama administration tried to implement in 2016.
It’s important to remember that salary is only the first step in the analysis. Even if an employee is paid a salary over the minimum, the employer still needs to establish that the employee satisfies the job duties requirements to be classified as exempt.
It seems like we spent the better part of 2016 getting ready to comply with the new overtime regulations that had been set to go into effect December 1, 2016 — until a federal judge in Texas issued a last-minute injunction. The Texas court’s injunction meant that the new overtime standards — including a much higher minimum salary requirement — did not go into effect as planned, even though many employers had already made changes to comply with them. That injunction is currently being appealed before the 5th Circuit, but the new Department of Labor’s positioning in that appeal is raising the potential that the 2016 rules could come back to life — at least until a new, replacement rule can get through the rule making process.
The issue here is that while the new Secretary of Labor has taken steps toward revising the overtime regulations (with an eye toward making them more employer-friendly), the DOL has not asked the appellate court to uphold the injunction that was issued late last November. This sets up a situation where the 5th Circuit could rule to dissolve the injunction — allowing the Obama administration’s rule to go into effect — before the agency has a replacement rule ready via the regulatory process.
Were this to occur, it would create a very difficult situation for the DOL and employers alike. The current DOL would be charged with implementing a rule that it plans to do away with, and employers would have to figure out how to comply with a rule that will likely change in the near future.
We suggest that employers hold tight until more information is known. Given the last-minute nature of the injunction, many employers had already taken steps to comply with the new overtime rules before they were stayed, so if the injunction is dissolved, those employers should be able to pick the process back up where they left off.
It is not clear when the 5th Circuit will issue its decision on the fate of the regulations and injunction, but we will alert you when it does.
We’re only a few days into Q2, but we wanted to make sure that you’re prepared for a significant legal change that is effective at the beginning of Q3. Starting July 1st, employees who work in Cook County will have a right to paid sick leave under the Cook County Earned Sick Leave Ordinance, the Chicago Paid Sick Leave Ordinance or both.
On their surface, the requirements of the Ordinances seem pretty straightforward, leaving many companies to believe that their current PTO or sick leave policy meets the new standards. However, most of the policies we’ve reviewed to date don’t meet all of the new standards. This is largely because the Ordinances:
- Apply to all employees – including part-time employees – who work at least 80 hours in any 120 day period.
- Allow the employee to carryover up to 20 hours of paid sick leave into the next year (up to 60 for employers that are covered by the FMLA).
- Require that paid sick leave may be used not just for the employee or a family member’s illness or injury, but also to seek medical care or to care for a family member, in the event that the employee or a family member is the victim of domestic violence, or in the event that the workplace or the employee’s child’s school or place of care is closed due to a public health emergency.
- Provide that an employer can’t require a note unless the employee is out for more than 3 consecutive days or more.
- Put limitations on the notice employers can require from employees, including allowing employees to provide last minute notice by phone, email or text.
There are also a couple provisions in the Ordinances that help employers – including capping accrual at 40 hours per year, capping use at 40 or 60 hours per year (depending on the size of the employer and the reason for leave), and not requiring payout on termination. However, to take advantage of these employer-friendly provisions, it’s important to reflect them in your policy.
Both Ordinances provide that employees who don’t receive the paid sick time the Ordinances require can file suit and collect triple damages. We expect Plaintiffs’ attorneys to be out in force looking for potential class actions, so it is important that every company that employs workers in Cook County have their policy reviewed in advance of the July 1st implementation deadline. Because of the number of sick leave policies we’ve already seen, we are able to review current policies and prepare compliant policies efficiently, on a flat fee basis.
Labor & Employment Practice Group Leader Laura Friedel is available for questions about how these ordinances might affect your company’s policies.
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.
Congress has joined the fight in trying to stop or delay the Department of Labor’s new overtime regulations. This week, the U.S. House of Representatives voted 246 to 177 to delay the effective date of the DOL’s overtime rule by six months until June 1, 2017. This bill faces an uphill battle — first having to pass the Senate and then a very likely Presidential veto.
Given that the bill is unlikely to become law, and given the questionable future of pending court challenges, employers should continue to prepare for the new regulations to be effective on December 1st. We will continue to monitor these challenges and keep you apprised.
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.
The long-awaited new overtime regulations took a big step forward this week when the Department of Labor submitted the proposed final regulations to the White House Office of Management and Budget for final review and approval. This last step in the review process is anticipated to take up to 90 days, with the final regulations anticipated sometime during Q2.
As we noted in our post on June 30, 2015, the proposed regulations more than double the minimum salary requirement for the “white collar” overtime exemptions (administrative, professional and executive) from $455/week ($23,660/year) to approximately $970/week ($50,440/year), with annual increases thereafter based on a to-be-determined index. The proposed regulations also increase the minimum salary for the Highly Compensated Employee exemption from $100,000/year to more than $122,000/year (though it is important to note that this exemption does not apply under some states’ overtime laws). Finally, while the proposed regulations did not change the job duties tests, they did suggest that the final rules may impact the job duties tests in addition to the minimum salary requirement.
There are various strategies available to businesses to minimize the financial, operational and employee-relations impact of the new regulations, but it is important to act quickly to consider available options for impacted employees. Companies should also consider whether other changes to exempt status classifications make sense, as the regulatory change is a good opportunity to improve compliance across the board.
As fall approaches and students head back to school, The Employment Lawyers are taking a look back and a look ahead at issues in labor and employment law. Join us for an informational webinar to review developments over the past year and discuss tips to keep your workplace practices current in the coming year.
Thursday, September 17, 2015
12:00 pm – 1:30 pm (CDT)
CLICK HERE TO REGISTER
- Proposed changes to overtime regulations that will make more employees overtime-eligible
- New standards in accommodating religious practices and pregnancy
- The NLRB’s “quickie” election rules and what they mean for union organizing efforts
- Raising the standard to establish that a worker is properly classified as an independent contractor
- The EEOC’s new position on wellness programs and disability discrimination
- Expanding employee retaliation and whistleblower claims
- New state and local laws that impact minimum wage, paid sick leave and accommodation requirements
CLE Credit Available | This program has been submitted to the HR Certification Institute for review.
Contact Annie Darmofal at 312.476.7626 or firstname.lastname@example.org