DOL Proposes Revamp of the “Regular Rate” 2019-04-01T10:41:18-06:00

Posted on April 1, 2019

The DOL continues to issue proposed rules to “modernize” the FLSA. The latest proposal, if finalized, would clarify and update the requirements for how employers calculate the “regular rate” of pay. The “regular rate” is the hourly rated used to calculate the overtime premium pay for non-exempt employees. The proposal:

provides more specific examples of exclusions from the “regular rate,” including exclusions for health and wellness programs, tuition benefit programs, and employee discounts on goods and services, among others; and
clarifies rules regarding “show up,” “call-back” pay, and paid meal breaks during which no work is performed.

Finally, the proposal increases the safe harbor for small nondiscretionary bonuses. Ordinarily, a nondiscretionary bonus has to be factored into the hourly rate for all the weeks during which it was earned. With the proposed rule, employers may skip this calculation if the additional overtime pay for the week would be less than 40% of the federal minimum wage.

The full proposal can be found here. The proposal is a win-win for both employers and employees, updating examples for employers with modern wage plans. The proposed rulemaking is not final and the DOL is taking public comments on the proposed regulation changes. For anyone would like to respond to the DOL’s proposals, comments will be accepted electronically or by mail. The instructions can be found at http://www.regulations.gov/

Don’t Mess With the IRS… and Don’t Misclassify Your Employees 2019-03-27T08:53:50-06:00

Posted on March 27, 2019

By Beth Ann Lennon

For those of you who were able to join us for Sherman & Howard’s Construction Law seminar earlier this month, you may remember our warnings about making sure your company is properly classifying and paying its employees. In case you need a reminder on how serious these issues can become, be sure to consider the 30 month prison sentence one employer from North Carolina just received for failure to report and pay employment taxes, along with a hefty $1.7 million restitution bill. https://www.justice.gov/opa/pr/north-carolina-mental-health-executive-sentenced-prison-failure-pay-employment-taxes. While this may be an extreme example, it is very real and very terrifying.

Remember – when you have one agency knocking at your door, you are likely to hear from more. In fact, here in Colorado the US Department of Labor (“DOL”), the Colorado Department of Labor and Employment (“CDLE”), and the Internal Revenue Service (“IRS”) have been sharing information concerning potentially misclassified employees since 2011. https://www.dol.gov/whd/workers/Misclassification/co.htm; https://www.dol.gov/whd/workers/MOU/irs.pdf. While it is unlikely that a company, or its executives, that unintentionally misclassifies an employee will end up facing jail time, the financial repercussions can still be staggering, with agencies reporting huge recoveries due to misclassification on a regular basis. See, e.g., https://www.dol.gov/newsroom/releases/whd/whd20160817-0 ($365,000 paid – “the Wage and Hour division considers misclassification a top enforcement priority and is working alongside our state, local and federal partners to achieve greater compliance with the law”); https://www.dol.gov/newsroom/releases/whd/whd20110309 (over $700,000 paid – “misclassification of employees as exempt from the FLSA has become a common problem and one the Labor Department is determined to bring to light”); https://www.osha.gov/news/newsreleases/region1/02222016-0 (OSHA fines of over $20,000 upheld against company who attempted to “evade their responsibility by claiming that workers on a job site are independent contractors when the facts show otherwise”).

Don’t be the next news story – avoid the risky business of misclassifying your employees. Conduct an individualized assessment with the assistance of legal counsel, if necessary, to determine whether the classification you are considering using is permissible under the applicable laws before the agencies come knocking.

DOL says: Don’t Be Too Generous With Your Employees 2019-03-18T11:43:13-06:00

Posted on March 18, 2019

By Beth Ann Lennon

Thursday the Department of Labor (”DOL”) issued three new opinion letters, two of which warrant a quick note. One provided guidance regarding the Family Medical Leave Act (“FMLA”), and the other addressed the Fair Labor Standards Act (“FLSA”). Both had the same ultimate takeaway – employer generosity easily backfires.

Providing more than unpaid FMLA Leave – According to the DOL, employers who want to provide employees more leave than the FMLA requires violate the FMLA if they delay designating leave as FMLA-qualifying to allow employees to exhaust other available paid leave. “[A]n employer may not delay the designation of FMLA-qualifying leave or designate more than 12 weeks of leave . . . as FMLA leave,” even if doing so benefits the employee. Employers have five days from when they have “enough information” to determine whether an employee’s leave is for a “FMLA-qualifying reason” to designate that leave as FMLA leave. The catch-22? The DOL also considers it a violation of the FMLA for an employer to not provide FMLA eligible employees “any employment benefit [provided for in a company policy] . . . that provides greater family or medical leave rights to employees than the rights established by the FMLA.” In other words, employers who provide more than 12 weeks of unpaid leave to employees need to make sure their leave policies are properly drafted and implemented, or their generosity could get them into hot water.

Encouraging Volunteer Work – The DOL also determined that employer generosity can be a violation of the law when employers provide bonuses for employees who engage in company sponsored volunteer work. According to the DOL, employers who encourage employee participation in volunteer activities may have to treat that volunteer time as “hours worked” under the FLSA unless they are very careful. Don’t want to pay overtime for your employees’ weekend housebuilding activities? Follow these (not so) simple rules…

Employers cannot “direct or control the employees’ activities” during these volunteer activities.
Employers cannot “guarantee a bonus for volunteering.”
Employers cannot require participation in the volunteer program or even “unduly pressure its employees to participate.”
And employees cannot suffer any “adverse effect” on “working conditions or employment prospects” because they do not participate.

Again, the takeaway is clear – if you encourage volunteer activities by your employees, this encouragement must be through a policy that is effectively drafted and administered to ensure compliance with the DOL’s new list of “do not”s.

OT Exemption Threshold Salary: Take 2 2019-03-08T09:55:15-06:00

Posted on March 8, 2019

By Bill Wright

The news is everywhere: the DOL has issued its new proposal for the salary threshold for executive, administrative, and professional exemptions. Don’t panic – the announcement concerns a Notice of Proposed Rulemaking. The DOL still has to take public comments and prepare a final set of regulations.

The proposal (this time) is to increase the salary threshold from the current $455 per week (annualized to $23,660) to $679 per week (annualized to $35,308). If the proposal makes it to the final form, executive, administrative and professional employees who make less than $35,308 annually will no longer be “exempt.” Employers would have to pay these lower-paid employees overtime premium pay for hours worked over 40 each week. The proposed rulemaking also includes an increase for the highly compensated employee exemption from $100,000 to $147,414. Instead of proposing that the thresholds would increase automatically, the DOL is now proposing scheduling period reviews of the thresholds. The full proposal appears at https://www.dol.gov/whd/overtime/overtime2019-nprm.pdf

For anyone who would like to respond to the DOL’s proposals, comments will be accepted electronically or by mail. Check out the instructions at http://www.regulations.gov/

Should Employers Keep Wage and Hour Records for Independent Contractors? 2018-10-04T10:23:12-06:00

Posted on October 4, 2018

By Bill Wright

The Department of Labor successfully stated a claim for record-keeping violations against a franchisor, because the franchisor failed to keep records on the hours worked by the specific individuals actually performing work under the franchise agreements. Using a franchise agreement, a janitorial company engaged corporations – and only corporations – to provide services to the company’s clients. The franchisees were typically one or two person operations, and the owners of the franchisees typically did the actual work themselves. The DOL sued the franchisor janitorial company, alleging that it failed to keep required records for those individuals who actually performed work for the company’s clients. At first, its use of franchise agreements protected the janitorial company; the case was dismissed by the trial court. But the Circuit Court reinstated the suit. The DOL’s allegations that the individuals performing the work were economically dependent on the janitorial company were enough to allege that those individuals were, by law, employees of the franchisor janitorial company, and therefore enough to allege the janitorial company was required to keep the FLSA records. Acosta v. Jani-King of Oklahoma, Inc., No. 17-6179 (10^th Cir. Oct. 3, 2018)

Beware! An employer’s corporate structure – including even arguably proper use of independent contractors – might not protect you from record-keeping requirements. This suit will continue and might result in increased record-keeping requirements for all employers who use independent contractors. To be safe, you should know who is doing the work and the hours they keep.

The DOL Can’t Always Get What It Wants 2018-07-06T10:27:56-06:00

Posted on July 6, 2018

By: Lindsay Hesketh

While investigating defendant La Piedad’s FLSA compliance, the Department of Labor subpoenaed, among other things, documents with the names and addresses of other businesses owned by defendant’s shareholders. La Piedad informed the DOL that it did not have responsive records. Rather than investigate that response, the DOL immediately moved for an order holding defendant in contempt. The district court rubber stamped the motion, granted it without a hearing, and didn’t hold the DOL to its burden of proof. On appeal, the Eighth Circuit admonished the lower court’s “misuse of the civil contempt power.” The court highlighted the DOL’s complete failure to meet its clear and convincing burden to show that defendant had custody or control over those documents and reversed the order. Acosta v. La Piedad Corp., No. 17-1845 (8^th Cir. July 3, 2018).

The courts continue to protect employers from government overreach, but consider the cost. Here the employer had to pursue its rights to the court of appeals, all because the DOL couldn’t be bothered to issue its subpoena to the shareholders themselves.

DOL Proposing New Tip Credit Regulations 2017-12-05T10:48:35-06:00

Posted on December 5, 2017

By Bernie Siebert

On December 4, 2017, the U. S. Department of Labor (“DOL”) issued a Notice of Proposed Rulemaking regarding the tip credit regulations under the Fair Labor Standards Act. https://www.dol.gov/newsroom/releases/whd/whd20171204 The proposed new regulation will be published today, and will be available for public comment. The purpose of the new regulation is to alter the regulations issued in 2011 concerning tipped employees. Under the FLSA, an employer is permitted to pay tipped employees $2.13 so long as the employee receives in tips an amount equal to at least $5.12 per hour. One of the biggest problems for employers under the 2011 regulation was that the number of employees for whom the employer could claim the tip credit was limited to only employees who directly received tips. Thus “tip pooling” arrangements were limited. Under the new proposed regulation, tip pools can be expanded to include non-tipped employees such as cooks and dishwashers. According to DOL: “This would likely increase the earnings of those employees who are newly added to the tip pool and further incentivize them to provide good customer service.” The proposed regulation would also address the issue of the propriety of an employer retaining tips paid to employees while paying its employees an hourly wage that exceeds the minimum wage. The 2011 regulation prohibited an employer from retaining tips and paying employees at least the minimum wage even when no tip credit was claimed. It should be noted, that the regulation is proposed, not final. Moreover, employers utilizing the tip credit should check local law to make sure they are in compliance with any applicable law, regulation or ordinance.

Salary Threshold Regs Un-enjoined? 2017-06-09T13:56:36-06:00

Posted on June 9, 2017

By John Alan Doran

Wednesday a group of Chipotle employees brought suit in New Jersey federal court alleging FLSA violations stemming from Chipotle’s failure to follow the Obama-era salary-basis regulations. As you will recall, these regulations doubled the salary threshold for the so-called white collar exemptions, thereby rendering millions of workers eligible for overtime. But, you will also remember that a federal judge entered an order last year enjoining those regulations before they became effective, and that injunction was nation-wide (S&H Blog Post: Salary Threshold Change Stopped). So are these Chipotle employees just sore losers or did we just misunderstand the meaning of “injunction?” The plaintiffs in this case are arguing that, while a federal court did preliminarily enjoin the DOL from implementing and enforcing the salary-basis regs, the regs nonetheless became effective automatically under the Administrative Procedures Act because the court did not enter a permanent injunction. The plaintiff’s argument seems like a real long-shot, but it is yet another twist in the unbelievably circuitous route these regs have taken.

DOL Trashes Obama-Era “Guidance” 2017-06-09T13:11:12-06:00

Posted on June 9, 2017

By John Alan Doran

Wednesday the DOL announced that it was withdrawing two critical pieces of “guidance” issued under the Obama administration. The first piece addressed the DOL’s rather narrow view of who is an independent contractor (S&H Blog Post: DOL Says Employers Are Morons). The second piece established an extremely broad view of joint employment (S&H Blog Post: Joint Employment Wage/Hour). Taken together, the guidance pieces made it much harder for employers to navigate through the gig economy. The withdrawal of these guidance pieces obviously helps employers who use contractors or have potentially joint employer relationships. But the DOL did not suggest what enforcement strategy it may follow in the absence of these guidances, so the impact in real-world terms remains to be seen. Nonetheless, this provides some indication that our new Secretary of Labor is moving forward, at least in some respects, to reverse some of the prior administration’s approaches.

Trump’s Puzder Gets Pulled 2017-02-15T15:23:52-06:00

Posted on February 15, 2017

By John Alan Doran

Andrew Puzder will not be the next Secretary of the DOL. The fast food magnate of Hardee’s and Carl’s Jr. fame “withdrew” his name from the confirmation process a few hours ago. The White House confirmed his withdrawal. When then-President-Elect Trump nominated Puzder to be the next DOL head on December 8, 2016, we all expected a radical turnaround at the DOL. But over the last few weeks Puzder has faced a wave of dramatic setbacks and challenges to his appointment, with some Republicans publicly crossing the aisle to oppose the appointment. Puzder is known for his outspoken views against an increased minimum wage, the Affordable Care Act, Obama-era trade treaties and policies, and more. His prospects diminished recently when it became public that he once employed an undocumented housekeeper, that his ex-wife had previously accused him of spousal abuse, and that his Carl’s Jr. and Hardee’s employees were suing him in dozens of states for alleged wage/hour violations. What President Trump does next to fill the DOL’s top spot is anybody’s guess, but we can be sure that it will be someone with the same political outlook as Puzder, sans the incredible baggage.

Posted on April 1, 2019

Posted on March 27, 2019

Posted on March 18, 2019

Posted on March 8, 2019

Posted on October 4, 2018

Posted on July 6, 2018

Posted on December 5, 2017

Posted on June 9, 2017

Posted on June 9, 2017

Posted on February 15, 2017

Email Disclaimer

Email Disclaimer