Category Archives: Compensation

Don’t Forget About the Duties Tests for Exempt Employees

Compensation, , , , , ,

While a federal judge in Texas last week set aside the requirement to pay exempt employees at least $47,476 per year, nothing has changed about the duties tests for exempt employees, and that is where many employers get into trouble. Under the old rules (which are new again), the Department of Labor was collecting $140 million per year for overtime violations.

So even though the judge’s injunction has relieved you as an employer from the obligation to pay yourcowmc8qf8a-crew-1r managers almost $50,000 per year, you still have to be vigilant that you are paying salaries only to those employees who actually are exempt from the Fair Labor Standards Act based on the duties that they perform.

Determining that an employee is exempt from the overtime rules and can be paid on a salary without reference to the number of hours worked each week by that employee has always been a two-step process:

  1. The employee you have designated as a manager, professional or administrative worker must be paid at least $23,660 per year. This is the amount that was in effect before the new rule and the judge’s injunction, which returns us to the status quo of $23,660 per year ($455 per week). But unlike the new rule, bonuses cannot be used to get the exempt employee to that amount. So you have to pay the salary of $23, 660, and,
  2. The employee you are calling exempt must perform certain duties to legally be considered exempt. These duties tests have tripped employers up for years, long before the salary increase was even proposed. And now that the salary increase has been enjoined, your focus as an employer should be back on these duties tests to determine if you really can pay an employee as an exempt, salaried employee without worrying about overtime.

So, in addition to making at least $23,660 per year, your exempt employee must pass all of the duties tests for at least one of the following categories if you want to claim that you don’t have to pay overtime to that particular employee:

Executive Employees Duties Test:

  1. The employee’s primary duty (the most important duty and the one that takes up a significant amount of his/her time) must be the management of a customarily recognized department or subdivision (such as a stand-alone store). Management includes the hiring, training, scheduling, disciplining and supervising of employees and/or the planning and controlling of the budget, workflow, safety and compliance of a department; and
  2. The executive employee must customarily and regularly direct the work of at least two other full-time employees (not full-time equivalents), and
  3. The executive employee has the authority to hire and fire other employees, or at least the executive employee regularly makes recommendations that are relied on in the determination of an employee’s hiring, promotion, firing.

Learned Professional Duties Test: Continue reading Don’t Forget About the Duties Tests for Exempt Employees →

How Should Employers Respond to 2016 Election?

Benefits, Compensation, Discrimination, Employee Rights, Hiring, , , , , , ,

Employers are facing a time of uncertainty in the workplace as a result of last week’s election. Does an employer still have to worry about compliance with the revised overtime rules? Do you still have to complete the Affordable Care Act tax forms due in January? What about paid maternity leave—must an employer provide salary for six weeks to new mothers? There will certainly be upheaval in the workplace because of the significant change in the governing philosophy to come in January.

Alth19-ryan-trump-mcconnell-w710-h473ough Mr. Trump is already backing off of some of his campaign rhetoric, there are some workplace issues that you as an employer will be affected by:

  • Immigration compliance should be your top concern under this new administration. As an employer, you must be certain that you are correctly completing an I-9 form on every new employee and assuring that you are only hiring applicants who are eligible to work in the United States.
    • A new I-9 form was released today, so you will need to start using that new form dated November 14, 2016, immediately with your new hires. The old 2013 form you have been using may not be used after January 21, 2017. You do not have to recertify your current employees just because they were hired when a different I-9 version was in use.
    • Trump has said that he wants all employers to use E-Verify, the internet verification program used by federal contractors to verify I-9 information provided by a new hire against records from Social Security Administration and the Department of Homeland Security. E-Verify sounds much easier in theory than it has proven to be in practice. Get ready for significant paperwork and several new steps whenever you receive a tentative non-confirmation letter from E-Verify on a new hire.
    • Remember that it is illegal to discriminate against an applicant on the basis of national origin or ethnicity. As an employer, you cannot have blanket hiring prohibitions against any group. You must individually check the employment eligibility of each person to whom you offer a job.
  • The new overtime law, which requires employers to pay at least $47,476 in salary to employees whom the employer wants to exempt from the overtime requirements, goes into effect in two weeks on December 1, 2016. That means that you as an employer need to comply with that law now without regard to how it may change down the road.
    • A change to the overtime law is not included in the new administration’s first 100-day plans and Mr. Trump only addressed it one time on the campaign trail. Changing the overtime regulation does not seem to be a top priority, but the possible changes that have been mentioned are an elimination of the automatic increases now scheduled every three years and a small business and/or nonprofit exception to the overtime rule.
    • The final overtime regulation took more two years to become effective after President Obama proposed it. Even if a change to it were fast-tracked, I think that you will have to comply with the current regulation at least until the end of 2017.
    • And even if the new rule is changed next year, are you really going to decrease the salaries of your management employees after they saw the increase this year? If you would consider a decrease as a possibility in the future, then think about putting your salaried employees on hourly pay and overtime pay immediately (by December 1) instead of giving them salary whiplash when this regulation changes down the road.
  • The Affordable Care Act is going to change significantly. How it will change, we don’t know, except that Mr. Trump has promised that it will be “replaced”, not just repealed. If that is the case, employers will still have to deal with healthcare headaches. They will just be new headaches rather than the ones we have learned to cope with over the last six years. For now, as an employer, you must continue to comply with the ACA, including sending out the Form 1095-C after the first of the year.
  • Trump has proposed six-week paid maternity leave. Never before has the federal government required a private employer to provide any paid leave, unless the company was a federal contractor. The Family and Medical Leave Act only requires unpaid leave.
    • This would be a radical departure from Republican policies in the past, which have always frowned on mandates to employers to pay people not to work. There is no indication yet that the U.S. Congress would go along with Mr. Trump’s proposal.
    • Meanwhile, employers should be more concerned right now about complying with the Pregnancy Discrimination Act in effect since 1978, but which has grown more teeth in the last couple of years thanks to the U.S. Supreme Court decision in Young v. UPS and stricter enforcement by the EEOC.
  • Title VII of the Civil Rights Act of 1964 remains the law and no administration would dare push for its revision, or the revision of later laws that prevented discrimination on the basis of age or disability. That means that as an employer (if you have 15 or more employees), you must continue to keep your workplace free from discrimination and harassment on the basis of sex, religion, national origin, ethnicity, age, disability, etc.
    • There were 3500 charges of religious discrimination filed in 2015 with the EEOC. That number has risen 44% in the last 10 years. Employers must be extra vigilant that some of the tenor and tone of the election rhetoric doesn’t lead to any hateful actions in their workplace against, for example, a Muslim employee.
    • Discrimination on the basis of sexual orientation and/or gender identity is not prohibited by the actual language of Title VII and it seems unlikely that the new administration would champion gay rights in the workplace. There is also no state law in Texas preventing such discrimination, although most of the larger cities in Texas have local ordinances. But employers need to know that the EEOC has targeted employers who are allowing discrimination against LGBT employees and there are several court rulings that back up the EEOC’s position that “sex” as a protected class includes sexual orientation, so all employers should continue to protect their LGBT employees from harassment and unfair treatment.

 

 

Overtime Rules: Are You Ready?

Compensation, , , , , ,

Reminder: The Department of Labor’s final rules regarding the overtime exemption requirements go into effect December 1, 2016. So in the next month, you must get in compliance with these rules:

  • Salary increase for certain exemptions. The minimum salary requirement for administrative, professional, and executive exemptions dramatically increases from $455 per week ($23,660 annually) to $913 per week ($47,476 annually). If you aren’t paying salaried employees $47,476 per year by December 1, 2016, you will be exposing your business to risky Department of Labor investigations and employee lawsuits.
  • Increase for highly compensated employees. The minimum total compensation required for the highly compensated employee exemption increases from $100,000 per year to $134,004 per year, which must include at least $913 paid on a weekly salary basis.
  • A portion of certain bonuses count. Employers may use nondiscretionary bonuses (generally those announced or promised in advance), incentive payments, and commissions, to satisfy up to 10 percent of the minimum salary requirement for the administrative, professional, and executive exemptions, as long as these forms of compensation are paid at least quarterly.
  • Automatic updates. Every three years, the DOL will adjust the minimum salary requirement, meaning you will need to review and adjust (if necessary) exempt employees’ salaries every three years as well.

 

Don’t wait until December; take steps NOW to prepare for the rule changes:

  • Ensure that your “exempt” employees are actually exempt. It takes more than the proper salary for an employee to be exempt. Call me for help with reviewing the primary duties your exempt employees actually perform to ensure they meet the DOL’s criteria for administrative, professional, and executive exemptions.
  • Compare the costs. If your exempt employees’ salaries fall below the new minimum, you will generally have to either: 1) raise their salaries to the new requirement; or 2) reclassify the affected employees as non-exempt and start following the overtime rules whenever they work more than 40 hours in a workweek. Review exempt employees’ salaries and their typical number of hours worked to determine which option is more cost-effective for your business.
  • Review your timekeeping policies. Get from me written policies and procedures for your business to ensure all non-exempt employees are accurately recording all time worked. I can provide training for employees on proper timekeeping practices and otherwise complying the compensation laws.

Overtime Salary Adjustments Could Violate Equal Pay Act

Compensation, , ,

The new overtime rule is causing employers to rethink employee compensation, but I fear that one pitfall is being overlooked – an employer who pays a woman less than a man for performing the substantially the same duties could be violating the Equal Pay Act of 1963.

Employers who can’t pay their salaried employees at or above the new white-collar exemption threshold of $47,476 may be forced to pay those same employees on an hourly basis and time and a half for all hours worked over 40 in any one workweek. Overtime scares employers because it is difficult to budget for and requires higher costs for each hour of productivity after the employee has worked 40 hours that week.

So in trying to juggle the new law and payroll costs, employers are reducing pay, overtime opportunities and benefits. That may be good business, but if the impact hits female employees more than male employees, we could see an increase in Equal Pay Act cases.

The Equal Pay Act requires that female employees be paid the same as their male counterparts with substantially similar job duties. “All forms of pay are covered by this law, including salary, overtime pay, bonuses, stock options, profit sharing and bonus plans, life insurance, vacation and holiday pay, cleaning or gasoline allowances, hotel accommodations, reimbursement for travel expenses, and benefits,” the Equal Employment Opportunity Commission points out.

If a woman files a lawsuit against a company for paying her less than a man performing the same work, the employer must show that the male employee’s higher pay is based on a seniority system, a merit system, a productivity system or another factor other than gender. That sounds easier than it is. Continue reading Overtime Salary Adjustments Could Violate Equal Pay Act →

Strange Exemptions to the Overtime Law

Compensation, , ,

The new overtime regulations are causing employers to take a closer look at the executive, administrative and professional exemptions from overtime, but did you know that there are a number of strange exemptions that allow you to pay specific employees on a salary and not worry about overtime pay?

These obscure exemptions may have more to do with the strength of certain industry lobbyists back in the 1940’s when the Fair Labor Standards Act (“FLSA”) was passed than they do with any logical reason for exempting these employees. But they are still on the books and may allow a few employers to avoid the rush to reclassify salaried employees by December 1, 2016, when the new overtime rules take effect.

Employees of certain seasonal amusement parks or recreational venues, for example, don’t have to be paid overtime or minimum wage. To qualify, the amusement park generally can’t be in business any longer than seven months of the year, or if it is, be affected so that at least six months of the year, its receipts are cut to 2/3s of the receipts in the six good months. All of the amusement park’s employees are exempt, not just the ride operators and the food concessionaires, but also the accounting, human resources and management personnel, but only as long as they work in the park and not in a corporate office that runs several seasonal parks. How is that for an arcane exemption that won’t help 99% of employers, but could be very important if you own Wonderland Park or a miniature golf course?

Similarly, there are overtime (but not minimum wage) exemptions from the FLSA for these employees: Continue reading Strange Exemptions to the Overtime Law →

Overtime Change: Local Businesses Should Start Planning Now

Compensation, , , , ,

Vicki Wilmarth was quoted extensively about the new Department of Labor overtime rule in today’s lead story in the Amarillo Globe-News.

Vicki Wilmarth, an employment law lawyer in Amarillo, said that employers now have two options: Pay the employee the minimum salary of $47,476 or start paying that employee by the hour.

Click here to read the rest of the Globe-News story.

New Overtime Rule Changes Salary Basis Requirement

Benefits, Compensation, Personnel Policies, , , , ,

Do you pay any employee on a salary basis instead of paying them hourly and overtime? Of course you do, so you need to be very aware of the new final overtime rule issued by the U.S. Department of Labor on May 17, 2016.

You must pay your salaried employees at least $913 per week ($47,476 per year) beginning December 1, 2016, or you will be in violation of the Fair Labor Standards Act (which you do not want to violate).

In the past, salaried employees had to be paid $455 per week ($23,660 per year) to qualify as an employee exempt from the FLSA’s requirement of paying overtime for every hour over 40 worked in any one workweek. That salary basis has doubled under the new regulations.

In addition to meeting this increased salary level, the salaried employee must perform the duties of an exempt employee (the white collar exemptions: executive, a professional or an administrator). These duties tests are much more difficult to meet than most people think, so don’t just assume that your salaried employees are actually exempt. For example, not every “manager” is an “executive exempt employee”, who under the FLSA must have the power to hire and fire and must supervise at least 2 full-time employees, as well as being in charge of a recognizable store, division or branch of your business.

This increase in the threshold salary required to consider an employee exempt could change the classification of many Panhandle-area retail managers and assistant managers, human resources directors, marketing professionals, bookkeeping employees, project managers, foremen, performers, and other employees who have not been earning overtime in the past.

Now those exempt employees will either get a raise to get them over the $913 per week threshold or they will have to be changed to nonexempt, hourly employees who earn overtime. Either way, it could mean an overall increase for the employee and higher payroll costs for the employer.   Continue reading New Overtime Rule Changes Salary Basis Requirement →

Employers Must Pay for “Unauthorized Overtime”

Compensation, Personnel Policies, , , , , ,

I see many employee policy manuals that prohibit “unauthorized overtime”, but employers must still pay an employee his overtime pay, whether the time worked was authorized or not.

Employers need to understand that all governmental enforcement agencies, such as the Texas Workforce Commission (“TWC”) and the U.S. Department of Labor (“DOL”), treat paychecks as sacred and not subject to any reduction or withholding because of a disciplinary reason.

Unauthorized overtime can result in disciplinary action, like a written warning, a suspension or a firing, but not docking of a paycheck or any refusal to pay.

The TWC explains it this way in their publication “Especially for Texas Employers”:

Many employers feel that such [overtime] should not be payable as long as the employer has not authorized the extra work, but the DOL’s position on that is that it is up to the employer to control such extra work by using its right to schedule employees and to use the disciplinary process to respond to employees who violate the schedule.

Just saying in your employee handbook that an employee cannot work overtime without prior authorization is not sufficient. You as an employer need to take steps to closely monitor (and pay for) all hours actually worked. Continue reading Employers Must Pay for “Unauthorized Overtime” →

Paying Employees on Salary Soon to Get Expensive

Compensation, , , ,

In July 2016, in all likelihood you as an employer will have to start paying your employees more than $50,000 per year if you want to pay them on salary.  If an employee makes less than $50,440 per year, by this summer that employee will need to be paid on an hourly basis and receive overtime whenever the employee works more than 40 hours in any one workweek.

The new regulations proposed by the Department of Labor last summer to increase the required salary basis under the Fair Labor Standards Act are expected to be finalized in July 2016, according to a statement made by the Solicitor of Labor to the New York State Bar Association.

Currently, an exempt “white-collar” employee who can legally be paid on salary only has to make $23,660 per year ($455 per week) and meet the specific duties of a professional, an administrator, a computer professional or an executive. This summer that number is widely expected to increase to $50,440 ($970 per week) and will be tied to an inflation formula that will raise that threshold number annually.

Once the final rule is released in the summer of 2016, employers could have as few as Continue reading Paying Employees on Salary Soon to Get Expensive →

Let Employees Discuss Their Wages

Compensation, Discrimination, Employee Rights, Personnel Policies, , , , , ,

Employees can discuss their wages with their coworkers, despite many employers’ policies to the contrary. If this wasn’t clear enough when the National Labor Relations Board and the Fifth Circuit Court of Appeals emphatically told employers that (see this post for more information), now the federal Equal Employment Opportunity Commission is joining the chorus.

On January 21, 2016, the EEOC issued a 73-page proposed guidance to its investigators concerning retaliation claims. All of the laws EEOC enforces, like the Americans with Disabilities Act and Title VII, make it illegal to fire, demote, harass, or otherwise retaliate against applicants or employees because they complained to their employer about discrimination on the job, filed a charge of discrimination with EEOC, participated in an employment discrimination proceeding (such as an investigation or lawsuit), or engaged in any other “protected activity” under employment discrimination laws (more on the proposed guidelines concerning retaliation is coming in future posts).

Hear Ye, Hear Ye
Employees Can Talk About Their Wages

Slipped into the middle of the proposed guidance is a section emphasizing that not only will the National Labor Relations Board come after you as an employer for unfair labor practices if you fire someone for discussing their wages, but that the EEOC might pursue a claim against you also. The EEOC said that reprisal for discussing compensation may violate the retaliation provisions of laws it enforces, such as the Equal Pay Act (requiring that similarly-situated women be paid the same as men for the same work) or Title VII (prohibiting discrimination on the basis of race, gender, religion, etc.).

All employers should review their current written employment policies to assure that any statement prohibiting wage discussions among coworkers has been removed. In addition, employers must not fire, demote, cut the wages or hours of or otherwise retaliate against an employee who discloses his/her compensation package with coworkers or others, whether shared verbally, by showing another person the pay stub or even by posting information about any worker’s pay on social media.