Tag Archives: overtime

Out-of-State Employees Have to be Treated Differently

Compensation, Discrimination, Documentation, Hiring, Personnel Policies, Termination, , , , ,

As a Texas employer, your employees in other states are protected by the laws of the state in which they perform their work, not Texas law. In most cases, those laws give your out-of-state workers more rights and protections than employees in Texas are given.

As a rule of thumb, the state and local laws of the physical location where the employee is working will supersede Texas law. That means that Texas businesses are responsible for complying with the laws of those other states when they employ a worker across the Texas state lines.

Many of my business clients are headquartered in the Texas Panhandle, but they also have operations, offices, clients and therefore, employees, in New Mexico, Oklahoma, Kansas, Colorado or other states. In an attempt to simplify their operations, those multi-state employers often prefer to adopt policies that apply across the board to all employees, regardless of where the employee is located.

But you cannot ignore the employment laws of the state in which your employees reside and perform some work, even if they only work in that state part of the time. While it is impossible to list every different employment law for even just the nearby states, here are just some examples that employers need to be aware of:

Continue reading Out-of-State Employees Have to be Treated Differently →

Employers Don’t Have to Raise Exempt Employees’ Salaries to $58K

Compensation, , , ,

On Friday, November 15, a federal judge in the Eastern District of Texas ordered a nationwide halt to the rule increasing the minimum salary that was set to go into effect on January 1, 2025, so that employers no longer have to raise the salary level of employees who are exempt from overtime to $58,656. Instead, the salary minimum level will return to the 2019 level of $35,568 for exempt employees.  

That means that the salary minimum that went into effect on July 1, 2024, of $43,880 per year also was thrown out, but I would not suggest taking back that raise if you just gave it to an exempt employee this summer.

 In addition, the regulation establishing an automatic increase in the minimum salary every three years was overturned by the judge.

The Biden Administration could appeal Friday’s injunction on the salary minimum increase, but it would be futile. The case was heard in Texas, meaning an appeal would have to go to the Fifth Circuit and then the U.S. Supreme Court, neither of which would rule in favor of these increased salary minimums because those courts are packed with conservative Trump appointees. And as soon as President-elect Trump takes office, his administration will abandon the appeal anyway.

It is still very important that employers comply with the Fair Labor Standards Act requirements before making an employee exempt and foregoing overtime pay for that employee. Under the FLSA, which has been the law since 1938, an employee must be paid overtime for all work over 40 hours performed in any one workweek. Paying an employee by the hour and paying overtime is the default category for paying all employees.

Only if a particular employee meets two requirements can he/she legally be paid on a salary basis (and not be paid overtime). Those two requirements are now once again:

  • The employee is paid at least a minimum salary of $684 per week (which is $35,568 per year); and
  • The employee performs the duties of a white-collar executive, professional, or administrator.

The duties test is the much harder test to pass than the salary minimum. For example, someone you are calling a manager must supervise at least two full-time employees and primarily spend most of his/her time in management activities to actually be exempt from overtime. That eliminates almost all fast food assistant managers, working foremen in the construction industry, and others that you may think you could pay on a salary.

Continue reading Employers Don’t Have to Raise Exempt Employees’ Salaries to $58K →

Deadlines Quickly Approaching for Major Employment Law Changes

Compensation, Discrimination, Employee Rights, Trade Secrets, , , , , ,

Employers should be preparing for several significant payroll and policy deadlines this summer that are required by new federal employment rules and regulations:

  1. Salaried employees must make a minimum salary of $43,888 annually beginning Monday, July 1, 2024. On January 1, 2025, that annual salary minimum threshold increases to $58,656. Only 10% of that annual salary can be paid in nondiscretionary bonuses or commissions.
  2. Noncompete clauses in almost all employment and severance contracts are scheduled to be banned on the deadline of September 4, 2024.
  3. Pregnant workers and women giving or returning from childbirth have to be reasonably accommodated, including being given individualized maternity leaves, under the broad final regulations as of a deadline last week (June 18, 2024).

Salary Minimum Increases

Employers cannot legally just pay employees on salary because it is convenient for the employer or the employee. Under the Fair Labor Standards Act, which applies to virtually all businesses, employees must receive hourly pay and overtime pay unless (1) the duties performed by that employee fit into one of the narrow white-collar exemptions; and (2) that employee also makes at least the amount required by the FLSA salary minimum threshold.

Since 2019, that salary minimum threshold has been $35,568 annually. But the regulations have been amended so that salaried employees must make at least $43,888 beginning next week. While court cases have been filed to try to stop this change from taking effect, no court has entered an injunction yet. That means that companies are out of time to resist this change. Therefore, as an employer, you need to double-check that your salaried employees are earning enough ($844 per week) to meet this salary minimum as of next Monday.

While you are at it, double-check whether your salaried employees are also actually performing the duties that allow you to pay them as an executive, a professional, an administrator, a computer specialist or outside salesperson (outside salespeople don’t have to meet the salary minimum but do have a duties test). If the employee doesn’t meet the duties test for their position to be exempt, you cannot pay that person on salary even if the employee is paid the salary minimum threshold amount.

Noncompete Contracts Ban

In April 2024, the Federal Trade Commission finalized a rule banning almost all employers (banks, credit unions, nonprofits and airlines excepted) from entering into, enforcing or attempting to enforce noncompetition clauses with employees. The rule goes into effect on September 4, 2024.

The FTC says that noncompete agreements suppress wages and block workers from pursuing better jobs. Employers like noncompetes because they prevent competitors from poaching talent and protects trade secrets and client relationships. But the FTC is siding with the free market and employees who want the opportunity to take their talents anywhere they please.

In addition to banning employers from entering into new noncompete agreements with employees, from enforcing noncompete agreements signed in the past, and from threatening to enforce existing noncompetes against departing employees, the new rule also requires employers to send out notices (FTC provided a model notice) by the deadline to current and former employees telling them that their noncompetition agreements are no longer in effect and won’t be enforced.

Continue reading Deadlines Quickly Approaching for Major Employment Law Changes →

Underpayment of Wages at Local Charity

Compensation, Personnel Policies, , ,

Advo Companies, Inc., a worthy local charity that trains and helps people with developmental disabilities find work, was recently investigated by the United States Department of Labor for underpayment of wages to 134 workers. The company had to repay $52,497 in back wages because, among other mistakes, it miscalculated the special wage rate allowed to be paid to their employees.

I don’t know the facts of this particular DOL investigation, but I know Advo Companies has been providing outstanding vocational services to disabled adults and operating group homes in Amarillo for more than 30 years. I seriously doubt that any of the wage problems discovered by the DOL were intentional underpayments. But Advo’s difficulties provide an example of how a very well-meaning employer can easily run afoul of the notoriously difficult Fair Labor Standards Act (“FLSA”) requirements.

For most employers, the Fair Labor Standards Act “simply” requires payment of minimum wage and overtime if an employee works more than 40 hours in any one workweek. But there are many ways for an employer to unintentionally break this law:

Continue reading Underpayment of Wages at Local Charity →

New FLSA Minimum Salary Requirements

Compensation, Employee Rights, , , , ,

If you pay any employees on salary instead of hourly, as an employer you need to review new regulations released today by the United States Department of Labor, requiring that the salary you pay to any exempt employee is at least $43,888.00 beginning on July 1, 2024. That minimum increases to $58,656.00 on January 1, 2025. Those are substantial increases from $35,568.00, the salary minimum currently required by the Fair Labor Standards Act (“FLSA”), which governs minimum wage and overtime.

If you aren’t paying an employee by the hour, plus overtime pay for each hour over 40 worked in a 7-day workweek, then you must prove the following about that salaried employee:

  1. The employee is paid a recurring salary regardless of the hours worked; and
  2. The amount that the employee is paid must amount to at least $844 per week beginning on July 1, 2024 and $1128 per week beginning on January 1, 2025; and
  3. The salaried employee must primarily perform executive, administrative or professional duties (commonly referred to as the white-collar duties).

These exemptions for salaried, white-collar workers are the exception to the overtime rules required by the FLSA, and the burden is on the employer to show that the salaried employee meets all of these requirements or the business will owe the employee unpaid overtime (plus punitive damages and possible penalties) for not paying overtime.

FLSA has been the law since the 1940’s, but the salary minimum amount to meet the exemptions has increased over time. The Trump Administration increased the salary amount in 2019, and it has stayed there for five years. The Department of Labor’s new rule will make those increases automatic every three years, meaning that on July 1, 2027, you can expect another increase in the salary minimum amount if you still want to claim that the employee is exempt from the overtime requirements.

In addition to meeting the FLSA salary minimum requirement, your employee must also perform white-collar duties to qualify for the overtime exemption. The duties tests are harder to meet than you might expect. For example, you may believe that an assistant manager is an “executive”, but the FLSA duties test says that employee must have the power to hire and fire and must personally supervise at least two full-time employees, as well as being in charge of a recognizable store, division or branch of your business to be considered exempt. Most assistant managers don’t meet those requirements. Only the general manager does in many circumstances.

In addition, the new regulations increase the FLSA salary minimum for “highly compensated employees”. The 2019 threshold for highly-compensated employees currently says that any employee making a salary of at least $107,432.00 per year is exempt as long as the employee is performing non-manual work and that employee performs at least one other exempt duty customarily and regularly (such as managing two employees or performing duties of a professional such as a CPA). The salary minimum for highly compensated employees increases to $132,964.00 on July 1, 2024. On January 1, 2025, it will increase again to $151,164.00.

So what do businesses need to do to get in compliance?

Continue reading New FLSA Minimum Salary Requirements →

Employer End of the Year Tasks: W-4 and Salary Minimum

Compensation, Forms and Policies, , , ,

Employers must address two important employment law issues before the end of 2019:

  1. Changing the exempt status of employees making a salary of less than $35,568 per year, and
  2. Adoption of the new W-4 form.

I’ve previously explained the new salary minimum for exempt (salaried) employees. In summary, for you to legally pay an employee on salary, that employee must perform exempt duties (such as running a division of the company, performing professional work such as a CPA, or performing non-profitable office duties requiring independent discretion and judgment, such as human resources, benefits coordinator, safety director, marketing director, and others, but not secretarial or bookkeeping) and make at least the new salary minimum per week of $684.00.

If an employee of yours does not meet both of these criteria (exempt duties + salary minimum), you must pay that employee by the hour and pay overtime if the employee works more than 40 hours in any one workweek. In other words, you must change the employee to a non-exempt status under the Fair Labor Standards Act and make that person an hourly employee.

There are a few exceptions to this new salary minimum rule: teachers, doctors, lawyers and outside salespersons are not subject to the salary minimum test. There are also some very  industry-specific, narrow exceptions for taxi drivers, truck drivers, fisherman and some other strange exemptions from overtime that don’t have salary minimums. But the vast majority of workers paid on salary are affected by the requirements of the exemptions.

If you are having any difficulty deciding whether to change an employee to hourly or determining if their duties meet the tests for executive, administrative or professional jobs, please call your employment lawyer immediately to get you into compliance for the January 1, 2020 effective date on the salary minimum rule.

The other big change you as an employer should be aware of is the new W-4 form that the government released on December 5, 2019. It is supposed to be easier to use for your employees.

Here are the things you need to know about this new W-4 as you start the new year:

  • You must use this new W-4 form for any employee you hire beginning on January 1, 2020 and thereafter.
  • Any employee who wants to adjust his/her withholding on January 1, 2020 or after must use the new W-4 to make that adjustment.
  • Current employees do not have to fill out a new W-4 if they don’t want to make any changes, but should consider filling out a new one if they faced an unexpected penalty of bill last year or will have a change in 2020 such as marital status, a new baby or a change in income.
  • Employees filling out the new W-4 must complete steps 1 and 5 on the new form, but may complete steps 2, 3, and/or 4 if applicable. So if you have a new employee fill out the W-4 after New Year’s Day, just check that steps 1 and 5 are complete.
  • Because it is an unfamiliar form and because it encourages people to use the IRS’s new online Tax Withholding Estimator, you should allow employees to take the new W-4 form home so they can have some time to understand and complete it.

DOL Finalizes New Salary Minimum

Compensation, , , , , ,

Update: This post from March 2019 has been updated as of September 24, 2019, because on that day the DOL issued the final salary minimum rule, which changed a couple of important items from what was proposed six months ago.

A new federal overtime rule that has been finalized by the U.S. Department of Labor will become effective on January 1, 2020, and employers need to start preparing now to get into compliance.

The final rule requires employers to pay a higher minimum salary to those employees who meet certain white-collar exemptions to the overtime rules of the Fair Labor Standards Act (“FLSA”). Right now, an employer can pay a salaried exempt employee as little as $455 per week ($23,606 annually) and still claim the exemption (and not pay that person overtime) as long as the employee is performing exempt duties, such as executive work or professional work.

On January 1, 2020, the final minimum salary threshold for exempt employees is going to increase to $684 per week ($35,568) annually)(the proposed rule was $5 per week less, so we thought that the annual number was going to be $35,308). That means that if you have any employee whom you are paying on salary in an amount less than $35,568 per year, you as an employer need to spend the rest of 2019 deciding if you will provide that employee with a raise or reclassify that employee as non-exempt and move him to an hourly rate and pay him overtime when he clocks more than 40 hours in any one workweek.

In addition to meeting this increased salary level to $35,568 per year, anyone you are paying on a salary must also actually 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 all of 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.

During the rest of 2019, you have time to audit your pay practices to know who you are paying on salary, review their actual job duties to assure that they actually qualify for one of the exemptions, and then confirm that those salaried employees are making at least $684 per week. As you are going through this process, remember that the Equal Pay Act also applies to your salary decisions and you must not violate it when trying to comply with the DOL’s new salary minimum.

And yes, the DOL does measure the salary basis in weekly increments, so the employee must make at least $684 every week, not just averaged out over the year. The final rule does provide employers the ability to make up 10% of the salary basis test with non-discretionary bonuses and commissions. So, if you pay an executive, administrator or professional employee no less than $32,011.20 in yearly salary (divided by 52 weeks) and then the employee earns another $3,556.80 annually in non-discretionary bonuses and commissions (paid on at least a quarterly basis), you will not be in violation of the final rule.

If this proposal gives you a sense of déjà vu, that’s because we went through this process in 2016 when the DOL proposed an increase of the minimum salary for exempt employees of $913 per week ($47,476 annually). That rule was enjoined by a federal judge in East Texas just before it was to take effect and then died in the courts and under the new administration. No such messy reprieve is expected this time with this lower salary threshold, so businesses need to start talking now about properly paying their salaried employees in 2020.

Employer should also be aware that the “highly compensated employee” exemption under the final rule for 2020 has slightly increased. That exemption currently says that any employee making a salary of at least $100,000.00 per year is exempt as long as the employee is performing non-manual work and that employee performs at least one other exempt duty customarily and regularly. The final rule raises that salary threshold for highly-compensated employees to $107,432 per year (the proposed rule was to raise the highly-compensated employee salary minimum to $147,432, which was universally criticized and so reduced by $40,000).

Obviously, if you have to move an employee from exempt status to non-exempt status because of this salary minimum change, you should find a way to clearly communicate that this change is not a demotion, but simply a change in a governmental regulation. You’ll also need to train anyone moving from exempt status to non-exempt status on your timekeeping rules so that all time worked is properly recorded.

After Hours Work Isn’t Banned, But Must Be Paid

Compensation, , , ,

Employers in the US aren’t banned from having employees check emails after hours like companies in France are, but after hours work can create significant overtime issues for American employers. As an employer, you must know the requirements for paying your hourly employees for their after hours work.

AP FRANCE EAVES DROPPING IN EUROPE I FRAhttps://www.usatoday.com/story/news/world/2017/01/04/heres-another-reason-move-france-no-after-work-emails/96148338/

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.