UPDATE June 27, 2024: As of this morning, the court has yet to rule on the pending motion to block implementation of the DOL’s new overtime rule. Yesterday, the DOL filed a “notice of supplemental authority,” suggesting that the district court should follow the Supreme Court’s decision yesterday in Murthy v. Missouri by holding that any relief in the case is limited to the state of Texas as an employer, rather than blocking the rule nationwide for all employers. If the district court follows that suggestion, the new rule may still take effect on July 1 even if the court finds that the DOL exceeded its authority in adopting the rule. Employers should remain prepared to implement the new rule on July 1 by increasing salaries to meet the new minimum salary thresholds or reclassifying employees as non-exempt.

ORIGINAL POST:

The clock is quickly ticking down to July 1, when the U.S. Department of Labor’s new rule increasing the minimum salary for many employees to be considered exempt from overtime under the Fair Labor Standards Act is supposed to take effect. When a similar rule was supposed to take effect back in 2016, the clock was paused at the last moment by a federal judge in Texas, who found that the DOL exceeded its authority under the FLSA by making salary rather than job duties the controlling factor for whether an employee is an exempt executive, administrative, or professional employee. The 2016 rule never took effect, although the DOL approved a smaller increase to the minimum salary level in 2019, to the current $684 per week.

This past Monday, June 24, 2024, another federal judge heard arguments on a motion to block implementation of the DOL’s new rule in State of Texas v. United States Department of Labor, et al. In comments during the hearing, Judge Sean D. Jordan reportedly expressed skepticism about the new rule, suggesting that a repeat of 2016 may well be in the works. Judge Jordan has yet to issue a ruling but could do so at any time.

So what should employers do in the meantime? As in life, nothing is certain in litigation. Until we know for certain that the rule will be enjoined, employers should assume that it will take effect on July 1. If it does, employees with salary levels below the new minimum of $844 per week (increasing again to $1,128 per week effective January 1, 2025) either need to be paid more or reclassified as non-exempt.

Stay tuned for further updates.

A common question for schools assessing how to comply with the new overtime exemption rule published by the U.S. DOL is what to do about coaches and athletic trainers in light of the new minimum salary requirement for the executive, administrative and professional exemptions.

For coaches, two exemptions may still apply even if the coach’s salary falls below the new thresholds of $884 per week (starting July 1, 2024) or $1,128 per week (starting January 1, 2025). A coach whose primary job duties are instructing student athletes on topics such as athletic performance, physical health, team concepts, and safety, or designing instructional programs for student athletes or the team as a whole, may qualify for the teaching exemption. Employees who fall under the teaching exemption do not have to be paid on a salary basis or meet the minimum salary level under the regulations.

Continue Reading Coaches and Athletic Trainers Under the New FLSA Exemption Rules

The U.S. Department of Labor recently published new final regulations that increase the minimum salary level for most employees to be considered exempt under the executive, administrative, and professional exemptions to the Fair Labor Standards Act. While these new rules could affect some 4 million workers, not all exempt employees are subject to the minimum salary requirement.

Continue Reading Not All Exempt Employees Are Affected by the New Minimum Salary Rule
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On April 23, 2024, the U.S. Department of Labor issued final regulations updating the minimum salary threshold for employees to be considered exempt from overtime requirements under the Fair Labor Standards Act. The regulations are scheduled to be published in the Federal Register on April 26, 2024. The new rules increase the minimum salary from the current level of $684 per week (about $35,568 per year) to $844 per week (about $43,888 per year) effective July 1, 2024, and $1,128 per week (about $58,656 per year) effective January 1, 2025. According to the final rule, $844 per week is the “20th percentile for weekly earnings of full-time nonhourly workers in the lowest-wage Census Region and/or retail industry nationally,” and $1,128 per week is the 35th percentile. Beginning July 1, 2027 and every three years thereafter, the salary level would be readjusted to reflect updated earnings data.

Continue Reading U.S. DOL Updates Salary Thresholds for Overtime Exemptions

In April, the Illinois Department of Labor published new regulations regarding the expense reimbursement requirements in Section 9.5 of the Illinois Wage Payment and Collection Act. The Act requires an employer to reimburse an employee for “all necessary expenditures or losses incurred by the employee within the employee’s scope of employment and directly related to services performed by the employer.” It defines “necessary expenditures” as “all reasonable expenditures or losses required of the employee in the discharge of employment duties that inure to the primary benefit of the employer.”

Continue Reading New Reimbursement Rules for Illinois Employers

In 2018, Congress added a provision to the Fair Labor Standards Act prohibiting employers from retaining employee tips or allowing managers or supervisors to participate in a tip pooling arrangement. Today, the U.S. Department of Labor announced a new final regulation in which the DOL asserts authority to penalize employers up to $1,100 per violation of this provision, on top of any back wages owed. Prior rules published by the Trump administration also provided for civil penalties, but only in cases of “repeated and willful” violations. The new rule allows the DOL to pursue penalties even for a first offense and regardless of whether the violation was willful. The rule defines “managers and supervisors” as those employees who meet the duties requirement for the executive exemption, whether or not the employees are paid on a salary basis or actually treated as exempt.

The rule is scheduled to be published in the Federal Register on September 24, 2021, and will take effect 60 days later on November 23, 2021.

The DOL is still working an additional rule that will govern how employers pay tipped workers who spend time on tasks that don’t generate gratuities, such as washing dishes or other “back of the house” functions. In June 2021, the DOL proposed dropping regulations issued by the Trump administration and returning to the longstanding rule that would require businesses to pay tipped workers at least the federal minimum wage for non-tipped activities when those activities take up at least 20% of a worker’s time in a workweek. The DOL is currently reviewing public comments on that proposal and is expected to issue a final rule in the coming months.

Wage and hour law is full of traps for the unwary. Even compensation practices that are well-accepted across an entire industry can sometimes create huge headaches for employers in the face of a legal challenge. Case in point: A recent decision by the Fifth Circuit Court of Appeals in Hewitt v. Helix Energy Solutions Group, Case No. 19-20023, in is causing upheaval in the energy sector by suggesting that even highly paid supervisory employees may be entitled to overtime pay on top of their six-figure compensation because they are paid a day rate rather than a weekly salary.

Continue Reading Even High Earning Supervisors Can Be Entitled to Overtime

Wage and hour violations in Illinois just got a lot more expensive. On Friday, July 9, 2021, Governor Pritzker signed an amendment to the Illinois Wage Payment and Collection Act that increases the penalty for underpaying wages from 2% of the amount of the underpayment per month to 5%. That may not sound like a lot, but it adds up fast.

Suppose a former employee claims that their employer failed to pay them $5,000 in vacation pay upon separation from employment. Employees have up to 10 years to file a lawsuit under the Act, so it may be several years before the claim is even filed, let alone before it works its way through the legal system. Assume optimistically that the claim is filed immediately and is resolved in the employee’s favor two years after the employee’s termination. Previously, the employee would be entitled to recover the original $5,000 plus an additional $2,400 (2% of $5,000 per month x 24 months) in statutory penalties. Under the amended law, the penalties would be $6,000, more than double the original amount due. The employer would also be on the hook for the employee’s attorneys’ fees, in addition to its own defense costs and other penalties.

This change brings the penalty provisions of the Wage Payment and Collection Act in line with earlier amendments to the Illinois Minimum Wage Law. However, the Minimum Wage Law provides for employees to recover triple the amount of any wages due, in addition to the 5% penalty. The amendment to the Wage Payment and Collection Act does not include a treble damages provision.

The message for Illinois employers is clear: wage and hour claims can cost you dearly. Make sure you pay your employees correctly and keep the records to prove that you did so.

The Department of Labor (“DOL”) released an opinion letter addressing whether certain overtime payments based on an expected number of hours may be credited towards the amount of overtime pay owed under the Fair Labor Standards Act (“FLSA”) and whether such overtime payments are excludable from the regular rate. The answer to both questions is yes.

The inquiry came from a business that provides in-home care services on a live-in basis or for shifts of 24 hours or more. The employer pays an hourly rate plus overtime based on anticipated overtime hours. The caregivers typically work five days a week for 120 or more hours. Given the nature of the caregivers’ work, the employer found it difficult to track which hours the caregivers were actually working. The employer therefore treats the employees as performing compensable work for the entire extended shift, minus 8 hours allotted for sleeping and meal breaks. If a caregiver has any work-related interruptions to meal or sleep periods, the caregiver is to track those hours and they are counted as compensable time. If a caregiver works more than anticipated, then the employer supplements the prepaid compensation at a rate of 1.5 times the caregiver’s hourly rate for each unanticipated hour of work over 40 hours.

Continue Reading Pay Me Now, or Pay Me Later? Wages Paid for Anticipated Overtime are Excludable from Employees’ Regular Rate

On September 8, 2020, the United States District Court for the Southern District of New York struck down portions of a January 2020 Final Rule issued by the Department of Labor. The Final Rule provided a new test for determining whether an entity is a joint employer with another entity under the Fair Labor Standards Act (FLSA). The Final Rule, which became effective in March of 2020, severely limited the situations in which an entity can be considered a joint employer and held liable for violations of the FLSA in a “vertical” joint employment relationship. A vertical joint employment relationship is the variety of joint employment that exists when there is some sort of intermediary, like a staffing firm, PLA, or temp agency between the employee and the employer that ultimately benefits from the employee’s work. We discussed “horizontal” joint employment in a prior post.

Several states, including Illinois, filed suit challenging the Final Rule’s legality with respect to the Final Rule’s changes to the vertical joint employment determination. Historically, courts and the DOL have made clear that control over an individual’s employment is not the dispositive factor in determining whether an entity is a joint employer with another entity. Instead, whether a joint employment relationship exists depends upon whether the employee in question is economically dependent upon the potential joint employer.

Continue Reading DOL’s Joint Employer Test Ruled Illegal