May 18, 2016

Long Awaited New Overtime Rules Issued

Posted in Administrative Exemption, Computer-related Occupations Exemption, Executive Exemption, Exempt/Non-Exempt Employees, Fair Labor Standards Act, Outside Sales Exemption, Overtime, Professional Exemption, Uncategorized tagged , , , , , , , at 1:15 pm by Tom Jacobson

time clockThe much-anticipated new overtime rules have been issued by the United States Department of Labor. The new rules will go into effect December 1, 2016 so employers will have until then to prepare.

The Society for Human Resource Management (SHRM) has published an excellent summary of the new rules, and I encourage you to review that. Then, contact me to discuss how to implement the new rules in your workplace.

Also, the new rules will be discussed at the 13th Annual West Central Minnesota Employment Law Update. There are still a few seats available at the seminar — click here for registration information.

For more information about these or other employment law issues, please contact me at taj@alexandriamnlaw.com.

The comments posted in this article are for general informational purposes only. They are not to be considered as legal advice, and they do not establish an attorney-client relationship. For legal advice regarding your specific situation, please consult your attorney.

Copyright 2016 Swenson Lervick Syverson Trosvig Jacobson Schultz Cass, PA.

February 18, 2016

New Overtime Rules Could Result in Loss of Exempt Status for Salaried Employees

Posted in Administrative Exemption, Executive Exemption, Exempt/Non-Exempt Employees, Fair Labor Standards Act, Hours Worked, Professional Exemption tagged , , , , , , , , , at 4:58 pm by Tom Jacobson

new flsa overtime rules

Many salaried employees would lose their exempt status under the DOL’s new overtime rules.

The U.S. Department of Labor’s proposed changes to the nation’s overtime pay rules would have a profound impact on workplaces throughout the country. The impact would be the potential loss of exempt status for many salaried employees. To prepare, employers should familiarize themselves with the proposed new rule and review their pay practices to ensure compliance in case the new overtime rules take effect.

The new rules would increase the minimum salary an employee must be paid before s/he may be classified as exempt from overtime pay under the Fair Labor Standards Act. This means many employees who are now properly classified as exempt will no longer be exempt. Consequently, they would then be eligible for overtime pay if they work more than forty hours in a workweek.

The change would come about because the FLSA generally requires most U.S. employers to pay overtime (that is, one and one-half times the employee’s regular rate of pay) when employees work more than forty hours in a work week. However, certain categories of employees are exempt from that requirement. To qualify for some exemptions, those employees must not only perform certain duties as specified in the FLSA, but they must also be paid a minimum salary.

Currently, that minimum salary is $455 per week ($23,660 per year). Under the new rule, that threshold would more than double to $970 per week ($50,440 per year).

The impact can be illustrated with a hypothetical workplace where an employee is currently paid a salary somewhere between $24,000 and $50,000 per year and works an average of 45 to 50 hours per week. Assuming that employee meets one of the FLSA’s “duties” tests, the employee would likely be considered exempt and not entitled to overtime pay. Therefore, the employee would be paid the same regardless of how many hours s/he works in a week.

If the new rules take effect, the same employee would no longer be exempt, and s/he would be entitled to overtime pay for the extra five to ten hours of work each week. Therefore, the employer would need to increase the employee’s salary to meet the new threshold and maintain the exemption, or the employer would need to convert the employee to an hourly-rate employee and pay time and a half for any overtime.

The new rules have not yet gone into effect, and it is not entirely clear if and when they will. They were initially slated to take effect this spring. However, the Society for Human Resource Management reports that this may not happen until later this year. SHRM also reports there is a remote chance that Congress could overturn the rules using the Congressional Review Act and/or that the rules will be challenged in court.

In the meantime, employers should pay attention to the potential rule change and be prepared to change their pay practices to remain in compliance. Suggestions include:

  • Determine which currently exempt employees would no longer be exempt if the salary threshold increases;
  • Assuming an employee’s exemption would be lost under the new rules, decide whether to increase the employee’s salary to meet the new threshold or convert the employee’s salary to an hourly rate basis;
  • Budget for any increased overtime costs resulting from employees who would become eligible for it under the new rules;
  • Review scheduling issues to determine whether hours can be reduced to limit the overtime liability for an employee who must be treated as non-exempt;
  • Address morale issues that could result from any perceived “demotion” of employees from exempt/salaried to non-exempt/hourly status.

In addition, although the proposed new rules do not alter the “duties” test for FLSA exemptions, employers would be wise to take this opportunity to review their exempt employees’ duties to determine whether they actually meet those duties tests. This is because even if an employee meets the salary test (whether under the current or proposed new standards), that does not automatically mean the employee is exempt from the law’s overtime pay requirements.

For more information about FLSA exemption issues, please contact me at taj@alexandriamnlaw.com.

The comments posted in this blog are for general informational purposes only. They are not to be considered as legal advice, and they do not establish an attorney-client relationship. For legal advice regarding your specific situation, please consult your attorney.

Copyright 2016 Swenson Lervick Syverson Trosvig Jacobson Schultz Cass, PA

July 20, 2015

FLSA Misclassification Proves Costly for Local Employer

Posted in Administrative Exemption, Computer-related Occupations Exemption, Enforcement, Executive Exemption, Exempt/Non-Exempt Employees, Fair Labor Standards Act, Minimum Wage, Outside Sales Exemption, Overtime, Professional Exemption tagged , , , , , , , , , at 10:22 am by Tom Jacobson

US Department of Labor v Patel

Local hotelier ordered to pay $184,000.00 to settle wage violation suit.

A Fargo, ND hotelier with a property in Alexandria, MN will pay nearly $200,000.00 to settle a lawsuit brought by the US Department of Labor (see Court Orders Hotel Owner to Pay More than $180K in Back Wages, Damages to 200 Workers Across North Dakota, Montana and Minnesota, DOL Release No. 15-1294-DAK; Lawsuit Settlement Helps Hotel Workers in Alexandria, Echo Press July 16, 2015). The DOL alleged in the suit that Bharat I. Patel violated the Fair Labor Standards Act by failing to pay minimum wage and/or overtime rates to nearly 200 employees at a number of hotels, including the Country Inn and Suites in Alexandria.

More specifically, the DOL claimed that Patel misclassified nonexempt workers as exempt salaried employees (see US Labor Department Lawsuit Alleges Hotel Owner Owes $200K in Wages, Damages to 192 Workers at 13 Hotels, DOL December 16, 2104). This, the department said, resulted in these workers not receiving minimum wage for all hours worked and not being paid overtime. According to the DOL, the company also failed to combine hours for employees who worked at two locations in the same workweek and failed to maintain accurate records of all hours worked and pay rates.

The lawsuit was resolved via a July 10, 2015 consent judgment in which Patel denied any wrongdoing but agreed to pay $184,000.00 to settle the dispute. In addition Patel agreed to train managers on FLSA wage requirements and to provide workers information on wage laws and contact information for the DOL’s Wage and Hour Division for at least four years.

How are FLSA exemption mistakes made, and why are they so expensive? To answer that, one needs to understand the two basic principles of the FLSA’s overtime rule. First, the FLSA generally requires that employees be paid at 1.5 times their regular hourly rate for their overtime (that is, their hours worked in excess of 40 hours in a workweek). Second, some employees, such as certain executives, administrators and professionals are exempt from that overtime requirement.

Claiming such exemptions may seem simple, but the FLSA has complex definitions of who can lawfully be classified as an exempt executive, administrator or professional. Those definitions all include a requirement that these employees be paid a salary of at least $455.00 per week. They also include a “duties test.” This requires that in addition to the salary requirement, the employees’ actual job duties must meet certain criteria before the employees can be considered exempt.

Thus, one of the most common mistakes starts when employers wrongly assume that by paying someone a salary, they automatically become exempt from overtime. Often, the employers also give that person a title such as “manager.” Then, the employers allow or require those people to work more than 40 hours per week without paying for the overtime.

But paying someone a salary and calling them a manager (or some other authoritative title) does not make them exempt if they do not also pass the duties test for an FLSA exemption.

This mistake is expensive. When non-exempt employees are misclassified as exempt, they are entitled to recover all of the overtime they should have been paid during the preceding two years. Plus, they can recover an additional equal amount as liquidated damages and their attorney’s fees and court costs. These costs are compounded when multiple employees are at issue. And, as was the case in Patel lawsuit, employers can also be ordered to implement other remedial measures such as training.

The DOL’s recent rulemaking actions provide an additional reason for employers to pay close attention to these FLSA exemption issues. On July 6, 2015 the DOL proposed a rule that would raise the salary basis test from around $23,600.00 per year to approximately $50,000.00 per year. If implemented, the new rule would greatly reduce the number employees who would be exempt under the law.

As the Patel case confirms, FLSA exemption mistakes are costly. And, based on recent DOL activity, those mistakes could get even more expensive in the future.

If you are an employer that is wondering if your employees are properly classified under the FLSA, or if you are an employee who wonders if you have been misclassified and underpaid, please contact me at alexandriamnlaw.com or  taj@alexandriamnlaw.com.

The comments posted in this blog are for general informational purposes only. They are not to be considered as legal advice, and they do not establish an attorney-client relationship. For legal advice regarding your specific situation, please consult your attorney.

Copyright 2015 Swenson Lervick Syverson Trosvig Jacobson Schultz Cass, PA

September 12, 2014

FLSA: counting the cost locally

Posted in Exempt/Non-Exempt Employees, Fair Labor Standards Act, Overtime tagged , , , , , , at 11:08 am by Tom Jacobson

time clockA Douglas County, MN employer recently learned a costly lesson when it misunderstood who is and is not exempt from the overtime pay requirements of the Fair Labor Standards Act (FLSA).

In this case, an employee was given a “manager” title and paid a fixed salary, but the employee alleged that his duties were primarily custodial and customer service and did not fit within any exemption allowed by the FLSA. Applying the formula set by FLSA regulations, the employee converted his “salary” to an hourly rate ranging from $11.61 to $13.54 with an overtime premium ranging from $5.81 to $6.77 per hour.

Failing to pay an employee an additional $5.81 to $6.77 per hour may not seem like a terribly expensive mistake, but in this case the employee had evidence suggesting that he had worked about 640 hours of unpaid overtime during his last year of employment. This calculated to approximately $3,800.00 of unpaid overtime, but that wasn’t the end of the story. The FLSA also allows an employee to double the amount of unpaid back wages as liquidated damages, so using the employee’s figures, the $3,800.00 became $7,600.00.

To compound the problem, the employee claimed that the employer also withheld $1,300.00 of the his final wages in violation of Minn. Stat. § 181.13, thus triggering the 15 day wage penalty of that statute. This added another $1,700.00 to the employee’s claim.

Because these laws also allow the employee to recoup his attorney’s fees incurred in trying to recover his wages, he tacked them on as well. Those fees exceeded $4,000.00.

Thus, the employee argued that the employer’s $6.00 per hour mistake became a liability exceeding $14,000.00 (excluding the employer’s own attorney’s fees incurred in defending the claim). The case was eventually settled out of court with a confidential agreement between the parties.

The case illustrates how costly it can be when an employer improperly classifies a non-exempt employee as exempt under the FLSA. Simply calling someone a “manager” and paying her a fixed salary does not automatically make her exempt from overtime. This is because exemptions are highly dependent on the employee’s actual duties, not her title and form of pay. And, while an hour of unpaid overtime may not seem like a huge risk, when those hours accumulate over time and are doubled as liquidated damages, a few dollars can quickly become several thousand, especially when attorney’s fees and court costs are added. Moreover, it’s a much greater problem if multiple employees are involved.

For more information about FLSA exemptions, please contact me at alexandriamnlaw.com or taj@alexandriamnlaw.com.

The comments posted in this blog are for general informational purposes only. They are not to be considered as legal advice, and they do not establish an attorney-client relationship. For legal advice regarding your specific situation, please consult your attorney.

Copyright 2014 Swenson Lervick Syverson Trosvig Jacobson Schultz, PA

June 19, 2012

Drug Reps’ Overtime Claims Rejected by US Supreme Court

Posted in Exempt/Non-Exempt Employees, Fair Labor Standards Act, Outside Sales Exemption, Overtime tagged , , , , , , at 9:57 am by Tom Jacobson

In a much-anticipated decision, the United States Supreme Court has rejected the overtime claims brought by pharmaceutical sales representatives in the case of Christopher v. Smithkline Beecham Corp.

The case centered around a group of drug reps whose primary objective was to obtain nonbinding commitments from physicians to prescribe Glaxosmithkline’s products in appropriate cases. Each week the reps spent about 40 hours in the field calling on physicians during normal business hours and an additional 10 to 20 hours attending events and performing other tasks. They were not required to punch a clock or report their hours, and they were subject to only minimal supervision. The reps were well compensated, and their gross pay included a base salary plus incentives determined based on the performance of their assigned portfolio. Because they were not paid time-and-a-half wages when they worked more than 40 hours per week, they brought claims for unpaid overtime under the Fair Labor Standards Act (FLSA).

In a 5-4 decision filed June 18, 2012 the nation’s highest court threw out the reps’ claims. To reach this conclusion, the Court first rejected the Department of Labor’s interpretations of the FLSA on this issue. This is a very important aspect of the case because it sends a signal that comparable DOL interpretations on related issues (for example, that mortgage loan brokers are not exempt under the FLSA) may not be given the deference that is often afforded to the DOL.

After declining to adopt the DOL’s interpretation of the FLSA’s outside sales exemption as applied to these employees, the Court then analyzed the language of the FLSA itself and concluded that these sales reps were subject to the FLSA’s outside sales exemption and, therefore, were not entitled to overtime pay.

What you need to know: The Supreme Court’s decision provides some much-needed clarification of the FLSA. In particular, it indicates that the outside sales exemption is to be broadly applied. Therefore, it is likely that more sales reps will be found to fall under this exemption.  Even so, whether an employee actually falls under this exemption will depend on the specific facts and circumstances of each case.  Therefore, any employer employing a sales force should carefully analyze those jobs to determine if they fall under the FLSA’s outside sales exemption.

For more information about this article, please contact me at taj@alexandriamnlaw.com.

The comments posted in this blog are for general informational purposes only. They are not to be considered as legal advice, and they do not establish an attorney-client relationship. For legal advice regarding your specific situation, please consult your attorney.

Copyright 2012 Swenson Lervick Syverson Trosvig Jacobson Schultz, PA

May 23, 2011

The times they are a changin’: will you sink or swim?

Posted in Computer Use, Confidential Information, Employee Privacy, Exempt/Non-Exempt Employees, Independent Contractors, Internet Policies, Social Media in the Workplace, Social Networking tagged , , , at 8:11 pm by Tom Jacobson

As I sit through the 2011 Minnesota Employment Law Institute, this 1964 Bob Dylan classic has been running through my mind:

“Come gather ’round people
Wherever you roam
And admit that the waters
Around you have grown
And accept it that soon
You’ll be drenched to the bone
If your time to you
Is worth savin’
Then you better start swimmin’
Or you’ll sink like a stone
For the times they are a-changin’.”

The Times They Are a Changin’, Bob Dylan (1964), http://bit.ly/hAPUnh.

Dylan’s words couldn’t be more fitting for today’s employers.  The 2011 Institute points out that rising around us are floodwaters like Facebook, blogs, tweets, Wikileaks, the new Americans with Disabilities Act regulations, increased enforcement efforts by the Department of Labor, protecting confidential information and trade secrets, and the mis-classification of non-exempt employees and independent contractors.  Employers who accept the sea of change and learn how to swim through it will succeed; those who don’t will sink like stones.

To learn to swim, we hire instructors and take lessons.  If you would like more information about how I can teach you to swim though the sea of employment law change, please contact me at taj@alexandriamnlaw.com.

The comments posted in this blog are for general informational purposes only. They are not to be considered as legal advice, and they do not establish an attorney-client relationship. For legal advice regarding your specific situation, please consult your attorney.

Copyright 2011 Swenson Lervick Syverson Trosvig Jacobson, PA

April 25, 2011

Save the date — 2011 West Central MN Employment Law Update

Posted in Exempt/Non-Exempt Employees, Fair Labor Standards Act, Independent Contractors, Social Media in the Workplace, Training, Uncategorized tagged , at 5:23 pm by Tom Jacobson

The Eighth Annual West Central Minnesota Employment Law Update will be presented at the Alexandria Technical and Community College on Thursday, June 9th from 8:00 a.m. to 4:30 p.m.

In addition to an update on the latest developments in employment law and the annual panel discussion of the featured topics, this year’s seminar will include bonus sessions covering employee relations topics.  Please check out the full seminar agenda and register using the attached 2011 Employment Law Update Flyer.   

Registrations are due by June 2nd.  HRCI credits are pending for the seminar.

I look forward to seeing you on June 9.

September 15, 2010

DOL to Disney: Failing to pay for hours worked ain’t no Mickey Mouse

Posted in Exempt/Non-Exempt Employees, Fair Labor Standards Act, Hours Worked, Record Keeping tagged , , , , at 5:00 pm by Tom Jacobson

Sixty-nine employees of Disney World in Orlando, FL will be receiving $433,819.00 in back wages after a U.S. Department of Labor investigation uncovered violations of the Fair Labor Standards Act.

The workers were a group of non-exempt inventory control clerks in the park’s food and beverage department who were not paid for work done before and after their normal shift, during meal times, and when working from home.

The FLSA requires that non-exempt workers be paid for “hours worked.”  Generally speaking, “hours worked” include all time an employee must be on duty, or on the employer’s premises or at any other prescribed place of work, from the beginning of the first principal activity of the workday to the end of the last principal work activity of the workday.  This includes time spent working when employees are supposed to be on their breaks.

“While Walt Disney has specific rules regarding off-clock work, an investigation conducted by the Department of Labor’s Wage and Hour Division found that managers within the company were not adhering to those important policies,” said Wage and Hour Deputy Administrator Nancy Leppink. “It is not enough to have policies. Management must also ensure that all supervisors are implementing them.”

The DOL’s investigative findings stress how important it is for employers to have and enforce policies for tracking and paying for the  “hours worked” by their non-exempt employees, even the time spent working from home and on breaks.

The comments posted in this blog are for general informational purposes only. They are not to be considered as legal advice, and they do not establish an attorney-client relationship. For legal advice regarding your specific situation, please consult your attorney.

September 7, 2010

DOL targets health care & other industries in FLSA enforcement campaign

Posted in Aggregating Work Hours, Enforcement, Exempt/Non-Exempt Employees, Fair Labor Standards Act, Hours Worked, Independent Contractors, Independent Contractors, Meal Periods, Overtime, Rounding, Travel Time tagged , , , , , , , at 3:35 pm by Tom Jacobson

As a part of its stepped up efforts to enforce the Fair Labor Standards Act, the Department of Labor has taken aim at certain industries.  The health care industry now appears to be one of the DOL’s targets.

In a recent article published in the Workplace Law Bulletin, the Society for Human Resource Management noted that when common FLSA issues permeate an industry, the DOL will target that industry with its enforcement efforts.  In the health care industry, for example, SHRM listed the following common violations:

  • Meal period violations;
  • Rounding time in the employer’s favor;
  • Failing to pay for pre-shift/post-shift time;
  • Mistakes about what is “off the clock” time;
  • Travel time errors;
  • Failure to aggregate work hours;
  • Employee/independent contractor misclassifications;
  • Exempt/non-exempt employee misclassifications.

As a result, some DOL Wage and Hour Division district offices have started local initiatives targeting health care employers.  These initiatives have been costly for non-compliant employers.  For example, the DOL  reported earlier this year that $2.2 million in back wages was awarded to health care workers in New York, while over $2 million was awarded late last year to their colleagues in Connecticut and Rhode Island.

The health care industry is not alone.  SHRM reports that other low-wage industries, such as agriculture, day care, restaurants, garment manufacturing, hotels and motels, janitorial, and temporary help have also been targeted.    Given the DOL’s March, 2010 administrative interpretation that most mortgage loan officers are not exempt from the FLSA’s overtime standards, it appears that the financial services industry is also in the department’s sights.

Although certain industries may be DOL targets, all employers must be aware of what the FLSA requires, for violations can lead to not only DOL enforcement, but also private lawsuits brought by employees or classes of employees.  For these reasons, employment policy development and review, education, training,  and proper record keeping are musts for all employers.

The SHRM article, “Health Care Industry Targeted in FLSA Enforcement,” can be found at http://www.shrm.org/LegalIssues/FederalResources/Pages/HealthCareIndustry.aspx.

The comments posted in this blog are for general informational purposes only. They are not to be considered as legal advice, and they do not establish an attorney-client relationship. For legal advice regarding your specific situation, please consult your attorney.

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