After months of anticipation by many employers, the DOL has released its Final Rule related to overtime this week. The Final Rule amends compensation levels for the Highly Compensated Employee (HCE) Exemption and the Executive, Administrative, and Professional (EAP) Exemptions. (The duties tests remain the same.) These levels were last updated in 2004.
The compensation for HCE will be set at an annual rate of $134,004, or equivalent to the 90th percentile of full-time salaried workers across the country. The EAP Exemption will be set at $47,476, indexed to the 40th percentile of the lowest-wage Census Region—at this time, the South. Importantly, the Rule also sets a method for updating the compensation levels automatically every three years to maintain the levels at those percentages.
By raising these pay thresholds, the Final Rule greatly increases the number of employees eligible for overtime protection. Many employers may modify the way they operate, taking measures to limit the work hours of employees or altering the structure of positions.
The changes become effective December 1, 2016. For more detail on the changes and how they may impact your operations, consult with employment counsel.
The Wage and Hour Division of the Department of Labor provided recent guidance for determining worker classification. The WHD says a business “‘suffers or permits’ an individual to work if, as a matter of economic reality, the individual is dependent on the entity.” The economic reality test factors are:
(a) the extent to which the work performed is integral to the employer’s business;
(b) the worker’s opportunity for profit or loss depending on managerial skill;
(c) the extent of the relative investments of the employer and the worker;
(d) whether the work performed requires special skills and initiative;
(e) the permanency of the relationship; and
Businesses are to analyze these factors in conjunction with each other, and no factor is given more weight than another. In particular, the “control” factor should not be given more weight. If you have questions or want to discuss how the relationships with your workers are structured, give us a call at Wilson Worley, PC.
The Wage and Hour Division of the Department of Labor issued an Administrator’s Interpretation on July 15, 2015. The Interpretation discusses the classification of independent contractors and employees. An Interpretation does not have the force of a regulation that has been subject to the procedures of notice and comment. However, the Interpretation is indicative of the stance that the DOL will likely take regarding employee and independent contractor classification. The Interpretation’s actual authority and ability to impact the classification of employees and independent contractors in litigation will be a source of future debate. It is an indication that misclassification continues to be a hot button topic for businesses paying workers.
Classification of workers has long caused confusion and been an area of concern for businesses. Because independent contractors work for themselves, they are not covered by tax and employment laws in their work for businesses. Because of the costs associated with employees and the labor and other legal requirements, employers are often tempted to label as many workers independent contractors as possible. Even consent by the worker or a written contract calling someone a contractor is not enough; instead, the law determines who is an employee.
It is a good idea to review job responsibilities and control exerted over your workers from time to time to ensure compliance. Worker misclassification is an area of emphasis at this time for many state and federal enforcement agencies. Much better to review your own workers than to have the IRS do it for you after you have issued 1099s for several years.
I wrote last summer about issues involving volunteer interns; it’s that time of year again to consider your practices involving interns. With more and more students and job seekers who need resume-building opportunities, there are many requests to job shadow or obtain unpaid work experience. Employers must use care to avoid running afoul of wage and hour laws.
The DOL has listed several factors in reviewing whether the FLSA is implicated, including if the internship is similar to educational training, is really for the benefit of the intern, does not displace regular employees, and offers no immediate advantage to the employer. Based on the factors, most interns should be paid for work they perform.
The complete DOL fact sheet is available here: Fact Sheet #71: Internship Programs Under The Fair Labor Standards Act.
Almost fifteen hundred home care workers will will recover $1.1 million in settlement of a class-action case against their employer. The recovery is against non-profit McMillan’s Home Care Agency. The case was originally filed in 2010, alleging blatant violation of wage-and-hour laws for New York City workers with individuals working up to 60 hours a week without additional compensation. Approximately one in seven low wage earners in New York are in the home care industry.
“Summer’s here and the time is right for dancing in the street. . . .”
The time is also right for having summer interns in your place of business. With a difficult job market, many students are seeking any type of position to build a resume while others are involved in education programs for credit that require practical on-the-job work.
If you plan on allowing volunteer interns to work over the summer at a for-profit business, you must meet certain criteria outlined by the Department of Labor to avoid a wage and hour violation under the FLSA. Those factors are:
- The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
- The internship experience is for the benefit of the intern;
- The intern does not displace regular employees, but works under close supervision of existing staff;
- The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
- The intern is not necessarily entitled to a job at the conclusion of the internship; and
- The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.
Click here to review the complete DOL fact sheet: Fact Sheet #71: Internship Programs Under The Fair Labor Standards Act.