On July 26, 2017, the Department of Labor asked the public for comments concerning revisions to the overtime rules.  Only a week later, the DOL has received over 12,000 comments. However, it appears a move is underway whereby individuals are cutting and pasting the same statement literally thousands of times. It appears an individual posted the 70th comment on July  31, 2017 (WHD-2017-0002-2990), stating that President Ford set the salary threshold in 1975 at what would be $58,000 today, and thus, the DOL should keep the $47,476 in tact (or greater). From what I can tell, the remainder 11,930 submissions so far have simply cut and pasted this comment. This makes it incredibly difficult to find and review different positions and share them here. Perhaps the DOL could institute an “Agree” or “Disagree” feature in the future?

 

The United States Department of Labor officially published its Request for Information (RFI 1235-AA20); Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees, today. In doing so, the DOL expressly acknowledged many employer’s concerns that the previously-set salary threshold of $913 per week was too high, it inappropriately excluded too many workers from the exemption who otherwise would pass the standard duties test, and it adversely impacted low-wage regions and industries. Accordingly, the RFI is intended to gather additional data regarding how the December 1, 2016 regulations affected employers and employees, and how the regulations could better be updated moving forward.

The RFI can be found at regulations.gov, where comments may be electronically submitted with a single click. Given the pending litigation in the District of Texas and the 5th Circuit Court of Appeals, the DOL is merely asking for public comment at this time, versus publishing a formal Notice of Proposed Rulemaking. The DOL acknowledges that the RFI is issued consistent with President Trump’s February 24, 2017 Executive Order 13777, “Enforcing the Regulatory Reform Agenda” which tasks federal agencies to identify regulations for repeal, replacement, or modification which meet certain requirements, such as hindering job growth.

The DOL is asking employers to weigh in on eleven (11) questions (summarized below):

  1. Should the DOL simply update the 2004 salary level ($455/wk) for inflation?
  2. Should multiple salary levels be created, and if so, how (size of employer, region, etc.)?
  3. Should there be different salary levels for executive, administrative and processional (as it was prior to 2004)?
  4. Should the DOL return to using the long and short test salary levels (and would the duties test need to change if so)?
  5. Does the 2016 salary threshold ($913/wk) in effect negate the duties test?  And if so, at what threshold does it not negate the duties test?
  6. What actions did employers take to prepare for the December 1, 2016 regulation (i.e., increase salaries, change hours, reduce pay, etc.)?
  7. Would it be preferable to base exemptions on duties only (no salary threshold)?
  8. Does the $913/wk threshold exclude occupations traditionally covered as exempt?
  9. Is the 10% non-discretionary bonus and incentive payment credit towards satisfying the salary threshold appropriate?
  10. Should the highly compensated thresholds have multiple levels, and if yes, how (i.e. size of employer, region, etc.)?
  11. Should the salary levels be automatically updated periodically, and if so, how/when?

The public has until September 25, 2017, to submit comments. Following the close of the comment period, employers can expect more waiting, as usual.  It appears from the RFI that the DOL will not be issuing a Notice of Proposed Rulemaking while the cases are ongoing, so as is the norm, we will continue to wait.

The United States Department of Labor announced today that, as indicated in the 5th Circuit Appeal recently, it will be publishing a new Request for Information (RFI) concerning the overtime regulations (technically, “Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees”) tomorrow. The July 26, 2017 RFI will seek public comments regarding the salary level test (recall the DOL told the 5th Circuit that it was dropping the $913/wk overtime threshold), the duties test, varying cost-of-living (i.e. the fact that one salary threshold may be inappropriate nationwide), inclusion of non-discretionary bonuses and incentive payments, highly compensated employee salary test, and automatic updating of such salary levels.

The RFI will be open for 60 days during which the public may submit comments.

On June 30, 2017, the Department of Labor filed its reply brief with the 5th Circuit Court of Appeals.  A copy of the brief can be found here. Thus, the Texas lawsuit that has put the overtime regulations overhaul on hold nationwide, is now in the hands of the 5th Circuit.  Any question as to whether the Department of Labor would chose to withdraw the appeal has been answered in the negative. Significantly, however, the Department of Labor has withdrawn its appeal with respect to the legality of the specific $913 per week ($47,476/year) salary threshold:

“The Department has decided not to advocate for the specific salary level ($913 per week) set in the final rule at this time and intends to undertake further rulemaking to determine what the salary level should be.  Accordingly, the Department requests that this Court address only the threshold legal question of the Department’s statutory authority to set a salary level, without addressing the specific salary level set by the 2016 final rule. In light of this litigation contesting the Department’s authority to establish any salary level test, the Department has decided not to proceed immediately with issuance of a notice of proposed rulemaking to address the appropriate salary level….Instead, the Department soon will publish a request for information seeking public input on several questions that will aid in the development of a proposal.”

Accordingly, the question now is simply whether the Department of Labor has the authority to set a specific threshold or whether Congress must do so. And again, we wait.

I was presenting a “Hot Topics in Employment Law” update at our 12th Annual Labor Law Forum in Bloomington, Minnesota today, and realized that I had gotten woefully behind on staying updated as to the status of the FLSA white-collar overtime regulations overhaul. So, here it is. As of April 19, 2017, the 5th Circuit Court of Appeals has granted the U.S. Department of Labor’s second unopposed motion to extend the deadline to file its reply brief, as the nominee to be the Secretary of Labor had not yet been confirmed. The Court granted the motion, allowing the DOL until Friday, June 30, 2017 to file its reply brief (or withdraw its appeal).

On April 28, 2017, R. Alexander Acosta was sworn in as the 27th United States Secretary of Labor. Accordingly, I suspect there will be no more delays, and, looking into my crystal ball, will not be shocked if the DOL chooses to withdraw its appeal.

Man runningOn December 8, 2016, the 5th Circuit Court of Appeals granted the Department of Labor’s request for an expedited appeal in the Texas overtime litigation. Recall, this is the litigation that put a halt to the December 1, 2016 revisions to the FLSA salary thresholds for white collar workers. What does this mean for employers? The wait continues. Briefing will take place through late January 2017, and then oral argument will be scheduled thereafter. Notably, this means that the DOL will be under the oversight of President-Elect Trump before it goes to oral argument, and therefore it may chose to drop the appeal at that time. I’ll keep you posted.

news-426892One of my new “fall favorite” shows is ABC’s Notorious. In it, a criminal defense attorney teams up with a major TV producer to attempt to control the media, justice, and public opinion by putting various individuals on the edgy national news show. So, when I got the United States Department of Labor (DOL) email today from the news subscription service, I read it and chuckled, instantly thinking of Notorious.

Following up to my post earlier today, the DOL issued a news release late this morning regarding its decision to file a Notice of Appeal in the Texas overtime litigation. In the release found here, the DOL argues its case via the media to the public:

The Department has always recognized that the salary level test works in tandem with the duties tests to identify bona fide EAP employees.  The Department has updated the salary level requirements seven times since 1938.”

Naturally, the DOL points out that it “strongly disagrees with the decision by the court” and that the Final Rule “is the result of a comprehensive, inclusive rule-making process” and notes that, “we remain confident in the legality of all aspects of the rule.”

Notice of Appeal_Page_1On December 1, 2016, the day the Final Rule regarding the Fair Labor Standard’s Act (FLSA) was to go into effect, the U.S. Department of Labor (DOL) filed its Notice of Appeal of the Eastern District of Texas’ November 22, 2016 Memorandum Opinion and Order to the Fifth Circuit. What does this mean? Well, it seems largely symbolic to me – the DOL had plenty more time to file the Notice of Appeal, but did it on December 1. Coincidence? I think not. From here the Fifth Circuit will set a briefing schedule and decide whether to hear oral arguments. That being said, the briefing will not be due until after the Trump Administration takes office. So, whether the DOL chooses to withdraw the appeal, only time will tell. For now, employers should stay the course – continue to verify your employees are properly classified, and keep your ears open on this issue until a final decision has been made.

Money2Well, by now everyone is aware of the injunction on the December 1, 2016 FLSA overtime Final Rule. Many employers had decided (a/k/a were forced) to increase an exempt employee’s salary to $47,476 to meet the DOL’s new (and now on hold) $47,476 threshold. So, now what? Can an employer just revert the employee’s salary, or not increase it as planned? Let’s put employee morale aside too…because certainly any reversion of a salary is not going to sit well with the employee who now may feel undervalued (and/or question whether he or she is properly classified anyway).

The Fair Labor Standards Act (FLSA) doesn’t address “promised” wages; accordingly, there is no federal requirement that an employee be paid a promised wage following an intervening event. Similarly, the Minnesota Fair Labor Standards Act (MnFLSA) does not impose any requirements on “promised wages”. But, Minnesota law does provide employees some protections in certain circumstances.

In Minnesota, “wages” is defined as: “Compensation due to an employee by reason of employment”.  Minn. Stat 177.23, Subd. 4.  Further, an employer cannot “directly or indirectly and with the intent to defraud…(2) directly or indirectly demand or receive from any employee any rebate or refund from the wages owed the employee under contract of employment with the employer…” or the employer can be liable for twice the amount in dispute.  Minn. Stat. 181.03. Why do I bring up this statute? Well, a salaried employee who is told she is getting a raise may try to argue she has a contract that she is “owed” those wages for the work she performs during the time frame she was told she’d get the raise. Is this a stretch? Probably, but then again, I’ve heard more far-fetching arguments than that. Also, notice the bold – “intent to defraud” – I think it’s safe to say, no employer was attempting a bait-and-switch here; it was all regulation driven and employers had the full intent (at the time) to increase a salary just to meet the new threshold.

In any event, for the cautious employer, you may want to provide the employee notice of the decrease prior to the period in which the employee would earn that money. So, for example, if the employee was told on November 25 that she would be getting a raise to $47,476 effective December 1, and the next payroll cycle is for the workweeks of November 21 to December 4 and paid on December 9, you may want to consider reverting back during the next payroll cycle that is for the workweek of December 5 to December 18 (so long as the employee is notified prior to December 5). That being said, this approach is being cautious – certainly in this instance there would be no “intent to defraud”, however, with this delayed decrease, there is no arguable “contract” with the salaried employee for the following payroll cycle (they may argue there is a contract for the payroll cycle encompassing December 1-5).

Yes, I’m fully aware that I did not address hourly employees here. Given they are hourly, and “earn” wages on an hourly basis, I would not expect the same argument to ever even remotely pop up. Finally, don’t forget to document the payroll change, preferably with the employee signing that he or she understands the change and applicable start date of the change.

Dont miss deadlineAlready this morning, my phone has not stopped ringing and the emails continue to pour in. The word is out – Judge Mazzant granted the emergency preliminary injunction, putting the December 1, 2016 FLSA DOL regulations on hold. What does this mean for employers and HR professionals that were scrambling to meet the December 1 deadline? All of your work preparing for the revisions can – and should – be put to good use. Remember, the white-collar duties test did not change! Thus, the ONLY employees who would have (theoretically) benefited from the rule changes, were those employees who met the duties test of a white collar employee, and who were paid more than $23,660, but less than $47,476, and thus needed to get a salary increase up to at least $47,476 to remain exempt.

In other words, embrace your internal audit and continue to use the old December 1 deadline as your internal target to reclassify employees. Again, the Final Rule has just been put on hold – it may rear its ugly head in the future and you’ll be back where you started. Thus, for those employees that were found to be misclassified after your internal audit, there is no reason not to reclassify them by December 1, as you were going to do. I love wage and hour litigation, but it is not employer friendly, and certainly not cheap. Thus, the only reprieve for employers is that you no longer need to increase the salary for properly classified white-collar exempt employees up to at least $47,476, until the final outcome of the Texas cases. If someone was determined to be misclassified based on their job duties (not salary), they are still misclassified – you can cut off damages and limit your potential liability by reclassifying them sooner than later (preferably by the December 1 deadline so there is some rationale as to why you are doing it now). As to the FLSA Texas cases and final outcome of the litigation – only time will tell. I’ll keep you posted.