Employers required to file an EEO-1 (hopefully you know who you are…certain federal contractors/subcontractors), must do so between March 18, 2019 and May 31, 2019 via the EEO-1 website. Importantly, on March 4, 2019, the U.S. District Court for the District of Columbia held that the Office of Management and Budget’s stay of the revised EEO-1 (which sought workforce pay data) was improper. Thus, the DOL may require employers to report employee pay data. If you want more information on how this works, you can read my previous posts (type “EEO-1” in the search bar above). That being said, it is not entirely clear whether the DOL will actually do so this reporting year or delay it a year given the timing. More information is expected to come out in the near future, so I’ll keep you posted (pun intended).
On March 7, 2019, HR 2274 was introduced in the Minnesota House of Representatives that would very simply change the state overtime requirement from 48 hours to 40 – matching the federal FLSA. This bill would simply strike “48” from Minn. Stat. 177.25, and replace it with “40”. It has been referred to the Labor Committee. Not much else to report at this time. However, given how many employers are under the purview of the federal FLSA, I do not foresee this change impacting the majority of employers in Minnesota.
Today the Minnesota Department of Labor and Industry (MNDOLI) issued employers yet another reminder not to engage in “wage theft” from employees, and encouraged subscribers to share the message. So, I’ll do my civic duty and share. In short, MNDOLI reminds employers of the following (with my comments below each point):
- Pay your employees the applicable state minimum wage. Minnesota’s 2019 minimum-wage rates are $9.86 an hour for large employers and $8.04 an hour for small employers. For additional details about the state’s minimum-wage rates, visit www.dli.mn.gov/business/employment-practices/minimum-wage-minnesota. New rates take effect Jan. 1 each year. Employers operating in Minneapolis or St. Paul should understand the requirements of the minimum-wage ordinances in those cities.
- There are some exceptions to the minimum wage rates such as training wages and youth wages (under 17).
- Since Minnesota’s minimum wage rates are currently greater than the federal minimum wage rates, Minnesota’s rates apply to Minnesota employers (as they are more favorable to employees).
- Pay your employees for all hours worked. Employees must be paid for employer-required training and for time needed to prepare to perform work, such as restocking supplies and performing safety checks. If you require employees to meet at a centralized location before driving to a worksite, pay the employee for the drive-time from the location to the worksite. Employers cannot require employees to remain at work and “punch in” only when it gets busy, “punching out” when business gets slow.
- If you have a Collective Bargaining Agreement, be sure to review those bargained-for terms as well.
- Tip: have employees drive directly to the jobsite in the morning. If they have no ride, or need a ride, make it voluntary and be sure they do not do any work before the trip – they are a passenger only.
- Pay your hourly employees for overtime. Federal law requires most hourly employees to receive overtime after working 40 hours in a workweek. Some employees are exempt from this requirement, but still need to be paid overtime after 48 hours in a workweek under Minnesota law.
- I wrote about this in an earlier post – just because an employee may be exempt from overtime under federal law does not necessarily mean they are exempt under Minnesota law.
- There is a bill pending (HF 2274) in the Minnesota legislature that would change overtime from 48 hours to 40 hours – stay tuned.
- If an employee is not authorized to work overtime but does it anyway, they must be paid for those hours worked but can be disciplined for not following workplace rules.
- Tip: remember private employers (almost everyone reading this) cannot use “comp” time from week to week – it must be paid out, unlike those employees in the public sector.
- Employers do not need to pay higher rates in Minnesota (unlike some states) for working on Saturdays, Sundays, or holidays.
- Pay your employees at least every 31 days, on a regularly scheduled payday that they are notified of in advance.
- Tip: don’t forget if you terminate an employee they may request their final paycheck be paid within 24 hours. Since this is sometimes difficult, if possible, it is best to just have the final check ready to hand to the employee upon termination.
- Do not misclassify employees as independent contractors. Such misclassification not only adversely impacts employees, it also creates a competitive disadvantage for employers that comply with state laws related to workers’ compensation, unemployment insurance and tax withholding.
- Similarly, be careful not to misclassify an employee as exempt from overtime – and keep reviewing this blog for updates on the pending DOL rule to change the salary threshold. If you missed my post, the update is here.
- Do not take unlawful deductions from your employees’ paychecks. Deductions that generally cannot be made include: property loss or damage; cash shortages; and tool or uniform expenses.
- Tip: you can ask the employee to agree to pay it back after the fact – but it has to be in writing, and deductions cannot take the employee below minimum wage (it’s a bit more complicated than that with taxes, other deductions, etc.). If the employee refuses, you can discipline the employee for whatever caused the loss.
- Do not require your employees to pool or share tips.
- Again, in Minnesota, employers cannot take a tip credit against minimum wage (like many states).
- Employees may voluntarily agree to share tips, but employers should stay out of it.
And final tip – don’t forget to keep the records of wages, time cards, deductions, etc. for at least three years after their termination.
The day we’ve all been waiting for has arrived! Perhaps not quite that exciting, but the U.S. Department of Labor has finally issued its Notice of Proposed Rulemaking, its second attempt at updating the Fair Labor Standard’s Act’s (FLSA) so-called “white collar” exemptions for executive, administrative, professional, outside sales, and computer employees. As I’m sure you know (or you can read ad nauseum on my blog), in order to qualify to be exempt from the overtime regulations, an employee must meet both the salary basis test, salary level test, and the duties test.
Currently, the salary threshold is $455 per week ($23,660 annually). The proposed rule would increase that threshold to $679 per week ($35,308/year) using the same methodology as how the DOL set the 2004 salary level. This is significantly lower than the 2016 Final Rule (that was enjoined), which attempted to increase the salary threshold to $913/wk or $47,476/year. Similarly, and perhaps more significantly, the salary threshold for highly compensated employees (HCEs) will increase from the current $100,000, to $147,414 per year. This is not the same method as used in 2004, but rather was set using the method in the 2016 Final Rule.
What else is new? Well, the DOL will commit to review and update the salary threshold periodically, but importantly, where the 2016 DOL Final Rule went wrong, any new salary threshold will be updated via a notice-and-comment rulemaking – it will not be automatic. Also, similar, but slightly different than 2016, employers may use non-discretionary bonuses and incentive payments (such as commissions) that are paid at least annually to satisfy up to 10% of the salary threshold. However, if not enough is actually earned, the employer must make a catch-up payment the following year. Thus, an inside sales person making $34,000 in base salary plus $10,000 commission will meet the salary threshold. There were no proposals to the job duties test. Overall, the changes are estimated to affect $1.3 million exempt employees.
What’s next? The public has 60 days to comment on the proposed regulation from the date it is published in the Federal Register (which has not happened yet). The rulemaking docket is RIN 1235-AA20, and will be able to be found at www.regulations.gov, or more specifically here. Once the comment period closes, we wait for any changes and the published final rule, which will provide the effective date.
Given this is a wage and hour blog, I feel compelled to address the changes the U.S. Department of Labor (DOL) made on February 15, 2019, to its Field Operations Handbook (FOH). Specifically, following up to Opinion Letter FLSAS2018-27, (as I wrote about here), 30d00(f) was amended as noted in Field Assistance Bulletin No. 2019-2. This amendment clarifies that employers may make a tip credit for duties performed in a tipped occupation that relate to that occupation, and that are performed contemporaneously, or reasonably before/after tipped activities. The revision rescinds the old 20% limit on non-tipped activities. How do you know whether a job duty is tipped or non-tipped? The FOH directs DOL staff to the non-tipped duties examples at 29 C.F.R. 531.56(e), and O*Net (Occupational Information Network).
That being said, this is a Minnesota wage and hour blog, don’t cha know! Thus, in Minnesota, employers cannot take tip credits to meet minimum wage obligations. Accordingly, it is wholly irrelevant unless you have business elsewhere.
On February 13, 2019, the US Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) issued Directive 2019-04. This Directive creates the Voluntary Enterprise-wide Review Program (VERP). The concept is to provide “high performing” contractors with a voluntary compliance program. This removes those contractors from OFCCP’s normal establishment-based compliance evaluations process for up to 5 years. Employers will be able to apply for the program later this year. The application will include a compliance review of the contractor’s headquarters location, and some of its establishments. While the framework is out, the program is still in development, so the specifics are not clear. Thus, I suppose I’m really not saying much here that you may not already know…but stay tuned. I’ll provide more details as they become available!
As expected, several bills have been introduced in the Minnesota House this session related to wage and hour issues. However, given we are the only state in the nation to currently have a split state legislature (Democrats control the House, while the Republicans control the Senate), it’s doubtful that any of these will actually get traction. In any event, for kicks and giggles, here’s what’s brewing:
- HF0005: This bill would create a state-wide family and medical benefit insurance program. The Family and Medical Benefit Insurance Division would provide employees partial wages for up to 12 weeks for leave due to a serious health condition, pregnancy, bonding, safety leave, or family care, and up to 26 weeks for caring for military service members. The insurance program would be financed through a joint employer/employee payroll tax that is yet to be proposed.
- HF0006: This bill would impose stricter penalties on employers who fail to properly pay employees, even for non-fraudulent instances. An employer would be guilty of a gross misdemeanor for failure to pay any wages due to an employee. Further, the bill gives the Minnesota Department of Labor and Industry (MNDOLI) greater enforcement power by authorizing the issuance of subpoenas. Additionally, employers would be subject to stricter record keeping requirements, and higher fines for violations of those requirements.
- HF0011: This bill, the “Earned Sick and Safe Time Act” would mandate paid sick and safe time at the state level. Similar to the Minneapolis and St. Paul ordinances, employers would be required to provide 1 hour of paid sick/safe leave for every 30 hours an employee works, up to 48 hours a year. The bill would apply to all employers with one or more employees, and includes temporary and part-time workers who work at least 80 hours a year for the employer in Minnesota.
On January 25, 2019, the National Labor Relations Board flopped again in SuperShuttle DFW, Inc., reinstating the pre-2014 common law agency test for determining independent-contractor status (overruling FedEx Home Delivery). Why is this important if you are not a unionized employer? Well, the National Labor Relations Act (NLRA) does not require the same protections to independent contractors as it does for employees (and even employees who are not unionized have NLRA protections). For example, Section 7 of the NLRA gives employees the right to self-organize, engage in union actives, and engage or refrain from protected concerted activities. Because the NLRA excludes independent contractors from the definition of employee, Section 7 rights are not applicable to independent contractors, nor are the protections that the NLRA affords to employees.
Under the common law agency test, the Board considers factors such as the extent of control the employer exerts over the individual’s work, the skill required in the position, and/or who provides the work supplies. None of the common law factors are decisive, and “all incidents of the relationship must be assessed and weighed.” The Board held, “going forward we will continue to consider how the evidence in a particular case, (viewed as it must be) in light of all the common-law factors, reveals whether the workers at issue possess entrepreneurial opportunity. Funny enough, the Board noted (in a footnote), that cases in this area have not been, “entirely consistent.” Who said judge’s don’t have sense of humor!
Admittedly, I’m a little late blogging about this one…not sure how it escaped me. It is slightly old news, but important for home health care providers or other employers who use varying average hourly rates. The Department of Labor (DOL) issued an opinion letter on December 21, 2018 regarding the determination of minimum wage and overtime compliance with the Fair Labor Standards Act (FLSA) for employees with varying average hourly rates. Specifically, the letter concerns an employer who provides in-home health care services. The FLSA mandates employers provided all covered, nonexempt employees at least the federal minimum wage for all hours worked and overtime compensation for all hours worked in excess of 40 hours per week.
Home health care workers may be required to travel between clients’ homes during the workday. In this case, the employer calculated employees’ weekly pay by multiplying the employee’s time with clients by his or her hourly rate, and then dividing the total by the employee’s total hours worked (including time with the client and travel time). The employer compared the resulting number to federal and state minimum wage rate requirements to confirm compliance.
The DOL has previously opined an employer complies with the FLSA “[i]f the employee’s total wages for the workweek divided by compensable hours equal or exceed the applicable minimum wage.” Thus, even though the employees’ hourly rates varied each week, because the employer ensured that the average hourly pay rate always exceeded the FLSA’s minimum wage requirements for all hours worked, the DOL found the employer’s compensation plan complied with the FLSA’s minimum wage requirements.
However, the DOL remarked that the employer’s compensation plan might not comply with the FLSA’s overtime requirements. Under the FLSA, nonexempt employees must receive overtime compensation, at a minimum of one and one-half times their regular rate of pay, for all hours worked over 40 hours per week. The employer in this situation assumed a regular rate of pay of $10 per hour when calculating overtime. The DOL opined that this may violate the overtime requirements for employees whose actually regular rate of pay is greater than $10 per hour because, “neither an employer nor an employee may arbitrarily choose the regular rate of pay; it is an ‘actual fact’ based on ‘mathematical computation’.” However, if the employees’ actual regular rate of pay were less than $10 per hour the compensation plan would not violate the FLSA’s overtime requirements because an employer has the discretion to pay overtime in excess of the FLSA’s requirements. As with all opinion letters it is important to remember that they are fact specific to an individual employer. However, they serve as a general guidance for all employers in similar situations.
As 2018 comes to a close, it is a great time for employers to address lingering issues that have been on the back burner and start “fresh” in the new year. A new year is a great time to roll out changes for both administration purposes and for employees; new year, new policies. Here are some items you may want to consider auditing internally and bringing up to current if need be for a January 1, 2019 revision date:
- Wage disparities (male/female/minority)
- Job classification (exempt, non-exempt, independent contractor)
- Job descriptions (should reflect what the employee actually does – jobs morph over time)
- Incentive compensation / bonus plans (the far majority I review need significant modification as they are written by sales folks and not HR/legal and thus leave out at-will language, deductions, prepayments, “earned” versus “accrued” and payout terms with absences, discipline, termination, etc.)
- Minimum wage increases (State, Minneapolis, St. Paul)
- Safe and Sick Leave Act ordinances (Minneapolis, St. Paul, Duluth)
- Changing paid time off methods / calculations (from up front to accrual, etc. – and in compliance with any applicable ordinance)
- Overtime (calculated weekly, all hours paid, no flex time between workweeks) – also, the new federal overtime rule is expected to be published in March 2019 – stay tuned on that (I would only be guessing as to how the DOL is going to roll it out).
- Recordkeeping (best practices being followed; exempt/salaried employees can be made to record their time – which is very good to have if their classification is challenged in the future)
- Wage deduction / loans / tuition reimbursement policies