Tag: Overtime Exemption

FLSA Update: Minimum Salary for Exempt White-Collar Employees Increasing in 2020

It’s actually happening. The Department of Labor is increasing the minimum salary threshold for the Fair Labor Standards Act’s white-collar minimum wage and overtime exemptions. On January 1, 2020, an estimated 1.3 million executive, administrative and professional employees will lose their FLSA-exempt status. Without some form of corrective action, employers will have to start paying overtime compensation to these newly-nonexempt employees.

The current standard salary level for exempt white-collar employees is $455 per week. Under the Final Rule, the minimum standard salary level for exempt executive, administrative and professional employees will be:

Weekly:               $684       (+ $229)

Bi-weekly:           $1,368   (+ $458)

Semi-Monthly:  $1,482   (+ 496.17)

Monthly:             $2,964   (+ $992.34)

Annually:            $35,568 (+11,908)

The Final Rule also:

  • increases the total annual compensation requirement for exempt “highly compensated employees” from $100,000 to $107,432 per year;
  • allows nondiscretionary bonuses and incentive payments (including commissions) that are paid at least annually to satisfy up to 10 percent of the standard salary level; and
  • revises the special salary levels for workers in U.S. territories and in the motion picture industry.

Employers don’t have much time to evaluate options and take corrective action, which depending on the circumstances, may include:

Corrective actions should be based on business necessity and applied in a uniform, non-discriminatory manner. They must also be implemented no later than January 1 ,2020.

Since change often creates uncertainty, employers should carry Employment Practices Liability Insurance that includes limited wage & hour coverage. Please contact us if you would like to learn more about employment practices liability insurance.

Fair Labor Standards Act: Wage & Hour Law Update

What is the most recent development involving Fair Labor Standards Act? Here’s a hint. It’s not the highly-publicized rise and fall of those new white-collar overtime exemption regulations. In fact, quite a bit has happened since the Department of Labor officially abandoned its fight for new white-collar regulations in late 2017.

Opinion Letters

In June 2017, the DOL announced that it would reinstate the issuance of written opinion letters to help employers and employees better understand the FLSA. These letters provide the Wage and Hour Division’s official opinion of how the FLSA applies in the specific circumstances described by the person requesting the opinion.

On January 5, 2018, the DOL made good on its promise when it re-issued seventeen FLSA-specific opinion letters, the first in nearly a decade. These letters were originally prepared in 2009 by the departing Bush administration and quickly withdrawn under the new Obama administration. Then, on April 12th, the DOL issued two new FLSA-specific opinion letters.

This new round of opinion letters covers various topics, including:

  • Compensability of frequent rest breaks required by a serious health condition;
  • Compensability of travel time;
  • Calculation of salary deductions;
  • Salary deductions for full-day absences based on hours missed; and
  • Year-end non-discretionary bonuses.

Opinion letters are significant because they can provide an affirmative defense for actions that may otherwise be unlawful under the FLSA. An employer may avoid liability for actions:

  • Taken in good faith; and
  • In conformity with and in reliance on any written regulation, order, ruling, approval or interpretation of the DOL’s Wage and Hour Division.

Tipped Employees

In December 2017, the DOL proposed new tip regulations. Under the FLSA, employers can credit tips toward their minimum wage obligation. This “tip credit” is equal to the difference between the cash wages it pays the employee (which must be at least $2.13 per hour) and the $7.25 per hour Federal minimum wage.

Under current regulations, employees must be allowed to keep all of their tips, except for tips distributed through a tip pool. However, the tip pool must be limited to employees who customarily and regularly receive tips, like servers, bartenders and bussers. This restriction applies regardless of whether an employer claims a tip credit.

The proposed regulations remove this restriction for employers that do not take a FLSA tip credit and pay a direct cash wage of at least the full Federal minimum wage. The proposed regulations do not change the rules for employers that do claim a tip credit.

Under the proposed regulations, employers who do not take a tip credit would be allowed to share tips with back-of-house workers and other employees who do not customarily and regularly receive tips. According to the DOL, this lets employers reduce wage disparities among employees who all contribute to a customer’s experience, and also incentivizes all employees to improve customers’ experience.

The period for public comment on the proposed regulations ended February 5, 2018, so we can only wait to see what the DOL does next.

The rapidly changing FLSA can put employers at serious risk. Adjusting to change takes time, but violations can happen in the blink of an eye. Employers should consider Employment Practices Liability Insurance to protect against various employment-related claims, including limited coverage for wage and hour claims.

Please contact us if you would like to learn more about protecting your business with employment practices liability insurance.

To receive regular updates about developments which may affect your business, subscribe to Setnor Byer Insurance & Risk’s weekly risk management news brief.