Hey Compliance Warriors!
Here’s a quick update on some proposed rules regarding White Collar Exemption Salary Level, Regular Rate of Pay, and Joint Employment. Read on…
Article via: lexology.com
Welcome to Seyfarth Shaw’s newest publication, Regulatory Spring! In the weeks to come, we will take you on a deep dive into the Wage & Hour Division’s proposed rules concerning overtime exemption, the overtime rate of pay, and joint employment. Given the proliferation of litigation in these areas, the proposed rules warrant the attention of virtually every employer.
We will also use this platform to invite feedback as we prepare comments to provide to WHD. The last time WHD undertook formal rulemaking on the salary level required for the white collar overtime exemption, we were cited in the preamble to the final rule more than any other law firm. We are proud of our ability to advocate for employers, and we take seriously our opportunity to do so with respect to WHD’s three latest proposals.
For background, we intend to submit comments in response to each of the notices that set forth the new rules that WHD proposes. We have designated specific team leaders for each rule. The team leaders will be soliciting feedback from clients and other interested stakeholders in a multitude of ways, including by asking and seeking answers to questions in future issues of Regulatory Spring.
In this inaugural (and likely longest) issue, we will set the table for our future discussion by providing a high-level overview of what each of the proposals contains. Off we go!
What’s in the Proposed Rules?
White Collar Exemption Salary Level Comments Due: May 21, 2019
In this Notice of Proposed Rulemaking (NPRM)—often referred to as the “overtime rule”—WHD requests comment on the following proposals:
- An increase in the salary threshold for most white collar exemptions from the currently-enforced level of $455/week ($23,660/year) to $679/week ($35,308/year).
- An increase in the annual compensation threshold for the highly compensated employee exemption from the currently-enforced level of $100,000 to $147,414.
- A provision in the regulations that would allow employers to pay no less than 90% of the weekly threshold amount as salary, with the remaining 10% paid as nondiscretionary bonuses, incentives, or commissions. If an employee did not earn sufficient incentive compensation to meet the 10% in a designated 52-week period, employers would be responsible for making up any shortfall.
- A commitment to revisit the salary threshold every four years through notice-and-comment rulemaking.
Regular Rate of Pay Comments Due: May 28, 2019
This NPRM addresses the proper calculation of the regular rate of pay (used for calculating overtime pay). Specifically, WHD requests comment on the proposals clarifying that the following payments should not be included in the regular rate:
- The cost of providing wellness programs, onsite specialist treatment, gym access and fitness classes, and employee discounts on retail goods and services.
- Payments for unused paid leave, including paid sick leave.
- Reimbursed expenses not incurred “solely” for the employer’s benefit.
- Reimbursed travel expenses that do not exceed the maximum travel reimbursement permitted under the Federal Travel Regulation System regulations and meeting other regulatory requirements.
- Pay for time that would not otherwise qualify as “hours worked,” including bona fide meal periods, unless an agreement or established practice indicates that the parties have treated the time as hours worked.
- Overtime premiums described in sections 7(e)(5) and (6) of the FLSA (e.g., premium pay for hours in excess of 8 in a day or Sunday work), even without a prior formal contract or agreement with the employee(s).
WHD also proposes to:
- Provide examples of discretionary bonuses that may be excluded and to clarify that the label given a bonus does not determine whether it is discretionary.
- Provide additional examples of benefit plans, including accident, unemployment, and legal services, that may be excluded.
- Clarify that tuition programs, such as reimbursement programs or repayment of educational debt, could be excluded under several different provisions of the FLSA.
- Eliminate the restriction that “call-back” pay and other payments similar to call-back pay must be “infrequent and sporadic” to be excludable from an employee’s regular rate, while maintaining that such payments must not be so regular that they are essentially prearranged.
- Update its “basic rate” regulations to raise the limit from a $0.50 per week increase in overtime pay due to additional payments to a $2.90 per week increase.
Joint Employment Comments Due: June 10, 2019
The final NPRM, officially issued just this week, addresses joint employment under the FLSA. In its proposal, WHD seeks to establish a clearer standard for determining whether an entity is a joint employer under the FLSA. WHD requests comment on its proposals to:
- Implement a four factor balancing test assessing whether a putative joint employer: (1) hires or fires the employee; (2) supervises and controls the employee’s work schedules or conditions of employment; (3) determines the employee’s rate and method of payment; and (4) maintains the employee’s employment records.
- Explain that additional factors may be used to determine joint employer status, but only if they are indicative of whether the putative joint employer is (a) exercising significant control over the terms and conditions of the employee’s work; or (b) otherwise acting directly or indirectly in the interest of the employer in relation to the employee.
- Explain that an employee’s “economic dependence” on the potential joint employer does not determine the potential joint employer’s liability under the FLSA.
- Establish that ability, power, or reserved contractual right to act in relation to the employee is not relevant for determining joint employer status.
- Clarify that indirect action in relation to an employee may establish joint employer status.
- Clarify that one’s business model—for example, operating as a franchisor—does not make joint employer status more or less likely.
- Identify several business practices (e.g., providing a sample employee handbook to a franchisee) and business agreements (e.g., requiring sexual harassment policies) that do not make joint employer status more or less likely.
- Eliminate the “not completely disassociated” standard for joint employment in situations where an employee works one set of hours for an employer that simultaneously benefit another person or entity.
WHD also provides a few examples applying the rule in hypothetical scenarios.”
For more information: https://www.lexology.com/library/detail.aspx?g=8071151a-6515-485e-8031-b5ece08ebd37&utm_source=Lexology+Daily+Newsfeed&utm_medium=HTML+email+-+Body+-+General+section&utm_campaign=Lexology+subscriber+daily+feed&utm_content=Lexology+Daily+Newsfeed+2019-05-13&utm_term=