Changes to the white collar exemptions under the Fair Labor Standards Act (“FLSA”) are coming slowly.  Very, very slowly.  Back in May 2016, under the Obama Administration, the Department of Labor issued a Final Rule updating the regulations for the FLSA’s minimum wage and overtime executive, administrative, and professional exemptions.  That rule would, among other things, have increased the minimum salary required for most employees within these exemptions from $455 a week ($23,660 a year) to $913 a week ($47,476 a year).  In November 2016, a federal judge in Texas enjoined that regulation just nine days before it was to go into effect.

In July 2017, the Department issued a Request for Information seeking public comment on a whole series of questions relating to whether and how the Department should update the existing regulations, which have been on the books since 2004.  Those questions include such topics as whether and how to revise the salary threshold, whether to differentiate salary levels based on geographic or other criteria, and whether to even have a salary requirement at all.

The Department’s semi-annual regulatory agenda indicates that the current plan is to issue a Notice of Proposed Rulemaking regarding these exemption regulations in or about January 2019.  That date has slipped before, and it may well slip again.

Apparently feeling that it does not yet have sufficient information to be able to make an informed decision about what it should say in the proposed regulations—notwithstanding the more than 214,000 comments received to date in response to the 2017 Request—the Department has announced a series of five “listening sessions” to be held in September in Atlanta, Seattle, Kansas City, Denver, and Providence.  According to the Department’s press release, “[t]he Department plans to update the Overtime Rule, and it is interested in hearing the views of participants on possible revisions to the regulations.”

Employers interested in letting their views be known to the Department in connection with this rulemaking are may register for one or more of these two-hour sessions.  There is no charge to attend, but the Department requires registration.  Given the nature of this type of gathering, it seems unlikely that the Department will provide any insights into where the rulemaking may be headed.  Instead, the purpose seems to be for the public to express its views and for the Department to take note of those views.

If you are interested in attending, please click here for the Department’s registration link.

Wage Hour Guide ChecklistsAs readers of this blog know, EBG’s free wage-hour app is now available for download on Apple, Android, and Blackberry devices. The app puts federal wage-hour laws and those of many states at users’ fingertips.

Now, the app also includes 7 checklists that employers should find helpful.

Each of the following checklists can be accessed through the “Downloads” icon on the app, then downloaded in seconds:

  • Applying the Administrative Exemption
  • Applying the Computer Employee Exemption
  • Applying the Executive Exemption
  • Applying the Highly Compensated Employee Exemption
  • Applying the Learned Professional Exemption
  • Common FLSA Exemption Pitfalls to Avoid
  • Wage and Hour Division Investigation

We hope you will find these checklists helpful as you try to navigate the sea of complex wage hour laws with which employers must comply.

By Andrew J. Sommer

There has been a lack of clarity in California wage and hour law on how compensation must be structured to meet the “salary basis test,” particularly where an exempt employee is paid based on hours worked. However, in Negri v. Koning & Associates, the California Court of Appeal addressed this very issue and concluded that a compensation scheme based solely upon the number of hours worked, with no guaranteed minimum, is not considered a “salary” for the purpose of state overtime laws. 

Under California law, an employee exempt from overtime laws must regularly receive “a monthly salary of no less than two (2) times the state minimum wage for full time employment” that cannot be reduced except in enumerated exceptions. Most of the litigation over the so-called salary basis test has addressed when deductions may be made from the exempt employee’s compensation without undermining the exemption. 

In Koning & Associates, the plaintiff/employee was paid an hourly wage for 40 hours per week so that, in effect, he received an unvarying minimum amount of pay. Nevertheless, the Court found that, based on the employer’s admission that it never paid the employee a “guaranteed salary,” the employee did not meet the administrative exemption. 

Although the Court acknowledged based on precedent that the employer may calculate a salary based upon hours worked, it emphasized that this must be a “predetermined amount” that is not subject to reduction because of variations in the quality or quantity of work performed. 

The Court recognized that an employee may otherwise be compensated beyond the predetermined amount for extra work without losing the exemption. The key fact that the Court relied upon in concluding that the salary basis test was not met was the employer’s concession that it never paid a “guaranteed salary.”   

This case highlights the importance of California employers properly characterizing compensation paid to exempt employees to reflect that it is a predetermined amount, no matter how the “salary” is ultimately calculated.   

By Michael D. Thompson

From restaurants in New York to childcare providers in Arkansas to the garment industry in Southern California, Department of Labor investigators continue to uncover FLSA violations by conducting unannounced workplace inspections.

Accordingly, in January, we released our Wage and Hour Division Investigation Checklist for employers and have received terrific feedback with additional questions. Following up on your questions, we will be regularly posting FAQs as a regular feature of our Wage & Hour Defense Blog.

We previously blogged about how to prepare for an audit, and how to develop a general protocol for the investigation.  In this post, we will discuss which records should be made available to Wage Hour Investigators.

QUESTION:  Do we have to allow the DOL to inspect our private business records?  What records do we have to make available, and what documents should we withhold?

ANSWER:  Your company cannot rely on general claims of privacy or property rights as a basis for keeping the DOL from inspecting its wage and hour records .  In fact, Section 11(a) of the FLSA specifically authorizes representatives of the Department of Labor to investigate and gather data concerning wages, hours, and other employment practices:

  • The inspector may review documents showing the employer’s annual dollar volume of business transactions, involvement in interstate commerce, and/or work on government contracts.  Those documents are inspected to determine if the employer is a covered enterprise under the FLSA, or if the employees are protected by the FLSA because their work involves them in interstate commerce.

If you are certain that the FLSA applies to your company or its employees, you may wish to discuss with the inspector whether you can stipulate to coverage and therefore eliminate or streamline this part of the inspection.

  • Pursuant to Section 11(a), DOL investigators may review the wage hour records required by 29 C.F.R. Part 516.  Accordingly, an inspector may require your company to produce records for each of the company’s employees showing the employee’s (i) total daily or weekly straight-time earnings, and total premium pay for overtime hours; (ii) regular rate or pay for any workweek in which overtime compensation is paid; (iii) hours worked each workday and each workweek; and (iv) date of payment and the pay period covered by that payment.  An employer’s records must also show the amount and nature of each payment which is excluded from the “regular rate”, and any additions to or deductions from wages for each pay period.

Even if an inspection is the result of a specific complaint, the DOL generally will not limit its investigation to that complaint.  Rather, the DOL will likely review all personnel time records and payroll records to determine whether your company is in compliance with all aspects of the FLSA for all current and former employees on the employer’s payroll for the past two to three years.

  • The DOL’s Wage and Hour Division is responsible for ensuring compliance with the employment eligibility verification recordkeeping requirements.  Thus, the DOL inspector may demand access to your company’s I-9 forms.

Refusing to produce documents requested by DOL investigators will generally do little more than antagonize the DOL.  However, employers should endeavor to avoid producing:    

  • Documents that were not specifically requested:  For example, if the inspector only requests records of wages and hours worked, don’t produce your job descriptions.  Similarly, if the investigator asks for employees’ I-9 forms, don’t turn over their entire personnel files.

There is often one exception to this rule.  Hopefully, your company has implemented a policy (i) prohibiting improper deductions and (ii) including a complaint mechanism through which employees may seek reimbursement for any improper deductions.  If followed, such a policy creates “safe harbor” that can protect the exempt status of employees who are subject to improper deductions.  That policy, therefore, should be provided to the DOL investigator.

  • Any analysis of the company’s wage hour issues prepared or requested by the company itself:  A self- audit of your company’s wage and hour practices is useful in identifying and correcting violations of the FLSA.  However, the DOL is likely to accept your conclusions about any violations identified in the audit, while giving no deference to any conclusions in your favor.  Therefore, you should not provide DOL investigators with a copy of your self-audit or similar materials.               
  • Trade secret or confidential business information:  Question the request to inspect trade secret or confidential business information, and discuss whether confidential information may be redacted from the requested records.  If you do produce such records, label them “Confidential and Proprietary.”

After locating the records to be produced to the DOL inspector, you should retain the original copies of every record produced to the DOL and track all documents produced on a Document Control Log.

In our next FAQ, we will discuss how to handle a “walkaround” inspection of the facility, in which the DOL inspector observes employee duties and looks for wage and hour violations.

Be sure to check out our Wage and Hour Division Investigation Checklist for more helpful tips and advice about preparing for and managing a Wage Hour Inspection.