1. recent developments in Wage and hour law
Presented by:
Heather kaiser, jd
HR consultant

2. Agenda Update on Exempt status salary levels DOL Initiatives
DOL opinion letters

3. The salary basis
The Fair Labor Standards Act (FLSA) obligates employers to do certain things in connection with “nonexempt” employees
Pay minimum wage
Pay overtime
Keep accurate records of hours worked
FLSA also created exemptions for some EEs, including those whose job duties fall within certain employment classifications
Executive
Professional (either Learned or Creative)
Administrative
Outside sales

4. The salary basis
The Department of Labor (DOL) developed regulations requiring that, in order to be exempt from the FLSA:
An employee’s primary duties must satisfy the definitions the DOL has developed for each of the exemption categories, AND
An employee must be paid a regular salary from week to week
In other words, to be exempt you must pass both a Primary Duties test and a Salary Basis test
The minimum weekly salary necessary for exemption status has changed over the years
1938: $30 / $50 per week
2004: $455 per week / $23,660 per year (last changed 1975)
2016: $913 per week / $47,476 per year (set to go into effect 12/1/2016)

5. The salary basis
Argument was that FLSA only gives DOL the authority to define the Primary Duties test:
“The provisions of sections 6 and 7 shall not apply with respect to (1) any employee employed in a bona fide executive, administrative, professional ... capacity ... (as such terms are defined and delimited by regulations of the Administrator ...).”
November, 2016: Court issued injunction that put regulations on hold, but called into question whether DOL has the right to establish a minimum salary requirement at all
Because of how high the new Salary Basis test was, states and business groups promptly sued

6. The salary basis
Obama DOL appealed entire injunction
Trump DOL continued the appeal, but only on the issue of whether the DOL had the authority to set a minimum salary requirement
Trump DOL argued that appeal on the new salary level itself is moot, since they will be engaging in new rule making

7. The Salary basis
August 30 – Texas court concluded that the DOL’s Final Rule is invalid by going “too far”
Broad authority given to the DOL to “define and delimit” the scope of exemptions
Setting the minimum salary level at the low end of the range of prevailing salaries is consistent with Congress’s intent because salary serves as a defining characteristic when determining who, in good faith, performs actual EAP duties
The Final Rule’s doubling of the DOL’s previous minimum salary level would exclude too many employees who perform exempt duties, essentially making the duties test meaningless if the employee’s salary fell below the new salary level
Note: never conclusively states the DOL’s ability to establish a minimum salary is clearly within that power

8. The salary basis
In July DOL requested feedback from the business community on a number of questions, including:
Would updating the 2004 salary level for inflation be an appropriate basis for setting the standard salary level and, if so, what measure of inflation should be used?
Should the regulations contain multiple standard salary levels? If so, how should these levels be set (e.g. by size of employer, census region, etc.)?
Should DOL set different salary levels for the executive, administrative and professional exemptions and, if so, should there be a lower salary for executive and administrative employees?
To what extent did employers, in anticipation of the 2016 Final Rule’s effective date, increase or decrease employee salaries or make other changes to address the new threshold?
Would a test for exemption that relies solely on the duties performed by the employee without regard to the amount of salary be preferable and if so, what elements would be necessary in a duties-only test?
Does the salary level set in the 2016 Final Rule exclude from exemption particular occupations that have traditionally been covered by the exemption?
Should the salary level and the highly compensated employee total annual compensation level be automatically updated on a periodic basis?

9. FLSA Exempt status salary level
Will likely be some time before the Trump DOL’s rule making process.
Indications are that DOL will propose lower salary level, and new Labor Secretary Acosta has suggested in the past that $33,000 annually may be reasonable.
In the meantime, existing $23,660 minimum salary remains in effect.
What should employers do?
New salary level never implemented
Stay the course and follow existing rules
Implemented new salary levels and/or employees moved to nonexempt status
Roll back increases and/or reclassify employees as exempt
Law today: $23,660
2 options if implemented changes: rollback or continue

10. The salary basis
For now, the standard remains $455/week ($23,660/year), and what you should do depends on:
What you’ve already done in preparation for the new standards
What you can afford to do
What your employees want

11. Agenda Update on Exempt status salary levels DOL Initiatives
DOL opinion letters

12. DOL Initiatives

13. DOL formally withdrew both Interpretation Letters effective 6/7/17
Dol guidance
2015 DOL Administrator Interpretation Letter on independent contractors
Created a very narrow interpretation of independent contractors (“most” workers will be considered “employees”)
Focused on economic dependence of the worker
Minimized control factor
2016 DOL Administrator Interpretation Letter expanded definition of who could be considered a “joint employer” under FLSA
Effect: it became easier for one employer to be responsible for failures of other joint employer
DOL formally withdrew both Interpretation Letters effective 6/7/17
No change in law, but sends signal that DOL will be taking a more business-friendly approach in interpreting the law

14. DOL initiatives
June 7, DOL’s announced it rescinded guidance on independent contractors
The guidance essentially stated that the DOL considered most workers to be employees under the FLSA.
DOL was applying a broad definition of “employee” and “employer” when investigating a company’s practices.
The rescission will be helpful for some businesses and business groups.

15. DOL Initiatives
Misclassification of Employees as Independent Contractors
According to the DOL, the “misclassification of employees as independent contractors presents one of the most serious problems facing affected workers, employers and the entire economy.”
It is the DOL’s position that misclassified employees often are denied access to critical benefits and protections they are entitled to by law, such as the minimum wage, overtime compensation, family and medical leave, unemployment insurance, and safe workplaces.
The DOL states that employee misclassification generates substantial losses to the federal government and state governments in the form of lower tax revenues, as well as to state unemployment insurance and workers’ compensation funds.
However, memorandum of understanding with Minnesota expires on October 24, 2017.

16. Dol Initiatives Focus of enforcement for DOL in recent years
2015 DOL Administrator Interpretation Letter
Narrow interpretation of IC
Focused on economic dependence of the worker
Minimized control factor
Withdrawal of letter as of 6/7/17
No change in law
Signals more business-friendly approach in interpretation though
But left without guidance presently

17. Dol initiatives Withdrawal of letter as of June 7, 2017
DOL Administrator Interpretation Letter January 20, 2016
Horizontal v. vertical joint employment
Effect: more employers considered joint employers, creating additional exposure for failures of other joint employer
Withdrawal of letter as of June 7, 2017
No change in law
Signals more business-friendly approach in interpretation though
But left without guidance presently

18. Dol initiatives New rule making process from Trump DOL
More guidance from DOL/Acosta
New regulations
Revising regulations
DOL still has authority on the interpretation of the duties test
Expect changes to the regulations and opinion of what types of duties will qualify under the duties test

19. Agenda Update on Exempt status salary levels DOL Initiatives
DOL opinion letters

20. Dol guidance
Formally, such as by creating and implementing regulations
Informally, such as through interpretive guidance, opinion letters, field manuals, etc.
DOL gives guidance to employers through a variety of mechanisms
Opinion letters issued for decades, but discontinued by Obama DOL in 2010, and replaced by Administrator Interpretations
Trump DOL has reinstituted opinion letters, and unofficially discontinued Administrator Interpretations

21. Dol guidance
What does a return to opinion letters mean for you? Probably not much, but
There is likely to be more guidance coming out, which can bring greater certainty to various employer practices
Business-friendly groups are likely to request opinion letters on specific subjects, and may be more likely to get the answers they want

22. lessons
Lessons
Watch for new rule making and updates on exempt status salary levels from DOL
DOL initiatives will be more business-friendly
DOL opinion letters will clarify and complicate the wage and hour arena

23. Questions / ABRC resources
Upcoming webinars (FREE SHRM and HRCI credit):
Intro to benefits administration part I: Implementing new hire benefits and key benefit concepts (Oct.18) 2 CEU
Intro to benefits administration part II: Administering employee changes, payroll and tax considerations and more (Oct. 25) 2 CEU
Wage and hour: Beyond the basics of calculating overtime (Oct. 26) 1.5 CEU
Recent developments in HR and benefits law (Oct. 27) 1 CEU
How to explain the Medicare puzzle to your employees aged 65+ and still working (Nov. 2) 1.5 CEU
Benefits during leave (Nov. 29) 2 CEU
Risk management compliance audits
Employee benefit consulting and tools
HR Hotline for clients of ABRC (guidance, templates documents, FLSA flowcharts)
Onsite training for managers and employees
Employee handbooks
Safety consulting
Heather Kaiser, J.D., HR Consultant