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Judge blocks rule increasing salary for workers exempt from overtime

Posted By Editor, Thursday, December 15, 2016

Contributed by Karen Davis - Senior Employment Attorney, Vigilant.
Vigilant is a sponsor of

Judge blocks rule increasing salary for workers exempt from overtime 

A federal district court has temporarily blocked a U.S. Department of Labor (DOL) regulation that would have taken effect on December 1, 2016, and raised the minimum salary for workers who are exempt from overtime. The ruling applies nationwide. The judge’s action buys more time for the parties to argue whether the rule should be permanently placed on hold. We don’t know yet how long that will take, but it’s reasonable to expect it will occur after the change in administration on January 20, 2017. The incoming Trump administration could voluntarily withdraw from defending the lawsuit, and thus leave the existing salary levels in place. This is still speculation at this point, though.

Here’s why the court decided to temporarily block the implementation of the DOL’s regulation. The federal Fair Labor Standards Act (FLSA) states that “any employee employed in a bona fide executive, administrative, or professional capacity” is exempt from overtime. Congress focused purely on workers’ duties, and didn’t establish a minimum salary. The DOL came up with the idea of a minimum salary for these exempt “white collar” workers. That salary is currently $455 per week and was scheduled to rise to $913 per week on December 1, 2016. (See our
5/18/16 Alert when the DOL published its new rules.) The court said the DOL exceeded its authority by establishing a salary that was so high that it overrode the “duties” test for the overtime exemption (State of Nevada v. U.S. Dept. of Labor, ED Tex, Nov. 22, 2016).

If an employer has already announced salary increases to employees who otherwise would have lost their exemption from overtime on December 1, 2016, the employer needs to decide how to proceed. If the increases were rolled into performance reviews, merit increases, or promotions, any reduction could create employee relations challenges. Any employer that communicated the increases purely as a legal compliance issue may be in a better position to explain why it won’t be implementing them. However, because workers may have been relying on any announced increases in planning their personal budgets, employers should proceed with caution. Also, keep in mind that any wage reductions cannot be done retroactively; employees must receive the full wage that was in effect at the time they performed the work. Stay tuned to see what happens with these overtime rules. We don’t know for certain what the court’s final ruling will ultimately be, or whether the new administration will continue to defend the lawsuit.

Karen Davis is an employment law attorney with significant experience providing advice and counsel to employers. She works with companies of all sizes, as a staff attorney for an employers' association. Connect with Karen Davis on Linkedin.

 

Tags:  DOL  employee  employment law  HR West 2017  minimum wage  Vigilant 

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It's Intern Season! How are you compensating them?

Posted By Laurie A. Pehar Borsh, Wednesday, June 17, 2015

By Shawn Edgington - Granite Insurance

Summer is here, which means internship season is here and with so many interns eager for work, it can be tempting to allow such individuals to 'volunteer' at your place of business or to pay less than the minimum wage.

In fact, you may be surprised to learn that internships are most often considered 'employment' subject to the federal minimum wage and overtime rules. 

The U.S. Department of Labor (DOL) uses certain criteria in determining whether an internship may be compensable employment under federal law, keep reading to be sure you are staying in compliance this summer.

Fair Labor Standards Act
Under the federal Fair Labor Standards Act (FLSA), interns in the for-profit private sector who qualify as employees typically must be paid at least $7.25 per hour, and not less than one and one-half times the regular rate of pay after 40 hours of work in a workweek.

Note: When both the FLSA and a state law apply, the employee is entitled to the most favorable provisions of each law. Be sure to check your state wage and hour laws for applicable requirements.

Test for Unpaid Interns
There are some circumstances under which individuals who participate in for-profit private sector internships or training programs may do so without compensation. The determination of whether an internship or training program meets this exclusion depends upon 
all of the facts and circumstances.

The Department of Labor uses the following six criteria which must be applied when making this determination:

  1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
  2. The internship experience is for the benefit of the intern;
  3. The intern does not displace regular employees, but works under close supervision of existing staff;
  4. The employer that provides the training derives no immediate advantage from the activities of the intern, and on occasion its operations may actually be impeded;
  5. The intern is not necessarily entitled to a job at the conclusion of the internship;
  6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.  

If all of the factors listed above are met, an employment relationship likely does not exist under federal law, and the FLSA's minimum wage and overtime provisions do not apply to the intern. This exclusion is narrow, because the FLSA's definition of "employ" is very broad.

Get our fact sheet and guide on how to hire interns now, it will provide you with everything you need to know about hiring interns.

About Granite Insurance
Granite Insurance Brokers provides a complete menu of Business Insurance and Employee Benefit Solutions with hundreds of top rated Insurance Companies. Granite helps companies put the pieces of the puzzle together by selecting the right solution for a specific type of business. Visit: http://www.graniteins.com/about-us.

Tags:  DOL  employee  Fair Labor Standards Act  FLSA  hr  human resources  interns  internships  management  nchra  training 

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