On March 7, 2019, The United States Department of Labor (DOL), announced a proposal to update the overtime rules under the Fair Labor Standards Act (FLSA). Under the FLSA, employers are required to pay employees at least the minimum wage for all hours worked, and overtime pay (at 1 ½ times an employee’s regular rate) for all hours worked in excess of 40 in a workweek. To be exempt from these requirements, an employee must be paid on a salary basis, at or above a set minimum weekly salary level, and meet certain specific requirements concerning their job duties. In March 2014, President Obama directed the DOL to update and modernize regulations under the FLSA governing overtime exemptions for “white collar” employees (i.e., executive, administrative and professional employees). After receiving more than 270,000 comments, in May 2016, the DOL issued a final rule, substantially increasing the minimum salary levels for the overtime-exempt classifications, from $455 per week ($23,660 per year) to $913 per week ($47,476 per year), and incorporating mechanisms to adjust the salary level in the future (“2016 Rule”). Under the 2016 Rule, the salary level needed to satisfy the highly compensated employee (HCE) exemption (which includes a less stringent “duties” test), was set at $134,004 (increased from the $100,000 threshold in effect since...
On November 22, 2016, in Nevada v. United States Department of Labor, et al., a judge in the United States District Court for the Eastern District of Texas issued a nationwide preliminary injunction enjoining the United States Department of Labor (“DOL”) from implementing and enforcing the Fair Labor Standards Act (“the FLSA”) final overtime rule that would otherwise become effective on December 1, 2016.
The United States Department of Labor (“the DOL”) has finally issued the long-awaited rules dramatically increasing the minimum salary level for the overtime-exempt classifications under the Fair Labor Standards Act (“the FLSA”). The new rules also incorporate mechanisms to adjust this salary level in the future. The effect of future adjustments will require an employer to pay wage increases unrelated to the employer’s financial condition or employee performance. The new rules will have the greatest impact on those employees currently classified as exempt but who will not meet the new minimum salary threshold. These rules go into effect December 1, 2016, a date later than DOL originally communicated, which gives employers an opportunity to conduct a self-analysis to prepare for these changes.
Supreme Court Upholds Department of Labor’s Authority to Issue Interpretive Rules Without Public Notice or Comment
Rules promulgated by agencies of the federal government can be divided into those which have the force and effect of law and those which are merely “interpretative” or provide general statements of policy concerning the agency’s view of the law. When an agency wishes to promulgate rules having the force and effect of law it must comply with the requirements of the Administrative Procedures Act (APA) by, among other things, publishing the proposed rules in advance, allowing sufficient time for public comment and responding to significant comments received. In Perez v. Mortgage Bankers Association, the United States Supreme Court addressed the issue of whether the Department of Labor (the “DOL”) was free to reverse itself about the proper interpretation of the laws over which it has enforcement responsibility without giving notice or allowing public comment of the proposed change. The Court unanimously held that the DOL was free to do so.
All employers operating in either New York or New Jersey should take note that — effective immediately — the minimum hourly wage for non-exempt employees has increased. In New York, the minimum wage is now $8.00 per hour. In New Jersey, the minimum wage is now $8.25 per hour. In these states, employers must pay at least the new minimum hourly wage to non-exempt employees for each hour worked. Other than raising the hourly minimum wage, the changes do not alter the way that overtime is calculated.
A recent Third Circuit decision, In re Enterprise Rent-A-Car Wage & Hour Employment Practices Litigation, addresses the circumstances under which a parent company will be liable under the Fair Labor Standards Act (“FLSA”) as a “joint employer” of employees of the parent’s subsidiaries. The Third Circuit’s opinion gives concrete guidance to employers confronted by the broad definition of “employer” set forth in the FLSA’s regulations, providing a standard for assessing joint employer liability. (The FLSA defines an employer as “any person acting directly or indirectly in the interest of an employer in relation to an employee.”) Although the standard announced by the Third Circuit is by no means a bright-line test, it does provide fair notice to employers of the factors that will determine joint employer status.
Third Circuit Opens the Door for “Hybrid” Wage & Hour Claims in New Jersey, Pennsylvania, Delaware, and the U.S. Virgin Islands
On March 27, 2012, the United States Court of Appeals for the Third Circuit issued a precedential decision in Knepper v. Rite Aid Corp. which dramatically alters the landscape for wage and hour litigation for employers operating in the jurisdictions within the Third Circuit, i.e., in New Jersey, Pennsylvania, Delaware, and the U.S. Virgin Islands. Specifically, the Third Circuit ruled that the procedures for litigating a class action alleging state wage and hour violations is not “inherently incompatible” with the procedures for litigating a collective action under the federal Fair Labor Standards Act (“FLSA”). As a result, courts in these jurisdictions may well see a wave of hybrid class/collective actions alleging wage and hour violations under both the FLSA and the corresponding state wage and hour laws in the same complaint.
Effective February 21, 2012, the inside salesperson exemption was re-adopted by the New Jersey Department of Labor and Workforce Development (NJDOL) as part of the Administrative Exemption contained in New Jersey’s wage and hour laws. When the NJDOL adopted the so-called “white collar” exemptions for Administrative, Executive, Professional, Outside Sales, and Computer employees as contained in the Federal Fair Labor Standards Act (“FLSA”) in September 2011, it eliminated this long-recognized exemption. As we previously reported, the NJDOL later admitted that the elimination of this exemption was inadvertent and proposed regulations to reinstate it.
In January and May 2011, we reported on a series of changes to New York Labor Law contained within the Wage Theft Prevention Act (“WTPA”). These changes are now applicable to all New York private-sector employers (including charter schools, private schools, and not-for-profit corporations). Affected New York employers must provide all employees with written pay notices at the time of hire on or before February 1 in each year.
Professionals Who Are Paid On An Hourly Basis May No Longer Be Exempt From Overtime Under New Regulations
As we previously reported on September 6, 2011, the New Jersey Department of Labor and Workforce Development (NJDOL) adopted the so-called “white collar” exemptions for Administrative, Executive, Professional, Outside Sales, and Computer employees as contained in the Federal Fair Labor Standards Act (“FLSA”). Employers are not required to pay overtime compensation (i.e. compensation at the rate of 1.5 percent of the employee’s regular hourly rate) to an employee who qualifies for one of these exemptions. The new regulations were intended to provide consistency between federal and New Jersey law. They leave open the possibility, however, that employees who previously qualified for an exemption under New Jersey law may now have to be reclassified as non-exempt. The issue is raised by the New Jersey Appellate Division’s recent decision in Anderson, et al. v. Phoenix Health Care, Inc., et al.