Fair Labor Standards Act Archives - Lake Effect HR & Law

Federal Court Vacates 2021 US Department of Labor Final Rule on Tipped Workers

admin — Tue, 03 Sep 2024 22:21:35 +0000

On August 23, 2024, the 5^th Circuit Court of Appeals in Texas vacated the US Department of Labor (DOL) 2021 Final Rule which had set strict guidance on the payment of tipped employees. As a reminder, the 2021 Rule had established three different categories of work that may be performed by tipped employees and specified the FLSA pay requirements for each when employers are utilizing the tip credit method of payment. Lake Effect’s prior blog on this issue provides additional information and history on this topic.

The 5^th Circuit Court vacated the Final Rule nationwide, holding that the DOL’s Rule was “contrary to the Fair Labor Standards Act’s clear statutory text” and “arbitrary and capricious.” The FLSA defines a “tipped employee” as “any employee engaged in an occupation in which he customarily and regularly receives more than $30 a month in tips.” Based upon this definition, the 5^th Circuit found that a pay analysis should focus on the field of work and the job as a whole, rather than on attempts to apportion time to specific types of tasks. Individuals who meet the definition of a “tipped employee” based upon their overall job may be paid using the tip credit method of payment. The only exception is when a tipped employee is also truly performing another discrete job, in which case they cannot be paid by the tip credit method and instead must be paid at the relevant pay rate for the other job (i.e., working as a server and also as a maintenance person).

This simplified approach to assessing the status of tipped employees for purposes of the tip credit method of payment now stands as the law of the land. Employers utilizing this method of payment should review their current pay policies and practices in light of this development. Keep in mind that state wage and hour laws may impose different and/or more stringent requirements for the payment of tipped employees, and those laws must be taken into consideration, as well. Your partners at Lake Effect can help ensure that payment of your tipped employees complies with all applicable federal and state laws.

Lake Effect is here to answer all your questions about employment laws, regulations, and new agency guidelines. We continue to monitor important legal and HR developments, as well as other information that could impact the workplace. Please watch our blogs and emails for these important updates, as well as discussions of how compliance meets culture. To dive into these issues, contact us at info@le-hrlaw.com or 1-844-333-5253.

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Employers Must Implement First FLSA Exempt Salary Increases on July 1, 2024

admin — Fri, 28 Jun 2024 01:12:43 +0000

Barring a last-minute, successful legal challenge, the Department of Labor’s final rule mandating higher salary levels for exempt employees will take effect Monday, July 1, 2024. On that date, employees whose job duties meet the test for the FLSA’s “white collar exemptions” must be paid a fixed salary of at least $844 per week, or $43,888 per year, in order to retain their exempt status (an increase from the current salary threshold of $684 per week, or $35,568 per year). As detailed in Lake Effect’s April 24, 2024 and June 2, 2024 blog posts, this is the first in a two-step mandatory increase to minimum salary levels for exempt employees under the FLSA. The second step will take effect on January 1, 2025, when employees will have to be paid a minimum of $1,128 per week, or $58,656 per year to remain exempt from the FLSA’s overtime requirements.

Lake Effect can answer remaining questions about exempt status requirements and implementation of the new FLSA minimum salary requirements.

Lake Effect provides guidance on all employment laws, regulations, and agency guidelines. We continue to monitor important legal and HR developments, as well as other information that could impact the workplace. Please watch our blogs and emails for these important updates, as well as discussions of how compliance meets culture. To dive into these issues, contact us at info@le-hrlaw.com or 1-844-333-5253.

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Be Ready on July 1: Initial Increase in Salary Level for Exempt Employees to Take Effect

admin — Sun, 02 Jun 2024 22:17:47 +0000

As we previously reported, on April 23, 2024, the US Department of Labor (DOL) issued a final rule that substantially increases the minimum salary levels for exempt employees under the Fair Labor Standards Act (FLSA). As a reminder, the Final Rule called for a 2-pronged increase in salary level threshold for both the “white collar exemptions” and “highly compensated employees,” first on July 1, 2024 and then again on January 1, 2025 (please see our prior post for further details). Further updates are scheduled to occur every three years thereafter.

Employer and business groups have raised concerns about the nature and methodology of the Final Rule and have challenged the rule on several bases. A collection of business groups filed a lawsuit to block implementation of the Final Rule in the U.S. District Court for the Eastern District of Texas. They have asked for expedited consideration of their complaint. We will continue to keep you apprised of the status of this challenge.

Until then, employers should keep the impending July 1^st deadline in mind and make preparations. As we noted in our prior blog, employers should identify those exempt employees whose current salaries do not meet DOL’s new thresholds ($43,880/year or $844/week for white collar exempt employees and $132,964/year with a base of at least $844/week for highly compensated employees). Employers should then assess whether they can maintain employees’ exempt status by increasing their salaries or whether they must convert employees to non-exempt status and comply with applicable overtime pay requirements. These decisions will require careful consideration of financial and budgetary constraints, operational needs, parity among positions and between pay grades, employee morale, and the need to attract high quality candidates with competitive compensation packages.

As we quickly approach the first effective date of July 1, 2024, Lake Effect can help assess your workforce and review your compliance options consistent with your mission, culture, compensation philosophy, and commitment to your employees. Let us help you navigate this challenging new landscape.

Lake Effect is here to answer all your questions about employment laws, regulations, and new agency guidelines. We continue to monitor important legal and HR developments, as well as other information that could impact the workplace. Please watch our blogs and emails for these important updates, as well as discussions of how compliance meets culture. To dive into these issues, contact us at info@le-hrlaw.com or 1-844-333-5253.

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US Department Of Labor Raises Salary Thresholds For Exempt Employees

admin — Thu, 25 Apr 2024 00:05:47 +0000

Employers wake up today to a daunting new landscape as they face higher salary requirements for their exempt employees. On April 23, 2024, the US Department of Labor (DOL) issued a final rule that substantially increases the minimum salary levels for exempt employees under the Fair Labor Standards Act (FLSA). If an employee’s job duties and fixed salary level meets specified requirements under the FLSA, they are deemed exempt, and employers are not required to pay them overtime under FLSA.

As set forth in the DOL’s final rule, the FLSA exempt salary thresholds will increase in two steps over the next 9 months. Effective July 1, 2024, employees whose job duties meet the test for the FLSA’s “white collar exemptions” must be paid a fixed salary of at least $844 per week, or $43,888 per year, in order to retain their exempt status (an increase from the current salary threshold of $684 per week, or $35,568 per year). Effective January 1, 2025, those employees must be paid a minimum of $1,128 per week, or $58,656 per year to remain exempt from the FLSA’s overtime requirements.

The DOL’s final rule also increases the minimum salary level for “highly compensated employees” under the FLSA. For this group of employees, the FLSA imposes a minimal, less detailed job duties test but a much higher compensation requirement to qualify for exempt status. Effective July 1, 2024, highly compensated employees must be paid a fixed salary of at least $132,964 per year, including at least $844 per week paid on a salary or fee basis in order to retain their exempt status (an increase from the current salary threshold of $107,432 per year, including at least $684 per week paid on a salary or fee basis). Effective January 1, 2025, these employees must be paid a minimum of $151,164 per year (including at least $1,128 per week paid on a salary or fee basis) to remain exempt.

In its final rule and accompanying FAQs, the DOL also specifies that beyond the increases specified at this time, it will continue to update minimum salary and compensation levels every three years based upon up-to-date wage data and methodologies. The first three-year-update will occur on July 1, 2027. Finally, the DOL confirms that it is not making any changes to the existing job duties tests for exempt employees under the FLSA.

Confronted with these new salary requirements, employers will face difficult choices. The first order of business will be to identify those exempt employees whose current salaries do not meet DOL’s new thresholds. Employers should then assess whether they can maintain employees’ exempt status by increasing their salaries or whether they must convert employees to non-exempt status and comply with applicable overtime pay requirements. These decisions will require careful consideration of financial and budgetary constraints, operational needs, parity among positions, employee morale, and the need to attract high quality candidates with competitive compensation packages.

As we quickly approach the first effective date of July 1, 2024, Lake Effect can help assess your workforce and review your compliance options consistent with your mission, culture, and commitment to your employees. Let us help you navigate this challenging new landscape.

Lake Effect is here to answer all your questions about employment laws, regulations, and new agency guidelines. We continue to monitor important legal and HR developments, as well as other information that could impact the workplace. Please watch our blogs and emails for these important updates, as well as discussions of how compliance meets culture. To dive into these issues, contact us at info@le-hrlaw.com or 1-844-333-5253.

The post US Department Of Labor Raises Salary Thresholds For Exempt Employees appeared first on Lake Effect HR & Law.

New Test for Employee vs. Independent Contractor

admin — Thu, 11 Jan 2024 16:50:03 +0000

On January 9, 2024, the US Department of Labor (DOL) released a rule setting forth the new standard for properly classifying workers as independent contractors. As a reminder, the classification of a worker as a W-2 employee or an independent contractor governs their eligibility for minimum wages, overtime pay, and other rights protected under the federal Fair Labor Standards Act (FLSA). There are also IRS tax implications and other consequences under federal and state laws. Employers who misclassify workers can face substantial liability for back pay, taxes, and other penalties.

As of March 11, 2024, the US Department of Labor (DOL) will return to the analysis it has historically used to classify workers, employing a six-factor balancing test to assess the relationship between employer and worker. The DOL’s new rule specifically rescinds a modified independent contractor test issued under the Trump Administration in 2021.

Under the DOL rule, the classification of a worker will be determined by evaluating the following six-factors:

opportunity for profit or loss depending on managerial skill;
investments by the worker and the potential employer;
degree of permanence of the work relationship;
nature and degree of potential employer’s control over the work being performed (considering issues such as scheduling, supervision, setting prices or rates, worker’s ability to work for others, etc.);
extent to which the work performed is an integral part of potential employer’s business; and
whether the worker uses specialized skills to perform the work and whether those skills contribute to business-like initiative.

These factors will be assessed under a “totality of the circumstances” approach, each one viewed equally, with no factor(s) afforded more weight than others. Furthermore, the DOL will consider additional, unspecified factors if they indicate in some way whether the worker is in business for themself, as opposed to being economically dependent on the employer for work.

With the effective date of the DOL’s new test on the horizon, now is a good time to review your workforce and the status of any independent contractors. Your partners at Lake Effect can help evaluate whether your workers are classified properly, minimizing your future exposure to hefty back pay awards and other penalties.

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