On July 15, 2015, the Wage and Hour Division of the Department of Labor issued guidance aimed at clarifying the distinction between “employees” and “independent contractors.” Published as an Administrator’s Interpretation, the DOL states that in its view, “most workers are employees under the Fair Labor Standards Act” (FLSA). The Administrator’s Interpretation also states that its analysis and the broad definition of employee it espouses also applies to certain other federal laws, specifically referencing the Family and Medical Leave Act. Importantly, the DOL announced a “misclassification initiative,” pursuant to which it has entered into numerous memorandum of understanding with states and the IRS to combat what it perceives as a significant, nation-wide problem of misclassification that deprives workers of important protections such as minimum wage, overtime compensation, unemployment insurance, and workers’ compensation. Read more
On June 30, 2015, the Department of Labor issued its anticipated update to the so-called “white collar exemptions” to the Fair Labor Standards Act (FLSA). The proposed rule more than doubles the minimum weekly salary threshold for the application of the Executive, Administrative, Professional, and Computer Employee overtime exemptions, and ties the rate to annual data on national wages for full-time salaried employees. The rule would increase the minimum salary for exempt employees from the current $455 per week, or $23,660 annually, to an estimated $970 per week, or $50,440 annually when the final rule issues, likely in 2016. The proposed rule would also increase the minimum compensation required to qualify for the Highly Compensated Employee exemption, from $100,000 to $122,148 annually based on current data, also tethered to annual wage rates. The regulations do not change the optional hourly payment method for qualifying computer employees, which would remain at $27.63 per hour and would not be tied to changes in national wage data.
While the proposed rule does not currently include changes to the duties tests that also must be met for each exemption, in its 285-page statement accompanying the draft rule, the DOL advises that it is considering possible changes to the duties tests, and invites comments on these and other aspects of the exemptions. For example, the DOL seeks comment on whether the duties tests “are working as intended to screen out employees who are not bona fide” exempt employees, specifically, whether employees should be required to spend a minimum amount of time performing “primary duty” work, whether the single standard duties test for each category is appropriate, and whether the “concurrent duties” regulation should be modified to prevent exempt-classification of otherwise nonexempt employees. The Department also seeks comments on various other issues relating to the exemptions, including whether the national wage data methodology is appropriate, whether employers should be permitted to credit certain payments, such as non-discretionary bonuses and commissions, toward the salary requirement, and whether any additional occupational titles or categories should be included in the regulations regarding computer and information technology sectors.
In the short term, the rule is expected to affect nearly 5 million workers who currently make less than the proposed $50,440 annual salary threshold. Still more will be impacted by the increase in the Highly Compensated Employee salary level. The ultimate impact of the new rule remains unclear, with some economists predicting that workers’ hours, and ultimately wages, will go down to compensate for the changes. The DOL will accept the public’s comments on the proposed rules, which can be submitted in writing or online until September 4, 2015. All comments are made available online at http://www.regulations.gov.
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