Over the last couple of years, there’s been a lot of buzz going around about employee eligibility as it relates to overtime pay, minimum wage, and employee vs. independent contractor status. Hopefully we can shed some light on the subject.
In 2016 employers anxiously watched as the Department of Labor (DOL) announced a rule requiring the salary threshold for exempt employees to double. The new overtime rule required that employees see a new salary of $47,476 in order to qualify as an exempt employee and be exempt from overtime pay.This salary threshold was in addition to the duties test, which requires employees to qualify as either executive, administrative, or professional.
21 states filed suit challenging the validity of the new rule, which was to take effect on December 1, 2016.
A federal judge stopped the implementation of the rule in December 2016 and after President Trump took office, the DOL took a few months to establish a future course of action. At the end of July 2017, the DOL started taking public comment as it looked to revise a new Overtime Rule. Currently, the final outcome of the old or a new overtime rule is still uncertain.
However, even as employers anxiously wait on the DOL decision, many states have local salary thresholds rising in 2018.
Currently, the salary threshold for exempt employees rests at $455 a week or $23,660 annually. These employees are exempt from being paid overtime for hours worked over 40 each week.
Every state law is different and some exempt employees from the state minimum wage while other states only exempt the employee from overtime hours.You can search online for an updated list of all the minimum wage changes made in in 2018.
HR Professionals should be sure to be up-to-date, and work to stay up-to-date, with Fair Labor Standards Act (FLSA) and Wage & Hour Division mandates; it’s en ever changing landscape. It’s imperative to know which white-collar employees are eligible for overtime pay, who falls under minimum wage protection, who qualifies to be employed as an independent contractor, and who doesn’t, who is protected by minimum wage laws, and who isn’t, etc…
One would think the rules would cleanly clarify everything, and make it easy, but we’re dealing with government regulations, and that typically results in a bit of fog. Lawsuits surrounding the matters are pop up frequently, and on the rise. The item that generates the most investigation and legal action is related to how companies have classified employees as “exempt” from overtime law.Her are some facts:
a) Under current rules, “white-collar” employees who earn less than $455 per week ($23,660 annually) must be paid overtime.
b) Employees earning more than $100,000 who perform at least one of the defined “exempt” duties are not eligible for overtime.
c) Employees whose salaries fall in the range of $23,660-$99,999 must be analyzed to see if their job duties fall under one of the following five exemption categories: executive, professional, administrative, outside sales or computer employee. If they do, they are exempt from overtime and minimum wage compensation.
It pays to understand these facts. A company could actually end up paying out more annually in wages and overtime, to a low level professional, by not having a salary above the $23,660 level. It may be actually cheaper to pay a $25,000 salary, and avoid the overtime. Regardless, all exempt/non-exempt decisions should be based on employees’ actual job duties, not their their title, and made in accordance with the law.
Another way companies get themselves in trouble is incorrectly classifying non-exempt workers as independent contractors.There are clearly defined instructions on properly classifying workers, and it pays to get it right. Here are a few examples, from the last decade, that resulted in expensive consequences for companies.
In 2016, a popular ride sharing company settled a class action lawsuit for brought against it by drivers in California and Massachusetts for $100 million.
In 2015, DOL announced that it recovered $700,000 in back wages, damages, and penalties for over 1,000 misclassified construction industry workers in Utah and Arizona.
In 2014, a Superior Court in California ruled that a newspaper publisher had misclassified over 5,100 newspaper carriers as independent contractors.
In May 2013, the DOL helped 196 employees at a Kentucky cable installer recover over $1 million in retroactive overtime pay and other benefits.
In 2012 and 2013, after having hired 300 additional investigators, the DOL collected more than $18.2 million in back wages on behalf of 19,000 employees who had been misclassified.
We see the same kind of legal wrangling over minimum wage exemptions, and the same kind of financial sledge-hammer being used to bring companies into compliance.
– In the end, due diligence pays. It’s always best to make sure you’re operating in accordance with the law, and companies who have failed in this regard have paid dearly.
Many companies have found that the use of staffing services, like those WorkSource provides, to be an effective tool in reducing overtime, avoiding worker burnout, and maintaining legal compliance. Many have also found that they were acutally able to improve the bottom line while doing so.
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