Wage and Hour Update
We have seen rapid developments in wage and hour laws over the past several months that will affect a wide range of industries and professions. These developments under the Fair Labor Standards Act (“FLSA”) include Opinion Letters issued by the United States Department of Labor (“DOL”) and proposed rules by the DOL relating to exemptions from overtime and calculations of regular rates of pay. Before we overview these changes, however, we remind you that the Florida Minimum Wage increased to $8.46 per hour on January 1, 2019.
White Collar Exemptions
On March 7, 2019, the DOL issued further guidance on the much-anticipated revisions to the salary requirements for the “white collar” exemptions which include the executive, administrative, and professional exemptions. Under current law, employees who earn less than $455 per week ($23,660 annually) must be paid overtime if they work more the 40 hours per week. Under the proposed new rule, an employee must meet the minimum salary requirement of $679 per week ($35,308 annually) to be eligible for the executive, administrative or professional exemptions, as well as meeting the appropriate duties tests. The proposed rule would also allow employers to use nondiscretionary bonuses and incentive payments to satisfy up to 10% of the standard salary levels. Unlike the prior proposed rule, this rule does not include automatic adjustments to the salary level which should provide some relief to employers. The rule is not yet final and must still go through a 60-day public commenting period. We encourage all employers, however, to review their current payroll practices and determine whether they have any employees who are currently classified as exempt, but who would no longer meet the salary threshold requirement under this new rule. Having a plan in place to either move these employees to a non-exempt status, meaning that they would be entitled to overtime, or increasing their salaries to meet the threshold requirement will be essential to a smooth transition once the rule becomes effective.
Regular Rate of Pay
On March 28, 2019, the DOL issued a proposed rule regarding an employee’s regular rate of pay. The DOL has issued this proposed rule “to clarify and update regular rate requirements”. Specifically, the proposed rule will focus on “whether certain kinds of perks, benefits, or other miscellaneous items must be included in the regular rate”. The proposed clarifications could exclude items such as wellness programs, reimbursed expenses, discretionary bonuses, benefit plans, and tuition programs from an employee’s regular rate of pay. This proposed rule is still in the early stages and public commenting on the proposed rule will continue until May 28, 2019. After public commenting has ended, we will have a better idea of the potential impact of this rule on employers.
Tip Sharing Prohibitions
In March 2018, Congress amended Section 3(m) of the FLSA to explicitly prohibit employers, including managers and supervisors, from keeping any portion of an employee’s tips. This restriction applies even if the employee is paid at or above the full minimum wage and the employer does not take a tip credit. With the amendment, employers may now face liability in a private cause of action for tips unlawfully kept by the employer as well as liquidated damages. To further clarify this amendment, the DOL issued a Field Assistance Bulletin stating that it will use the duties test for the executive exemption to determine whether an employee qualifies as a “manager” or “supervisor”. The Field Assistance Bulletin also clarified that customarily non-tipped employees, such as cooks, are no longer prohibited from participating in a valid tip pool as long as the employer pays all employees participating in the tip pool the full minimum wage and does not take a tip credit for any employee participating in the tip pool. If the employer takes a tip credit, then the restriction against customarily non-tipped employees participating in the tip pool still applies. The full effect of this amendment and Field Assistance Bulletin are still being determined. In the meantime, employers should pay careful attention to the classification and duties of their employees who participate in any tip pool.
Tipped Employees and Dual Jobs
In late 2018, the DOL reissued a previously withdrawn Opinion Letter concerning dual jobs and the application of the “80/20 rule”, which capped at 20% the time tipped employees could spend on related, nontipped duties if their employer claimed a tip credit. The new Opinion Letter expressly supersedes the 80/20 rules and provides detailed guidance for employers to use in determining “on the front end which duties are related and unrelated to a tip-producing occupation so that they can take necessary steps to comply” with the FLSA. The DOL identified several principles that should be used in determining whether a particular duty is related to a tipped occupation. If is not related, the Opinion Letter indicates that the employee should be paid full minimum wage for the unrelated duties. It is still unclear how courts in Florida will apply these new principles in determining whether an employee is entitled to full minimum wage for nontipped duties. We will continue to monitor developments relating to this Opinion Letter, including the DOL’s anticipated revision of its Field Operation Handbook.
Save the Date!
We will be hosting our annual Best Employment Practices Seminar on Wednesday, October 23, 2019, at Ruth Eckerd Hall in Clearwater. The seminar will include further updates on these and other employment related topics. We will provide additional details with an opportunity to RSVP at a future date. In the meantime, if you have any questions or need clarification on any of these issues, our Labor and Employment Group is ready to assist you. Please visit our blog at ShieldingEmployers.com