Category: Overtime

Court Orders New Overtime Rules Delayed

Employers Question How To Pay Overtime Now That New Overtime Rules Delayed

By Joshua Herman

email: joshua.herman@mhtlaw.com

For now, implementation of new federal overtime regulations has been delayed. A federal court halted the December 1, 2016, implementation of the Department of Labor’s (“DOL’s”) new regulations doubling the minimum annual salary from $23,660 ($455 weekly) to $47,476 ($913 weekly) in order for an executive, administrative or professional employee to be exempt from overtime requirements. Following the court’s ruling in State of Nevada v. U.S. Dep’t of Labor, No. 16-00731 (E.D. Tex. Nov. 22, 2016), employees exempt from overtime requirements will continue – for now – to be those receiving $23,660 annually ($455 weekly).

How this change impacts Illinois employers is less than clear.

The underlying opinion (available at http://src.bna.com/kgs) is the product of a coalition of states and businesses seeking to overturn the new rule. The coalition argued the DOL overstepped its authority because the Fair Labor Standards Act (“FLSA”) enacted by Congress provides that “any employee employed in a bona fide executive, administrative, or professional capacity… as such terms are defined and delimited from time to time by regulations of the Secretary” shall be exempt from minimum wage and overtime requirements. 29 U.S.C. § 213(a)(1). The FLSA overtime exemptions do not refer to any salary requirement.  In analyzing Congress’ actual language, the court found that Congress intended to exempt employees based on their executive, administrative, or professional (“EAP”) duties, not their salaries.

The court’s preliminary injunction states the new regulations are unlawful because the DOL “exceeds its delegated authority and ignores Congress’ intent by raising the minimum salary level such that it supplants the duties test.” The court explains that “[i]f Congress intended the salary requirement to supplant the duties test, then Congress, and not the Department, should make that change.”

Despite the fact that the DOL has stated it cannot evaluate overtime exemption based on salary alone, the court found that the new rules would essentially create a de facto salary-only test. The court further held that the new regulations would cause irreparable damage due to the significant expense of compliance if they were allowed to go into effect.

The court held that public interest is best-served by an injunction, stating that:

If the Department lacks the authority to promulgate the Final Rule, then the Final Rule will be rendered invalid and the public will not be harmed by its enforcement. However, if the Final Rule is valid, then an injunction will only delay the regulation’s implementation. Due to the approaching effective date of the Final Rule, the Court’s ability to render a meaningful decision on the merits is in jeopardy. A preliminary injunction preserves the status quo while the Court determines the Department’s authority to make the Final Rule as well as the Final Rule’s validity.

Consequently, the court imposed a nationwide injunction because the DOL’s regulations are applicable to all states, extending the scope of alleged irreparable injury nationwide.

The injunction prevents the DOL from implementing and enforcing the new overtime regulations; however, the impact of this ruling on Illinois employers is less than clear. The injunction is only temporary, pending further action by that court. The court can lift the injunction at any time, or if the court makes it permanent, the injunction can be reversed upon appeal. If lifted or reversed, courts dispute whether the regulations would retroactively apply to employers who delayed implementation.

Should I implement overtime changes now that new overtime rules have been delayed?

Employers have significantly invested in preparing for the new regulations, but they are now faced with the crucial question: “Should I delay implementing changes to comply with the new regulations to avoid significant and possibly unnecessary costs, or should I proceed?” If the regulations eventually become effective, employers who violate them may be fined up to twice the unpaid overtime, civil penalties, and be responsible for employees’ attorneys’ fees.

Employers should consider the risks of further action and proceed on a case by case basis, seeking legal advice where necessary.

Generally, employers who have prepared no-cost solutions (such as limiting employees to 40 hours a week, or converting a salaried employee to hourly compensation at a rate that will not incur additional costs after considering overtime), should implement those solutions. Costly changes (such as raising an employee’s salary to the new threshold) can be delayed while the temporary injunction is in effect; however, employers should immediately begin to track impacted employee hours. If the injunction is lifted, or applied retroactively, these records should allow employers to adequately compensate employees in compliance with the new laws while minimizing potential risks associated with their delay.

Employers that have already implemented costly changes should exercise extreme caution before reverting to earlier practices. Not only will such actions have practical effects on current employee morale, they may also be prohibited based on collective bargaining requirements or other property rights employees may have in their new salaries.

It is uncertain whether the current exempt salary threshold will remain, increase as a compromise, or be completely eradicated. Further, it is unclear whether the incoming Trump administration will continue to push for these regulations, which were created at the Obama administration’s request. Only time will tell. Wise employers will pay close attention to developments on this matter.

For more information or to receive fact-specific advice, contact Joshua Herman and our Labor and Employment team.

Coins stacked in front of clock

Park Districts & Governments Must Know the New Overtime Rules and Other Legal Developments

We invite elected officials, officers, and administrative employees of local governments or park districts, and other interested parties to review how new Fair Labor Standards Act (FLSA) overtime rules will automatically extend overtime pay to over 4 million newly eligible employees. This focused seminar will also address new travel and expense reimbursement rules, as well as practical advice on implementing email and cell phone policies following recent Illinois Attorney General’s decisions subjecting private employee emails to the Freedom of Information Act (FOIA).

The seminar will include materials and educate attendees as to the following:

New FLSA Overtime Rules Impact  Local Governments & Park Districts and as of December 1, 2016

  • What will change and how the new rules apply to your employees.
  • How to identify employees exempt from the overtime requirements after the changes.
  • How to evaluate exemptions for employees who do not work year-round.
  • Whether you can still offer compensatory time instead of paying overtime.
  • Special considerations for local governments and park districts.
  • How to prepare for and minimize the impact of the new regulations.
  • Penalties for failure to comply with the new rules.

Illinois Travel and Expense Reimbursement Requirements (P.A. 99-604)

  • New prohibitions on reimbursement for “entertainment” expenses.
  • Required policies that must be adopted before employees, officers and officials may be reimbursed for travel, meal and lodging expenses.
  • How FOIA impacts records related to reimbursement under the new law.
  • The regularly “misunderstood deadline” for implementing the new travel expense reimbursement requirements.

Employee Emails and Text Messages Subject to FOIA

  • What issues and pitfalls email and text messages pose with respect to FOIA and the Open Meetings Act (OMA).
  • Important FOIA and OMA considerations that email and text-message policies should address.
  • Impacts of recent decisions regarding electronic messages, including the recent August, 2016 decision finding that employees’ private emails can be subject to FOIA.

OUR SPEAKERS

Herman presents seminar on New Overtime Rules
Joshua Herman presents seminar on New Overtime Rules to area business leaders.

Joshua HermanJoshua concentrates in advising schools and educational institutions, focusing on labor and employment, commercial law, and related litigation. He has previously been interviewed regarding the impact of the new overtime regulations by WMBD, WYZZ, and the Peoria Journal Star. In August, Joshua also lectured on the impact of the new overtime regulations in cooperation with the Small Business Development Center at Bradley University to local Small Business Leaders (pictured above). Joshua has focused on educational and local government law since 2008. He received his Bachelor’s degree in 2003 from Bradley University in Peoria, Illinois. After his deployment to Iraq as an Army Reservist 2003-2005, Joshua attended the Chicago-Kent and the University of Illinois Colleges of Law, graduating Summa Cum Laude.  Joshua was selected by the Illinois State Bar Association as Young Lawyer of the Year in 2011 and he is one of the 2014 Peoria 40 Leaders Under Forty.

Richard M. Joseph
Richard M. Joseph

Richard JosephRick has authored on the subject of the new Illinois Local Government Travel Expense Control Act and regularly advises units of local government on related matters. Rick has over 30 years’ experience in representing public bodies in all areas of practice, including experience with acquisition and sale of real estate, procurement, construction matters, public and bond financing, taxation, open meetings and public records laws, review and revision of policies and assisting public officials and employees with understanding their roles and duties, including legal  and ethical standards and assisting key staff members in fulfillment of their responsibilities.  Rick received his Bachelor’s degree in 1982 from the University of Notre Dame and his Juris Doctor from Marquette University, Cum Laude, in 1985.

Christopher Oswald
Christopher Oswald

Christopher OswaldChris has 14 years of experience counseling public bodies, and those interacting with public bodies with respect to FOIA and the Open Meetings Act.  Chris’ practice is focused on assisting local governments and private clients as general counsel and in structuring transactions relating to real estate, development incentives, construction, taxation, finance, acquisitions, and special matters unique to public bodies.   Chris received his Bachelor of Science degree in Agricultural Economics with honors from the University of Illinois at Urbana-Champaign and his Juris Doctor, Cum Laude, from Northern Illinois University College of Law.

Join us for this informative lunch and learn on October 26, 2016

5:00 p.m.  – 6:30 p.m.
Jump Trading & Simulation Center, OSF
1306 N. Berkeley Avenue • Peoria, Illinois 61603

Cost: $35 (includes handouts and Hors d’Oeuvres)
4:30 p.m. – 5:00 p.m.:    Registration and Hors d’Oeuvres
5:00 p.m. –  6:30 p.m.: Presentation, Q & A

Tiled sheet of $1 Bills

What Schools Need to Know Now about the New FLSA Overtime Regulations and Other Legal Developments

We invite school administrators, board members and other interested parties to review how new Fair Labor Standards Act (FLSA) overtime rules will automatically extend overtime pay to over 4 million newly eligible employees. The October 26, 2016 lunch-and-learn seminar will also address new travel and expense reimbursement rules, as well as practical advice on implementing email and cell phone policies following recent Illinois Attorney General’s decisions subjecting private employee emails to the Freedom of Information Act (FOIA). Do not wait to learn about these changes at the Illinois Association of School Boards’ conference – it could be too late!

The seminar will include materials and educate attendees as to the following:

New FLSA Overtime Rules Impact Schools as of December 1, 2016

  • What will change and how the new rules apply to your employees.
  • How to identify employees exempt from the overtime requirements after the changes.
  • How to evaluate exemptions for employees who do not work year-round.
  • Whether you can still offer compensatory time instead of paying overtime.
  • Special considerations for schools and educational institutions.
  • How to prepare for and minimize the impact of the new regulations.
  • Penalties for failure to comply with the new rules.

Illinois Travel and Expense Reimbursement Requirements (P.A. 99-604)

  • New prohibitions on reimbursement for “entertainment” expenses.
  • Required policies that must be adopted before employees, officers and officials may be reimbursed for travel, meal and lodging expenses.
  • How FOIA impacts records related to reimbursement under the new law.
  • The regularly “misunderstood deadline” for implementing the new travel expense reimbursement requirements.

School Emails and Text Messages Subject to FOIA

  • What issues and pitfalls email and text messages pose with respect to FOIA and the Open Meetings Act (OMA).
  • Important FOIA and OMA considerations that email and text-message policies should address.
  • Impacts of recent decisions regarding electronic messages, including the recent August, 2016 decision finding that employees’ private emails can be subject to FOIA.

OUR SPEAKERS

Herman presents seminar on New Overtime Rules
Joshua Herman presents seminar on New Overtime Rules

Joshua HermanJoshua concentrates in advising schools and educational institutions, focusing on labor and employment, commercial law, and related litigation. He has previously been interviewed regarding the impact of the new overtime regulations by WMBD, WYZZ, and the Peoria Journal Star. In August, Joshua also lectured on the impact of the new overtime regulations in cooperation with the Small Business Development Center at Bradley University to local Small Business Leaders. Joshua has focused on educational and local government law since 2008. He received his Bachelor’s degree in 2003 from Bradley University in Peoria, Illinois. After his deployment to Iraq as an Army Reservist 2003-2005, Joshua attended the Chicago-Kent and the University of Illinois Colleges of Law, graduating Summa Cum Laude.  Joshua was selected by the Illinois State Bar Association as Young Lawyer of the Year in 2011 and he is one of the 2014 Peoria 40 Leaders Under Forty.

 

Richard M. Joseph
Richard M. Joseph

Richard JosephRick has authored on the subject of the new Illinois Local Government Travel Expense Control Act and regularly advises units of local government on related matters. Rick has over 30 years’ experience in representing public bodies in all areas of practice, including experience with acquisition and sale of real estate, procurement, construction matters, public and bond financing, taxation, open meetings and public records laws, review and revision of policies and assisting public officials and employees with understanding their roles and duties, including legal  and ethical standards and assisting key staff members in fulfillment of their responsibilities.  Rick received his Bachelor’s degree in 1982 from the University of Notre Dame and his Juris Doctor from Marquette University, Cum Laude, in 1985.

 

Christopher Oswald
Christopher Oswald

Christopher OswaldChris has 14 years of experience counseling public bodies, and those interacting with public bodies with respect to FOIA and the Open Meetings Act.  Chris’ practice is focused on assisting local governments and private clients as general counsel and in structuring transactions relating to real estate, development incentives, construction, taxation, finance, acquisitions, and special matters unique to public bodies.   Chris received his Bachelor of Science degree in Agricultural Economics with honors from the University of Illinois at Urbana-Champaign and his Juris Doctor, Cum Laude, from Northern Illinois University College of Law.

Join us for this informative lunch and learn on October 26, 2016

12:00 p.m.  – 1:30 p.m.
Jump Trading & Simulation Center, OSF
1306 N. Berkeley Avenue • Peoria, Illinois 61603

Cost: $35 (includes handouts and lunch)
11:30 a.m. – 12:00 p.m.:    Registration and lunch
12:00 p.m. –  1:30 p.m.: Presentation, Q & A

Image of cashbox with money

New Overtime Rules Double Salary Requirements for Exempt Employees

On December 1, 2016, Most Employees’ Annual Salaries Must be at Least $47,476 to Qualify as Exempt from Overtime Pay Requirements

By Kathleen M. Carter

kathleen.carter@mhtlaw.com

On May 23, 2016, the Department of Labor issued new rules regarding the Fair Labor Standards Act (“FLSA”) that almost double the threshold salary requirements for employees to qualify as exempt from overtime pay requirements, raising the minimum salary from $455/weekly ($22,750 annually) to $913/weekly ($47,476 annually) (the “Adjusted Salary Threshold”). The new rules take effect on December 1, 2016, and will result in nearly 4.2 million more people qualifying for overtime pay.  Although these new rules apply to all employers, including units of local government, the FLSA also contains provisions specific to local governments.

Generally, the FLSA requires that overtime compensation be paid at a rate not less than one and one-half times a non-exempt employee’s regular rate of pay for each hour worked in excess of 40 hours per work week. Certain employees, however, are exempt from these requirements and need not be paid overtime.

In order to qualify as exempt, an employee must satisfy a “duties test” and be paid a specified minimum salary. It was this minimum salary requirement that was adjusted by the new overtime rules and with which employers must comply by December 1, 2016.

In addition to the Adjusted Salary Threshold, the new rules: (1) raised the compensation level for “highly compensated individuals” to be considered exempt to $134,004, annually; (2) defined that up to 10% of an employee’s standard salary level can come from non-discretionary bonuses, incentive payments, and commission, paid at least quarterly; and (3) established a mechanism for an automatic 3-year adjustment of the salary threshold.

Not all municipal employees will be affected by the new rules. For example, the new rules will not impact currently non-exempt hourly and salaried employees, who will continue to be entitled to overtime if they work more than 40 hours in a work week. Moreover, the new rules will not affect any employees who are not covered by the FLSA, such as independent contractors.  The FLSA also provides several exemptions unique to public bodies, such as the “small-agency” exemption for law enforcement or firefighter agencies that employ fewer than five such employees.  Otherwise, the new rules will significantly impact many municipal employees previously considered to be “exempt.”

With respect to municipal employees to whom the new rules apply, there are several options that municipal employers may use to comply with the new rules, including:

  • Raise salaries of currently exempt employees to meet the new threshold and maintain their exempt status;
  • Maintain salaries and either prohibit overtime or pay overtime for hours worked over 40;
  • Adjust wages so that when overtime is calculated, average pay remains the same; or
  • Utilize compensatory time rather than cash overtime payments (only applicable to state and local governmental employers and in certain instances).

The penalties can be steep for violations of the FLSA overtime provisions. Accordingly, regardless of the method chosen, municipal employers should review employee compensation and their “duties” classifications to ensure that they are prepared to comply with the new rules.

MHT will soon provide a seminar to public bodies that addresses the new rules and offers guidance for how public bodies should proceed. Additional information related to the new overtime rules can also be found at http://mhtlaw.com/overtime/.