Wednesday, August 9, 2017

Update on the Overtime Law

Remember the new overtime regulations that were supposed to take effect on Dec 1, 2016? Remember all the headaches you went through last Fall trying to figure out the best way to handle those exempt employees who made less than the proposed new threshold? Remember how it all seemed to just go away but can't remember why and where things stand? Here's a reminder of what happened and an update on where things are today:

Just before Thanksgiving a Federal Judge in Texas issued an injunction to pause the new rules from going into effect on Dec. 1. In one of its last acts under the Obama administration, The Department of Labor appealed that injunction. The DOL, now under the new Trump administration, dragged its feet on that appeal while waiting to get the new Secretary of Labor confirmed and new top administrators in place. Finally, on June 30, the DOL officially dropped the appeal, as expected.  So this means the changes are dead, right?

Not so fast!  The DOL also submitted a formal Request for Information to another agency in late June signaling that the new administration and Secretary Acosta might still be considering changes. While no one expects the new salary test thresholds to be as high as the $47,476 proposed by the Obama team, even many conservatives agree that the current threshold of $23,660 is too low. 

Duties test?  To be compliant with the Fair Labor Standards Act, employers must consider both the salary test and the duties test in determining whether an employee is eligible to be classified as exempt (salaried). All the hoopla in 2016 was related to proposed changes in the salary test - but no changes were proposed for the duties test. The salary test has always been the easy part of the FLSA to understand and be in compliance with. The duties tests have always been where the gray areas are and where confusion lies. The Society of Human Resource Management (SHRM) and other lobbying groups have repeatedly asked the Department of Labor to review the duties tests.

Hopefully this Request for Information is the beginning of a process that will lead to a meaningful review of both the salary test AND the duties test this time around! Stay tuned to this blog for updates as they happen.

In the meantime, just because some of your employees meet the old salary test doesn't mean that a wage and hour division auditor would agree that they are exempt. We always recommend reviewing the duties test requirements that apply to each of your exempt positions to ensure that your exempt employee meets both standards.



Workers Comp Landmines

One of the more risk-filled areas associated with having employees is Workers Compensation insurance and the issues that surround it.  Here are a few thoughts:

1. Make Sure You Have It (if required) - in general, companies with three or more employees (part-time or full-time) are required to carry workers comp insurance. Discuss your specific situation with a licensed insurance professional as there are some exceptions. Penalties for not having it when it's required can be severe. And if you utilize 1099 workers, an injury by one of them can prompt a review of your practices and subject you to even more fines and penalties.

2. Make Sure You Report Quickly and Accurately - Bob sprains his ankle on the job. Bob says he's fine - he'll go home and put some ice on it. Bob shows up for work the next day, still limping slightly, but powers through. The company doesn't bother to report the incident to their work comp carrier because there are no medical expenses and Bob hasn't missed any time from work. Two months later, Bob's still limping. He finally goes to his doctor and discovers he has a stress fracture which will require surgery and he will be out of work for 6 weeks. Now the work comp carrier is wondering why the company is reporting an injury that happened two months ago and questioning whether the stress fracture is related to the original injury or something that may have happened since the original sprain. The owner spends a lot of time wrestling with his carrier and his broker to get the claim approved - time that he could have spent doing something productive for the business.

Had the company had Bob's injury evaluated at the time it occurred, there would be no question of liability, but the delay has now complicated the claim and, very likely, made the claim much more expensive than it would have been. 

3. Make Sure You Don't Retaliate (or even appear to) - Bob is now out of work and Mike is covering his workload. Mike seems to be getting the work done much faster than Bob did and Mike has discovered several errors that Bob made in the weeks prior to his leave of absence. The business owner has decided he really doesn't need Bob anymore because Mike is doing so well. When Bob is released to return to work, the owner tells him that he's no longer needed. Bob sues for retaliation and ultimately wins a large settlement. 

The owner is miffed because he thought working in an at-will state allowed him to let Bob go for any reason or no reason. Unfortunately for the owner, his state (as most states do) has legal protections for employees against various forms of retaliation that trump at-will employment statutes. In NC it's the Retaliation Employment Discrimination Act. So the owner tries to shift his argument that the termination was justified on business grounds, but Bob's lawyer has an easy time with it - Bob worked there for several years and his performance reviews were excellent and he was never written up. He got hurt, which cost the company money, so they fired Bob to punish him. Any reasonable person would agree that Bob's termination was in retaliation for his injury and all that stuff about Mike doing better is just a pretext for getting back at Bob. Slam dunk! 

The owner now has to file a claim with his insurance policy to cover the settlement, driving up the cost of that insurance at the same time his work comp premiums jump up - not to mention the legal fees he paid to defend his losing position!

Employee injuries and work comp exposure is one of the riskier areas that owners must manage. Unfortunately, owners sometimes outsmart themselves by making mistakes like the ones I identified above and they end up risking dollars in an effort to save nickels.