An insider reveals Obama’s plan to increase overtime eligibility

The Obama administration is dead set on increasing overtime availability for workers.

In fact, when President Obama announced his intention to amend the current FLSA overtime regs, even the DOL was surprised by the move.

Now employers are wondering exactly when those changes will take place and what the impact will be.
An expert’s insight

If anybody’s likely to have that info, it’s Tammy McCutchen, a former administrator of the DOL’s Wage and Hour Division (WHD).

Not only was McCutchen instrumental in drafting the most recent changes to the OT regs (enacted in 2004), she also participated in a number of recent “listening sessions” with DOL Secretary Thomas Perez on the current rulemaking process.

These sessions involve the agency soliciting the feedback and questions of employers and employment groups.

At the 2014 SHRM Conference & Exposition in Orlando, McCutchen talked about when employers can expect the final rules (not just the proposed version) as well as the methods the DOL is currently considering to overhaul the current regs.

Here are the highlights.
Ready by 2015?

The DOL recently said it expects to have proposed rules on the “white collar” OT exemption by November of this year. But when can firms expect the final rules to actually take effect?

McCutchen said she expects the DOL to move faster than usual with this rule change. In her estimation, the final rules are likely to be published by September 2015 – and likely to go into effect by January 1, 2016.
3 critical DOL questions

To come up with the most efficient way to change the regs, Secretary Perez is asking three main questions:

1. What should the salary level be moving forward? One thing is certain about the new OT regs: The salary level – currently $455 per week or $23,660/year – will be increased.
The agency is looking at the most effective ways to raise this level and according to McCutchen, these are the front-runners:
Raise the level – after adjusting for inflation – to 1975’s level. That would bump the minimum salary level all the way up to $50,000 per year and force many firms to change the status of many employees they had previously classified as exempt.
Adopt the California salary level. This method relies on auto-corrections for inflation. Based on today’s standards, that level would be $570 per week.
2. What changes should be made to the duties test? The DOL also plans to increase the availability of OT by amending the current duties test.
The agency is likely to narrow the duties test – rather than make wholesale changes – and simplify language in the current regs. It’s also likely to specifically spell out more jobs which are definitely OT exempt.
Also, the agency will probably revise the “concurrent duties” regs under the executive exemption test; this gives managers an exemption even if they’re doing the same work as direct reports.
The DOL is seriously considering adopting California’s duties test instead, which requires an exempt manager to spend more than 50% of his or her time supervising employees.
Bottom line: Prepare for more borderline workers to be eligible for OT as soon as the new regs pass.
3. What can the DOL do to streamline the process? According to McCutchen, the DOL realizes this is a massive undertaking. As a result, it’s looking to employers for suggestions and insight to make the new rules as clear and effective as possible.

Docking pay for exempt employees: What’s allowed?

Don’t feel bad if you have trouble understanding the pay-docking rules laid out by the Fair Labor Standards Act (FLSA). The regs are pretty murky.

 

As a rule of thumb, FLSA doesn’t permit deductions from exempt employees. The regs state that the amount of money a salaried employee earns can’t be dependent on the number of days or hours he or she works. You also can’t deduct money based on the quantity or quality of work the employee produces.

But – no surprise here – there are several exceptions. What happens if your company accidentally makes an improper deduction? Nothing, so long as it’s an isolated incident and the company corrects it. But if there are repeat violations, entire departments of exempt workers can suddenly transform into OT-eligible ones by the magical powers of FLSA.

Permitted and prohibited deductions

Here’s a rundown of the situations in which you can dock exempt employees pay.

  • Exempt employees do not need to be paid for any workweek in which they perform no work.
  • Exempt employees who are absent for a day or more for personal reasons other than sickness or accident. (Note that these deductions must be made only in full-day increments – not for partial-day absences.)
  • Exempt employee absences of a day or more caused by sickness or disability, if the company maintains a plan that provides compensation for loss of salary caused by sickness and disability and the employee exhausted his or her “bank” of leave.
  • Penalties imposed for violation of safety rules of major significance
  • To offset any amounts received by an employee as jury or witness fees or military pay; however, beyond those offsets, deductions may not be made for absences caused by employee jury duty, attendance as a witness or temporary military leave.
  • Unpaid disciplinary suspensions of one or more full days for breaking workplace conduct rules.
  • Partial weeks worked during the initial or final weeks of employment. For example, if Joe resigns in the middle of a workweek, pay him only for the days actually worked in that week.
  • In some cases, when a salaried/exempt employee has worked a reduced or intermittent work schedule under the Family and Medical Leave Act (FMLA). (You can convert a salaried employee to an hourly rate during the time he or she is on intermittent or reduced-workweek FMLA leave without destroying the person’s exempt status.

Red flags

On the flip side, the following deductions are FLSA red flags. These deductions can make a formerly exempt employee eligible to collect overtime:

  • Business trips. You can’t deduct salary (or run the clock on paid time off benefits) for absences related to business trips, and
  • Lack of work. If an exempt employee is ready, willing and able to work, you can’t deduct money for slow times when there’s little or no work assigned.

Court decision defines ‘reasonable’ medical leave

So many companies have landed themselves in legal trouble over “inflexible leave policies” — those requiring workers to return to work after a certain amount of leave — that many firms are hesitant to enforce such a policy any longer. But a recent appeals court ruling could mean companies have more leeway in this area than they thought.

The case is Hwang v. Kansas State University, and it hinged on the idea that all inflexible leave policies are inherently discriminatory.
Needed more than 6 months

Some background on this case: Kansas State had granted Hwang six months of leave. After she exhausted that leave time, Hwang requested additional leave.

Kansas State rejected Hwang’s request, citing its company policy which capped employees’ leave at six months, and she sued under the Rehabilitation Act — a law that covers government workers with disabilities.

It’s very similar to the Americans with Disabilities Act (ADA), and it prohibits the discrimination on the basis of an individual’s disability.

In Hwang’s lawsuit, she cited EEOC guidance and argued that Kansas State’s inflexible leave policy was inherently discriminatory. She also claimed Kansas State was required to provide her with additional leave as a reasonable accommodation.
A timeline for employers?

The court not only ruled in favor of the employer, it also offered a succinct explanation on why Hwang’s request wasn’t feasible.

The court commented on Hwang’s request for additional leave, saying it:

perhaps goes without saying that an employee who isn’t capable of working for [six months] isn’t an employee capable of performing a job’s essential functions — and that requiring an employer to keep a job open for so long doesn’t qualify as a reasonable accommodation. After all, reasonable accommodations — typically things like adding ramps or allowing more flexible working hours — are all about enabling employees to work, not to not work.

That statement is significant in and of itself because the court is essentially shooting down the argument that additional leave is a reasonable accommodation in most situations — a stance many employers feared courts were leaning toward.

Even more significant, however, is what the court said regarding the company’s six month leave policy and its ability to terminate workers who can’t return to work after their leave time is over.

According to the court, it’s:

difficult to conceive how an employee’s absence for six months … could be consistent with discharging [i.e., performing] the essential function of most any job in the national economy today.

With that statement, the court seems to be spelling out a timeline employers can use to deny additional leave, claiming more than six months of leave presents an undue hardship to business. In the past, courts have ruled that additional leave must be considered as a reasonable accommodation, but intentionally avoided mentioning specific time periods.

In fact, the closest we’ve seen is a ruling that touched on additional leave being unreasonable is a case where a court dismissed the idea that “indefinite” leave could be considered an accommodation under the ADA.

Here the court seems to be saying that keeping an employee’s position open for longer than six months would almost always present an undue hardship on the company.

Policy can ‘protect rather than threaten’

The court also offered some interesting commentary on how inflexible leave policies impact workers with disabilities.

As the court put it, these policies:

can serve to protect rather than threaten the rights of the disabled by ensuring disabled employees’ leave requests aren’t secretly singled out for discriminatory treatment, as can happen in a leave system with fewer rules, more discretion, and less transparency.

Although this decision’s certainly welcome news for employers, it’s important to remember that it’s just one appeals court — other federal circuits could certainly have ruled differently. Still, if your company ever finds itself in a similar legal snarl, it’s good to know that there is existing case law that argues in your favor.

PayrollEase Holiday Hours

Independence Day
Friday, July 4th: PAYROLL EASE and BANKS will be CLOSED

Paychecks dated Thursday, July 3rd:
You must submit your payroll on Tuesday, July 1st by 12pm/Noon

Paychecks dated Monday, July 7th:
You must submit your payroll on Wednesday, July 2nd by 12pm/Noon

Thank you and have a great holiday!

11 things that could add to HR’s workload

Based on the feds’ recently released Semiannual Regulatory Agenda, agencies like the DOL and the EEOC have some big plans for the remainder of 2014 — plans that could potentially have a major impact on HR.

So what can you expect before the end of 2014? Here are the highlights of the Spring Agenda:
DOL’s minimum wage, OT and FMLA plans

Wage and Hour Division (WHD). All in all, the DOL listed 91 regulatory items in the agenda, with five of those items specific to the WHD. Of those five, two items were listed as long-term actions — meaning the agency doesn’t have a projected date for when it may issue a proposed rule.

The good news is one of those long-term items is the “Right to Know” rule under the Fair Labor Standards Act (FLSA). If you remember, the Right to Know rule would require employers to perform a written classification analysis for every exempt employee — and share that info with all affected workers. This would add a significant administrative burden on HR pros. While it’s too soon to say the feds are abandoning the rule altogether, many benefits experts feel it’s headed in that direction.

The other long-term action item involves the Child Labor Hazardous Occupations Order, No. 7.

In terms of the action items on the WHD’s priority to-do list, the agency listed three main items:

* Obama’s overtime reg overhaul: This was listed as “Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees.” President Obama made national news when he used his authority to order the DOL to amend the current overtime regs under the FLSA. And the DOL has prioritized these rule changes as “Economically Significant” and assigned a tentative date for when the proposed rules will be issued: November of this year.
* Revised definition of “spouse” under the FMLA: Following the Supreme Court’s Defense of Marriage Act (DOMA) decision, the agency promised to amend this definition to reflect the slew of federal benefits same-sex married couples are now entitled to receive. The WHD listed this proposed rule as “imminent.”
* Executive Order 13658: Back in February, President Obama issued a proposed rule on raising the minimum wage for certain federal contractors — and the WHD needs to scramble to complete this rule by the Executive Order’s deadline of Oct. 1, 2014.

Employee Benefits Security Administration (EBSA). The main item on the EBSA’s agenda continues to be an expanded definition of fiduciary status under the Employee Retirement Income Security Act (ERISA). However, this has already been delayed several times and action may not be taken until after the November elections.

The EBSA also has plans to refine the existing fee-disclosure regs under ERISA. Specifically, it’ll focus on drafting enhanced disclosure requirements for target-date funds. Finally, the DOL’s benefits division will focus on the fiduciary implications of self-direct investment (aka, “window”) accounts for the remainder of 2014 and into 2015.
Big news from the EEOC coming

Although the EEOC has nine items on its list, there is just one new action item: Wellness programs offered through company-sponsored health plans.

The agency is looking to draft a proposed rule on how wellness incentives given to employees should be treated under federal laws like the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA). According to the EEOC, HR pros should prepare to see the ADA amended to address whether, and to what extend, the law allows employers to incentivize or penalize employees via wellness programs.

The EEOC also says it’ll make changes to the current GINA regs to: “resolve the frequently-asked question of whether employers may offer inducement to employees’ spouses or other family members who answer questions about their current medical conditions” on health risk assessments, which are sometimes included in wellness plans.

NYC Paid Sick Leave (ESTA) Update

Below is a brief summary of the NYC Paid Sick Leave. For more detailed information or to download the employee notice please click the appropriate PDF below.

* Summary of NYC Paid Sick Leave
* NYC Paid Sick Leave FAQs
* NYC Paid Sick Leave Employee Notice

Effective April 1, 2014, all employers in the NYC AREA have been affected by the Earned Sick Time Act (ESTA). Employers will be required to provide:

1. Sick leave to employees for their own care as well as care for family members
2. Paid leave for employers with 5 or more employees
3. Unpaid leave for employers with less than 5 employees

Attached is further guidance from NYC Department of Consumer Affairs. In addition, below are time sensitive items to note: Important Dates:

* February 26, 2014 – Signed by Mayor de Blasio
* April 1, 2014 – accrual begins; must distribute notice of rights to new hires
* July 30, 2014 – usage begins (Employees can begin to use accrued sick time 120 days after commencing employment or 120 days after the ESTA’s effective date, whichever is later)
* May 1, 2014 – must distribute notices to existing employees

Compliance Steps:

* Distribute written notice, including calendar year and rights information, to new hires after April 1, 2014 and to existing employees by May 1, 2014.
* Sick time accruals begin April 1, 2014.
* For employees already eligible for equal or greater PTO benefits:
o Can designate first 40 hours of paid time off as ESTA time
* For employees who are not currently eligible for paid time off benefits
o Adopt policy providing for at least minimum benefit

Written Notice Requirement:

* Attached for your convenience is the required written notice of rights to be distributed to new and current employees.
* Written notice of rights includes information regarding right to accrual and use of sick time, designated calendar year of employer, right to non-retaliation and right to file complaint with the DCA.
* Notice must be provided in English and primary language of the employee.

In Booming San Jose, Businesses Settle Into A Minimum Wage Hike

It’s been a little more than a year since San Jose, Calif., increased the city’s minimum wage by $2 per hour, with adjustments for inflation. Now at $10.15 an hour, it’s one of the state’s highest.

Back in 2012, as voters were debating the wage hike, some in the restaurant and hospitality industry warned that an increase would be bad for the sector. It would deter new businesses from opening, they said, and would cause existing businesses to slash hours for employees.

So how are San Jose’s businesses faring today? The answer is, it depends.

Read More…

Weak US Economy Report Dents Global Stock Markets

SEOUL, South Korea (AP) — World stock markets were mostly weaker Friday after a government report showed the U.S. economy shrank in the first quarter and the U.S. dollar lost value against major Asian currencies.

The yen gained against the greenback after reports that Japan’s consumer price index rose 3.2 percent in April, the highest inflation rate since 1991. Higher inflation was driven by a sales tax increase that is expected to dampen growth this quarter. The dollar fell to 101.63 yen from 101.73 yen.

Europe opened mostly lower but the drop was small. Britain’s FTSE 100 was down 0.1 percent to 6,867.07 and France’s CAC 40 dipped 0.3 percent to 4,519.33. Germany’s DAX rose 0.2 percent to 9,962.37.

Futures indicated Wall Street was set for a flat session. Dow futures stayed nearly unchanged and S&P 500 futures edged down 0.1 percent.

Japan’s Nikkei 225 declined 0.3 percent to 14,632.38 and South Korea’s Kospi slipped 0.9 percent to 1,994.96. Earlier Friday, the South Korean won strengthened to the highest level against the U.S. dollar in more than five years.

“Asian equities have remained directionless heading into the weekend and the end of the month with mixed performances across the board,” IG strategist Stan Shamu said in commentary.

Australia’s S&P/ASX 200 fell 0.5 percent to 5,492.50. Markets in Indonesia, Taiwan and New Zealand also fell.

But Hong Kong’s Hang Seng added 0.3 percent to 23,081.65. Thai stocks also rose.

Figures from the Commerce Department showed that the U.S. economy, the world’s largest, shrank by an annualized rate of 1 percent in the January-March period, far worse than the initial estimate of a 0.1 percent contraction.

Much of the blame has been pinned on the brutal winter weather that engulfed large parts of the U.S. in the early part of the year. As such, analysts said the data provide few insights about the underlying strength of the U.S. economy.

But investors in Asia didn’t take heart from figures suggesting U.S. unemployment continues to fall. The Labor Department said the number of Americans applying for unemployment benefits fell by a bigger-than-anticipated 27,000 to 300,000 last week. The fall took the 4-week moving average down to its lowest level since August 2007.

In energy markets, benchmark U.S. crude for July delivery was down 42 cents to $103.16 in electronic trading on the New York Mercantile Exchange. The contract added 86 cents to close Thursday at $103.58.

In currencies, the euro rose to $1.3614 from $1.3602 late Thursday.

US Consumer Spending Down 0.1 Percent In April

WASHINGTON (AP) — U.S. consumers cut back on spending in April for the first time in a year, taking an unexpected pause after a big jump during the previous month. The results, however, are unlikely to derail an expected spring rebound in the economy.

Consumer spending, which accounts for 70 percent of overall economic activity, fell 0.1 percent in April, the Commerce Department said Friday. The drop was the first in 12 months. But it followed a 1 percent surge in spending in March, which marked the biggest increase in more than four years.

The latest figure reflects reductions in durable goods purchases such as autos and in services such as heating bills.

Income rose 0.3 percent in April after a 0.5 percent March gain.

With spending down while Americans were earning more, the saving rate increased in April to 4 percent of after-tax income, up from a saving rate of 3.6 percent in March.

Inflation, as measured by a gauge tied to spending, showed prices rising 1.6 percent from a year ago, up from a 1.1 percent year-over-year price gain in March. However, even with the increase, inflation is still below the Federal Reserve’s 2 percent target.

In April, consumers reduced spending on durable goods such as autos by 0.5 percent, but this drop followed a big 3.6 percent jump in durable good spending in March. Consumers boosted spending on nondurable goods a slight 0.1 percent while trimming spending on services by 0.1 percent. Spending on services, which includes utility bills, had been rising rapidly during the winter, reflecting higher heating costs due to the severe cold in many parts of the country.

The rise in income was the fourth consecutive gain. The economy has been generating jobs at a solid pace in recent months including a gain of 288,000 jobs in April, the strongest uptick in hiring in two years.

Through the first quarter, consumer spending remained strong, rising at an annual rate of 3.1 percent, but much of that strength came from increased health care spending reflecting the fact that implementation of the Affordable Care Act opened up new access to the health care system.

People spent more on utilities because of the cold winter, but spending on durable goods such as autos slowed, also because of the weather.

Friday’s data follows news Thursday that the overall economy shrank 1 percent in the January-March quarter. It was the first contraction in growth in three years and was blamed on a number of special factors including an unusually harsh winter that disrupted economic activity.

Economists believe that further gains in hiring will boost consumer confidence and spending in coming months, driving overall economic growth, as measured by the gross domestic product. Some analysts believe GDP growth could hit an annual rate of 4 percent in the second quarter and top 3 percent in the second half of this year.

Consumers were more confident in May than in April, according to the Conference Board, which said its confidence index rose to 83 in May, the second highest level since January 2008, just after the recession began. The survey showed that the number of Americans who consider jobs easier to find rose to a six-year high.