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U.S. DOL Springtime Rulemaking: Overtime Threshold, Joint Employment, and Regular Rate of Pay

This spring, the U.S. Department of Labor (“DOL”) has been busy updating its rules and regulations. Here is a quick recap of some of the more impactful proposed rules that employers need to watch:

  1. $35,308 Overtime Threshold: Yes, it’s really probably going to happen this time. On March 22, 2019, the DOL published a Proposed Rule that increases the minimum salary threshold for overtime eligibility. The Proposed Rule only makes changes to the salary test, not the duties test. Under the Proposed Rule, an employee would have to earn at least $679 a week ($35,308 per year) in order to be exempt from overtime pay for any hours worked over 40 in a workweek. The current threshold is $455 a week ($23,660 a year). Of course, there could always be litigation surrounding the validity of the rule, but it’s very likely that this Proposed Rule will become final. Employers should start taking steps to comply with this rule, which is expected to become final in early 2020.

 

  1. Responsibilities of Joint Employers: On April 9, 2019, the DOL published a Proposed Rule clarifying when a joint employment relationship exists under the Fair Labor Standards Act (“FLSA”). Adoption of the Proposed Rule will result in fewer businesses being considered Joint Employers, thereby reducing the risk of joint and several liability in employment arrangements. There are a number of proposed modifications to the current joint employment rules, but most impactful is the elimination of the “not completely disassociated” standard. In its place will be a four-factor test, which analyzes whether the business actually exercises the power to 1) hire or fire the employee; 2) supervise and control an employee’s schedule and employment conditions; 3) determine an employee’s rate and method of pay; and 4) maintain an employee’s employment records. The Proposed Rule also emphasizes that economic dependence factors are not relevant to the joint employment analysis. This Proposed Rule is ripe for severe criticism, and likely litigation, as it significantly departs from the previous analysis of joint employment. But, if made final, it will provide employers with much needed clarity on this issue.

 

  1. Regular Rate of Pay under FLSA: On March 29, 2019, the DOL published a Proposed Rule that would clarify “regular rate” of pay for purposes of calculating overtime pay pursuant to the FLSA. The clarifications deal with whether certain employment perks and benefits must be included in the regular rate. For example, the Proposed Rule states that wellness programs, on-site gym facilities, payments for unused sick leave, reimbursements for expenses, and employee discounts on retail goods or services are NOT included when calculating the employee’s regular rate of pay. However, the Proposed Rule indicates that the perks that are normally excludable from the calculation must be included when the perks are tied to an employee’s quality or quantity of work, e.g., production bonuses. Those types of perks must be included in the regular rate because the perk is understood to be compensation for services, even though not directly attributable to any particular hours of work. Overall, if made final, the rule makes it easier for employers to add perks to their compensation packages without the risk of increasing their overtime costs. Employers already offering or considering offering such perks should evaluate their pay practices with assistance of an employment attorney to be sure that their pay practices comply with the FLSA regular rate rules.

The Employment Attorneys at Stock and Leader are constantly monitoring rulemaking from the DOL so that we can keep you up to date and compliant. If you have questions regarding the updates in this blog, or any other employment law issue, please feel free to contact us.

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