Late Tuesday afternoon, a federal district court judge in Texas granted a preliminary injunction to a number of plaintiffs who sued the United States Department of Labor, challenging the new overtime rules that were expected to take effect next Thursday, December 1.
The highly publicized rule would increase the salary threshold required for determining whether or not an individual is exempt from the Fair Labor Standards Act’s overtime rules. The new rule was applauded by the Obama administration and and workers’ rights groups, who cheered the fact that millions of workers would now be entitled to overtime compensation. The rules likewise was opposed by many business owners for the same reasons.
A number of states and private plaintiffs sued, claiming that the Department of Labor either had no authority to make salary a part of the exemption test or at least that the DOL exceeded whatever authority it did have. The court consolidated a number of the cases and recently considered a request to grant a preliminary injunction that would halt or delay the new rules until the court could consider the full merits of the case. The Court today granted the preliminary injunction, noting that delaying the implementation of the new rule while the case is pending would be wise, since it will be less disruptive than allowing the rule to go into effect and then potentially invalidating it after the fact.
The temporary delay places in jeopardy the final implementation of the rule, as it is expected that the final decision on the merits will not come until after January 20, 2017, when Donald Trump is sworn in as President. Some observers anticipate that President Trump and his new Labor Secretary will not defend the Obama Administration’s rule, allowing the overtime expansion to be invalidated.
We will continue to monitor this matter, but for now, it remains to be seen when, if or how these new overtime rules actually will take effect.
Last year, the US Department of Labor published a proposed rule expanding overtime entitlement for millions of workers. The Department received a significant number of comments since then, both in favor of and opposed to the proposed rule, and today the Obama administration announced a final version of the overtime exemption rule.
The rule, which will go into effect December 1, 2016, will expand the class of people who will be eligible for overtime compensation. The Fair Labor Standards Act currently requires employers to pay employees one and one half times their regular rate for all hours worked in excess of 40 hours in a workweek. Some employees, however, are exempt from this requirement if they meet certain criteria. Specifically, in order to be exempt the employee must perform certain types of duties and must be paid a certain minimum salary. It is that minimum salary threshold that is altered by the new rule.
Under the current rule, in place since 2004, that minimum threshold has been $455 per week, or $23,660, per year. The new rule would double that, to $47,476, per year.
If an employer has any employee that currently is exempt, but who is paid less than $47,476, then starting December 1, the employer has several options if he or she wishes to maintain the exemption and avoid paying the overtime premium. For example, the employer can increase the employee’s salary to some amount above that threshold, to maintain the exemption. Of course, that is most feasible for those exempt employees who already are paid some amount close to that threshold.
What is more likely, however, is that many employers will reduce the number of hours worked, to limit the likelihood of overtime compensation. Alternatively, some employers may reduce the base pay for some employees, so that the same total compensation is paid after accounting for the new premium pay.
The new rule requires perhaps the most significant change in overtime rules in more than a decade, and employers now have about six months to plan and prepare.
In a decision upsetting to many employers, the National Labor Relations Board last week expanded the concept of what it means to be “joint employers” under the National Labor Relations Act.
In some cases, two different employers can be considered “joint employers” of the same employee, meaning that both employers share statutory obligations with respect to the employees’ rights guaranteed by the Act. Previously, for two employers to be considered “joint employers” it was necessary to find that they both had “direct operational and supervisory control” over the employees. Under the new standard, though, the Board will look at new factors, including even whether the other purported employer exerts control “indirectly.”
So why does this matter?
Franchisors and franchisees are worried that their relationship will be impacted, since each could be dragged into employer-employee disputes that traditionally would have belonged to the other one alone. In addition, if franchisors are going to be responsible for the treatment of franchisee’s employees, then the franchisees could face stricter control exerted by the franchisor over employment matters that traditionally had been left to the franchisee’s control.
Similarly, an employer that subcontracts functions to another company may be considered a joint employer of the employees servicing the contract, meaning that both employers could be responsible for labor law violations involving those employees. Clearly, then, the value of utilizing subcontractors may be impacted adversely as well.
Employment relationships, including subcontracting decisions, are complex and subject to numerous standards. Contact us to discuss how this or other issues could impact your business.
Photo by Annette Bernhardt [CC BY-SA 2.0], via Wikimedia Commons
More than a year ago, a group of Northwestern University football players took the unprecedented step of filing a Petition to form a union, and until today there still was no answer to the legal question of whether or not they could. Northwestern had argued that the players were not “employees” as that term is defined by the National Labor Relations Act, which is the law that gives private sector employees the right to form, join and assist labor unions.
In March, the NLRB Regional Director ruled that they in fact were employees, and he ordered an election among the team members. Those ballots from that election, held this spring, have been sealed while the University appealed the determination that the students were in fact employees.
The full NLRB unanimously ended the matter today, though, but not by answering the question of whether the students are employees. Instead, to borrow a football concept, they punted. The Board dismissed the Petition by concluding that the NLRB had no jurisdiction over this Petition.
The statute does not give the NLRB any jurisdiction over public employers, including public (and state-related) universities. According to the NLRB, 108 of the nation’s roughly 125 Football Bowl Subdivision colleges and universities are public and therefore outside the NLRB’s jurisdiction, and in fact all other schools in the Big Ten are state affiliated schools.
The NLRB noted that many of the matters that likely would be the subject of collective bargaining are also the subject of NCAA and conference policies, and the NLRB would not have jurisdiction over those policies as applied to the vast majority of other schools. The difficulty that could come, then, from the NLRB exercising jurisdiction over issues that also are governed by NCAA and conference policy, without any jurisdiction over the overwhelming majority of schools with which Northwestern finds itself aligned, would not promote the kind of stability in labor relations that the law and the NLRB are designed to promote.
By dismissing the case due to a lack of jurisdiction, the NLRB did not answer the question of whether or not student athletes are employees under the National Labor Relations Act, so that question remains for another day. Still, this represents a significant victory for Northwestern.
Earlier this month, the United States Department of Labor published proposed regulations to expand the class of employees entitled to overtime compensation under the Fair Labor Standards Act.
The Act generally requires that employees be paid premium overtime compensation for all hours worked in excess of 40 in a workweek, but the law also contains exceptions for certain types of employees. Specifically, the regulations provide that an employer need not pay any overtime compensation if all three of the following elements are present:
- the employee is paid on a salaried basis (i.e. is paid the same amount each week regardless of the quality or quantity of work),
- the salary exceeds $455 per week ($23,660 annually), and
- the employee’s work duties fall into certain enumerated categories involving administrative, executive or professional duties.
The most notable change in the newly proposed rule would increase that $455 threshold, which has not been adjusted in more than a decade. In addition, instead of establishing a specific amount, the proposed regulations would provide for an annual adjustment to this threshold. The amount would be set at the 40th percentile of weekly earnings for full time salaried workers. Based on 2013 data for all full time salaried workers, this threshold would be $921 per week (or $47,892 annually), and the Department of Labor projects that in 2016, when the regulations likely would take effect, the amount would be approximately $970 per week ($50,440 annually).
As you can see, this change, to more than double the threshold amount, will increase greatly the number of employees eligible to paid on an overtime basis. The Department is seeking comments on the proposed rule, and we will monitor the status of the proposal. Stay tuned for updates.