News

U.S. Department of Labor Issues Final Overtime Rule

PRESS RELEASE

WASHINGTON, DC – Today the U.S. Department of Labor announced a final rule to make 1.3 million American workers eligible for overtime pay under the Fair Labor Standards Act (FLSA).

“For the first time in over 15 years, America’s workers will have an update to overtime regulations that will put overtime pay into the pockets of more than a million working Americans,” Acting U.S. Secretary of Labor Patrick Pizzella said. “This rule brings a commonsense approach that offers consistency and certainty for employers as well as clarity and prosperity for American workers.”

“Today’s rule is a thoughtful product informed by public comment, listening sessions, and long-standing calculations,” Wage and Hour Division Administrator Cheryl Stanton remarked. “The Wage and Hour Division now turns to help employers comply and ensure that workers will be receiving their overtime pay.”

The final rule updates the earnings thresholds necessary to exempt executive, administrative, or professional employees from the FLSA’s minimum wage and overtime pay requirements, and allows employers to count a portion of certain bonuses (and commissions) towards meeting the salary level. The new thresholds account for growth in employee earnings since the currently enforced thresholds were set in 2004. In the final rule, the Department is:

  • raising the “standard salary level” from the currently enforced level of $455 to $684 per week (equivalent to $35,568 per year for a full-year worker)
  • raising the total annual compensation level for “highly compensated employees (HCE)” from the currently-enforced level of $100,000 to $107,432 per year
  • allowing employers to use nondiscretionary bonuses and incentive payments (including commissions) that are paid at least annually to satisfy up to 10 percent of the standard salary level, in recognition of evolving pay practices
  • revising the special salary levels for workers in U.S. territories and in the motion picture industry

The final rule will be effective on January 1, 2020.

The increases to the salary thresholds are long overdue in light of wage and salary growth since 2004. Nearly every person who commented on the Department’s 2017 Request for Information, participated at listening sessions in 2018 regarding the regulations, or commented on the Notice of Proposed Rulemaking agreed that the thresholds needed to be updated for this reason.

The Department estimates that 1.2 million additional workers will be entitled to minimum wage and overtime pay as a result of the increase to the standard salary level. The Department also estimates that an additional 101,800 workers will be entitled to overtime pay as a result of the increase to the HCE compensation level.

A 2016 final rule to change the overtime thresholds was enjoined by the U.S. District Court for the Eastern District of Texas on November 22, 2016, and was subsequently invalidated by that court. As of November 6, 2017, the U.S. Court of Appeals for the Fifth Circuit has held the appeal in abeyance pending further rulemaking regarding a revised salary threshold. As the 2016 final rule was invalidated, the Department has consistently enforced the 2004 level throughout the last 15 years.

More information about the final rule is available at https://www.dol.gov/whd/overtime2019/.

The Wage and Hour Division’s (WHD) mission is to promote and achieve compliance with labor standards to protect and enhance the welfare of the Nation’s workforce. WHD enforces Federal minimum wage, overtime pay, recordkeeping, and child labor requirements of the FLSA. WHD also enforces the Migrant and Seasonal Agricultural Worker Protection Act, the Employee Polygraph Protection Act, the Family and Medical Leave Act, wage garnishment provisions of the Consumer Credit Protection Act, and a number of employment standards and worker protections as provided in several immigration related statutes. Additionally, WHD administers and enforces the prevailing wage requirements of the Davis Bacon Act and the Service Contract Act and other statutes applicable to Federal contracts for construction and for the provision of goods and services.

The mission of the Department of Labor is to foster, promote, and develop the welfare of the wage earners, job seekers, and retirees of the United States; improve working conditions; advance opportunities for profitable employment; and assure work-related benefits and rights.

DOL: Workers Can Use FMLA To Attend Children’s Special Education Meetings

By Katie Clarey
An employee may use Family and Medical Leave Act (FMLA) leave to attend a Committee on Special Education (CSE) meeting regarding the educational status of the employee’s child, the U.S. Department of Labor Wage and Hour Division (WHD) said in an opinion letter released Thursday.
The individual who wrote WHD has two children with FMLA-qualifying serious health conditions, WHD said. The individual’s wife has certification from her employer enabling her to use intermittent leave to care for the children and, specifically, to take them to medical appointments. Her employer has not approved her to use FMLA leave to attend the CSE meetings, the individual told WHD. Because her attending these meetings qualifies as “‘care for a family member … with a serious health condition,'” this is a qualifying reason for intermittent FMLA leave, WHD said.
The Individuals with Disabilities Education Act (IDEA) obligates public schools to create an Individualized Education Program for any child “who receives special education and related services with input from the child and the child’s parents, teachers, school administrators, and related services personnel.” The conclusion of this letter applies to any meetings “held pursuant to the IDEA, and any applicable state or local law,” not just Committee on Special Education meetings, WHD said.
There’s one big takeaway from this letter for employers, according to Fisher Phillips Partner Myra Creighton: Don’t view the “to care for” component of the FMLA too narrowly. In this specific circumstance, a mother needed to attend a meeting to fully comprehend and give input regarding her children’s situation at school. Similar cases may arise; WHD even referenced a previous opinion letter in which it approved a worker’s request to use FMLA leave to attend a caregiving conference because her attendance was “essential to the employee’s ability to provide appropriate physical or psychological care” to her mother.

This doesn’t mean employers should approve FMLA leave for any request related to family care. Employers must strike a balance. “You need to be somewhat judicious with this kind of thing,” Creighton said. “My view is don’t have a knee-jerk response. Think through what the employee is asking you, what they are telling you they need to miss scheduled work time to do.”

Going forward, employers will want to train managers and supervisors to recognize these types of requests and involve the HR department. “If I’m the manager, I’ve got 50 million things that have to do with the business,” Creighton said. “Human resources? This is what they do.”

DOL’s latest round of opinion letters included this and two others, both focused on the Fair Labor Standards Act. Opinion letters are fact-specific, in that their scope is limited to the specific issues they address, but they can serve as a complete affirmative defense in litigation.

US Companies to Hold Steady on Wage Increases in Favor of Bonuses

By Valerie Bolden-Barrett

Money might still be the top motivator for most workers, but based on new reports from Willis Towers Watson (WTW) and global insurance broker Gallagher, companies plan to keep wage increases at or below the current 3% average by offering personalized benefits, bonuses and other variable compensation. According to Gallagher’s 2019/2020 Salary Planning Survey, companies of all sizes and industries are looking for ways to attract and retain workers who aren’t motivated by the highest salaries when job hunting. And WTW’s 2019 General Industry Salary Budget Survey showed that while employers plan to hold the line on wage increases, others plan to modestly increase discretionary bonuses or add separate promotional budgets to reward top talent in 2020.
Gallagher found that 32% to 35% of employers surveyed are reserving variable pay for executives and managers, while 22% to 25% are offering it to lower-level employees, including those eligible for overtime pay under the Fair Labor Standards Act. According to Gallagher, healthcare costs are a main reason why salary increases have capped at around 3%.
“Despite an extremely tight labor market, most employers are either not willing or fiscally unable to increase their fixed costs across-the-board by bolstering their salary budgets,” said Catherine Hartmann, WTW’s North America rewards leader. According to WTW, pay raises will continue to hover around 3% next year, but top performers can expect significantly higher increases than mediocre performers, said WTW.
The employee-driven labor market, with a 40-year-low unemployment rate, has pressured employers in some industries (particularly in manufacturing) to raise wages to attract and retain talent, ADP reported in July. Employees also repeatedly note in surveys that they would be likely to quit their current jobs for a higher salary elsewhere.

But as CEO of Gallagher Employee Benefits Consulting and Brokerage William F. Ziebell said, employers have other options. “It’s important to understand that pay increases are not the only solution for attracting and retaining employees – particularly millennials,” Ziebell said in a media release. “By leveraging tailor-made benefits and compensation strategies, organizations can create a deeper connection with their workforce and, at the same time, keep expenses in check. A few examples include flex-time or remote-working options, as well as health and wellness programs.”

U.S. Bureau of Labor Statistics data has shown that wages have been steadily climbing from year to year, but so have benefits. In an interview with HR Dive, Mary Ann Sardone of Mercer said that while wages continue inching up, they’re merely keeping up with consumer prices; therefore, employees might not be experiencing those increases. An Aon survey showed that workers’ total earning possibility, or their potential earnings between salary and variable pay, has actually decreased in recent years.

The Federal Reserve Bank of San Francisco published a letter earlier this year noting that it “[does] not foresee a sharp pickup in wage growth nationally if the labor market continues to tighten as many anticipate.” Also, employers may be reluctant to raise wages right away if the market suddenly collapses, experts previously told HR Dive. Talk of a looming recession may fortify this apprehension.