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DEPARTMENT OF LABOR’S FINAL OVERTIME RULES CHALLENGE EMPLOYERS
Superior Court Clarifies Owner Liability for Corporate Debts
Because of the Superior Court’s recent ruling in Mark Hershey Farms, Inc. v. Scott T. Robinson, et al., executives who aren’t company shareholders or other owners (such as members of a limited liability company), can never be held personally liable for a corporation’s debt, even if the executive’s behavior was reprehensible.
Judge James Continues Stay on Landlord Registration Ordinance
On December 29, 2016, Judge James, “in the interest of judicial economy,” signed a court order stating that he won’t take action on Jones, Gregg’s pending case challenging that the City’s Landlord Registration Ordinance violates Pennsylvania’s Home Rule Charter...
Act 171 Opens Doors to Minority, Women, and Veteran-Owned PA Businesses
With the federal government considering a huge infrastructure investment, Pennsylvania’s Act 171 business certification expansion will open a wide range of opportunities to our state’s minority, women, and veteran-owned businesses.
Whether new Fair Labor Standards Act overtime rules take effect in December 2016 or a recently passed House bill succeeds in delaying implementation until June 2017, start planning now to comply with the new regulations and protect your business. The new rules will inflict serious financial repercussions on non-compliant companies and individuals. Employers can be slapped with lawsuits and attorney fees, liquidated damages, and civil money penalties, not just DOL overtime pay costs. Even worse, anyone on a company’s Board of Directors or involved in payroll or classification of employees may be found individually liable. Private attorneys will diligently pursue class action suits, while the Department of Labor will be spearheading an intense enforcement campaign targeting non-compliant companies.
Here are some of the major pitfalls you’ll encounter now that the FLSA takes effect:
HIGHER PAY STANDARDS AND A NEW DUTIES TEST MEAN THAT MORE EMPLOYEES WILL BE ELIGIBLE FOR OVERTIME PAY.
In order to be exempt from overtime pay, workers will now have to earn $913 per week, or $47,476 per year, a huge increase from the old $23,660 per year limit.
Highly compensated workers now need to earn $134,004 per year to be exempt from overtime pay, instead of $100,000.
White collar workers (executive, administrative, and professional employees) must be paid on a salary basis, their pay must meet the minimum salary level, and they must meet specific duties tests to be exempt from overtime pay requirements.
The Department of Labor estimates that 4.2 million currently exempt workers will be entitled to overtime pay in the first year under the new rules; 65,000 workers newly eligible for overtime will be highly compensated workers.
The Department of Labor’s Wage and Hour Division is expected to engage in a nationwide compliance investigation to enforce the new regulations.
Beginning on January 1, 2020, the Department of Labor will automatically update pay standards every three years.
The DOL has offered a few options that may help some of your employees meet the salary threshold to be considered exempt from overtime pay:
Non-discretionary bonuses may satisfy up to 10 percent of the standard salary test requirement to be considered exempt from overtime pay. This includes bonuses designed to motivate workers to “work more efficiently,” meet production goals, or bonuses used as a retention tool, as well as commissions and bonuses tied to a percentage of profits earned in a quarter. However, if you give an annual holiday bonus, the DOL considers it as given “at the employer’s sole discretion,” and it can’t be used to satisfy the standard salary level.
“Catch-up payments” of up to 10 percent of an employee’s salary given at the end of a quarter will help your employees retain exempt status, if those employees haven’t earned enough in non-discretionary bonuses and incentive payments to meet the salary standard in that quarter.
How can you keep personnel costs in line and still comply with the new rules? Since every business is different, strategies will vary. Some employers may find it best to hire more workers to avoid overtime costs, while others may find it most cost effective to raise employee pay to the new exempt levels. Such high salaries may be out of reach for smaller businesses, who may need to retain current salaries, but eliminate or reduce overtime. Perhaps lowering wages and paying overtime is the best option for your company.
NEW RECORD-KEEPING REQUIREMENTS MUST BE FOLLOWED TO AVOID COSTLY PENALTIES.
Employers must keep records on employee hours and rate of pay, including retroactive pay recorded as an entry on pay records (amount, period covered, and date of payment) for all workers subject to overtime pay. Employers will be required to submit a form approved or provided by the Department of Labor to the Wage & Hour Division.
For overtime exempt white collar workers (executive, administrative, and professional employees), employers must keep records on work week schedules and the basis used to pay wages. Employers must report the amount earned in a week or month, plus commissions and benefits such as hospitalization, insurance plans, paid vacation, and benefit packages.
Employers will be required to preserve payroll, certificates, agreements, plans, notices, collective bargaining agreements, trusts, employment and individual contracts, and sales and purchase records for three years. Other records must be kept for two years.
Failure to keep proper records can result in substantial penalties and sanctions.
JONES, GREGG IS WORKING TO PROTECT OUR CLIENTS.
How can you avoid individual and class action lawsuits, as well as DOL liability, under the new overtime rules?
At Jones, Gregg, we are working to protect our clients. We can help you develop company policies and practices that avoid the risk of liability, and provide you with alternative approaches to rule out prosecution.
Whether new Fair Labor Standards Act overtime rules take effect in December 2016 or a recently passed House bill succeeds in delaying implementation until June 2017, start planning now to comply with the new regulations and protect your business.