A Christmas Miracle? Overtime Reform on Pause... (For Now)

Last week, a Federal district court judge in Texas ordered a preliminary injunction against the Department of Labor's Overtime Reform set to take effect on December 1, 2016.  For many of you, this is the Christmas/Holiday miracle you were waiting for.  For others, it's a reminder that overtime reform remains a controversial topic and is still not a sure thing.  Here is some key information you should know (and some thoughts for the future).

So I did all that Overtime Reform planning for nothing?!

Maybe, maybe not. The federal case that led to this preliminary injunction was initiated by various states challenging the Department of Labor's authority to initiate unilateral reform.  This is complicated legal stuff that will probably go through various appeals before a final decision is ordered.  In the meantime, the preliminary injunction preserves the status quo - meaning the current overtime laws remain in place until this lawsuit is played out.  This also means that December 1, 2016 deadline is meaningless for the time being. 

Remind me about the current Overtime laws, please.

Overtime is due to every non-exempt employee who works more than 40 hours in a workweek.  In order to be exempt from overtime (meaning that employee does not get overtime regardless of how many hours worked), the employee must meet the salary threshold and an exemption description/category.  The current law states that the salary threshold is $455 per week or $23,600 per year.  As to the exemption categories, we talked about some of there key ones in this blog post.  If the employee does not meet both the salary threshold and the exemption description/category, he or she is non-exempt and owed overtime if they work more than 40 hours in a workweek.  

^^ This will be the law you follow until the preliminary injunction expires and/or an alternative body of reform is initiated. 

What do I do while I wait?

Here's the deal:  regardless of what happens with this federal lawsuit, there is a strong likelihood overtime gets reformed.  It has been a pretty universal concept that overtime is in need of a makeover since it hasn't been updated in over a decade and the salary threshold no longer makes sense considering the purpose of overtime.  (Read more about the pros and cons of overtime reform here).  That said, I would continue to operate under the assumption that sometime (maybe soon) the salary threshold will increase.  Will it continue to be the 100%+ increase we saw earlier this year?  We simply do not know.  However, it can never hurt to be ahead of the curve and to start prepping for these changes by formulating a business plan to accommodate an increase in overtime recipients.  

To be continued.... 



If You Haven't Thought of Overtime Reform, You Should Start Yesterday.

Overtime (noun | over-time):  for non-exempt employees, hours over 40 worked in a workweek.  Synonymous with stress.  Also synonymous with hell. 

All jokes aside, the latest Overtime reform takes effect December 1, 2016.  Yes, that says 2016.  Yes, this mean overtime reform is set to take the main stage in every office in a few short months. Yes, this means if you haven't started thinking about overtime and how to deal, you need to start this now... if not yesterday.

Are you kidding me?

Nope.  Overtime reform has been floating around the DOL for a few years and finally this past Spring, overtime reform was finalized with a December 1, 2016 effective date.  This means as of December 1, 2016, certain employees who may have been "exempt" on November 30th may become "non-exempt" which means if any of these employees regularly work more than 40 hours in a  workweek, they will be seeing quite a jump in their pay check due to overtime.  This also means for employers, you may want to re-think the (non)standard 60 hour workweek, consider hiring some support staff to bring all hours below 40, or increasing the base wage for the employees who fit an exemption category but do not meet the new salary threshold.  

Wait, you said what?

Overtime reform did one primary thing: it raised the salary threshold for "exempt" employees so that less employees will qualify as "exempt" and therefore more employees will be eligible to receive overtime.  For the logic behind this mess, refer to our past post here.  Recall that the "White Collar Exemptions" are the main categories that classify an employee as exempt from overtime.  Also recall that in order to meet one of these exemptions, the employee's day-to-day job activities must fit the exemption description AND the employee must be paid a minimum salary.  This year's overtime reform adjusted the salary threshold to match inflation since the 1970's and raised it from $23,660 (or $455 per week) to $47,476 (or $913 per week).   This means as of December 1, 2016, employees making less than $47,476 per year (or $913 per week) will be owed overtime for any hour over 40 worked in a workweek.  This is even if that person fits an exemption description.  For most employers, this is going to cause some adjustments (and some brain aches).  

OK. I'm done.

Dealing with overtime reform is going to take some time, thought, and patience.  And possibly some trial and error.  Here are some things you may want to consider bringing up in your next board meeting:

1- For those who are paid less than the new salary threshold OR for those who do not fit an exemption category, you MUST start tracking their hours worked each week. This is annoying and for some employees will be a huge adjustment but you will want to make sure hours are tracked so that once they get close to 40 (or right at 40) you can send them home or prepare for overtime pay.  

2- Be prepared to pay unavoidable overtime.  If you are an employer that routinely works people over 40 hours, be prepared to pay more people more money. 

3- Give some peeps a raise.  If an employee who's duties make them fall into an exemption category but they are  paid under the salary threshold, you can give them a raise so they are paid at least $47,476 per year or $913 per week.  If they meet both the exemption description AND the salary threshold, they will remain exempt.  

4- Hire more people.  If you have a lot of work and overtime is unavoidable a lot, consider hiring more help.  Make sure these employees also track their hours and do not go over 40 in a workweek.  Adding to the workforce overall may permit workers to get their stuff done within the 40 hour workweek so that working extra hours past 40 is unnecessary.  

5- Don't rely on staffing agencies and "temps" to solve the OT problems.  There is growing literature on a new take on "joint-employer" liability that may not be good for you if you rely on staffing agencies.  

6- Contact an overtime guru for advice before doing anything.  HR consultants, attorneys, accountants, whatever.  Contrary to popular belief, modern television dramas, and our invoices, we all really do like to help and we have a lot of knowledge to share.  


SHAMELESS PLUG:  We do FREE Coffee-&-Learns if you want us to come to your office and talk about overtime reform and help brainstorm solutions.  We'll bring the coffee and leave the billable time behind. Sign up here!

Urban Outfitters & the Great Volunteer Debate of 2015

Have you heard the one about that time Urban Outfitters looked up to its employees and shouted "Volunteer for us!" and the employees whispered "no?" [*]  

Last week, Urban Outfitter's parent company URBN had execs send an email to salaried employees offering the employees the golden chance to "volunteer" over a few weekends at a packing and shipment facility.  Unfortunately for Urban Outfitters, the Fair Labor Standards Act, every Federal Circuit, and the Supreme Court agree that a volunteer is not an employee and vice versa, leading me to think URBN could use a basic "employee vs. volunteer" refresher. 

As with many great employment law debates, there is no clear cut "test" to determine if a volunteer is truly a volunteer or riding the fine line to employee-status.  However, there are some widely recognized factors courts look to under the infamous "totality of the circumstances" test.  This means any employer (public or private) should also consider these factors BEFORE classifying someone as a volunteer.  Here are the factors:

1- No Expectation of Compensation.  

This one should be a no-brainer.  We volunteer our time to certain events, functions, and groups because of the personal fulfillment and not the $$$. If an employer even slightly alludes to the fact that compensation will be received in exchange for volunteer time, you may find yourself in a heated misclassification battle that rarely ends well.  On that note, it is not wise to "test drive" an employee by having them start as a volunteer.  If the court thinks you have used the volunteer time as a vessel to employment, that may be enough to tip the cards in favor of that volunteer actually being an employee (hint: this is not good). 

2- Immediate & Primary Benefit is to the Individual and NOT the Employer.

If the "volunteer" is receiving the primary benefit of his or her work (e.g. additional knowledge for school, experience for applications, fulfilling probation requirements, etc) then they are probably classified correctly.  If the employer is the primary beneficiary of the work, not so much.  Example: You are asked by a grocery store to volunteer by bagging groceries for paying customers.  Because the grocery store is the primary beneficiary (and the work is integral to the business- see factor #3), the "volunteer" may need to be compensated as an employee for his or her time (hint: this means minimum wage, overtime, etc). 

3- Whether the Work Performed is Integral to the Employer.  

Volunteers play benign, auxiliary roles in a business.  Employees perform essential work.  Recall that the FLSA was enacted in the 1930's to combat companies with an unfair advantage by paying employees substandard (read: really low) wages.  Not paying people for work that keeps the business alive would be counter to the entire purpose behind the FLSA. 

4- No Coercion or Pressure.  

Once again, should be a no-brainer.  You cannot "force" people to volunteer.  This means it cannot be a requirement, which in turn means the "volunteer" should have the freedom to come and go without major repercussion.  You can have "rules" but you cannot have "demands." 

5- Time of the Activity & Part-Time vs. Full-Time.  

Traditionally, courts like to see volunteering that takes place outside of the volunteer's "normal working hours."  Time spent "volunteering" during normal working hours may be construed as an employee-employer relationship.  Also, courts favor volunteer terms that equate to part-time work.  Volunteering full-time is possible but it is a factor often weighed in favor of the employee-employer relationship.  

6- Similarity to Job Duties.  

Based on recent Department of Labor opinions, you cannot volunteer to do the job you already have.  In other words, it is very, very, very, very rare that someone can safely be a volunteer for the same work they do as an employee.  If a volunteer does perform work he or she typically does at their job, the DOL would argue that the volunteer is really an employee at that point and needs to be paid for the time. 

7- Length of Relationship.  

Volunteers probably shouldn't last forever.  The longer the relationship, the more likely a court will consider the relationship that of employee-employer. 

8- Non-Profits vs. For-Profits.  

The FLSA accounts for public sector and non-profit volunteerism but does not mention private sector volunteerism.  THIS IS A TRICKY SITUATION.  Courts have not been very clear on this issue but it can be assumed that "volunteering" for a for-profit company may be risky and the presumption may favor the employee-employer relationship.  All the above factors would also apply.  

To briefly conclude, I find it absurd that URBN asked its salaried employees to "volunteer" on weekends in a packing and shipment facility.  From recent news reports of the scandal, it appears the URBN exec email stated that the volunteering would be "fun" and suggested it would be similar to a team-building experience.  Please.  Even without know all the specifics of the situation, I would strongly advise URBN against this scheme and would advise any of my readers with regular volunteers to run through the factors and make sure you don't get caught up in a similar media storm.  

Also, just as a side note- these same factors are applied to the infamous "unpaid intern."  Better round-up your college interns and apply these factors to their day-to-day work.  

[*] Borrowed from the greatest book of all time. You're welcome.