Once again it’s time to peer into the crystal ball, swirl the tea leaves, consult my spirit guide and otherwise attempt to predict what wage and hour issues might be coming down the pike in the coming year.
The year 2017 saw some significant changes in wage and hour regulations, and I believe we’ll be seeing even more in 2018. It’s a busy, exciting, and possibly somewhat dangerous time! It will definitely pay to keep a close eye on wage and hour developments over the next few months.
In this article, we’ll cover the following issues:
- Worker Classification
- Joint Employment
- Tip Pooling and the Tip Credit
- Scheduling Laws
- Overtime Threshold Update
- Comp Time for Private-Sector Employees?
Worker classification — as employees versus independent contractors — continues to be a huge issue, a trend that will likely not change any time soon. While Secretary of Labor Acosta rescinded an Obama-era Administrator Interpretation (AI) on worker classification as one of his first acts in office, the Department of Labor (DOL) hasn’t issued any further clarifications, which leaves many employers up in the air looking for guidance.
Further complicating the matter is the fact that different federal agencies and courts use different worker classification tests. For instance, the DOL has one set of criteria, while the National Labor Relations Board (NLRB) has another, and the Internal Revenue Service (IRS) has their own.
The hope is that the DOL will issue revised guidance at some point in 2018 to help bring some clarity to employers.
Meanwhile, some states are moving forward to more aggressively pursue misclassification issues. For instance, right here in our home state of North Carolina, the North Carolina Employee Fair Classification Act (EFCA) will take effect on December 31, 2017. While it does not change the definition of what constitutes an independent contractor, the law makes it easier for workers to report suspected misclassification, and makes it easier for state agencies to prosecute violators. The practical effect of the law is that a single misclassification complaint could set off a full-court-press investigation into an employer’s classification of all workers.
Acroprint Recommends: The rules are in flux, it’s easy to make a mistake, and errors can be costly. We strongly advise you consult with your employment law attorney to make sure you’re complying with the most recent pronouncements. Find out which court cases apply to your region. And talk to your people to find out what they’re really doing in their day-to-day work to make sure your job descriptions are accurate. For a good initial evaluation, many experts recommend using the IRS 20-factor questionnaire. While they have recently adopted an abbreviated three-factor test, I believe the older 20-factor test is probably more useful to employers looking for guidance. You can find a copy here.
As with worker classification, uncertainly abounds in the area of joint employment. Under President Obama, the DOL took an aggressive stance toward identifying joint employment arrangements. Secretary Acosta also withdrew the Obama-era AI on the topic of joint employment, but the department has not so far issued any further guidance.
This left many employers scratching their heads, wondering if they’ll inadvertently find themselves classified as a joint employer. The good news is that many experts in the industry interpreted Secretary Acosta’s actions as a signal of a change in the DOL’s enforcement priorities — meaning that the chances of the DOL “dinging” you as a joint employer are probably less now than they were in 2016.
Meanwhile — just to add to the confusion and uncertainty — states are increasingly legislating their own definitions of “joint employer,” the NLRB has just issued a revised definition, and several cases are winding their way through the court system. Plus, in November, the U.S. House of Representatives passed H.R. 3441 (the “Save Local Business Act”) that seeks to re-define joint employment under both the Fair Labor Standards Act (FLSA) and the National Labor Relations Act (NLRA). Under the terms of this bill, joint employment would become a rare exception for franchises and most other vertical business relationships. However, the bill went to the Senate in early November and so far has seen no further action.
Acroprint Recommends: If you hire workers through a staffing agency (or if you are a staffing agency who supplies workers to others), consult regularly with your employment law attorney to make sure you stay up-to-date with any new developments in this area.
Of course, the best defense to joint-employment issues is to avoid them in the first place. If you hire workers through a staffing agency, track their time yourself, and audit the invoices you receive to ensure the workers are being appropriately paid for all the hours they work, including any overtime they might have earned.
If you run a staffing agency, you should also take steps to accurately track your employees’ work time and pay them appropriately. Fortunately, Acroprint’s AcroTime cloud-based solution makes managing a distributed workforce a breeze. With modules including time and labor tracking, payroll processing, scheduling, and HR management tools (including incident tracking, skills tracking, and performance management), AcroTime can simplify your business operations.
Tip-Pooling and the Tip Credit
First, a little background. In most states, employers of workers who regularly receive tips are allowed under certain circumstances to take a “tip credit” against the employees’ wages. The way this works is this: the employer pays a lower cash wage than the mandated minimum wage. As long as the employees’ tips added to the lower cash wage meet or exceed the required minimum wage, the employer does not have to pay the employee anything additional. However, if the combination of cash wage and tips does not equal or exceed the mandated minimum wage, the employer is required to make up the difference.
For many years, if employers chose to forego the tip credit and simply pay their workers the full mandated minimum wage, they could require participation in a “tip pool.” In a tip pool, all tips received during a shift are pooled together and shared evenly among the tipped employees. It’s worth noting that tip pooling is only allowed under the law “among employees who customarily and regularly receive tips.”
But in 2011, the DOL issued a regulation stating, “Tips are the property of the employee whether or not the employer has taken a tip credit.” This appeared to make tip pools illegal under all circumstances. The rule was controversial from the start, and there was a split among the Federal Courts as to whether it was proper.
In July 2017, the DOL announced they would not enforce the 2011 rule. As of early December, the DOL has issued a Notice of Proposed Rulemaking that would rescind the rule. After a comment period (and any revisions based on comments received) the rule will likely become final sometime in 2018. But it’s important to note: the rule has not yet been rescinded. Even though the DOL is not enforcing it, current or former employees could still bring their own FLSA lawsuits, at least until the rule is formally rescinded.
Acroprint Recommends: If you do business in a state that allows the tip credit and you want to take advantage of it, and you want to implement a tip pooling arrangement, it may pay to wait until the rule is formally rescinded.
A growing number of cities (and even one state) have recently passed laws regulating employer scheduling practices. While these usually apply to workers in the hospitality, food service or retail industries, some regulations have been broadly worded and could apply to other industries that employ workers on irregular or part-time schedules, such as car washes, doctors’ offices, warehouses, and more.
While the specific differ from one jurisdiction to another, these scheduling laws generally include the following provisions:
- Giving employees advance notice of their schedules (usually two weeks’ notice)
- Penalty pay associated with schedule changes
- A requirement to offer work to existing employees before hiring new workers
- The requirement to engage in an “interactive process” with workers regarding scheduling
- A prohibition on retaliation against employees who exercise their rights under the rules
- Specific notice and recordkeeping requirements
So far, several cities in California, Seattle (WA), and New York City, as well as the state of Oregon, have passed laws. They’re also being considered or debated in Chicago, Connecticut, North Carolina, and Ohio, among other places.
Acroprint Recommends: Keep an eye peeled for developments at the local and state level in your area. Whether scheduling laws are in place in your area or not, if you have employees who work part-time or irregular schedules, you could potentially benefit from the use of robust scheduling software, such as the Scheduling module in AcroTime. Even if your organization is not covered by scheduling laws, you can benefit from the more accurate scheduling to ensure you have the right employees at the right place and right time.
Overtime Threshold Update
Background: some employees are considered exempt from overtime regulations under the FLSA. Many people mistakenly believe that all salaried workers are exempt and do not need to be paid overtime. The fact is, while some salaried workers are exempt, each position must meet certain criteria or the worker is still due overtime, even if they’re paid a salary.
The first standard is that the worker’s salary must meet a certain threshold. Currently, the threshold is set to $455 per week (about $23,660 per year). The Obama administration proposed to raise this threshold to $913 per week (about $47,476 per year).
Several lawsuits were filed challenging the DOL’s authority to make this change, and a federal judge issued an injunction preventing implementation of the updated regulation. The Trump administration decided not to defend the proposed increase to $913 per week. However, the DOL has asked the courts to affirm the concept of a salary threshold, to help ensure the DOL has the authority to address the issue.
Members of the administration have indicated they believe the $455 per week threshold is too low, but they felt the jump to $913 per week was too much. We don’t have the details, but in the most recent fall regulatory plan, the agency indicated that in October 2018 they plan to issue a notice of proposed rulemaking with a revised threshold.
Acroprint Recommends: While businesses received a reprieve from the original planned update, we should still expect to see some sort of adjustment of the salary threshold. The amount in place currently has not been adjusted since 2004 and is actually below the poverty line for a family of four.
Your best bet is to keep an eye out for any further announcements. If all goes as planned, we will see draft regulations in late 2018. Given the usual timeline, the revised regulation would then likely take effect sometime in 2019. This gives most organizations plenty of time to prepare and adapt as needed, as long as they don’t procrastinate.
One way to minimize the impact of any changes when they occur is to ensure your salaries stay in line with the market. But doing salary surveys can be time-consuming and difficult — unless you have AcroTime! Our marketplace add-ons include access to Payscale’s comprehensive compensation database, making it simple for you to align your salary ranges to the marketplace. As an added benefit, market-based compensation can help you retain valuable workers and attract a better caliber of applicants.
Comp Time for Private-Sector Employees?
Sometimes, your employees might prefer to receive compensatory time (“comp time”) in lieu of overtime pay — to bank an hour and a half of paid time off instead of being paid an hour and a half for each hour of overtime worked. Many employers would like to be able to offer their workers the choice of comp time or pay when they work overtime.
Comp time has been an option for public-sector employees for many years, but the FLSA does not allow it for private-sector workers.
The Working Families Flexibility Act (H.R. 1180) passed the U.S. House of Representatives in May and went to the Senate. This bill would allow employers to “bank” paid time off for employees who request it when they work overtime. The employees could use the time “within a reasonable period after making the request if the use of the compensatory time does not unduly disrupt the operations of the employer.” So far, the bill has been in committee in the Senate, with no action taken.
Acroprint Recommends: There is no telling when — or if — this measure will pass the Senate, and what the final version might be. Your best bet would be to simply keep your eyes and ears open for further developments.
In the meantime, if you have employees who really want a comp time option, there is a legal alternative. You can pay them the required time-and-a-half when they work the overtime, then allow them to take unpaid time off later. Your workers get paid up front according to the requirements of the FLSA, and they still get to take time off after they work overtime. It’s a win-win! You make your workers happy and you stay out of trouble with the DOL, without incurring any additional out-of-pocket costs.
2018 is shaping up to be a dynamic year in wage and hour law. With so many issues in flux, your best bet is to make good friends with your employment law attorney. Keep in close contact to ensure you’re up to date with the latest developments in what is bound to be a year of change.
You may also want to consider implementing a solution such as AcroTime Workforce Management for tracking time, processing payroll, and managing your scheduling and HR tasks. AcroTime includes automatic software updates, so you can rest easy, knowing your solution will keep up with the times, and its flexible options mean we can support your business operations no matter what changes come down the pike.
Did you find this article useful? Subscribe to our free email newsletter and enjoy informative articles like this every month!