Tag Archives: Department of Labor

Department of Labor Weighs In on New Age of Salary Servitude for ‘Executives’

Today’s post comes from guest author Roger Moore, from Rehm, Bennett & Moore.

Most of the U.S. workforce has the right, provided by the Fair Labor Standards Act, to be paid overtime for working more than 40 hours in a week. Before the federal government set rules for overtime, most employees worked longer hours, and millions of Americans worked six or seven days a week, as Chinese factory workers do today. Salaried workers also have the right to be paid a premium for overtime work, unless they fall into an exempt category as a professional, an administrator, or an executive. Exempt employees must be skilled and exercise independent judgment, or be a boss with employees to supervise. However, many companies have worked to get around these overtime rules by classifying employees like cooks, convenience store employees or restaurant workers as “managers,” “supervisors,” or “assistant managers or supervisors,” so that their employer can deny them overtime under this exception. 

In May 2016, the Department of Labor issued its final rule establishing a new minimum salary threshold for the white-collar exemptions (executive, administrative and professional) under the Fair Labor Standards Act. This new threshold of $913 per week ($47,476 annualized) more than doubles the current minimum weekly salary threshold of $455 per week ($23,660 annualized).  While that may seem like a huge increase, the old threshold level is only $2 a week above the poverty level for a family of four. Twenty-one states have filed suit to challenge this rule, citing the rule will force many businesses, including state and local governments, to unfairly and substantially increase their employment costs. 

The old rule allowed companies to put employees on “salary” at a low rate and require them to work sometimes significant overtime. The fact that so many government entities are concerned about this new rule substantially increasing their employment costs underscores the extent to which even government entities have taken advantage of employees in this fashion. Can you imagine earning $25,000/year and having to work 50, 60 or 70 hours a week? Even at 50 hours a week, that equates to an hourly wage of only $8.01!

In the first year, the department estimates that the new rule may affect, in some manner, over 10 million workers who earn between $455/week and the new $913/week threshold.  

The median worker has seen a wage increase of just 5 percent between 1979 and 2012, despite overall productivity growth of 74.5 percent (Mishel and Shierholz, 2013), according to the Economic Policy Institute. One reason Americans’ paychecks are not keeping pace with their productivity is that millions of middle-class and even lower-middle-class workers are working overtime and not getting paid for it. Before this rule change, the federal wage and hour law was out of date. This change purports to correct this modern day servitude that the law – for the last 30 years – has carved out a huge exception, allowing workers to be taken advantage of simply by assigning them a title and paying them a salary.  

 

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FLSA – Minimum Wage & Overtime

The Fair Labor Standards Act (FLSA) establishes minimum wage, overtime pay, and youth employment standards. The FLSA establishes a federal minimum wage of $7.25 per hour and requires overtime pay at a rate not less than 1.5 times the regular rate of pay after 40 hours of work in a workweek for covered nonexempt workers. Many states also have minimum wage laws and where a worker is subject to both federal and state minimum wage laws, the employee is entitled to the higher minimum wage.

Bona fide administrative, executive, professional, and outside sales employees are exempted from minimum wage and overtime pay under Section 13(a)(1) of the FLSA. However, a job title does not exempt an employee from those provisions. Instead employees must meet certain tests regarding their job duties and receive a salary of at least $455 per week ($23,600 per year). President Obama drew attention to the low salary standard in a 2014 Presidential Memorandum directing the Department of Labor to update the minimum wage and overtime standards. Effective December 1, 2016, the standard salary level will increase to $913 per week and will automatically update every three years to reflect economic changes.

Many employees are often unaware of minimum wage and overtime pay laws until it is too late. Generally, under the FLSA an employee cannot recover back pay more than two years after it is due to him. However, if the employer willfully violates the FLSA, an employee has three years to assert his claim. To file a complaint under the FLSA, contact the U.S. Department of Labor’s Wage and Hour Division.

N.C. Workplace Deaths Being Under-Reported

The News & Observer recently published an article exposing the under-reporting of workplace deaths by the North Carolina State Department of Labor. The Department reported only 23 deaths for 2013 and for 2014, the Department reported 44 deaths. However, even 44 deaths is significantly less than the 243 workplace deaths reported by the Department in 2001. In a 2009 press release by the Department of Labor, NC was “one of the safest states to work.” However, according to the N&O, this reduction in reported fatalities is due to a change in methodology, not safety.

In 2006 the N.C. Department of Labor began reporting only the deaths that the Department had authority to investigate. That policy change excluded independent contractors (self-employed workers) as well as any death that falls under federal jurisdiction. Federal jurisdiction includes the death of a federal employee, any worker who dies while working on a military base or at a federal facility, any death in the mining industry, and any death that occurs around open waters including firefighters and divers. The State’s total also excludes laborers at small farms, owners of unincorporated companies, most workers who die on roads, and many workers who died months or years after the injury that eventually killed them.

Misclassification of workers as independent contractors (the topic of another investigation by the N&O) not only results in employers cheating the workers’ compensation system by failing to obtain insurance, but it also results in inaccurate data reported by the Department of Labor. This under-reporting is not due to increased safety and enforcement by our State, it is due, in part, to employer fraud of misclassifying workers.

Read more here.

Increase in Wage Theft Claims

According to a recent article in The New York Times (Sept. 1, 2014), more workers are claiming wage theft by their employers. Worker advocates assert that violations of minimum wage and overtime laws, erasure of work hours and wrongful takings of employees’ tips are increasing in volume.

David Weil is the director of the federal Labor Department’s wage and hour division. Since 2010, Mr. Weil’s agency has uncovered almost $1 billion in illegally unpaid wages, with a disproportionate amount of immigrant victims. Weil believes the surge in wage theft is due to underlying changes in the national business structure. As large employers increase franchise operations as well as use of subcontractors and temp agencies, these companies deny any knowledge of wage violations.

A federal appeals court in California recently ruled that FedEx committed wage theft by labeling its drivers as independent contractors to avoid having to pay them overtime. New York’s attorney general, Eric T. Schneiderman, has recovered $17 million in wage claims over the past three years and in Nashville last February nine Doubletree hotel housekeepers were paid $12,000 in back wages owed by the hotel’s subcontractor. Wage theft is prevalent in North Carolina as well. According to the N.C Department of Labor 2012-13 Wage and Hour Bureau Annual Report, 4,244 complaints were investigated. Out of an estimated $2.4 million due, almost 73% of unpaid wages (over $1.79 million) were recovered for 2,168 workers. To file a wage dispute claim in North Carolina, contact the Department of Labor’s Wage and Hour Bureau at 919-807-2796 or 1-800-NC-LABOR.

Misclassification – Department of Labor Recovery

United States Department of LaborThe U.S. Department of Labor has recovered more than $1 million in back wages and liquidated damages for 196 employees of Bowlin Group LLC and Bowlin Services LLC out of Ohio and Kentucky. Bowlin Services installed cable for Insight Communications, a cable, telephone and Internet provider in Kentucky. The defendants misclassified 77 employees as independent contractors and violated the Fair Labor Standards Act (FLSA) by denying these workers access to critical benefits, including minimum wage, overtime, family and medical leave, unemployment insurance, workers’ compensation and failing to maintain accurate payroll records.

Misclassifying employees negatively impacts our economy, generating losses to the U.S. Treasury, Social Security and Medicare funds, state unemployment insurance, and state workers’ compensation funds. It also leads to unfair competition because businesses that play by the rules are at a disadvantage.

This problem has become so acute in Tennessee that last month the legislature passed Senate Bill 833, which has been signed into law and imposes penalties on construction companies for misclassifying workers in an attempt to evade workers’ compensation premiums. A Tennessee study in 2012 revealed losses of up to $91.6 million in workers’ compensation premiums. North Carolina has identified the problem but has yet to take any action. Until states aggressively prosecute misclassification, this fraud will continue.