The Department of Labor is starting to get active again, recently issuing notices regarding minimum salary levels and other items. In general and no surprise, the DOL is moving away from actions taken under the Obama Administration. Here’s a summary of the recent activity.
Minimum Salary for Overtime Exempt Employees
The DOL, after getting three extensions of time to do so, has announced its position on the controversy over the Obama Administration’s 2016 rule to increase the minimum salary required for employees exempt from overtime pay. That rule would have increased the minimum salary for exempt employees from $23,660/year to $47,476/year starting in December 2016. [See Higher Salary Minimum Requirements Announced for Overtime Exempt Employees]
However, in October 2016 a federal district court in Texas issued a nationwide injunction blocking implementation of the rule. [See DOL Salary Increase Requirement Put on Hold] The Obama Administration appealed that ruling and the Trump Administration delayed filing its position in the case pending re-appointment of a Secretary of Labor and then pending review once Alexander Acosta became the Secretary of Labor. The DOL has filed a brief stating that it too disagrees with the district court’s holding that the DOL lacks the authority to set and raise the minimum salary levels (the DOL has been periodically resetting this minimum level for over fifty years). But the DOL stated that it would review whether the $47,476 salary level in the 2016 rule is too high. Secretary Acosta has said on several occasions this year that he views an increase of the minimum salary to around $33,000/year to be more reasonable.
While the appeal now awaits a court ruling, the DOL on July 26, 2017 issued a notice seeking public comment over the ensuing 60 days on what is an appropriate minimum salary level for exempt employees. The DOL is also seeking comments on whether it should revise various aspects regarding exempt employees, such as automatic indexing of future increases; the appropriate minimum salary for the highly compensated employee exemption; whether and at what rate to credit bonuses, commissions or incentive payments towards the minimum salary; and, notably, whether the duties tests for overtime exemption status should be revised. This latter subject may give rise to interesting debates.
For those employers who raised their exempt employees’ salaries in 2016 in anticipation of the rule going into effect, the DOL also seeks input on potential options for these employers should, as now appears likely, a different lower minimum be set. This last point is unlikely to result in anything other than a cosmetic palliative restatement of the rights employers would have anyway, such as stating it is permissible for employers to lower these salaries or freeze them from future increases (which would not solve the potential morale and turnover problems).
Stay tuned for future developments on these points. Also, when any changes occur in federal law, particularly if they involve the job duties qualifications tests for exempt status, be reminded that employers should also check whether state law requires more than federal minimums or exemption qualifications. Employers have to meet the higher or more employee-favorable requirements of state or federal wage and hour law.
DOL Wage & Hour Administrator’s Interpretations
The DOL has also announced that it will resume the practice, suspended under the Obama Administration, of issuing opinion letters in response to specific questions about wage and hour issues. These letters are published so that many employers can take advantage of their guidance on various aspects of wage and hour law. They can also provide an employer facing an unclear or difficult issue an answer on how to handle the situation. In these situations, the opinion letter requests are typically written by attorneys so as to keep confidential the identity of the employer involved.
Employers with tipped employees may have some reason for optimism as the DOL has stated it will review whether to undo parts of a 2011 DOL regulation that imposed significant restrictions on employers using tip pools. In essence, this regulation stated that tips were the property of direct service workers and could not be distributed to or shared with anyone else. The restaurant industry was limited to only pooling and sharing tips between “front of the house” employees such as hostesses, bussers, and bartenders, but not with “back of the house” staff like cooks and dishwashers.
The federal Fair Labor Standards Act permits employers to use tips as a credit against the minimum wage requirement as long as the employees receive at least $30.00/month in tips and employer pays at least a lower minimum wage and makes up the difference if the tips don’t bring the employee’s effective wage rate up to the regular minimum wage rate (the tipped-employees minimum wage rate is $2.83/hour in Pennsylvania, $2.62/hour in West Virginia, $4.08 in Ohio, while in New York the rate varies by location and type of establishment, as state law in these and other states requires a higher minimum tipped employee wage rate than the $2.13/hour minimum under federal law).
The existing DOL regulation limiting who can share in tips applies even if the employer doesn’t take a tip credit against the minimum wage requirement and pays a wage rate at or above the regular minimum wage ($7.25 under federal and Pennsylvania law, $8.75/hr. in West Virginia, $8.15/hour in Ohio for all but small employers, and $9.70/hour in New York although higher rates may apply in New York City and some nearby counties).
Different federal appeals courts have reached different results on whether the DOL has the power to regulate what employers do with tips if they are paying at least the regular minimum (i.e., not taking a tip credit against the minimum wage requirement). It seems likely that the DOL will remove the restrictions on tip-sharing where the employer pays at least the regular minimum wage. Perhaps greater flexibility may also be given regarding who can be included in the sharing of tips for those paid less than the regular minimum wage.
For those affected by this subject, stay tuned for the DOL’s actions. For now, the court decisions invalidating aspects of the existing regulation do not apply to Pennsylvania, Ohio or New York. But, they do apply to West Virginia and Maryland, such that employers there can consider making changes now, although it seems likely that this issue will go to the U.S. Supreme Court. A new DOL regulation may clear up some of the issues for employers going forward.
The above are small examples of how complicated wage and hour law can be. This makes it wise for employers to periodically review their practices. The most common employer violations are improperly classifying employees as exempt from overtime pay when their job duties do not fit the exemption requirements, as well as improperly or not paying for various activities such as travel time and training time.
If you have any questions or would like to use our employer self-audit wage and hour questionnaires for your own review (available for a nominal $100 charge), please contact us. Should you have any interest in submitting input to or getting an opinion from the DOL regarding any of the above, we are also available to help you. Wage and hour questions can be submitted to the author of this update, Craig Brooks, or Adam Shestak whose contact information is below.
Craig M. Brooks, Esq.