In response to the financial impact of the Great Recession on employees (notwithstanding the storm weathered by employers), the Secretary of Labor has been tasked with developing proposed amendments to the Fair Labor Standards Act (“FLSA”) that would further restrict employee pay classifications, with the practical result being that employers may have increased overtime pay obligations.
Previously, the Department of Labor (“DOL”) projected this proposed rule to be ready by November 2014. The DOL has, however, pushed back the release date for the proposed rule until the first quarter of January 2015, thus delaying adding to employers’ budgets the expense of reviewing employee classifications and, if need be, reclassifying employees.
Generally speaking, under the existing rule, employees earning at least $455 and exercising some level of independent judgment and/or professional expertise are considered “exempt” from the minimum wage and overtime requirements of the FLSA. When an employee does not qualify as “exempt”, the employee is, instead, classified as “non-exempt”, meaning that the employee must be paid at least minimum wage for every hour worked and overtime pay for any time worked over 40 hours per week.
Under the current FLSA classification standards, it is possible for an employee to be classified as “exempt”, while performing the same tasks as non-exempt employees while earning less per hour than his or her non-exempt counterparts and, in some circumstances, even less than minimum wage. For example, a middle manager at a retail establishment tasked with the responsibility of managing two individuals would likely be considered “exempt”, even if the same middle manager also performs hands-on tasks with customers, just like employees classified as “non-exempt”. Because of the “exempt” status, this middle manager, while performing some of the same tasks as non-exempt employees, could be required to work any number of hours per week for the weekly salary of $455, resulting in the possibility of being paid less than minimum wage per hour worked. This, according to the President, is an unacceptable consequence of broad classification criteria.
When the FLSA amendments are finally released, the burden will be on employers to decide how to appropriately classify employees’ positions, possibly resulting in employee reclassifications. To make a legally sound decision, employers will need to perform an audit of employee classifications, including reviews of employees’ job descriptions and, in many cases, interviews with employees. With the FLSA being an ever increasing area of employer liability, particularly in the case of misclassifications, employers would be best advised to start auditing FLSA classifications as soon as the proposed rules are released.
While employers may, this Thanksgiving, toast a few more months of relief from the impending FLSA amendments, keep in mind, narrower employee classification criteria is still on the horizon and will most likely need to be addressed before the next fiscal year. Contact a knowledgeable employment attorney to help you through the process.
The Eastern Pennsylvania Employment Log (EPELog) is a publication of the KingSpry Employment Law Practice Group. Jeffrey T. Tucker, Esquire, is our editor-in-chief. EPELog is meant to be informational and does not constitute legal advice.
