Missouri’s new Republican governor has indicated that he fully supports right-to-work legislation, which failed to get past previous governor Jay Nixon in its last go-round. With that being the case, what would a right-to-work law mean for the employers in the state who have collective bargaining agreements with labor organizations?

First, right-to-work legislation does not result in any collective bargaining agreement suddenly being null and void. It is a very limited, surgical deletion of the union security clause from contracts.  And, while we do not know exactly what the law may provide, it will likely be something along the lines of previous legislation.  In other words, it will provide that any union security clause will be null and void and no employee shall be required to pay any dues or fees or similar charges to any labor organization as a condition of employment.

Accordingly, if an employee is not a union member and has not signed a dues check-off authorization card, the employer can cease deducting dues from the employee’s paycheck when the right-to-work law takes effect. However, an employer’s legal obligation is different if any employee has signed a valid dues check-off authorization card as such authorizations will likely be enforced, as a separate lawful agreement between the employee and the union.  The reason is that even after the effective date of a right-to-work law, an employer who has agreed to a dues check-off provision in the collective bargaining agreement may have a contractual obligation to continue to remit monthly dues to the union for employees who have signed dues check-off authorizations.  However that provision can be revoked.

The National Labor Relations Act provides some guidance in terms of the revocation process. In particular, it permits employers to deduct monies for dues “provided that the employer has received from each employee on whose account such deductions are made a written assignment which shall not be irrevocable for a period of more than one year or beyond the termination of the applicable collective bargaining agreement, whichever is sooner.”  Hence, while there may be an ongoing obligation beyond the effective date of the right-to-work legislation, there is a process for employees to revoke that authorization at a later point in time and not be responsible for any dues going forward.

The end result is that without financial support from a majority of the employees a union may simply walk away from the collective bargaining agreement they have with an employer as it simply is not cost effective to maintain the relationship. Hence while right-to-work legally only impacts union security and dues check-off, from a practical standpoint it may result in a defacto decertification of the union.

Executive, Professional and Administrative employees are exempt from overtime requirements if they meet three tests:  the salary level test; the salary basis test; and the duties test. As I am sure you have heard, new overtime regulations raise the required annual salary level from $23,660 to $47,476 (or $913 each week). Under the new salary level test, which goes into effect on December 1, 2016, exempt employees paid less than $47,476 no longer qualify for exempt status. So what is an employer to do?  Here are some potential options:

1. Retain Exempt Status. Increase the employee’s annual salary to at least $47,476 and the employee will remain exempt. Please note, however, that the rules establish a mechanism for automatically updating the salary and compensation levels every three years; thus, you may be required to again increase the employee’s salary in three years to meet the new threshold. Additionally, the employee still needs to meet the duties test, and this is a good time to review compliance with that test. This is the only option that does not require the employer to track the employee’s work hours.

a. Example.  Currently an exempt employee has an annual salary of $41,600 ($800 weekly) and, therefore, no longer passes the new salary test.  Employer raises the employee’s annual salary to $47,476.  Employee retains the exemption from overtime pay under the new regulations.

2. Convert to Hourly. Convert the exempt employee from a salary to an hourly wage and begin paying overtime for more than 40 hours worked in a week. The employer must begin tracking the hours worked by the employee. Overtime hours can be controlled by limiting or forbidding overtime without the employer’s express approval.

a. Example.  Currently exempt employee has an annual salary of $41,600 ($800 weekly).  Employer converts the employee to the equivalent hourly wage of $20 an hour ($800 ÷ 40 hours).  The employee’s overtime rate would be $30 an hour ($20 x 1.5).  Thus an employee who works 45 hours during one week would be paid $950 (($20 x 40 hrs) + ($30 x 5 hrs.)).  Assuming the employee averages working 45 hours a week during a year, this equates to an annual salary of $49,400 ($950 a wk x 52 wks).  Under these particular facts, it would be cheaper to pay the employee the $47,476 annual salary and have the employee remain exempt.

3. Remain Salaried, but Pay Overtime. Have the employee remain on a salary, but pay overtime when the employee exceeds 40 hours in a workweek. This will require the employer to track the employee’s time. The regular rate will be calculated by dividing 40 hours into the weekly salary and then paying 1 ½ times that amount for overtime hours. This may be a good option where an employee enjoys the status of a salaried employee and doesn’t want to become an hourly employee. Overtime hours can be controlled by limiting or forbidding overtime without the employer’s express approval.

a. Example.  Currently exempt employee has an annual salary of $41,600 ($800 weekly).  Employer retains the employee at this salary, but pays the employee overtime for any hours worked over 40 in a week.  The employees overtime rate would be $30 an hour (($800 ÷ 40) x 1.5).  Thus, an employee who works 45 hours during one week would be paid $950 ($800 + (30 x 5)).  Assuming the employee averages working 45 hours a week during a year, this equates to an annual salary of $49,400 ($950 x 52).  Please note that the employee is paid the same amount whether he is paid hourly or paid a salary.  Under these particular facts, it would be cheaper to pay the employee the $47,476 annual salary and have the employee remain exempt.

4. Fluctuating Workweek Plan. Use the Fixed Salary/Fluctuating Work Week plan, which is approved by the DOL regulations. Under this plan, the employee is paid a fixed salary that covers the straight time for all hours worked, including overtime hours. Thus, overtime is paid at a ½ time rate (compared to 1 ½ time rate) for the hours worked over 40 hours.  Under this plan, the regular rate must be calculated each week (by dividing the total number of hours worked by the fixed salary). Certain conditions, including prior employee agreement and paying the same salary when the employee works less than 40 hours in a week, are necessary to use this plan. Continue Reading Employer Options Under the New DOL Regulations

As you may recall, The Davis-Bacon Act applies to contractors and subcontractors performing on federally funded or assisted contracts in excess of $2,000 for the construction, alteration, or repair of public buildings or public works. This week, The United States Court of Appeals for the District of Columbia struck down an attempt by the DOL to significantly expand the Davis-Bacon Act. The Act requires that contractors on federal and DC government construction projects pay prevailing wages and fringe benefits to the workers on such projects. DOL sought to apply the Act to CityCenterDC, which is a mixed-use development on the site of the DC Convention Center.

For more information about the recent ruling on this Public-Private Partnership project, visit a this original blog post by my colleague Hal Perloff on Husch Blackwell’s The Contractor’s Perspective blog.