On September 2, the Second Circuit Court of Appeals issued its decision in Patterson v. Raymour’s Furniture Co., the most recent case in what has become an all-out war between employers and the NLRB over the use of class-waiver provisions in arbitration agreements.  The decision, consistent with prior Second Circuit precedent enforcing such waivers,…

Once again I shake my head at the NLRB’s analysis in their application of the National Labor Relations Act. In the high profile Northwestern University case which issued in August of last year, the Board found that it would not assert jurisdiction over the grant-in-aid scholarship football players of Northwestern University, citing in particular the…

In a recent decision, Heinsohn v. Carabin & Shaw, the Fifth Circuit found that an employee’s “self-serving” testimony created a material fact question. The Court also included language that should be of concern for employers when seeking summary judgment.

In Heinsohn, the Court reversed summary judgment in a pregnancy discrimination case in which the employer fired a legal assistant for making mistakes on the job that she denied making. The Fifth Circuit found that an employee’s “self-serving” deposition testimony created genuine issues of fact as to the employer’s alleged legitimate, nondiscriminatory reasons for terminating Heinsohn.

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.

On May 26, the Seventh Circuit Court of Appeals issued its decision in Lewis v. Epic Systems Corporation, another case evaluating the NLRB’s position that class-waiver provisions in arbitration agreements violate the National Labor Relations Act.  However, unlike any other Circuit Court that has addressed this issue thus far, the Seventh Circuit agreed with…

In an unpublished decision, which issued on May 3, 2016, the United States Court of Appeals for the District of Columbia made it clear that there was a “fundamental and long-running disagreement” between the Court and the Board as to the appropriate approach by which to determine whether an employer had violated Section 8(a)(5)…