New Overtime Law May Be Delayed
We have been continually keeping our readers updated regarding the new law effective December 1, 2016. As you know, the final rule updating the federal overtime regulations was published in May 2016. The biggest impact of the new rules is the huge increase in the minimum salary required to qualify as exempt from overtime under the FLSA’s executive, administrative, and professional exemptions. Under the new rules, the minimum salary to qualify for exempt status is $47,476 (more than double the existing minimum) and is subject to further automatic increase on January 1, 2020 and every three years thereafter. Industry groups have voiced strong opposition to the new rules, prompting members of Congress to introduce legislation seeking to delay implementation of the new rules by six months. The House passed one such bill, HR 6094. A similar bill has been introduced in the Senate. However, President Obama has already vowed to veto these bills should they reach his desk.
Meanwhile, industry groups and a coalition of 21 states have filed two separate lawsuits in the Eastern District of Texas seeking to block the new overtime rules. A motion for a preliminary injunction to halt the implementation of the new rules is set for hearing on November 16. The industry groups have also filed a motion for summary judgment with a request for an expedited hearing before December 1. Both lawsuits allege that the overtime regulations were issued in excess of applicable authority and should be declared unlawful and set aside. Notably, these lawsuits are pending before the same District Court that just issued an order enjoining most aspects of the Obama administration’s Fair Pay and Safe Workplaces Executive Order (and implementing regulations) that was scheduled to take effect October 25, 2016.
Importantly, as of now, the overtime regulations are still scheduled to take effect December 1, 2016, and employers are still urged to take steps to ensure timely compliance if they have not already done so. This means that employers should review the compensation levels for their exempt executive, administrative, and/or professional employees to determine which employees’ salaries are below the new $47,476 threshold. For employees whose compensation does not meet the new minimum salary threshold, employers should determine whether to (1) give the employee a salary increase to at least the new minimum; or (2) re-classify the employee to non-exempt and start tracking hours worked and paying overtime compensation in accordance with the FLSA and applicable state law(s).
Stand by! We will update you after the ruling on November 16th.
Accrued Vacation on the Pay Stub.
As California employers are increasingly aware, California has a unique law requiring employee wage statements (pay stubs) to include specific items of information. Failure to include all such information, completely and accurately, exposes an employer to substantial penalties. The plaintiffs’ employment bar has of course seized on the opportunity to profit off of this law because of the automatic right of a prevailing plaintiff to recover attorneys’ fees. Claims alleging inaccurate and incomplete wage statements and seeking penalties on behalf of all aggrieved employees under PAGA have been filed in droves. One such lawsuit was filed against Motel 6, alleging that this employer violated California wage statement law by failing to include the monetary amount of employee’s accrued vacation on their pay stubs. Yesterday, a California Court of Appeal upheld the dismissal of this claim, ruling that California law does not require the monetary amount of accrued vacation time to be included on employees’ pay stubs (unless and until the accrued vacation time is paid out on termination of employment).
The court rejected the plaintiff’s argument that because accrued vacation/PTO is considered a form of “wages” in California and wage statement law requires that gross wages and net wages earned during the pay period be itemized on the pay stub, this means that the monetary amount of vacation “wages” earned during the pay period must be itemized on the pay stub. Rejecting this argument, the court reasoned that an employee does not have any entitlement to be paid the value of accrued vacation until termination of employment and, as such, until termination of employment accrued vacation is just a benefit and not a wage earned during the pay period that must be itemized on an employee’s pay stub.