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Significant wage and hour regulations, court rulings and voter referendums are among the developments that require close payroll attention in 2016.
On the federal level, 2016 is to see changes brought about by several significant agency rules and executive orders issued in 2013 and 2014, including those governing who is covered by Fair Labor Standards Act minimum wage and overtime provisions and the minimum wage paid to workers on certain federal contracts.
The Labor Department's white-collar exemption final rule (RIN 1235-AA11) is expected in spring 2016. The rule, as it was proposed on June 30, 2015, would modernize the white-collar overtime exemption to extend overtime protection to most salaried workers earning less than $50,440 a year, or $970 a week, in 2016.
Under existing regulations, last updated in 2004, the standard salary required for an executive, administrative or professional employee to qualify for exemption from the FLSA's overtime requirements is $23,600 a year, or $455 a week. As proposed, the rule also would raise the amount that highly compensated employees must earn in total annual compensation to qualify for the exemption to $122,148 from $100,000 and would establish a way to automatically update the salary and compensation levels. The department also sought comments on whether it should adopt a quantitative test that an employee must spend at least half of all working time performing exempt job duties to be ineligible for overtime pay.
The Labor Department received more than 270,000 comments on the proposed rule for the department to assess in developing the final rule, including more than 3,000 unique remarks about the rule, which is three times the number of comments received after the 2004 revision, Labor Solicitor M. Patricia Smith said.
The department's fall 2015 semiannual regulatory agenda, published Nov. 19 by the Office of Management and Budget, said the final rule would be issued no sooner than July 2016, but Labor Secretary Thomas Perez told Bloomberg BNA in an interview Dec. 16, 2015, that the final rule to expand overtime pay eligibility is to be issued by spring 2016.
As of Jan. 1, 2016, the Labor Department's home-care final rule (RIN 1235-AA05) was in effect and being “strategically” enforced, which entails targeting investigations on situations when labor law violations are greatest, according to an Oct. 31, 2014, blog post by David Weil, administrator of the department's Wage and Hour Division.
The home-care final rule, issued Oct. 1, 2013, narrows the FLSA's domestic-service exemption to exclude third-party employers, narrows the definition of companionship services to extend FLSA minimum-wage and overtime protections to most direct-care workers and revises recordkeeping requirements for employers of live-in domestic-service employees.
From Oct. 13, 2015, when the home-care final rule took effect, until Nov. 12, the Labor Department enacted a nonenforcement policy, followed by a period of discretionary enforcement that ended Dec. 31; however, starting Jan. 1, 2016, employers and workers could expect the Labor Department to strategically use its “enforcement resources, including complaint-based and agency-initiated investigations, to achieve compliance with these new important protections,” the department said.
The National Association for Home Care & Hospice and other home-care associations that challenged the validity of the Labor Department's final rule Nov. 19 petitioned the Supreme Court for review, but a decision on whether to accept the case is pending and may not be issued by the high court until late April 2016.
Because the federal appeals court upheld the home-care final rule's validity Aug. 21, 2015, the Wage and Hour Division issued a field-assistance bulletin and an administrator's opinion that offered guidance on FLSA compliance applicable to certain home-care employment situations and other employment situations.• Field Assistance Bulletin 2015-1: Credit toward Wages under Section 3(m) of the FLSA for Lodging Provided to Employees, issued Dec. 17, 2015, identified situations when employers of home-care workers may take a wage credit for workers’ qualifying lodging arrangements, such as residing in the home of those to whom they are providing care. • Administrator's Interpretation 2016-1: Joint Employment under the Fair Labor Standards Act and Migrant and Seasonal Agricultural Worker Protection Act identified common scenarios in which two or more employers jointly employed a worker and were jointly liable for compliance, such as home health-care providers that share staff and have common management.
On Jan. 1, 2016, the hourly minimum wage that must be paid by employers to workers on certain federal contracts rose to $10.15, from $10.10, and the minimum hourly cash wage that must be paid to tipped workers performing work in connection with covered contracts rose to $5.85, from $4.90, under Executive Order 13658, “Establishing a Minimum Wage for Contractors,” which was signed Feb. 12, 2014, by President Obama.
The order raised the hourly minimum wage to be paid to employees, including tipped workers and workers with disabilities, by employers on new federal contracts and on replacements for existing contracts that are put out to bid, effective Jan. 1, 2015, and provided for the hourly minimum wage to be annually adjusted thereafter.
The order also specified that starting Jan. 1, 2016, the hourly minimum cash wage for tipped workers is to annually increase by 95 cents until it reaches 70 percent of the standard hourly minimum wage for federal contractors. The final rule (RIN 1235-AA10) that provides guidelines and the means by which the minimum wage is to be annually adjusted was published in the Oct. 7, 2014, Federal Register (79 Fed. Reg. 60,633).
Among the wage and hour litigation to which payroll professionals should be attentive in 2016 are two cases being considered by state supreme courts that challenge whether labor regulations related to meal breaks and the calculation of a state's minimum wage conflict with state labor law.
Whether a labor regulation that allows health-care industry employees, by mutual consent with their employer, waive a second meal period when working more than 12 hours to the extent that such a waiver conflicts with state labor law is the question before the California Supreme Court (Gerard v. Orange Coast Mem. Med. Ctr., Cal., No S225205, 11/10/15).
Whether Nevada's two-tiered minimum wage system and the calculations and qualifications for the lower minimum wage to apply are valid are questions being considered by the Nevada Supreme Court (Hancock v. State of Nevada, F.J.D.C.R., No. 14-oc-0080-iB, 8/12/15).
The Nevada labor commissioner and state of Nevada are appealing a district court ruling that the state's Minimum Wage Amendment does not permit two labor regulations that allow tips and gratuities to be included when establishing the maximum allowable premium cost to the employee of qualifying health insurance whereby the state's lower minimum wage may apply and that allow the lower minimum wage to apply when employers offer qualifying health insurance, regardless of whether the employee accepts the benefit.
Tips and gratuities must be excluded from such calculations and the qualifying health benefits must not only be offered but also accepted for the lower minimum wage to apply, the court said.
California's Labor Code Section 512 states in part that “except that if the total hours worked is no more than 12 hours, the second meal period may be waived by mutual consent of the employer and the employee only if the first meal period was not waived.” However, the state Industrial Welfare Commission's Wage Orders 4-2001 and 5-2001, Section 11(D) contain a provision that has allowed such second-meal-period waivers for health-care industry employees since 1993.
A state appeals court resolved the conflict between the labor law and the wage orders in favor of the labor law, ruling that the former hospital workers who brought the lawsuit were owed overtime premium pay under the state's labor law.
Complicating the matter, a law (S.B. 327) enacted by Gov. Jerry Brown (D) on Oct. 5, 2015, and immediately effective amended the labor code to allow for such a waiver to resolve uncertainty raised by the appeals court ruling.
The hourly minimum wage rose in several states, effective Jan. 1, 2016, including Alaska ($9.75), Arkansas ($8), California ($10), Colorado ($8.31), Connecticut ($9.60), Hawaii ($8.50), Massachusetts ($10), Michigan ($8.50), Nebraska ($9), Rhode Island ($9.60), South Dakota ($8.55), Vermont ($9.60) and West Virginia ($8.75).
New York raised its state minimum wage to $9 from $8.75 on Dec. 31, 2015, at which time two wage orders also took effect raising the minimum wage for hospitality industry workers to a uniform $7.50 and raising the minimum wage for fast-food workers to $10.50 in New York City and $9.75 in the rest of the state.
In addition, on July 1, the minimum wage is to increase in the District of Columbia ($11.50) and Maryland ($8.75). Nevada will annually review its minimum wage in April for possible adjustment July 1.
On Aug. 1, Minnesota's minimum wage is to rise to $9.50 for large employers and $7.75 for small businesses.
Several local jurisdictions established minimum wages in 2015 and more are to do so in 2016.
Minimum wages are scheduled to be considered in 2016 in Long Beach, Calif., San Diego and Santa Monica, Calif.
The Long Beach city council agreed Jan. 20 to consider a minimum wage ordinance. Voters in San Diego are to decide in June whether to adopt a city minimum wage. The Santa Monica City Council unanimously approved a minimum wage measure Jan. 12 in the first of two votes needed to finalize the ordinance.
The push to regulate wages and benefits on a local level had some opposition in the courts in 2015, as St. Louis and Pittsburgh in 2015 had local wage and hour ordinances struck down by courts. As it is likely that additional local minimum wages are to take effect, more consideration of local minimum wages by courts may occur in 2016.
Voters in several states may have the opportunity to vote on minimum-wage changes as a result of efforts now underway to try to qualify minimum-wage initiatives for Nov. 8, 2016, election ballots. In some cases, multiple versions of an initiative have been proposed in a state allowing for different wage amounts or different effective dates.
As of late January 2016, minimum-wage ballot initiatives for 2016 have been proposed in Alabama, California, Florida, Maine, Nevada, Ohio, Oregon, South Carolina, South Dakota and Washington. The initiatives must collect a certain number of signatures by specified deadlines, generally in June and July, to qualify to appear on the Nov. 8 ballots.
The South Dakota Youth Minimum Wage Referendum, Referred Law 20, already is to appear on the Nov. 8 ballot. The measure, if approved, would uphold a bill (S.B. 177), signed March 30, 2015, by Gov. Dennis Daugaard (R) to decrease the minimum wage for workers younger than 18 to $7.50 from $8.50.
South Dakota voters in 2014 approved a measure that raised that state's minimum wage to $8.50 from $7.25; the youth minimum-wage ballot measure on the 2016 ballot would exempt workers younger than 18 from that increase.
The Supreme Court was expected to rule this year on an employer's appeal to overturn a $5.8 million overtime pay award in a collective and class action involving more than 3,000 meat-processing workers in Iowa (Tyson Foods Inc. v. Bouaphakeo, U.S., No. 14-1146, oral argument 11/10/15).
The workers claimed that they were not adequately compensated for the time it took them to put on and take off protective equipment. To support their claims, they relied in part on a study that calculated the average amount of time workers spent in the activities to prove liability and damages.
A federal district court jury awarded the workers $2.9 million under the FLSA and Iowa laws, which was doubled to $5.8 million after damages were included. In a 2-1 decision, the U.S. Court of Appeals for the Eighth Circuit affirmed class certification under Rule 23 and the FLSA collective action as well as the jury's verdict on the lump sum.
The Supreme Court, in questions raised during oral arguments, hinted that it may narrowly rule on the use of statistics in cases brought under the FLSA, rather than issue a broad ruling on evidence standards for class certification under Rule 23 of the Federal Rules of Civil Procedure.
In another wage and hour case, the Supreme Court removed a pending labor arbitration case from its February oral argument calendar after attorneys for both sides informed the justices of a tentative settlement (MHN Gov't Servs. Inc. v. Zaborowski, U.S., No. 14-1458, argument postponed 1/7/16). The court acted after receiving a letter from attorneys for MHN Government Services Inc. that a signed settlement was reached between the employer and consultants to settle claims under the FLSA and California law.
The consultants claimed the employer wrongly classified them as independent contractors rather than employees entitled to overtime pay and other protections under federal and state law. They sought certification of an FLSA collective action and a class action on the state law claims.
The Supreme Court still could hear the case at a later date. A hearing on final approval of the settlement was scheduled for March 11.
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