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Brace Yourselves: The DOL’s New Overtime Rules Are Here

On Tuesday, May 17, 2016, news broke that the U.S. Department of Labor (“DOL”) will be publicly issuing their final rules regarding overtime exemptions under the Fair Labor Standards Act on Wednesday, May 18, 2016.  The final rule will raise the salary threshold exemption from $23,660 to $47,476, which is more than double the current amount.  While the salary threshold is not quite the $50,440 that was initially proposed by the DOL, it is still certainly a very high number that will negatively impact many small businesses, non-profit organizations, and other companies that simply cannot afford to raise salaries to $47k for all of their exempt employees.

The final rule will also trigger automatic increases to the salary threshold every three years, beginning on January 1, 2020.  To put it lightly, this escalator clause could prove to be a real back breaker for many companies.  Under the DOL’s estimation, this would increase the salary threshold to $51,168 in 2020.  It is also not clear whether the DOL has fully thought about the implications of this escalator clause, but that is a different discussion for another day (see below).

In addition, the final rule also raises the salary threshold that is used for the “highly compensated employees” exemption from $100,000 to $134,004.   With the escalator clause, this number is estimated by the DOL to be $147,524 in 2020.

Finally, the new rule also provides that non-discretionary bonuses and incentive payments (including commissions) can be used to satisfy up to 10% of the new standard salary level, as long as they are paid on a quarterly basis (or sooner).

The new rules will take effect on December 1, 2016.  This gives employers just under 200 days to start preparing for these major rule changes.

Certainly, this is BIG NEWS!  And bad news, too.

In order to assist employers with understanding and preparing for the DOL’s final overtime rule, the Hawaii Employers Council (“HEC”) will be conducting a seminar/webinar next Wednesday from 8:30 to 10:30 am.  This program will contain three main components:  (1) a discussion of the current and new rule; (2) actions plans employers can implement in response to the new rule; and (3) how to communicate with employees about changes that are (or will be) implemented by the employer.  I will be presenting the first part of the program.  

Here are some links for further information:

Oh, one last thing – I should also note that the final rules do not make any changes to the duties tests for the Executive, Administrative and Professional exemptions.  Employers can probably view that as a good thing, although I do not think such changes were likely because the DOL did not include them in its proposed rule.  Therefore, implementing such changes would have probably been in violation of the Administrative Procedures Act anyway.

 
End of Legislative Session Update

The 2016 legislative session has come to a quiet ending.  As part of my duties at the Hawaii Employers Council (“HEC”), I track and report on bills that may be of particular interest to companies doing business in the State of Hawaii.  I also prepare a digest of all the bills I’m tracking and a separate article that highlights a few of the more significant employment-related bills.

For this year’s session, some of the employment-related legislation that Hawaii employers should know about address the following topics:

  • Social Media Privacy
  • Workers’ Compensation Treatment Plans
  • Penalties for TDI and Workers’ Compensation Violations
  • Additional Unemployment Insurance Benefits

The HEC legislative digest provides a brief overview of these bills, as well as all the other bills I have been tracking this legislative session.  The digest can be viewed here:  Legislative Digest After Sine Die.  The highlights article contains a more detailed discussion of employment-related bills that I found to be of particular significance.  The article is available to HEC members only, and can be accessed here:  Highlights of Bills After Sine Die.

All the bills that have been passed by the legislature have been sent to the Governor for his approval or veto.  The deadline for the Governor to give notice of any vetoes is June 27, 2016.  The deadline to make the actual veto is July 12, 2016.

 
New Persuader Rules Issued!

They’re finally here:  the DOL’s new persuader rules have been published in the Federal Register and – at first glance – they look pretty bad.  The DOL watered down their proposed rules just a lil’ bit, and even provided a small set of different rules to allow trade associations to engage in certain activity without triggering any reporting requirements, but overall the rules will be a game-changer for most employers.

discussionI’m currently going through the rules with a fine tooth comb (the rules are either 129 or 446 pages long, depending on whether you read the version with small print or the one with a larger font and double spacing).  In a nutshell, the new persuader rule will no longer accept the “accept or reject” test for the “advice” exception.  As a result, persuaders and employers will be required to file a report for “indirect” persuader activities, which could include the following:

  • Planning, directing, or coordinating supervisors or managers;
  • Providing persuader materials;
  • Conducting seminars; and
  • Developing or implementing personnel policies or actions.

It appears trade associations are exempt from the reporting requirements if they (1) host a counter-organizing seminar but bring in outside speakers or (2) simply provide “off the shelf” materials to an employer for a union campaign.  To get a firmer grasp on how these new rules will affect organizations like the Hawaii Employers Council (“HEC”), however, I need to read through the rules and examine them in more detail.

For anybody who wants to read up on the rules, you can view the following:

In addition, HEC will be providing a seminar on May 11, 2016 that will provide an overview of the new rules, a discussion of how the new rule will impact employers, instructions on how to fill out the LM-10 form for employers, and a review of some of the legal challenges that have arisen against these new rules.  That seminar will be available to HEC members only, and on a first-come-first-served basis.

Finally, once I have a chance to read through all the rules, I’ll prepare and send out an article summarizing the new rule – which will also be available only to HEC members.

 
2016 Legislative Forecast

Earlier this week, on Monday, I presented a 1.5 hour webinar that discussed several issues I anticipate will be hot topics during the 2016 legislative session in the realm of labor and employment law.  The webinar was free and available only to members of the Hawaii Employers Council.  This was the fourth year in a row that I conducted this type of webinar before the start of the legislative session.

Although this is an election year, I expect to see lawmakers addressing several significant issues during session.  Such issues will likely include the following:

  • Paid Sick and Safe Leave
  • Expansion of HFLL
  • Wage and Hour Exemptions
  • Expanded Rights for Medical Marijuana Users
  • Increased WC and TDI Penalties
  • NAICS Reporting Requirements
  • PHC Premium Supplementation Fund
  • ACA and Connector Issues
  • Employment Discrimination (in light of the Adams decision)
  • WC and IME’s
  • Social Media Privacy
  • Independent Contractors vs. Employees

Of course, these are just predictions about what we can expect to see during this legislative session.  As anybody who has been through the legislative process surely knows, the only certainty about session is that it will be full of uncertainty.

 
Hawaii Minimum Wage Now $8.50 Per Hour

Happy New Years everybody and welcome back to work!  This is just a quick reminder that the Hawaii minimum wage increased by 75 cents on January 1, 2016, which makes the new minimum wage in Hawaii $8.50 per hour.  The tip credit is still just 75 cents per hour (assuming the tipped employee earns at least $7.00 per hour in tipped income and wages).

Minimum+wage+increase.mgn (1)

In addition, the minimum wage is also scheduled to increase twice more in the next two years.  Beginning January 1, 2017, the minimum wage will be $9.25 per hour and on January 1, 2018 it will increase to $10.10 per hour.

For further discussion on the Hawaii minimum wage or tip credit, you can read a helpful guide issued by the Hawaii Department of Labor and Industrial Relations back in 2014:  DLIR Wage and Hour Notice.