Posts tagged ‘Exempt Employees’

Two Dates You Need to Know

Well, it’s that joyous time again, when New York state employers brace themselves for a new round of mandates taking effect at the beginning of the year. They can ponder yet again if they can afford to do business in New York unless of course you run Amazon.

Some of the most important dates impact your employees.

First, on December 31, the state-level salary exemption threshold for an employee to be classified as “exempt” for purposes of the state labor law increases as follows as explained by New York’s Department of Labor:

(1) New York City by (i) Large employers of eleven or more employees $825.00 per week ($975.00 per week on and after December 31, 2017; $1,125.00 per week on and after December 31, 2018); (ii) Small employers of ten or fewer employees $787.50 per week ($900.00 per week on and after December 31, 2017; $1,012.50 per week on and after December 31, 2018; $1,125.00 per week on and after December 31, 2019;

(2) Remainder of downstate (Nassau, Suffolk and Westchester counties) $750.00 per week ($825.00 per week on and after December 31, 2017; $900.00 per week on and after December 31, 2018; $975.00 per week on and after December 31, 2019; $1,050.00 per week on and after December 31, 2020; $1,125.00 per week on and after December 31, 2021);

(3) Remainder of state (outside of New York City, Nassau, Suffolk and Westchester counties) $727.50 per week ($780.00 per week on and after December 31, 2017; $832.00 per week on and after December 31, 2018; $885.00 per week on and after December 31, 2019; $937.50 per week on and after December 31, 2020.

What’s going on here? The Federal Fair Labor Standards Act requires that “non-exempt” employees receive a minimum of time-and-a-half of their hourly wage for every hour they work over 40 hours a week. In addition, both New York and the federal government have several other conditions that must be met before an employee is nonexempt; the federal threshold is $455 per week. In other words, there are many employees who meet the exemption threshold requirements to be non-exempt as a matter of federal law, but not state law. You have to keep this in mind, regardless of whether you are a federal or state charter. Remember that salary is just one of the conditions that must be met before an employee can be exempt.

If all this sounds familiar, it’s because regulations were finalized in the waning days of the Obama administration that raised the federal threshold to $47,476, but a lawsuit and the Trump administration kept these from taking effect.

On another note, starting January 1, 2019, the number of weeks eligible employees can take paid family leave to bond with a new child, care for a sick family member, or assist loved ones when a family member is deployed abroad on active military service increases to 10 weeks.

December 18, 2018 at 10:36 am Leave a comment

Administration Should Trump These Labor Regs

From the National Labor Relations Board’s (NLRB) intrusion into everything from an employer’s rights to regulate employee conduct, to the expansion of non-exempt employees, no area has had a more direct impact on your workplace. And no area may see a more radical shift under the Trump Administration.

Here are some examples:

Concerted Activity: The NLRB arbitrates disputes that involve both union activity and nonunion activity that implicates so called concerted activity. Traditionally this jurisdiction was understood as protecting the rights of nonunionized workers to ban together to address issues of concern in the work place and ultimately not be deterred from forming a union. In contrast, under the Obama Administration’s appointees, concerted activity has been used to regulate everything from punishment of an employee for Facebook postings critical of the boss, to workplace restrictions on sharing salary information. This shift has made your workplace policy manual a tripwire for litigation and made it more difficult to impose common sense restrictions on employee behavior. Let’s hope the NLRB will take a second look at these decisions.

Regulation of Mortgage Originators: For more than a decade now, the courts and the Labor Department have grappled over whether or not mortgage originators are exempt employees. Talk to any veteran of the mortgage industry and they will scoff at the notion that mortgage originators are anything other than exempt employees. After all, if a member calls at 4:55pm wanting to apply for a mortgage loan, no employee in their right mind would tell the applicant to call back tomorrow because their shift is almost over. Nevertheless, the Obama Administration’s Labor Department overruled an interpretation provided by the Bush Administration and opined that in-house mortgage originators are non-exempt employees who must receive overtime. The Supreme Court upheld the right of the Department of Labor to issue this interpretation. The good news is, what the Department of Labor giveth it can taketh away. I hope there will be quick action to reconsider this interpretation so that common sense can once again prevail in the mortgage industry.

Exempt-Employees: The most prominent Labor Department regulation increased the threshold of exempt employees to slightly more than $47,000, and indexed the threshold for inflation. Although it was supposed to take effect late last year, the regulation has been tied up in litigation and it is unlikely to survive the incoming Trump Administration without substantial revisions. Remember that even without the Federal changes, New York State has updated its own exempt-employee regulations

Obligations of Fiduciaries: Last but not least, in April, regulations imposing fiduciary obligations on financial advisors are scheduled to take effect. The outgoing Department of Labor recently issued a memorandum providing questions and answers about the new regulation. This one doesn’t have much of a direct impact on most credit unions. It does, however, on the individuals who provide investment advice to the trustees of your 401(k) plans. By tightening conflict of interest requirements and the fiduciary obligations of outside advisors, there are subtle changes to how your 401(k) plan is overseen. Expect to see changes made to this regulation.

This  extensive to-do list underscores how antiquated our labor laws have become. They were created at a time when a good chunk of the workforce was unionized and it was relatively easy to distinguish the white collar worker in the executive suite from the blue collar worker on the assembly line. The most constructive thing the Trump Administration’s Labor Department can do is advocate for changes to the National Labor Relations Act and the Fair Labor Standards Act  so that classifications such as exempt and non-exempt employees can reflect the modern workplace.

 

January 19, 2017 at 9:22 am Leave a comment

Three Things That Happened While you were in a Turkey Fog….

sleepy-baby-turkey

Mortgage Consummation Bill Set To Become Law

A bill clarifying that a mortgage is consummated at closing in New York State  is on the verge of becoming law. The legislation, (S.7183/Savino A.9746/Richardson) was sent to the Governor on November 16.  The Governor has 10 days excluding Sundays to veto a bill after it has been sent to him  or it automatically becomes a law.  (N.Y. Const. art. IV, § 7).  This means that we should know by tomorrow morning at the latest  whether or not the bill has been approved by the Governor.  He is expected to approve it.

Overtime Regs Blocked

Black Friday came early for employers. In case you missed it, on Tuesday a Federal District Court in Texas blocked the Department of Labor from implementing regulations that would have increased the number of employees eligible for overtime effective December 1, 2016.

Under the Fair Labor Standards Act, non-exempt employees who work more than forty hours a week must receive overtime pay. Regulations set to take effect on December 1, 2016 would have doubled the salary threshold from $455 per week ($23,660 annually) to 921 per week ($47,892 annually). This meant that if your branch manager made  less than that amount starting December 1  she would be entitled to overtime.

It also stipulated that the salary threshold would be automatically adjusted every three years to equal the minimum salary level based on the 40th percentile of weekly earnings of full-time salaried workers in the lowest wage region of the country.

The lawsuit brought by a group of states challenged the authority of the US DOL to automatically index the exemption threshold. Not only did a Federal District judge agree with this argument but he imposed a nationwide injunction against its imposition.

He explained that “The State Plaintiffs have established a prima facie case that the Department’s salary level under the Final Rule and the automatic updating mechanism are without statutory authority. The Court concludes that the governing statute for the EAP exemption, 29 U.S.C. § 213(a) (1), is plain and unambiguous and no deference is owed to the Department regarding its interpretation.” Nevada v. United States Dep’t of Labor, No. 4:16-CV-00731, 2016 WL 6879615, (E.D. Tex. Nov. 22, 2016)

Does this mean all that work you did reclassifying your employees was for nothing? Not at all. For one thing, the injunction could be reversed. In addition, the pending regulation provided credit unions the opportunity to examine how their employees should be classified. Finally, as explained by this Bond, Schoeneck & King blog, New York is promulgating state level regulations which will increase the exempt employee threshold.

This is yet another example of the increasing tension between an Executive branch aggressively using its regulatory powers and a Judiciary increasingly unwilling to defer to agency judgements. For those of us who believe that federal agencies have been given too much flexibility over the years to interpret laws as they see fit and not as Congress intended, this is a good thing.

Chris Christie Named Secretary of Transportation

Explaining that no one understands the importance of transportation to a political career better than he does, President- Elect Trump recently named N.J. Governor Chris Christie as his Secretary of Transportation. Trump also announced that Howard Stern will be his Communications Director.

Just joking, I wanted to make sure you were still awake.

 

November 28, 2016 at 9:29 am Leave a comment

DOL Finalizes Major Revisions to Overtime Rules

It’s alive! The U.S. Department of Labor finalized regulations increasing the minimum salary level for an employee to be exempt from overtime pay requirements from $455 a week to $913 a week. This means that when the regulations become effective in December, unless your supervisors make at least that amount, they must be paid the overtime rate of time and one-half for each hour they work over 40.

In addition, under current law there was an exception from  overtime pay for highly compensated employees (HCE) who make at least $100,000 annually but whose duties don’t qualify them for exempt classification. This regulation increases the HCE threshold to $134,000. Check with your HR person on this one as there are exceptions that apply to certain professions.

The minimum salary threshold will be updated every three years beginning in 2020. It will be adjusted so that it is equal to the 40th percentile of full-time salaries for workers in the lowest wage region (which is currently the South). As originally proposed, the exempt employee threshold would have been adjusted annually to equal the 40th percentile of full-time salaried workers nationally. This would have resulted in a threshold of over $50,000, which is the number I used in a recent blog. Nevertheless, if and when this regulation becomes effective, it will mark the first time that the exempt employee threshold is automatically updated on a periodic basis.

Why do I say “if and when this regulation becomes effective?” I’ve always thought that this regulation was, in part, politically motivated. I strongly suspect that it will become a major campaign issue with the Donald pledging to annul the regulation and Hillary pledging to ensure that it goes forward untouched.

But with the regulation now finalized, you must find out, if you don’t already know, how many of your currently exempt employees make less than this threshold, how much overtime they work, and if it makes more sense to bump their salaries so that you may continue to classify them as exempt employees, pay them overtime or make sure they don’t work more than 40 hours a week.

Incidentally, there is some good news in all this. Up to 10% of the standard salary level can come from non-discretionary bonuses, incentive payments and commissions, provided they are paid at least quarterly. Furthermore, the final regulation makes no changes to the way in which employers classify exempt and non-exempt employees based on the duties they perform. Many of us were concerned that the Department would institute a rigid test under which employers would have to document that a supervisor spends at least 50% of her time carrying out supervisory responsibilities. This would have harmed many small credit unions.

Finally, when you are done reading this blog, it’s time to reach out to your HR professional so that you can understand precisely how this regulation will impact your credit union. On that note, get to work and enjoy your day.

May 18, 2016 at 8:21 am 1 comment

Two Things Your HR Person Should Be Thinking About

Credit unions are not just financial institutions; they are small businesses.  This means, of course, that even regulations that have nothing to do with banking can pose challenges to their bottom line.  While we can’t prevent the federal government from churning out mandates, the more we can plan ahead, the more we can mitigate compliance expenses.

What triggered this didactic diatribe?  Most importantly, the U.S. Department of Labor will be finalizing regulations this year that will increase the minimum salary level for employees to be considered exempt from $455 a week to $970 a week, which equals at least $50,440 annually.  This is a big deal for credit unions as it is for all businesses.  For example, if you currently have an exempt supervisor who makes $44,000 a year, you will have to decide whether to 1) increase his wage; 2) pay overtime or 3) limit overtime.  These types of decisions take time, so my first point in writing this blog this morning is to remind you that if you haven’t started reviewing how your costs may be affected by this regulation, you should.

The second point of this blog is to point out just how out of touch federal regulators can sometimes be with reality.  During a hearing of the Senate Committee on Small Business and Entrepreneurship last week, I assumed I had simply misunderstood the testimony of D. McCutchen, who pointed out that the DOL estimates that it will only take businesses about one hour of a midlevel employee’s time to familiarize themselves with these regulations.  Sure enough, you can find that estimate in the preamble to the proposed regulations under the Department’s assessment of regulatory familiarization costs.

As up and coming Republican U.S. Senator Tim Scott of South Carolina explained, this analysis was “hogwash.”  It also makes me wonder yet again how many of the regulators overseeing workplace conduct in this country have actually ever had a job in the private sector.

Bathroom Access For Transgender Employees Under Federal Law

Given the amount of attention the federal government guidance on the use of facilities by transgendered students received last week, I figured now is a good time to point out that the EEOC recently released a fact sheet on bathroom access rights for transgender employees.  The fact sheet, among other things, reminds employers that:

“Gender-based stereotypes, perceptions, or comfort level must not interfere with the ability of any employee to work free from discrimination, including harassment. As the Commission observed in Lusardi:  “[S]upervisory or co-worker confusion or anxiety cannot justify discriminatory terms and conditions of employment.  Title VII prohibits discrimination based on sex whether motivated by hostility, by a desire to protect people of a certain gender, by gender stereotypes, or by the desire to accommodate other people’s prejudices or discomfort.”

May 16, 2016 at 8:49 am Leave a comment

Do Your Supervisors Make $50,000?

If not, then they can no longer be classified as exempt employees and must get overtime. According to this morning’s news reports, that’s the core part of proposed regulations updating the Fair Labor Standards Act to be released by the Obama Administration’s Department of Labor later this week.

Under existing regulations, one of the conditions for an employee to be classified as exempt is that he or she makes a little more than $23,000. Critics point out that this threshold requirement is so low that it has allowed employers to contravene the intent of federal law by classifying an employee as the supervisor and expecting them to work 50-60 hour weeks without overtime pay. They argue that a $50,000 threshold simply adjusts the Act to where it would be had it kept pace with inflation.

Opponents of this well-meaning but fatally misguided view correctly point out that a $50,000 threshold won’t increase the salary of many employees, but simply decrease the amount of hours existing employees work and, in a best case scenario, encourage the hiring of more lower-paid employees.

To put this in practical terms, review a list of your exempt employees making less than $50,000 and estimate how many hours they work over 40 each week. Then figure out how much it would cost you to pay each of these employees time and one-half for these hours. This is how much the federal government effectively wants to tax you. Occasionally, it makes me wonder if we live in a capitalist country.

June 30, 2015 at 7:54 am Leave a comment

The Most Important Proposal of the Year

The most important proposal of the year has nothing to do with Risk-Based Capital or Field of Membership.  It has nothing to do with overdraft fees or payday loans.  In fact, it hasn’t even been released yet for comment.  Nevertheless, your fearless blogger is going to go out on a limb and tell you that the most important regulatory proposal you will be confronted with this year is one that is expected to be issued by the Department of Labor this summer.

What I am referring to is the release of regulations redefining what constitutes an exempt or non-exempt employee under the federal Fair Labor Standards Act (FLSA).  At the very least the regulations could impact the operation of your credit union; in a worst case scenario it will be another one of those unfunded government mandates.

Under the FLSA, employees are entitled to a minimum wage and to at least time and one-half overtime pay for every hour they work over 40 hours per week.  As many of you are aware, however, so-called exempt employees are not entitled to overtime.  As a gross over-simplification, an exempt employee is generally defined as someone whose duties involve supervising or exercising independent judgment.

In March of last year, President Obama directed the Department of Labor to scrutinize the existing DOL regulation.  To give you a sense of where this is headed, a fact sheet that accompanied the President’s directive argued that “the overtime rules that established a 40-hour work week, a lynchpin of the middle class, have eroded over the years.  As a result, millions of American workers have been left without the protections of overtime” even though they are expected to work 50-60 hours a week.

One way the DOL is expected to attack this perceived problem is to restrict the so-called primary duty test, which could have a profound impact on many smaller credit unions.  For example, let’s say you have a four person branch.  Your manager’s primary duty is to manage the entire branch.  But, on any given week, he may spend a good deal of his time pitching in at the teller window or helping out originating mortgage loans.  Under the existing regulations, you still can treat that manager as an exempt employee, but it is quite possible that the DOL will seek to limit the exempt designation solely to managers who spend the majority of their time taking on purely supervisory tasks.  You may want to take a look at 29 CFR 541.106.

Technology can also influence the DOL’s proposal.  A recent article in the Wall Street Journal reports an increase in lawsuits in which employees are suing employers who provide them cell phones with the expectation that they perform uncompensated work outside the work day.  This is an issue I have always found intriguing.  It’s one thing to send your top managers an email at 6:00 a.m., it’s another to send that same email to all of your employees irrespective of their work status.

These are just two examples of how the DOL’s regulation could impact your credit union.  Regulations haven’t even been proposed yet, so we are a long way from seeing any of my worst case scenarios become realities.  Nevertheless, given the potential scope of the proposal, you should all be keeping an eye out for the DOL regulations once published.  It could have a uniquely negative impact on small businesses like credit unions.

May 27, 2015 at 8:38 am Leave a comment

Does the Supreme Court’s Loan Officer Decision Impact Your Credit Union?

As readers of this blog know, last week the Supreme Court unanimously reversed a lower court decision and upheld the U.S.  Department of Labor’s authority to issue an opinion letter classifying mortgage loan officers as non-exempt employees for purposes of the Fair Labor Standard Act (Perez v. Mortgage Bankers Ass’n, No. 13-1041, 2015 WL 998535, at *4 (U.S. Mar. 9, 2015).  What kind of impact will this have on your credit union?  I can’t answer that for you, but the question you should be asking is: What are my employees’ primary duties? If an employee’s job is to act as a mortgage loan officer, then the decision may change the way he is classified and compensated.   In contrast, if your supervisors originate the occasional mortgage, but spend most of their day supervising staff, then the decision won’t impact your operations.  The key point is that labels don’t matter: it’s what the employee actually does that you and your HR person have to look at in the aftermath of this ruling.

First-with apologies for those of you for whom this is real basic stuff-federal law divides us up into two basic categories of workers: exempt and nonexempt.  Nonexempt employees are entitled to overtime whereas exempt employees are not.  The distinctions made sense in 1938 when it was obvious who the blue collar factory worker was and who was the white collar boss, but in the information age, the distinction isn’t as easy to figure out. Regulations recognize five categories of exempt employees including professional, administrative, executive, outside sales, and computer-related professions.   In 2010, the Obama Administration’s DOL reversed an earlier DOL opinion letter.  It ruled that mortgage loan officers were not administrative employees and had to be given overtime. Last week’s decision upheld the DOL’s right to issue this ruling.

The distinction can be tricky for credit unions, particularly smaller ones.  For example, since many branch managers wear multiple hats-they not only manage staff but they sign off on most of the mortgage loan originations-does this decision mean that they are now automatically non-exempt employees? No,   it comes down to what an employee’s “primary duties” are. Nothing in the Court’s decision changes this erstwhile test.    As explained on the DOL’s website, the primary duty “means the principal, main, major or most important duty that the employee performs.”

Remember, the label you give a job doesn’t mean all that much.  For example, our small branch manager who helps out with an occasional mortgage loan is considered a Mortgage Loan Originator under other federal regulations; after all she sometimes offers, arranges, or assists a member in obtaining or applying for a mortgage at the credit union. ( 12 CFR  1026.36.)  But, while the CFPB doesn’t care what an originator’s primary duty is, the DOL sure does

March 17, 2015 at 10:40 am 3 comments


Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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