December 1, 2016– the date that the U.S. Department of Labor (DOL)’s new overtime pay rules under the federal Fair Labor Standards Act (FLSA) take effect– is next week. [1]   The new rules are one of the most significant changes affecting U.S. employers in more than a decade. The DOL estimates that more than 4 million workers will need to be reclassified from exempt to non-exempt as a result.

As you may already know, wage and hour lawsuits are the largest category of lawsuits filed in the U.S. and one of the fastest-growing.   Last year, according to the DOL, 8,871 FLSA wage/hour lawsuits had been filed, as of September 30, 2015.  In 2016, employers paid hundreds of millions of dollars in FLSA lawsuits.  With the new rule taking effect, compliance with the FLSA and other wage/hour laws is more crucial to employers’ survival than ever.

These rules affect non-profits in a unique way.  Unlike employers in the private sector, non-profits do not have a way to pass on the increased cost of labor to a customer.  In some cases nonprofits may be bound to provide services at a contractually agreed upon rate, or may be constrained by their dependence on donations.

II.        Are You Covered?

Before implementing changes to employee pay or classification, a nonprofit organization should first determine whether it is covered by the FLSA.  Under the FLSA, there are two types of coverage: enterprise or named enterprise coverage, and individual coverage.

Enterprise Coverage

The FLSA applies to businesses with annual sales or business of at least $500,000, and two or more employees engaged in interstate commerce.  With respect to non-profit organizations, FLSA “enterprise coverage” applies only to the activities performed for a business purpose that are in substantial competition with other businesses such as operating a gift shop or providing services for a fee. The DOL states:  “[The FLSA’s enterprise coverage] does not apply to the organization’s charitable activities that are not in substantial competition with other businesses so income from donations used for charitable activities or membership fees do not count toward the $500,000 threshold.”

Revenue generated by a nonprofit organization that is used in furtherance of charitable activities is not considered for purposes of determining enterprise coverage.   Note that under the FLSA, individuals generally may not lawfully volunteer in commercial activities run by a non-profit organization such as a gift shop.

Certain “named enterprises” are covered by the FLSA regardless of the total of their annual sales or business done or their non-profit status.  These are hospitals, schools and preschools, government agencies, and businesses providing medical or nursing care for residents.

Individual Coverage

Even if your organization is not covered as an “enterprise,” your organization’s employees may be entitled to FLSA protections if any of them is “engaged in interstate commerce or in the production of goods for interstate commerce,” a very broad term. For example, an individual is covered if the employee makes or receives interstate telephone calls, ships materials to or receives materials or goods from another state, or transports persons or property to or from another state.  Thus an employee, who calls donors in other states or orders supplies online, may be individually covered under the FLSA and entitled to its protections.

Employees at a nonprofit food bank whose job it is to sort donated goods received from out-of-state would also be considered as “individually covered” even if the organization itself is not a “covered enterprise” because it does not have commercial revenue.

Once the organization has determined whether it or any of its employees may be covered under the FLSA, it should heed the impending changes.  Even if not covered by the FLSA, employers will still be covered by their state’s wage/hour laws.

III.       What Changes Take Effect December 1, 2016?

Here are the key provisions employers covered by the FLSA need to be aware of:

New Salary Threshold

The Final Rule updates the salary threshold for determining whether an employee is exempt from the FLSA’s overtime pay requirements under the executive, administrative or professional “white collar” exemptions to:  $913 per week, or $47,476 annually (note that the salary level test does not apply to teachers, doctors and lawyers).  The prior salary threshold was $455 per week, or $23,600 annually.

Nondiscretionary Bonuses May Count Toward Salary Level

Employers may use nondiscretionary bonuses and incentive payments, including commissions, to satisfy up to 10% percent of the new standard salary level, if those payments are made on a quarterly or more frequent basis. (Remember that, even if an employee’s salary exceeds the salary threshold, he/she must still meet a “duties” test to fit within one or more of the “white collar” exemptions from overtime pay under the FLSA).

Higher Salary Threshold for Highly Compensated Employees

The total annual compensation requirement for workers classified as exempt under the “highly compensated employee (HCE)” exemption is now $134,004, up from $100,000 annual compensation.  To qualify, the HCE must be paid on a salary or fee basis of at least $913/week, their primary duty must include performing office or non-manual work; and they must customarily and regularly perform at least one of the exempt duties or responsibilities of an exempt executive, administrative or professional employee.  Nondiscretionary bonuses will not count towards reaching the salary of at least $913/week.

Automatic Salary Update Every 3 Years

The above salary thresholds in item #1 and #2 will be automatically updated every three years, beginning on January 1, 2020.

IV.          What Nonprofits Should Do Now

Conduct a self-audit of all worker classifications

This self-audit should include a review of the salaries of “exempt” employees who are earning less than $913 per week ($47,476 annually) to determine whether the positions associated with those salaries will need to be reclassified. It is also a good idea to review those “exempt” employees above the new salary threshold of $913/week to ensure they meet the “job duties” test of one of the “white collar” exemptions.  This self-audit should also include a review of anyone currently classified by the organization as an “independent contractor,” “consultant,” or “volunteer” to ensure they are properly classified as such.  Misclassification of employees as independent contractors is one of the areas of greatest legal risk to employers at this time.

Update job descriptions

Ensure that your current job descriptions accurately reflect worker classifications of “exempt.”  Remember, even if an employee is earning a salary at or above the salary threshold, he/she may still be entitled to overtime pay.  The employee still needs to meet the duties tests of one of the “white collar” exemptions in order to be exempt from overtime pay.

Although the DOL decided not to make changes to the standard job duties tests, employers would be well-advised to pay particular attention to the job duties of workers classified as “managers” and “assistant managers” because much litigation has been brought by workers with those titles, claiming that they were actually performing non-exempt duties, notwithstanding their lofty titles.

Review Your Highly Compensated Employees

You must ensure that the highly compensated positions still qualify for the exemption (i.e., they are earning annual compensation of $134,004 which includes at least $913/week on a salary or fee basis; their primary duty includes performing office or non-manual work; and they customarily and regularly perform at least one of the exempt duties of the “white collar” administrative, executive or professional exemptions).

Determine the financial and budgetary impact on your organization.

If you determine that you must convert some “exempt” employees to non-exempt status, decide how you will address it.

Ask yourself these questions:

• Will the organization need to staff differently, hire more people working fewer hours, restrict the use of overtime, issue or re-issue policies and procedures addressing off-the-clock work to ensure that workers converted to non-exempt are no longer working before and after scheduled hours (i.e., sending and responding to emails and texts on weekends), train managers on new practices, and/or make other staffing adjustments?
• Will you seek to renegotiate or reopen government contracts or grant amounts to obtain higher reimbursement rates in view of anticipated increased costs?
• Will you conduct targeted solicitations of donors for additional staff funding?

Decide how you are going to implement these changes.

• Are you going to reclassify some or all currently exempt employees earning salaries below $913/week as non-exempt?
• Are you going to increase the salaries of currently exempt employees who meet the job duties test for a “white collar” exemption up to the salary threshold to maintain their exemption?
• Will you limit overtime pay?
• Will you reduce staff, hire more part-time staff to avoid overtime pay, or readjust workloads?
• Will you convert salaried non-exempt employees to hourly?
• Will you reduce a non-exempt employee’s base pay, by using a lower regular rate of pay and paying expected overtime pay?
• Will you implement other measures?

Ensure proper time records are maintained for all non-exempt staff.

A failure to keep proper time records is an independent FLSA violation.  Consider expanding time-keeping systems if needed to address a potentially much larger group of nonexempt employees than before.

Determine whether employees to be reclassified to nonexempt will no longer be eligible for certain benefits.

Consider how you are going to communicate the changes to employees to be reclassified as nonexempt to mitigate the impact on employee morale when employees previously classified as exempt may view a reclassification to non-exempt status as a demotion.

Consider how to address to wage compression issues.

If you raise the salaries of currently exempt employees to the new salary threshold, what is the rippling effect on higher salaries in the organization? Must any of those salaries of higher paid employees now be bumped up to fairly compensate the supervisors of the employees whose salaries have just been brought up to the salary threshold?

Determine how State laws will affect any changes you plan to implement.

Regardless of whether an organization or its employees is covered by the FLSA, employers must still also comply with their own States’ labor laws.  Confer with your employment counsel about your State’s laws.  Does your State require employers to provide advance notice to employees before making changes to wages?  In New York, for instance, employers must provide at least 7 days’ notice before making any changes to the written notice of pay rate unless the paystub will reflect that change, and must notify an employee in writing before reducing wages.  Many States’ minimum wages will increase in 2017 so employers need to be alert to those developments as well.

V.     DOL Guidance for Not-for-Profits on Final Overtime Rules

The U.S. Department of Labor has issued two pieces of guidance specifically for not-for-profits, including a reminder about the federal law concerning the use of volunteers.  Note that States may also have their own laws regarding the use of volunteers, as New York does, and employers will need to comply with State laws and court decisions in those jurisdictions.

Links to the U.S. DOL guidance sheets are attached here:

https://www.dol.gov/sites/default/files/overtime-nonprofit.pdf https://www.dol.gov/whd/overtime/final2016/nonprofit-guidance.pdf.

VI.     Will Change in Political Winds Affect Rule?

On November 22, 2016, a federal court judge in the United States District Court for the Eastern District of Texas, an Obama appointee, is expected to rule on injunctions in two separate, now consolidated lawsuits, challenging the Department of Labor’s new overtime rule and seeking to prevent it from taking effect on December 1st.  One lawsuit was brought by 21 States and the other was brought by more than 50 business groups.

In September, the U.S. House of Representatives passed a bill that would delay implementation of the final overtime pay rule for six months (see H.R. 6094, the Regulatory Relief for Small Businesses, Schools and Nonprofits Act).  Notwithstanding such pending action by the House and a similar bill introduced recently in the Senate, President Obama is likely to veto any such legislation.

Even assuming the Judge denies the injunction and President Obama vetoes the proposed legislation, it is anyone’s guess whether the Final Rule will later be reversed or modified in some respect, including the automatic salary increases every three years, with a Republican President in 2017.  However, for now, employers must hunker down and implement changes to be compliant with the December 1^st deadline.

VII.      Some Final Thoughts

A number of non-profits have voiced objections to this new rule on the grounds that increased staffing costs will make it more difficult for them to execute their mission and provide contractually mandated programs.   At least one commentator, however, has questioned whether nonprofit organizations that underpay or do not pay their workforce are undermining their own missions of helping those in need.  See, e.g., http://www.theatlantic.com/business/archive/2016/08/the-plight-of-the-overworked-nonprofit-employee/497081/.  The current federal salary threshold of $23,660 is below the poverty line for a family of four.  Is it incongruous for a non-profit to oppose an increase in wages for its own staff above the poverty line while promoting the betterment of the world or a particular group as part of its mission?  Or put another way, how can the shoemaker provide shoes to others when he cannot provide shoes for his own children?  This is a point for all non-profits to consider while they seek to better the world in some way.

[1] * Note that the DOL has carved out a limited-time, non-enforcement policy exception for Medicaid-funded services for individuals with intellectual or developmental disabilities in residential homes and facilities with 15 or fewer beds.  With respect to those facilities, the DOL will delay enforcement of the Final Rule until March 18, 2019.

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The EEOC has been increasingly focused on workplace discrimination against lesbian, gay, bisexual, transgender (LGBT) individuals and has brought litigation against many employers, or filed “friend of the court” briefs in cases involving non-profit organizations, alleging discrimination based on sexual orientation, gender identity, and sex.

On November 4, 2016, a federal district court ruled in U.S. EEOC v. Scott Medical Health Center (Case 2:16-cv-00225-CB), in U.S. District Court for the Western District of Pennsylvania in Pittsburgh, that sexual orientation is a prohibited form of sex discrimination–i.e., sex stereotyping– under Title VII of the Civil Rights Act of 1964, as amended.

In Scott Medical Health Center, the EEOC filed its first sex discrimination lawsuit based on sexual orientation. The EEOC alleged that a gay male employee was subjected to sex-based harassment because of his sexual orientation and then forced to quit his job rather than endure further harassment.

Specifically, the EEOC alleged that the male employee’s manager repeatedly referred to him using various anti-gay epithets such as “fag,” “faggot,” “fucking faggot,” and “queer,” and made other highly offensive comments about his sexuality and sex life. The EEOC further alleges that when the employee complained to the clinic director, the director responded that the manager was “just doing his job,” and refused to take any action to stop the harassment.

The employer moved to dismiss the complaint on the grounds that, among other things, Title VII did not prohibit discrimination based on sexual orientation. The court denied the employer’s motion to dismiss the sex discrimination lawsuit. In its ruling, the court noted that sexual orientation discrimination is a type of discrimination “because of sex,” which is barred by Title VII because it is based on “sex stereotypes,” i.e. pre-conceived ideas of how a man or a woman should act or think. The federal court stated, “There is no more obvious form of sex stereotyping than making a determination that a person should conform to heterosexuality.” See file://sql2005/USERDATA/lisa/Downloads/gov.uscourts.pawd.229003.48.0.pdf. There has been no trial or factual finding, however, whether discrimination occurred.

The EEOC has previously concluded that harassment and other discrimination because of sexual orientation is prohibited sex discrimination under Title VII, but the EEOC states that this is the first decision by a federal court making that finding. On July 15, 2015, the EEOC, in a federal sector decision, determined that sexual orientation discrimination is, by its very nature, discrimination because of sex. See Baldwin v. Dep’t of Transp., Appeal No. 0120133080 (July 15, 2015).

Even though Congress has not yet amended Title VII to prohibit sexual orientation discrimination, progress awaits no one. The EEOC has already been interpreting and enforcing Title VII’s prohibition of sex discrimination as forbidding any employment discrimination based on gender identity or sexual orientation. The EEOC is forging ahead with tackling workplace discrimination against LGBT employees based on sex as one of its top priorities set forth in its Strategic Enforcement Plan for FY 2017-2021. See https://www.eeoc.gov/eeoc/plan/sep-2017.cfm and https://www.eeoc.gov/eeoc/newsroom/wysk/enforcement_protections_lgbt_workers.cfm.

Both non-profit and for-profit employers would be wise to:

• Review and update their employee handbook EEO policies and practices; and
• Train managers to ensure their workplaces are free of workplace discrimination based on sexual orientation or otherwise based on sexual stereotyping (even if State laws do not provide such protection).

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Here are seven questions and answers that may help non-profit 501(c)(3) organizations and for-profit employers navigate the treacherous waters of “politics in the workplace.”  Many of the answers to these questions will be governed by state law.

1. Do employees have a First Amendment right to express their political views in the workplace?

Answer:  No.  While private citizens may exercise their First Amendment right to free speech about their political views outside of the workplace, a First Amendment right does not extend to private-sector employees in the workplace.  A narrow exception to this exists where an employee’s speech concerning a political candidate has a “nexus” to the employee’s terms and conditions of employment (see below).

2. May an employer impose an absolute ban on any employee discussions of politics in the workplace?

Answer: Employers should be careful not to impose absolute bans on employee speech about support of positions of political candidates. Under the federal National Labor Relations Act (NLRA), covered employees have a legal right to discuss terms and conditions of employment like wages and workplace health and safety.   If there is a “direct nexus between the specific issue that is the subject of the advocacy and a specifically identified employment concern of the participating employees,” then the employee’s political speech may be protected by the NLRA.  Even where the “direct nexus” exists, however, the employee’s advocacy is protected only when it is non-disruptive and occurs on the employee’s non-working time in non-work areas.

If, for instance, an employee supports a certain political candidate because the candidate’s platform supports an increase in the minimum wage or improved workplace safety regulations, that speech would likely be viewed as protected speech by the National Labor Relations Board (NLRB) which enforces NLRA.  However, employers may have solicitation policies limiting employee solicitations, including soliciting for political campaigns—whether by email, social media or otherwise– to non-working time.  They may also limit distributions of materials, including campaign materials, to non-working areas.   As noted below, 501(c)(3) organizations should prohibit employees from using the organization’s resources or equipment for purposes of endorsing or supporting a political campaign.

   3.  May an employer recommend certain politicians to its employees or tell its employees that if they vote for a particular political candidate, the organization will suffer and they will likely lose their jobs?

Answer:  In an earlier Perlman & Perlman blog entitled “Political Activity and Nonprofits – 501(c)(3)s Beware,” our firm addressed restrictions on political activities of 501(c)(3) organizations. As noted there, federal laws prohibit 501(c)(3) not-for-profit organizations from endorsing or opposing a political candidate.

With respect to for-profit employers, the answer depends.  There is no federal election law that currently prohibits employers from using corporate funds to endorse and campaign for political candidates, or that prevents employers from telling their employees that they “could lose their jobs if they vote for a certain candidate.”  A number of States, like Pennsylvania and New Jersey, however, among others, make it unlawful to threaten or intimidate employees to influence their political opinions or actions, including prohibiting employers from displaying any notice within 90 days before an election threatening to reduce compensation or conduct layoffs depending on election results.  In addition, State laws protecting an employee from discrimination based on political affiliation or activity may be implicated.  Employers should be aware of State laws governing these issues and potential issues under the federal National Labor Relations Act relating to workers’ rights to unionize.

4.  May an employer prohibit certain employees from contributing to certain political campaigns or politicians?

Answer:  It depends.  In an earlier Perlman & Perlman blog entitled “Political Activity and Nonprofits – 501(c)(3)s Beware,” we addressed restrictions on political activities of 501(c)(3) organizations.  As noted there, federal and state laws prohibit 501(c)(3) not-for-profit organizations from engaging in political activity, including making campaign contributions, endorsing or opposing a candidate—implicitly or explicitly, but that prohibition may or may not extend to private citizens, outside the workplace. As was also noted in that blog, employees at 501(c) (3) non-profit organizations are not prohibited by federal law from privately contributing to or participating in political campaigns so long as their actions and statements are not attributable to the 501(c)(3) organization.

Additionally, certainly 501(c)(3) organizations may forbid their Executive Director, high-level executives or anyone who could be perceived as speaking for the organization, from endorsing or expressing their views publicly (or even internally at workplace meetings) about a particular political candidate or campaign.  It should also prohibit all employees from contributing money, time or use of the organization’s facilities or resources to making calls or emailing on behalf of a candidate or campaign.  Or conversely, they should expressly direct those individuals not to do so.

Certain private-sector, for-profit employers with “pay-to-play” prohibitions may, in fact, restrict certain levels of employees from contributing to certain political campaigns or politicians.  For instance, you may have heard that one major global financial institution has prohibited its partners from contributing to: “Any federal candidate who is a sitting state or local official (e.g., governor running for president or vice president, such as the Trump/Pence ticket, or mayor running for Congress), including their Political Action Committees (PACs).”  The stated purpose of this prohibition is “to prevent inadvertently violating pay-to-play rules, particularly the look-back provision, when partners transition into roles covered by these rules.”  It is “also meant to minimize potential reputational damage caused by any false perception that the firm is attempting to circumvent pay-to-play rules, particularly given partners’ seniority and visibility.”   On the flip side, for-profit corporations may ask their “executive and administrative” employees and their family members, and stockholders and family member, to voluntarily contribute to a company’s political action committee.  However, those corporations may not condition compensation, promotion or other employment benefits or detriment on such contributions. The Federal Election Commission regulations state that a corporation cannot facilitate the making of federal contributions by means of “coercion, such as the threat of a detrimental job action, threat of any other financial reprisal, or the threat of force, to urge any individual to make a contribution or engage in fundraising activities on behalf of a candidate or political committee.”  As noted above, a number of States also prohibit employers from threatening or coercing employees to influence political action.

5. May an employer prevent an employee from campaigning for a particular politician or political party at the workplace?

Answer:  With respect to 501(c)(3) non-profit organizations, they may not use or allow the use of their resources for political activity, including, but not limited to, the use of work telephones, copy machines for making fliers, faxes or emails.  For-profit employers may prohibit employees from campaigning for a particular politician or political party at the workplace subject to the caveats mentioned above.

6. May an employer fire an employee for campaigning for a politician outside of work if the employer feels strongly opposed to that candidate?

Answer:  State laws vary concerning whether employers may discriminate against employees on the basis of political campaigning or fundraising.  For instance, New York Labor Law prohibits discrimination against employees on the basis of off-duty political activities, such as campaigning or fundraising, outside of working hours, off of the employer’s premises and without use of the employer’s property or equipment.  There is an exception where the off-duty political activity creates a material conflict of interest with the employer’s trade secrets, proprietary information or other proprietary or business interests.

7. What if an employee expresses to co-workers that he/she supports a particular political candidate because the candidate wants to close the U.S. border to Mexicans, ban Muslims, and does not believe married women should work outside the home? Must an employer allow an employee’s expression of support for a political candidate in the workplace?

Answer:  Employers should be mindful that employee speech or conduct, that disparages or supports the disparagement of a person because of their legally protected status (i.e., gender, marital status, race, national origin, religion, disability, etc.), may violate an employer’s anti-harassment policy.  Employers need not tolerate any remarks or conduct that would violate their anti-harassment policies or other workplace conduct policies.  Typically, an organization’s anti-harassment policies apply to the organization’s electronic communications and social media policies as well.

Recommendations

• Ensure policies and procedures regarding politics in the workplace (and time-off-to-vote in States that require it) are current.
• Ensure managers are trained on organization policies around discussing politics in the workplace and voting leave rights under State law.
• Ensure that your organization has posted mandatory postings regarding time off to vote; and that your organization’s policies and practices adhere to the legal requirements of the applicable States.
• Employers would be well-advised to confer with their employment counsel regarding the particular facts regarding their employees’ political discussions in the workplace and applicable State laws to ensure compliance and avoid penalties.

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In a March 3, 2015 Dilbert comic strip, the boss tells his subordinates that because of a study showing that tall people earn more than shorter people, the company will not be doing performance reviews but will instead simply measure the height of each employee and then pay them accordingly. The boss then adds: “Alice will earn 10% less than the men. I think that’s the law.”

Well, jokes like those about women earning less than their male counterparts for doing the same job–as a matter of fact, if not a matter of law– may soon be “history” or “herstory” if laws like the one recently passed in Massachusetts and the one proposed this week in New York City take hold. On August 1, 2016, Massachusetts became the first State in the nation to prohibit employers from asking about a job applicant’s salary history or past benefits before extending an offer of employment with compensation, in a new pay equity law. Although Massachusetts had already passed a pay equity law requiring equal pay for comparable work back in 1945, this new law goes further.

The Massachusetts pay equity law also prohibits employers from requiring employees not to talk about wages, benefits or other compensation, or not to inquire, discuss or share information about any other employee’s wages, benefits or other compensation. An employee who prevails in a lawsuit under this new pay equity law may also recover his/her reasonable attorneys’ fees and costs.

The law does, however, allow an employer who is sued for alleged violation of the law to raise an affirmative defense to liability by showing that, within 3 years and before the commencement of the action, it had conducted a self-evaluation of its pay practices in good faith and can demonstrate that reasonable progress has been made towards eliminating compensation differentials based on gender for comparable work in accordance with that evaluation. A copy of the Massachusetts bill can be found here: https://malegislature.gov/Bills/189/Senate/S2119.

This provision of Massachusetts’ pay equity law is truly groundbreaking in the United States, and may be one of the first real impactful acts to alter the pay disparity at the outset of employment between men and women performing comparable work.

Why this law when federal and State equal pay laws have been “on the books” for decades? As the Dilbert comic strip makes plain, those laws have largely failed to accomplish their intended purposes. Paying new hires based on salary history rather than market-competitive rates has historically disadvantaged women who may have been victims of wage discrimination at a prior job, taken a break from the workforce to bear children or made other economic sacrifices that later disadvantaged them when they sought new employment despite their performing work comparable to that of their male counterparts.

Massachusetts is now attempting to level the playing field for women by requiring employers to essentially pay women based on their worth to the employer or in the marketplace.

New York City may be next on the gender pay equity path. On the “high heels” of Massachusetts’s law, on August 10, 2016, New York City’s Public Advocate Letitia James announced a proposed bill that also would prohibit New York City employers and employment agencies from asking job applicants about salary history, including benefits. See http://pubadvocate.nyc.gov/news/articles/pa-james-announces-legislation-close-gender-wage-gap.

New York employers may recall that, effective January 19, 2016, New York State amended New York’s Labor Law Section 194, by enacting a gender pay equity law. That law requires that any differential in rate of pay between a man and woman performing the same job be based on a bona fide factor other than sex such as education, training or experience. Such a factor may not be based on a sex-based differential, and must be “job-related and consistent with business necessity.” But the New York State law does not go as far as the one in Massachusetts to prohibit inquiries about salary history.

Like the Massachusetts law, New York State’s gender pay equity law prohibits employers from paying women less than their male counterparts for performing comparable work. Failure to comply with the New York State law may result in liquidated damages of up to 300% of the amount of unpaid wages (you read it right).

As the New York State legislature explained in passing the gender pay equity law last year, “[d]espite existing protections under the law, women in New York earn 84 percent of what men earn and jobs traditionally held by women pay significantly less than jobs predominately employing men. In New York, on average, a woman working full time is paid $42,113 per year, while a man working full time is paid $50,388 per year. This creates a wage gap of $8,275 between full-time working men and women in the state.”

And as noted elsewhere by the New York State legislature, “[d]espite the enactment of the federal Equal Pay Act and the state Equal Pay Law in 1963 and 1966 respectively, there are still incidences of discrimination in pay based on sex.” New York’s gender pay equity law–like Massachusetts’ new law– also prohibits employers from “forbidding employees from sharing wage information that would otherwise deny women workers the ability to discover whether their wages are unequal to their male counterparts” (despite the fact that the National Labor Relations Board had already made it unlawful for many years for covered U.S. employers to prohibit employees from discussing their compensation in the workplace).

Some other States like California have their own equal pay laws as well. California has also introduced legislation that would bar inquiries into a job applicant’s salary history.

In view of the above legal developments and more expected to come throughout the U.S., employers would be well advised to consider reviewing their pay practices and adjusting as needed to ensure that employees performing the same jobs are paid comparably to their counterparts of a different gender and are paid based on their worth to the employer and market-rate, regardless of gender.

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Here are the key provisions that covered employers need to be aware of:

1. The Final Rule updates the salary threshold for determining whether an employee is exempt from the FLSA’s overtime pay requirements under the executive, administrative or professional “white collar” exemptions to: $913 per week, or $47,476 annually (note that the salary level test does not apply to teachers, doctors and lawyers). The prior salary threshold was $455 per week ($23,600, annualized).

2. Employers may use nondiscretionary bonuses and incentive payments, including commissions, to satisfy up to 10% percent of the new standard salary level, if those payments are made on a quarterly or more frequent basis. (Remember that, even if an employee’s salary exceeds the salary threshold, he/she must still meet a “primary duties” test to fit within one or more of the “white collar” exemptions from the FLSA’s overtime pay requirement).

3.  The total annual compensation requirement for workers classified as exempt under the “highly compensated employee (HCE)” exemption is now $134,004, up from $100,000. Those employees must still be paid on a salary or fee basis of at least $913/week, and nondiscretionary bonuses may not be used towards reaching the salary threshold.

4. The above salary thresholds in item #1 and #2 will be automatically updated every three years, beginning on January 1, 2020.
What Should Employers Do Now?

Employers should take steps to ensure compliance with the Final Rule by the December 1st deadline. In discussions with their employment counsel (to preserve an attorney-client privilege), employers would be well-advised to:

1. Conduct a self-audit of all worker classifications, those above and below the new salary threshold of $913/week.  Determine whether the positions associated with salaries below $913/week will need to be reclassified as non-exempt or salaries will need to be increased to maintain the exemption, and whether those earning a salary of $913/week or more still qualify as exempt from the FLSA’s overtime pay requirements based on the “primary duties” test.

2. Review salaries of workers classified as “exempt” under a “highly compensated employee” exemption to ensure that those positions still qualify for that exemption (i.e., they are earning annual compensation of $134,004 which includes at least $913/week on a salary or fee basis; their primary duty includes performing office or non-manual work; and they customarily and regularly perform at least one of the exempt duties of the “white collar” administrative, executive or professional exemptions).

3. Determine the financial and budgetary impact of converting those “exempt” employees to non-exempt status. Will the organization need to staff differently, hire more people working fewer hours, reassign duties from newly reclassified nonexempt employees to exempt employees to avoid overtime, issue or re-issue policies addressing off-the-clock work to ensure that converted workers are no longer working before and after scheduled hours, train managers on the new rules, and/or make other staffing adjustments? If you decide to increase salaries to the new salary threshold of $913/week, will there be wage compression on those who will now be earning just slightly more than the new salary threshold, requiring upwards movement of those salaries? What will be the financial impact of such a ripple effect?

4. Review and update job descriptions of all positions to ensure they accurately reflect worker classifications of “exempt.” Although the DOL decided not to make changes to the standard duties tests, employers would be well-advised to pay particular attention to the job duties of workers classified as “managers” and “assistant managers” because much litigation has been brought by workers with those titles, claiming that they were actually performing non-exempt duties, notwithstanding their lofty titles.

5. Ensure proper time records are maintained for all non-exempt staff (including newly converted to non-exempt) as failure to do so is an independent FLSA violation.

6. Consider how to communicate these changes effectively to mitigate the impact on employee morale as employees previously classified as exempt may view a reclassification to non-exempt status as a demotion.

Finally, note that even if an employer or its employees are not covered by the FLSA, employers must be compliant with their own States’ wage and hour laws. States may have more employee-protective wage and hour laws than the federal law.

Employers can learn more at the U.S. Department of Labor’s website regarding the final rule: https://www.dol.gov/whd/overtime/final2016/index.htm.

The post The U.S. Department of Labor’s Final Overtime Pay Rule Takes Effect on December 1, 2016: Will your organization be ready? appeared first on Perlman & Perlman.

Employers seeking amnesty must satisfy eligibility requirements, submit an application to the IRS, and enter into a closing agreement with the IRS.  The agreement that the employer enters with the IRS need not include all of the workers that the employer is treating as independent contractors.  If an employer chooses to participate in the program, it will be required to pay 10% of the amount of the employment taxes that would otherwise have been due on compensation paid for the most recent tax year to the workers. This amounts to about one percent (1%) of the wages paid to the reclassified workers during the prior year and  the IRS will not impose interest or penalties on the amount paid, and the employer will not be subject to an employment tax audit with respect to these workers for prior year

A caveat – the program covers only federal taxes and not unpaid local state payroll taxes.

The IRS did not set a deadline yet for businesses (or charities)  to apply.

The post IRS Continues Amnesty Program for Misclassified Workers appeared first on Perlman & Perlman.