Changes to FLSA Overtime Rules Effective December 2016

In May 2016, the U.S. Department of Labor released updated regulations that increases the number of salaried employees eligible for overtime under the Fair Labor Standards Act (FLSA). These changes increase the number of employees eligible for overtime pay at businesses across the country.

Eligibility for overtime pay is determined by certain tests of job duties and rates of pay as outlined by the FLSA. Under the new rules, salaried employees must be classified as non-exempt and will be eligible for overtime pay if their annual salary is below $47,476.  This new salary floor increases the current salary threshold of $23,660 per year. The change goes into effect December 1, 2016.  Specifically, the final ruling mandates the following:

  1. Raises the standard (threshold) salary level to $913 per week (in California – this represents an increase from the current $800 per week); $47,476 annually for a full-year worker;
  2. Sets the total annual compensation requirement for highly compensated employees subject to a minimal duties test to $134,004 (Note: California does not have a highly compensated exemption); and
  3. Establishes a procedure for automatically updating salary and compensation levels every three years.

In addition, the new regulations amend the salary basis test to allow employers to use nondiscretionary bonuses, incentive payments, and commissions to satisfy up to 10 percent of the new standard salary level.

Employers have some flexibility as to how they will meet the terms of these new requirements:

  • Employers will have the option to continue to pay employees at the same salary but pay an overtime premium rate of one and a half times the regular rate of pay for any overtime worked.
  • Employers may increase the salary of an employee who meets the duties test to at least the new salary level to retain his or her exempt status.
  • Employers may reduce or eliminate overtime hours or reduce the amount of pay allocated to base salary and add pay to account for overtime hours worked over 40 hours in the work week.

Employers should carefully audit employee hours to determine who will be earning less than the new salary threshold.  They should also assess the impact of reclassification on their benefit offerings.  Lastly, employers should consider a communication strategy for those employees who will be impacted by the change.

By: Meredith Delia – HR Consultant

Disclaimer: Some information contained herein has been abridged from numerous sources and may be protected by various copyright laws. Such information should not be construed as consulting or legal advice. Please contact our office for specific advice and/or referrals.

Bay Area Human Resources Services

California Decision Expands Accommodation Requirement

Must California employers provide disability-based accommodation / protection to an employee who is neither disabled nor perceived to be?  Most would think no, but a California state appellate court recently decided that disability accommodation and other related protections should be extended when the employee is associated with a disabled person.

Luis Castro-Ramirez was a driver for Dependable Highway Express, Inc. (DHE).   When he was hired, he shared with his employer that his son required home-based dialysis each evening.  No other family members were able to provide this care to the child.  For several years, DHE supervisors and schedulers worked with Castro-Ramirez’s request to ensure that he would be home each evening.   All apparently went well until a new supervisor assigned Castro-Ramirez to a different route and schedule that would interfere with him getting home on time for the treatment.  Castro-Ramirez responded by asking for a different route or schedule, but his supervisor declined to revise the newly-assigned shift.  Castro-Ramirez refused the shift assignment and his employment was terminated.

Castro-Ramirez sued DHE, stating that he had been discriminated and retaliated against based on “associational disability discrimination”, which is discrimination on the basis of associating with someone in a protected class, in violation of California’s Fair Employment and Housing Act (FEHA).  The trial court dismissed the case; an initial apparent win for the employer.  However, Castro-Ramirez appealed the ruling, claiming disability discrimination, failure to prevent discrimination, retaliation and wrongful termination in violation of public policy.

In its decision, the Court of Appeal broadly determined that the duty to accommodate is not limited to disabled employees, and that FEHA requires employers provide reasonable accommodation to an applicant or employee based on their association with a disabled person.  Previously, whether an employee is “disabled” under FEHA has been limited to his or her own disability, or the perception thereof.  The Court of Appeal also determined that there was basis for the retaliation claim, because Castro-Ramirez’s complained about his schedule and was subsequently terminated.

Significance

This decision, though good news for employers, represents a new and broader interpretation of disability-related protections for California employees.  It is also a departure from the Federal Americans with Disabilities Act (ADA), which does not, in itself, obligate employers to accommodate employees who are associated with a disabled person, though other laws like the Family Medical Leave Act may apply and allow for time off for caregivers.  California employers should be particularly attentive and train supervisors to escalate any employee request related to disability.

By: Amy Kelemen, SPHR – Director of Professional Services, Sr. HR Consultant

Disclaimer: Some information contained herein has been abridged from numerous sources and may be protected by various copyright laws. Such information should not be construed as consulting or legal advice. Please contact our office for specific advice and/or referrals.

Bay Area Human Resources Services

Can Employers Require Reimbursement for Training Costs If the Employee Resigns Prematurely?

Training employees is an expensive business investment.  According to the Association for Talent Development’s 2014 State of the Industry Report, organizations spend an average of $1,208 per employee on training and development. For companies with fewer than 500 workers, that number is even higher, coming in at $1,888 per employee.   If you add the cost of sponsoring advanced degrees or certifications, the cost can be higher.  The benefits of providing training and development opportunities are well documented and are proven to result in a more effective workforce, as well as increased morale and employee loyalty.  The risk, of course, is that an employee may decide to take his or her employer-funded education and use it somewhere else.  To mitigate that risk, employers sometimes require the employee to agree to repay the employer if the employee decides to work elsewhere.  But what if the employee refuses to pay?  Is the repayment agreement enforceable?  The answer is “yes”, according to a California Court of Appeal in USS-POSCO Industries v. Case.

Floyd Case (Case) voluntarily enrolled in a three-year, employer-sponsored educational program for training as a Maintenance Technical Engineer (MTE).  He signed an agreement to refund a prorated amount of the tuition for this course in the event he terminated his employment, voluntarily, within 30 months of completing the program.   Just two months after he completed the course, Case resigned. USS-POSCO asked him to refund $28,000 of the $46,000 it spent on his training in accordance with the agreement. Case refused to repay any funds.  He claimed the agreement was unenforceable in California for lack of consideration, that it was basically an unlawful non-compete agreement. Case further argued that the agreement violated Labor Code provisions preventing employers from passing operating expenses on to employees and mandating that employers reimburse necessary employee expenses.

In an important victory for employers, both the trial court and the court of appeals rejected Case’s arguments and granted summary judgment in favor of USS-POSCO.  The court denied his Labor Code claims based on the fact that Case’s participation in the training program was voluntary, and that there were other alternatives to obtaining the promotion beyond entering the training program.  For example, Case could have taken a test in lieu of the training program.  The Court also rejected Case’s claim that the agreement was effectively a non-compete agreement because Case could and, in fact, did, find another job.  Finally, the court rejected the claim that the contract lacked consideration because Case obtained valuable training and wage increase in exchange for agreeing to repay if he left early.

Significance

The Court of Appeal distinguished this case from another line of cases in which the same Court denied the City of Los Angeles’ attempt to recover employer-mandated training expenses from police officers who quit early.  The key distinctions were that L.A.’s program was both mandatory and specific to the job, whereas USS-POSCO’s program was voluntary and the training was transferable to other jobs.  So, here’s the takeaway: California employers can require employees to repay back educational costs if the employee quits early if:

  • There is a clear, mutually agreed education reimbursement agreement;
  • The educational program was voluntary; and,
  • The training or education was not exclusive or highly specific to the employer’s operations.

By: Saul Macias, MBA, PHR – Vice President HR Services

Disclaimer: Some information contained herein has been abridged from numerous sources and may be protected by various copyright laws. Such information should not be construed as consulting or legal advice. Please contact our office for specific advice and/or referrals.

Bay Area Human Resources Services