Perspectives

Wage and hour compliance is an essential aspect of operating a business. It’s not just a legal obligation but a critical component of maintaining a fair and equitable workplace. Failure to comply with wage and hour laws can lead to significant financial penalties, damage to your company’s reputation and costly litigation. This post will provide an overview of wage and hour compliance, focusing on the Fair Standards Act (FLSA) and state laws like the Minnesota Fair Labor Standards Act (MFLSA).

Federal Standards: The Fair Labor Standards Act (FLSA)

The FLSA is the cornerstone of federal wage and hour regulations. It sets the baseline standards for several key areas, including:

Minimum Wage: The FLSA establishes a federal minimum wage, which is currently $7.25 per hour. However, many states, including Minnesota, have set higher minimum wages. For instance, Minnesota’s minimum wage is higher than the federal standard, and employers in Minnesota must pay the state rate. (Always be sure to review your local and state laws.)

Overtime Pay: The FLSA requires that non-exempt employees receive overtime pay at 1.5 times their regular rate for any hours worked over 40 in a workweek. This standard applies across the country, but states can impose stricter rules.

Recordkeeping: Employers are required to maintain accurate records for employee’s hours worked and wages paid. This includes details like the employee’s full name, social security number, address, birth date (if under 19), gender, occupation, time and day when workweek starts, hours worked each day, and total hours worked each week.

Youth Employment: The FLSA also sets restrictions on the employment of minors, limiting the hours they can work and the types of jobs they can perform. These provisions are designed to protect the educational opportunities of minors and prohibit their employment in jobs under conditions that may be detrimental to their well-being or health.

State-Specific Standards: The Minnesota Fair Labor Standards Act (MFLSA)

While the FLSA sets the baseline for wage and hour laws, state laws like the MFLSA can impose additional requirements. Employers must comply with both federal and state regulations and apply the standards that are most favorable to employees.

Overtime Pay: Unlike the FLSA, which requires overtime pay for hours worked over 40 in a workweek, the MFLSA mandates overtime pay for hours worked over 48 in a workweek. However, this does not mean that employers can ignore federal overtime requirements. If an employee is covered by both the FLSA and the MFLSA, the employer must pay the employee according to the standard that benefits the employee the most.

Minimum Wage: You state’s minimum wage may be higher than the federal minimum wage and vary depending on the size of the business. Employers must pay the higher state minimum wage if they are subject to both federal and state laws.

Additional State Requirements: Be aware that state’s also may have additional specific requirements. For example, Minnesota law requires meal and rest breaks, payment of wages upon termination, and protections for certain types of leave. Specifically, MN law requires that employees be given enough time to eat a meal during a shift that is eight hours or longer. Employers must be aware of the nuances to ensure full compliance. We recommend working with trusted legal counsel to ensure your follow all city, state, and federal laws.

The Importance of Compliance

The consequences of non-compliance with wage and hour laws can be severe. Employers who fail to meet these obligations may be subject to:

Back Wages: Employers may be required to pay employees any unpaid wages that were owed under law.

Liquidated Damages: In cases where violations are found to be willful, employers might be liable for liquidated damages, which can double the amount of back wages owed.

Attorney’s Fees and Court Costs: Employers found in violation may also be responsible for paying the employee’s attorney’s fees and court costs.

Reputational Damage: Beyond the financial impact, wage and hour violations can seriously damage an employer’s reputation, making it difficult to attract and retain top talent.

Staying Compliant: A Proactive Approach

Given the complexities of wage and hour laws, especially when considering both federal and state requirements, it is crucial for employers to take a proactive approach to compliance. This includes:

Regular Audits: Conduct regular audits  of your payroll practices and recordkeeping procedures to ensure compliance with all applicable laws.

Employee Training: Ensure that your HR team and management are fully trained on wage and hour laws and understand the importance of accurate recordkeeping and fair pay practices.

Staying Informed: Wage and hour laws are subject to change, so it’s important to stay informed about any updates to federal or state laws that may affect your business.

Consulting with Legal Counsel

Navigating the complexities of wage and hour laws can be challenging, especially for businesses that operate in multiple states or industries with specific regulations. To ensure compliance and protect your business from potential liabilities, it is highly recommended to work with trusted legal counsel who can provide expert advice tailored to your specific situation.

Your legal counsel can help you understand your obligations under both federal and state laws, identify potential areas of risk, and implement best practices to mitigate those risks. By partnering with experienced employment law attorneys, you can confidently navigate the complexities of wage and hour compliance, allowing you to focus on what matters most-growing your business. 

The Department of Labor (DOL) recently updated the Overtime Rule, bringing significant changes to the salary threshold for overtime exemptions. As of July 1, 2024, the threshold will increase to $844 per week, with a further increase to $1,128 per week on January 1, 2025. These changes will have wide-ranging implications for employers across the country. In this blog post, we’ll explore the historical context, financial and administrative impacts, and essential strategies for ensuring compliance with the new rule.

Historical Context and Rationale

The salary threshold for exemption has eroded over time, falling to $455 per week-currently less than the poverty threshold for a family of four. This has resulted in millions of workers working long hours without fair compensation. Between 1938 and 1975, the DOL increased the minimum salary required for the executive, administrative, and professional (EAP) exemption from overtime pay to every 5 to 9 years. However, long periods between increases after 1975 have caused the real value of the salary threshold to erode, lessening its effectiveness. 

The January 2025 salary threshold is set at the 35th percentile of earnings for full-time workers in the lowest-wage Census Region (currently the South), while the highly compensated employee (HCE) threshold is tied to the 85th percentile of earnings for full-time salaried workers nationally. Additional increases based on current wage earnings data are set to automatically occur every three years, beginning July 1, 2027.

Financial Impact

One of the most immediate concerns for employers is the financial impact of the new DOL overtime rule. With the new salary threshold increases, many employers will need to adjust their budgets to accommodate higher payroll expenses. For companies with a significant number of employees currently earning below these new thresholds, this could mean substantial increases in labor costs.

Employers will need to decide whether to raise salaries to maintain exempt status or reclassify employees as non-exempt and pay overtime wages. This decision will depend on the nature of the work, the number of hours typically worked, and the financial capacity of the business. Conducting a thorough cost-benefit analysis will be crucial to determine the most financially sound approach for your organization.

Administrative Impact

The new rule will require significant changes to payroll and HR practices. Employers will need to update payroll systems to ensure accurate tracking hours worked and proper payment of overtime for newly non-exempt employees. This may involve investing in new timekeeping software or upgrading existing systems. Additionally, HR departments may need to revise job descriptions and employment contracts to reflect changes in employment classification. Training for managers and HR personnel will be necessary to ensure compliance with the new regulations and effectively manage the reclassification process.

The administrative burden can be significant, especially for small business with limited HR resources. However, these changes are essential to ensure compliance and avoid potential legal issues.

Legal Compliance

Adhering to the new regulations is crucial to avoid penalties and potential lawsuits. Non-compliance can result in hefty fines, back pay for unpaid overtime, and legal fees. Additionally, failing to comply with the new rules can damage your company’s reputation and employee morale. Regularly auditing your payroll practices and employee classifications is important to ensure ongoing compliance. 

Consulting with legal experts and HR professionals can provide valuable guidance and help mitigate risks. Remember, staying proactive and informed is key to navigating these regulatory changes successfully.

Practical Considerations

Employers have some flexibility regarding the timing of reclassification. You can wait until January 2025 to reclassify employees if they meet the July, 2024 salary level. Planning for the reclassification process now will ensure a smooth transition. Stay informed about potential legal challenges and enjoinments to the new rule to make the best decision for your organization.

The DOL’s new Overtime Rule presents significant challenges and opportunities for employers. Assessing the financial and administrative impacts and ensuring legal compliance are crucial steps to navigate these changes successfully. By staying proactive and informed, you can make strategic decisions that benefit both your organization and your employees. 

Don’t know where to start? Integrating new legislation into your workflow shouldn’t be overwhelming. The Employment Law group at Wagner, Falconer and Judd stays up-to-date on state and federal laws so our clients can focus on running their businesses. Reach out today to learn how partnering with a firm like WFJ can provided much needed support to your organization’s leadership. 

The landscape of workplace safety inspections is evolving, with new regulations from the Occupational Safety and Health Administration (OSHA) reshaping the dynamics between employers, employees, and third-party representatives. Effective May 31, 2024, a revised rule grants employees the right to choose a representative, whether an internal colleague or an external third-party, to accompany OSHA inspectors during workplace inspections.

This significant shift is designed to bring clarity and inclusivity to the inspection process. No longer bound by formal credentials, such as safety engineering or industrial hygiene qualifications, third-party representatives can now be selected based on their knowledge, skills or experience relevant to the workplaces’ hazards and operations. The purpose is clear: to facilitate effective and thorough inspections that prioritize safety and compliance.

However, with this newfound flexibility comes a need for careful consideration and preparation on the part of employers. Understanding the implications of this rule and how to navigate them is crucial for maintaining compliance and ensuring a smooth inspection process.

Key Points in the Revised Rule:

• Expanded Representation Options: Employees now have the freedom to choose either an internal colleague or an external third-party as their representative during inspections.
• Inclusive Representation Criteria: Third-party representatives are not limited to individuals with formal credentials. Instead, their selection is based on their ability to contribute positively to the inspection through their knowledge, skills or experience.
• Compliance Officer’s Discretion: The Compliance Safety and Health Officer retains ultimate authority to determine whether a third-party representative is reasonably necessary for an effective inspection. This decision hinges on the representative’s potential contribution to the process.

Employer Response and Preparation

In anticipation of these changes, employers must revisit their policies and procedures related to OSHA inspections. This includes:

Analyzing Good Cause: Employers should be prepared to assess whether there is a legitimate argument against the presence of a third-party representative and articulate objections to the compliance officer.

Monitoring Representative Activities: Employers must ensure that third-party representatives adhere to the scope and purpose of their presence, preventing any behaviors that could disrupt or interfere with the inspection process.

Ensuring Transparency: Employers can promote transparency by staying informed about the selection process for third party representatives, potentially through active involvement in safety committees.

Addressing Union Concerns

While unions may view this rule change as an opportunity to increase organizing activities, it’s crucial to emphasize that the presence of third-party representatives is strictly for aiding in inspections. Compliance officers retain the authority to exclude individuals whose conduct disrupts the process.

OSHA’s revised rule on third-party representation in workplace inspections represents a significant step towards inclusivity and effectiveness. By empowering employees to choose representatives based on their expertise, the aim is to enhance safety and compliance standards. However, employers must be proactive in understanding and implementing these changes to ensure a smooth inspection process while maintaining a focus on workplace safety and compliance.

As employers adapt to to these changes, it’s essential to see guidance and expertise to ensure compliance while maintaining a safe working environment. If you find yourself grappling with updated regulations or need assistance in developing effective policies and procedures, we’re here to help.

On April 23, 2024, the U.S Department of Labor (DOL) issued a Final Rule raising the minimum salary thresholds for exempt employees under the Fair Labor Standards Act (FLSA). Exempt employees are (quite literally) exempt from the minimum wage, overtime, and time reporting provisions of the FLSA, allowing employers to pay these employees a weekly salary regardless of actual hours worked. The DOL sets the minimum threshold for compensation, and the positions must meet certain duties tests to be considered exempt. The Final Rule affects employees under the White Collar Exemption (executive, administrative, or professional) and Highly Compensated Employees’ Exemption.

Now and until July 1, 2024, employees occupying white collar exempt positions must be compensated at a rate of at least $684 per week ( about $35,568 per year). Similarly, employees in highly compensated positions must be compensated at a rate of at least $107,432 to qualify for the exemption.

The DOL, in its Final Rule, drastically raised these thresholds. But, potentially to soften the blow on the employers, the DOL is implementing the salary threshold increase in a two-part approach:

• First, effective on July 1, 2024, the salary level threshold for exempt employees will increase to a minimum of $844 per week (about $43,888 per year), and to $132, 964 per year for highly compensated employees.
• Then, starting on January 1, 2025, the threshold is set to increase to at least $1,128 per week (about $58,656 per year) for exempt employees and $151, 164 per year for highly compensated employees.

The Department of Labor plans on updating salary thresholds every three years beginning July, 1, 2027.

What Should Employers Do Now?

The Final Rule has already not been well received by some, and is expected to be challenged-which could delay implementation. Nevertheless, employers should proceed with caution and, despite the potential delay in the implementation, start preparing and budgeting for the changes.

• Employers could either prepare to increase employees’ salaries in a two-part approach, as the DOL suggests, first on July 1, 2024, and then again on January 1, 2025.
• Employers could also increase the salary threshold to January 1, 2025 levels on July 1, 2024.
• Employers can always convert the employees to the nonexempt status should the new thresholds be too burdensome.

As always, when it comes to exempt employees’ classification and compensation, employers should always seek experienced legal counsel. Our attorneys at Wagner, Falconer & Judd are always available to answer any of your questions.

On April 23, 2024, the Federal Trade Commission (FTC) convened an open commission meeting. Following deliberation, the five commissioners cast their votes, resulting in a decisive 3-2 outcome in favor of approving the proposed final rule-banning non-compete agreements. This pivotal decision marks a significant shift in regulatory action.

This new rule could impact an estimated 30 million workers (or 1 in 5 Americans) who are subject to a non-compete through their current or former employers. Barring a successful legal challenge, this new rule will go into effect in 120 days (August 2024).

In January 2023, the FTC warned of this eventuality when it issued its proposed rule adopting the stance that non-compete clauses were an unfair method of competition due to a multitude of factors:

• preventing workers from leaving jobs
• decreasing competition for workers
• lowering wages for both workers who are subject to the agreements and who are not

This rule paints with broad strokes, applying the ban not only to workers, but also independent contractors, externs, interns, volunteers, apprentices, or any sole proprietor who provides a service to a client or customer.

This new rule not only prevents employers from entering into new non-compete agreements with workers, but it also requires employees to rescind existing non-compete clauses. The rule also requires that employers notify parties that are currently subject to a non-compete, that the agreement is now void and unenforceable. While it may be of cold comfort to employers who traditionally utilize non-compete agreements, the FTC has not banned non-solicitation or nondisclosure agreements. Existing non-competes with senior level executives remain in effect, but new agreements, even with executives, are banned.

We expect pushack from employers and business groups who will likely challenge this rule in court. Wagner, Falconer & Judd will be watching these developments closely and will share as we know more.

Staying on top of legislative updates is time consuming. Consulting with an Employment Law Attorney to proactively monitor and update company policies is a simple way to ensure compliance with your local and federal laws. Learn more about the Business Support Services provided by Wagner, Falconer & Judd here. 

That’s right. You heard us. The National Labor Relations Board (NLRB) is not the toothless, independent federal agency some would have you believe.

In March of this year, Region 25 of the NLRB secured an agreement settling a case against a Midwest employer, Hilst Enterprises, Inc. d/b/a La-Z-Boy Furniture Galleries (Hilst), for $297,000 in backpay, front, pay, interest, excess tax, mileage, and medical expenses for the two discharged employees; removal of the unlawful discharges from the employee’s files; and a letter of apology to the discharged employees with mail and email notices to its current employees.

So, what exactly happened with Hilst? Essentially, it boils down to two key issues.

First, Hilst maintained three unlawful work rules:

• Forbidding employees from discussing wages
• Imposing restrictions on employees’ use of its name and logo without explicit permission.
• Prohibiting employees’ personal use of the company email system and equipment

Additionally, two employees were fired the day after they engaged in protected concerted activity by expressing concerns about the behavior of Hilst’s President and its potential effect on Hilst’s employees and business.

As you probably know, Section 7 of the NLRA guarantees certain rights for workers. These include “the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representative of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection,” as well as the right to “refrain from any or all such activities.” Section 8(a)(1) of the NLRA makes it an unfair labor practice for an employer to “interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in Section 7.”

In the present case, the Court concluded that “it is axiomatic that employees have a Section 7 right to discuss their wages” and observed that the three rules stated above could reasonably be construed by an employee to restrict or prohibit Section 7 activities. The Court also found “that the employee complaints about changes made by management to their working conditions constituted protected concerted activity” and that Hilst’s discharge of the two employees was intended to punish their protected conduct.

The crucial insights from this case abound. Employers need to regularly reassess their policies to ensure they are not chilling the rights of their workers under the NLRA. Employers must be aware that, in the words of NLRB Regional Director Patricia K. Nachand, “Workers have a right to take collective action free from retaliation.”

The NLRB laws serve as a crucial safeguard for employee’s rights to organize and collectively bargain. Employers who fail to uphold these rights not only risk legal penalties, but also undermine trust , morale, and productivity within their organizations. It’s essential for employers to prioritize compliance with these laws, not only to avoid financial and legal repercussions but also foster a fair and respectful workplace environment where both employees and employers can thrive together. Upholding these rights is not just a legal obligation but a cornerstone of an equitable workplace.

Being mindful of the language in your employee handbooks, contracts and agreements is solid first step in proactively protecting your business from legal risk. Consulting with an Employment Law Attorney while creating and updating your documents is a simple way to ensure compliance with your local and federal laws. Learn more about the Business Support Services provided by Wagner, Falconer & Judd here. 

Establishing clear and comprehensive best practices for workplace misconduct is essential for fostering a healthy and productive work environment. These guidelines not only define acceptable behavior but also empower leaders to address issues promptly and effectively.

By proactively outlining expectations and consequences, organizations provide a framework that encourages accountability and professionalism. In the unfortunate event of misconduct allegations, having a well-defined set of procedures facilitates a fair and thorough workplace investigation. This not only mitigates legal and reputational risks but also ensures that the investigation is conducted transparently and impartially.

Additionally, such best practices serve as a preventive measure by promoting a culture of respect and integrity, ultimately contributing to employee satisfaction and retention. Regular training and communication about these guidelines reinforce the commitment to maintaining a safe and respectful workplace, empowering leaders to handle misconduct issues with confidence.

The employment law group at Wagner, Falconer, & Judd recommend the following tips when conducting your workplace investigations, whether you are conducting them yourself, or decide to outsource the investigation:

DO:

• Explain confidentiality issues (and that confidentiality cannot be guaranteed).
• Explain retaliation issues (particularly that any retaliatory conduct should be reported immediately).
• Take time in interviews. If an interview is taking longer than anticipated, notify subsequent interviewees of any expected delay.
• Be courteous and professional toward witnesses, including the complainant and accused.
• Ask non-leading questions and provide the witnesses an opportunity to speak. Do not cut off the witnesses.
  • Don’t forget: who, what, when, where, why, how

DON’T:

• Accuse: accusatory questions that are likely to put the witness on the defensive. For example, questions like “Did you sexually harass Employee X at the Employer’s holiday party on December 23rd?” should be avoided. “Could you describe your interaction with Employee X at the Employer’s holiday party on December 23rd?” is a better approach.
• Become angry or emotional
• Use legal jargon. (For example, sexually harassed, discriminated, constructively discharged, and so on.)
• Use conclusory statements like “when Employee X harassed you, what did they do?”
• Reveal the source of the questioning unless absolutely necessary. “Ms. X stated that you stole our Employer’s trade secrets and shared them with our competition.”
• Make predictions on the outcome of the investigation to any of the interviewees, such as “this conduct is outrageous, Employee X is going to be fired for sure.”
• Express agreement or disagreement with a witness’ statement.

To ensure the legality and comprehensiveness of the investigation process, it is highly recommended to consult with an experienced employment attorney. Legal expertise can provide invaluable guidance in navigating complex situations, minimizing potential risks, and ensuring that the company’s actions align with applicable laws and regulations. Investing time and resources in a well-structured investigation process not only safeguards the organization from legal repercussions but also demonstrates a commitment to maintaining a workplace where employees feel safe, valued, and heard.

Ultimately, prioritizing the integrity of workplace investigations is an investment in the long-term success and reputation of the company.