Fair Labor Standards Act Regulations Are Changing

Although employers should always be vigilant in their monitoring of the evolution of the Fair Labor Standards Act (FLSA) regulations, it is vital that employers are aware of current changes to the FLSA and make modifications as needed to their compensation structures in order to remain in compliance as the regulations evolve.

Home Care Final Rule became effective October 13, 2015

The Home Care Final Rule, issued on October 1, 2013 which had an effective date of January 1, 2015, extends the minimum wage and overtime rules to certain home care workers who previously enjoyed an exemption from all or part of the FLSA.  In June 2014, associations of home care companies filed a lawsuit in federal court challenging the Final Rule.  In December 2014 and January 2015, the U.S. District Court for the District of Columbia issued opinions and orders vacating the Final Rule’s revised third party regulation and revised definition of companionship services and, thus, the Final Rule could not be enforced as of January 1, 2015.

The Department of Labor (DOL) filed an appeal of the orders and on August 21, 2015, the Court of Appeals reversed the District Court’s orders and upheld the Final Rule.  The Court of Appeals’ opinion became effective on October 13, 2015 when the Court of Appeals issued its Mandate.  The DOL has stated that it will not begin enforcement of the Final Rule until November 12, 2015.  The DOL has also announced a time-limited non-enforcement policy between November 12 and December 31, 2015, during which it will exercise prosecutorial discretion in determining whether to bring enforcement actions, with particular consideration given to the extent to which states and other entities have made good faith efforts to bring their home care programs in compliance with the promulgation of the Final Rule.  If you are in the home care industry, we suggest that you contact us to review your compliance with the Home Care Final Rule.

Proposed Amendments Increase the Salary Threshold for FLSA White Collar Exemptions

This summer the DOL published its Notice of Proposed Rulemaking revisions to the FLSA’s white collar exemption regulations.  The DOL focused primarily on updating the salary and compensation levels for white collar workers.  If adopted, the DOL estimates that the revised regulations will eliminate exempt status for millions of employees.  The DOL proposed to set the standard salary level at the 40th percentile of weekly earnings for full-time salaried workers.  Using 2013 data, the proposed salary amount would increase from $455 per week to $921 per week (which is $47,892 annually for a full year worker).  DOL estimates that a 2016 level may be about $970 per week or $50,440 annually.   The DOL is also proposing to set the highly compensated employee (HCE) annual compensation level equal to the 90th percentile of earnings for full-time salaried workers ($122,148 annually).  Additionally, DOL is proposing to automatically update the salary level on an annual basis.   Although the DOL did not propose changes to the duties portion of the white collar exemption tests, it did request public comment on several aspects related to the duties tests and, thus, regulatory language that was not initially proposed may be added into the Final Rule.  As a result, employers will not know the extent of the rule changes until the Final Rule is issued.  The 60 day public comment period is now closed and employers await DOL’s Final Rule which will take into account the public comments.  Employers should be certain to monitor for the announcement of the Final Rule and begin analyzing what changes, if any, they will need to make in order to remain in compliance with the FLSA.

Colleen M. Flynn is a partner at Johnson Pope whose practices focuses on labor and employment law.