In a victory for employers in Connecticut and across the country, a federal district court in Texas last week invalidated the Obama Administration’s Department of Labor overtime regulation which sought to increase the salary threshold for the overtime exemptions under the Fair Labor Standards Act from $455 per week ($23,660 annually) to $913 per week ($47,476 annually) with the thresholds increasing every three years.  For employers who have exempt employees receiving salaries below the proposed increased threshold, this decision allows them to continue to keep those employees exempt at their current salary.  The court’s decision follows its injunction last November to enjoin the rules from being implemented. Continue Reading Increased Salary Threshold for Overtime Exemptions Struck Down By Federal Judge

Connecticut employers must begin paying $10.10 per hour to their employees on January 1, 2017.  For hotel and restaurant employees who normally receive sufficient gratuities, the employer must pay at least $6.38 per hour ($8.23 for bartenders) under the new minimum wage, but the employee must still make at least $10.10 per hour including tips and employers must follow recordkeeping and reporting obligations related to the tip credit.

Employers must also update their workplace posters to ensure they reflect the new minimum wage.  The posters are available from the Connecticut Department of Labor at http://www.ctdol.state.ct.us/gendocs/labor_posters.htm.

Also, in case you missed it, the new “overtime rule” for salaried employees was blocked nationally on November 22nd.

Our team of labor and employment attorneys can assist employers in adjusting to the new minimum wage requirements and ensuring compliance with all applicable labor and employment laws

Earlier this year, the U.S. Department of Labor issued a rule requiring employers to pay most employees a minimum of $913 per week in order for them to be exempt from overtime under federal law.  This rule more than doubled the existing salary threshold of $455 per week and was slated to go into effect December 1.  The threshold applies to those exempt under the executive, administrative, and professional exemptions.

A federal district court in Texas just issued an emergency injunction blocking the rule from going into effect.  Moreover, the decision questions the validity of a salary minimum in general, calling into question not just the new rule, but the existing rule as well.  The emergency injunction preserves the status quo by blocking the rule from going into effect on December 1, and based on the court’s declaration that the rule is “unlawful,” a permanent injunction can be expected.  The court determined that the rule, in various respects, exceeded the authority granted by Congress to the Department of Labor under the Fair Labor Standards Act.  The Department of Labor could appeal the ruling, but given the short time remaining in the current presidential administration, it is unlikely that the rule would be defended.  In other words, the rule is likely dead.

What does this mean for employers?  If you have not already increased salaries or restructured pay to comply with the rule, you do not need to do so and can maintain the status quo.  If you already made changes, it can be hard to roll them back with current employees due to the effects on employee morale.  Some employers may choose to do this anyway, some employers may choose to make the effects permanent, and some may choose to return the pay structure to its previous status for future employees.  Collective bargaining agreements should be consulted before altering pay arrangements.  Any plans to reduce an employee’s pay must be communicated to the employee in writing before any work is performed under the new arrangement.

Future developments are difficult to predict, but it is possible we will see courts or the Trump Administration eliminate the existing salary threshold of $455 per week.  Many states, including Connecticut, have their own thresholds.  Connecticut requires a minimum salary of $400 per week for executive, administrative, and professional employees; a simplified analysis of the employee’s duties applies if a threshold of $475 is met.  Since 2004, when the $455 threshold went into effect nationally, the $400 threshold became irrelevant.  If the existing $455 threshold is eliminated, Connecticut employers may be able to pay salaries of as little as $400 per week in some cases without being subject to overtime obligations.  It is quite possible that Connecticut will pass legislation to increase the salary threshold statewide in light of the (apparently) failed effort on the federal level.

For now, the takeaway for employers is that the December 1 deadline is on hold.  What will follow remains to be seen.  Our team of labor and employment attorneys can assist employers in ensuring compliance with all applicable labor and employment laws.  Contact us to arrange a wage-and-hour self-audit for your organization.

In a recently released decision, CHRO v. Echo Hose Ambulance, et al, a unanimous Supreme Court affirmed the Appellate Court’s dismissal of the CHRO’s appeal of a human rights referee’s determination that a volunteer was not an employee for purposes of Connecticut Fair Employment Practice Act, Conn, Gen. Stat. §461-60, et seq. (“CFEPA”) The issue before the Court was whether the Appellate Court properly applied the remuneration test to determine employee status.

Brenda Puryear filed a CHRO complaint against the City of Shelton and Echo Hose Ambulance (a volunteer ambulance corps) on behalf of her minor daughter, Sarah Puryear, alleging racial discrimination under both federal (Title VII) and state (CFEPA) antidiscrimination statutes. Sarah was a volunteer in the Echo Hose’s “precepting program”, but was not voted in as a member of Echo Hose Ambulance. The complaint alleges that Sarah was harassed and treated differently in terms of discipline based on her race and color.  The Human Rights Referee dismissed Sarah’s claim after applying the federal remuneration test to determine Sarah was not an employee and, therefore, not protected under either statute. The CHRO appealed and the trial court dismissed the appeal, the Appellate Court affirmed and the Supreme Court thereafter granted certification on the limited issue of whether the Appellate Court properly applied the federal “remuneration test” rather than the State’s common law “right to control” test to determine an “employee” under CFEPA.

The Court determined that the circular definition of an “employee” found in CFEPA (“any person employed by an employer”) was “unhelpful” to its analysis and followed precedent in looking to the federal court employment decisions for guidance in construing CFEPA. The federal courts employ two tests in determining whether an individual is an employee under Title VII, which uses a “virtually identical” definition of employee: The “right to control” test and the “remuneration test”.

The Supreme Court rejected the “right to control” test proposed by the CHRO, agreeing with the Second Circuit that “a test designed to distinguish employee from independent contractor is ill-suited to distinguishing employees from volunteers.”  Instead the Court held that the remuneration test – which was used to address circumstances where it was not clear whether an individual had been hired – was better suited for such a determination.

The remuneration test involves a two-step inquiry: First, as a threshold issue, a volunteer is required to show remuneration.  If remuneration could be established, then – and only then – would the court analyze the employment relationship under the agency test. The Court acknowledged that remuneration was not limited to salary or wages, but could include “indirect benefits not merely incidental to the activity performed.” What exactly that might entail is left for another day.

The Supreme Court also rejected the CHRO’s argument that the legislature’s subsequent enactment of P.A. 15-56, “An Act Protecting Interns from Workplace Harassment and Discrimination”, clarified the existing law to protect volunteers like her. The Court held that P.A. 15-56 expanded protection to a “narrowly defined class of persons – unpaid interns – to which Sarah does not belong.”

The U.S. Department of Labor just issued its final rule, requiring minimum wage and overtime for some employees who are currently “exempt” from these requirements. Employers need to plan ahead for implementation, as the rule change could lead to seismic shifts in some payrolls.

The federal Fair Labor Standards Act (“FLSA”) requires that employees receive minimum wage and overtime (calculated at one-and-a-half times the regular rate of pay for hours over 40) unless they are “exempt” from one or both requirements. The most popular exemptions are the so-called “white collar exemptions,” which apply to executive, administrative, and professional employees who meet rigorous criteria based on their duties. To be exempt, these employees must be paid a salary of at least $455 per week and the employer must pay on a salary basis (meaning no docking for partial workweeks, subject to limited exceptions). Doctors, lawyers, and teachers can be exempt under the FLSA even if they are not paid on a salary basis and there is no minimum salary for these employees. (The computer professional exemption has special rules under which employees can be paid hourly, but in any event, there is no computer professional exemption under Connecticut state law.)

The rule change more than doubles the salary threshold from $455 per week ($23,660 annually) to $913 per week ($47,476 annually). Further, these thresholds will be subject to inflationary increases every three years. Nondiscretionary bonuses and incentive payments (including commissions) may account for up to 10 percent of the minimum salary level. By contrast, discretionary bonuses do not count toward the minimum salary level.  The duties tests are not changing under this rule. The threshold for the “highly compensated employee” exemption increases from $100,000 to $134,004, but Connecticut does not recognize this exemption, so employers should not rely upon it for employees in the state.

Raising the salary threshold is expected to transform millions of exempt employees into non-exempt employees overnight. Some employers will be able to weather this change better than others. Virtually every employer in the country is subject to the FLSA, even if there is only one employee. This includes non-profits and public sector employers. In Connecticut, where the cost of living is high, the effect of this change may be lower than elsewhere in the country. It is more likely here than elsewhere that employees who meet the duties tests are already earning at least $913 per week. However, non-profit, low-profit, and government employers may find that many of their employees are subject to this rule change and these employers may have more rigid budgets that cannot withstand the impact. Employers with an annual volume of sales or business of less than $500,000 may wish to consult an employment lawyer to see if they are one of the very few employers not subject to the FLSA.

To comply with the rule, employers need to either raise salaries of affected employees to ensure they meet the threshold or begin treating these employees as non-exempt. Raising salaries is straightforward, but remember that the rule is likely to require inflationary increases, so the amount will change going forward. If employers do not wish to raise salaries, the employees must be treated as non-exempt. This means that employers must keep records of their hours worked and they must be paid overtime for hours over 40. It is legally permissible to cap hours at 40 by prohibiting employees from working overtime and some employers may choose to hire multiple employees to do what was once one employee’s job. Collective bargaining agreements may limit employers’ options.

It cannot be overstated how important it is to ensure that employees are properly exempted if they are not going to be paid overtime. Consider the following scenario. A passionate, well educated executive director of a nonprofit organization earns a salary of $912 per week – just one dollar short of the new threshold. She labors with love, working 70 hours most weeks. A disgruntled employee complains to the Department of Labor that he is owed overtime and the agency examines the payroll practices of the entire organization. The Department of Labor finds that the executive director is not exempt. It is not that she is underpaid by fifty-two dollars. It is that she is not exempt at all. She is owed unpaid overtime of more than $20,000 (more if the salary was only intended to cover a certain number of hours) all because she was paid one dollar per week too little to qualify as exempt.  She would likely also be eligible for liquidated damages, doubling the underlying liability. (There are some arguments an employer could make to apply more favorable damages calculations, but these arguments have yet to be successful in the Second Circuit.) That is the legal significance of the salary threshold and why employers must be extremely careful. For that matter, when considering the duties tests as well, employers should recognize how a small mistake in classifying an employee or a group of employees could add up to huge liability.

Employers should take time now to review their payroll practices to ensure they are in compliance with state and federal laws now and in the future. For each employee believed to be exempt, ensure that he or she meets the duties tests for the applicable exemption, is paid on a salary if required by the exemption, and is paid a salary that is high enough to support the exemption. In considering the duties of a position, employers should be concerned not with titles or job descriptions, but with how the employee actually spends his or her time. It is a good idea to update job descriptions to match reality.

Ensure that all non-exempt employees’ hours are being tracked, including time spent offsite performing work, on call, or traveling, to the extent required by law. Ensure that break periods of fewer than 20 minutes are treated as working time.

Now is a good time to change payroll practices without raising alarm that perhaps things were not done properly before. Employers can connect changes with the new overtime rule to minimize suspicion, particularly in cases of misclassification. Internal review of payroll practices should be aided by a competent labor and employment attorney, as the rules can be excruciatingly detailed. Using non-attorney human resource consultants or payroll companies for this activity is not advised, as communications will not be privileged. Changes to payroll practices, hours, or other terms or conditions of employment should be communicated to employees well in advance, ideally at least 30 days.

Our team of labor and employment attorneys can assist employers in adjusting to the new white-collar exemption requirements and ensuring compliance with all applicable labor and employment laws.  Contact us to arrange a wage-and-hour self-audit for your organization.

Connecticut employers must begin paying $9.60 per hour to their employees on January 1, 2016 as part of legislation designed to raise the state minimum wage to $10.10 per hour by 2017.  For restaurant waitstaff who receive sufficient gratuities, the employer must pay $7.82 per hour under the new minimum wage, but the employee must still make at least $9.60 per hour including tips and employers must follow recordkeeping and reporting obligations related to the tip credit.

Employers must also update their workplace posters to ensure they reflect the new minimum wage.  The posters are available from the Connecticut Department of Labor at http://www.ctdol.state.ct.us/gendocs/labor_posters.htm.

Our team of labor and employment attorneys can assist employers in adjusting to the new minimum wage requirements and ensuring compliance with all applicable labor and employment laws.

Connecticut employers need to be aware of two significant changes in the law surrounding internships.

The first is a new state statute including unpaid interns in the protections afforded to employees with respect to discrimination and harassment. Employers should update their handbooks and training materials to ensure that interns receive the same protections as employees with respect to discrimination and harassment.  They should also ensure that internship opportunities are not advertised in a manner that would discriminate against members of protected classes.  (Last year, the New York City Council made a similar amendment to the New York City Human Rights Law.)

The second change is the recent Second Circuit decision in Glatt v. Fox Searchlight Pictures.  This decision makes it easier for for-profit employers to meet the requirements for an intern to be unpaid.  The U.S. Department of Labor has taken the position that an intern may only be unpaid when all parts of a six-part test are met.  The Second Circuit held that this test should be replaced with a more flexible “primary beneficiary test” to assess whether the intern or the employer is the primary beneficiary of the relationship.  The Second Circuit then provided a list of seven non-exhaustive considerations that should be applied by “weighing and balancing all of the circumstances.”  In other words, the test provides some guidelines, but it is not necessary for all of the factors to be met in order for an intern to be unpaid and courts may consider other relevant evidence as appropriate.  The factors are:

  1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa.
  2. The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands‐on training provided by educational institutions.
  3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
  4. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
  5. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
  6. The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
  7. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

The Second Circuit’s decision covers New York, Connecticut, and Vermont.  Employers in other jurisdictions are subject to decisions within their jurisdictions and/or the Department of Labor’s six-part test.  Also, until the Second Circuit’s factors are used in more decisions allowing for some level of predictability of outcome, employers should take a conservative approach when determining whether interns must be paid.  If in doubt, paying the intern at least minimum wage and complying with all applicable employment laws is the safest course of action.

While employers must still remain wary about hiring unpaid interns, the Second Circuit decision enhances the options available to employers who desire to use interns.  The new Connecticut statute, while creating a new avenue of liability for employers, is unlikely to have a significant impact on employers’ practices.   Our team of labor and employment attorneys can assist you in reviewing these issues to ensure your use of interns is legal.

Wage violations are about to get more costly for Connecticut employers.  A new statute, effective October 1, 2015, requires courts to award double damages plus court costs and attorneys’ fees if an employer has failed to pay an employee’s wages (including minimum wage and overtime owed), accrued fringe benefits, or arbitration award.  The new law applies to all employers in the state.

Previously, Connecticut law allowed for double damages and attorneys’ fees only in cases involving bad faith, arbitrariness, or unreasonableness on the part of the employer.  Now the burden is shifted.  Double damages can be avoided only if an employer can establish it acted in good faith.  While good faith is not defined, under federal law it requires that the employer have reasonable grounds for believing the act or omission was not a violation of the law.  It can be difficult to establish “reasonable grounds” for such a belief and, at a minimum, the employer should be able to establish that it investigated its obligations under the law.  Consulting with experienced labor and employment counsel on your wage-and-hour practices is the best way to ensure compliance.

While most employers mean well when it comes to wage-and-hour laws, the intricacies can be extremely complicated.  Are you making payroll deductions lawfully?  Are you properly classifying your employees as exempt and non-exempt?  Employers should proactively assess their compliance with wage-and-hour laws to avoid costly audits and lawsuits.  An attorney can help you conduct a self-audit to evaluate your pay practices and correct errors before you become the subject of enforcement actions.

Our team of labor and employment attorneys can assist you in keeping up with employee pay requirements and addressing other labor and employment law compliance issues.

Connecticut employers must begin paying $9.15 per hour to their employees on January 1, 2015 as part of legislation designed to raise the state minimum wage to $10.10 per hour by 2017.  For restaurant waitstaff who receive sufficient gratuities, the employer must pay $5.78 per hour under the new minimum wage, but the employee must still make at least $9.15 per hour including tips and employers must follow recordkeeping and reporting obligations related to the tip credit.

Employers must also update their workplace posters to ensure they reflect the new minimum wage.  The posters are available from the Connecticut Department of Labor at http://www.ctdol.state.ct.us/gendocs/labor_posters.htm.

Our team of labor and employment attorneys can assist employers in adjusting to the new minimum wage requirements and ensuring compliance with all applicable labor and employment laws.

For employers, preparing for winter weather includes ensuring all employees are paid properly on snow days.  Many employers are surprised to learn that their payroll does not take a snow day when their employees do.  While snow days are probably the most common application of the principles discussed in this article, these rules apply to most temporary closures regardless of the reason.

Exempt Employees

Somewhat counterintuitively, exempt employees have greater rights when it comes to temporary closures than non-exempt employees do.  This is because exempt employees (with limited exceptions) are paid on a salary or fee basis, so a reduction in their hours typically cannot trigger a reduction in pay.

For exempt employees, if the business is closed for less than a week, exempt employees must be paid their full salaries.  Under federal law, it is permissible to require the employee to use vacation days or other paid time off to cover the absence, but even if the employee has no available time off, it is not permitted to reduce the employee’s salary.  It is also permissible to require the employee to make up the missed time.  State law may vary on these issues.  For example, Connecticut employers are not permitted to make a deduction from an exempt employee’s paid time off (or vacation, sick, personal, etc.) bank if the worksite is closed.  This restriction does not apply to teachers, attorneys, physicians, and very limited other categories of exempt employees.

If the worksite is open but the employee chooses not to report to work (even if it is for very legitimate reasons, such as impassible road conditions), it is permissible to deduct from the employee’s salary or paid time off bank.  But remember, if an exempt employee performs any work during the day (whether onsite or from home), the employee must be paid for the whole day.  Partial-day deductions from a paid time off bank are allowed, even for exempt employees.  So, if an exempt employee chooses to come in late due to road conditions, a portion of a day may be deducted from the employee’s paid time off bank.

While partial-day deductions in pay are never allowed for exempt employees in the private sector, exempt employees in the public sector may, in limited circumstances, receive partial-day deductions.  This is only permitted when certain conditions are met and the deduction is required by a law, policy, or practice established pursuant to principles of public accountability.  Due to complexities in this area, a competent labor and employment attorney with experience in the public sector should be consulted to determine whether a partial-day deduction is required.

Non-Exempt Employees

Non-exempt employees are subject to much different treatment.  In general, a non-exempt employee must only be paid for hours worked.  Some passive time, such as on-call time, is considered “hours worked,” so it is possible some non-exempt employees will need to be compensated, even if they do not perform any actual work.

Some state laws require some form of payment for non-exempt employees who report to work and are then sent home early.  In Connecticut, employees who work in restaurants (including hotel restaurants) must be paid for a minimum of two hours at their regular rate of pay if they reported or were called to work and were not given adequate notice the day before not to report.  In the case of mercantile employees, there is a four-hour minimum, subject to the same notice requirements.  (A partial waiver is available for mercantile employees in some cases, subject to approval from the Connecticut Department of Labor.)  Other Connecticut employees are not required to receive any “report-in pay.”  In other states, like New York, nearly all non-exempt employees are eligible for report-in pay, subject to specific requirements by industry.  In addition, employers should count these hours as “hours of service” for purposes of the Affordable Care Act.

Recommendations for Employers

As discussed above, there are several circumstances in which an employer may make deductions from pay or a paid time off bank based on inclement weather.  Many employers choose to pay all employees for the full day, without deducting from a paid time off bank, for administrative simplicity, employee morale, or other reasons.  (Of course, a collective bargaining agreement may limit these choices.  Employers with collective bargaining agreements should rely on the applicable contract and past practice to determine what is permissible.)

Whether or not to close the worksite can be a difficult decision and may be influenced by road conditions, the length of employees’ commutes, the nature of the job, whether schools are closed, production requirements, whether telework is possible, employee morale, and the amount of pay at issue.  Unless the employee’s job is of a critical nature (e.g. hospital employees), employers should avoid subjecting an employee to discipline or termination for failing to report to work if the employee feels the road conditions are unsafe.  Employers should communicate to employees beforehand how the employees will be notified of a worksite closure.  Small employers typically will call each employee at home or send an email, while larger employers may announce a closure through a radio station or company website.  Whatever you choose, make sure employees know whether they are expected to report to work.

Our team of labor and employment attorneys can assist you in keeping up with employee pay requirements and addressing other labor and employment law compliance issues.