The U.S. Department of Labor recently announced a proposed rule that would change the minimum salary threshold for exemption for the so-called “white collar” exemptions – the administrative, executive, and professional exemptions.

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 proposed rule would increase the salary threshold from $455 per week ($23,660 annually) to $679 per week ($35,308 annually). Nondiscretionary bonuses and incentive payments (including commissions) may account for up to 10 percent of the minimum salary level under the proposed rule, while discretionary bonuses would 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 $147,414, 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 many 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 $679 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.

Assuming the rule is ultimately promulgated, employers will 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 periodic 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.

Employers with exempt employees earning less than $679 per week should consider their budgets and operational practices to determine how they wish to comply with the rule if and when it goes into effect.  The last time the Department of Labor promulgated a rule on this subject, it was halted by a court decision, so employers should be prepared for a great deal of uncertainty regarding whether and when this proposed rule would go into effect.  Nonetheless, it is a change that may require significant advance planning, so it is a good idea for employers to examine their payrolls now.

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 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.

This is Part 3 in a 6-part series on Connecticut Employment Laws You Didn’t Know Existed.

Any time you are having employees pay you – whether through a payroll deduction or by having the employee pay you directly – you are walking into a legal minefield.  Deductions are typically allowed only when there is some benefit being provided to the employee in exchange.  Costs of loss, breakage, and customer theft are treated by the Connecticut Department of Labor as part of the “cost of doing business,” and are almost never recoverable from an employee.  While many employers are familiar with these parameters, many do not realize that most deductions must be authorized in writing by the employee on a form approved by the Commissioner of Labor.  Even more surprising is that the sample form provided on the Connecticut Department of Labor’s website may not be used without approval from the Commissioner of Labor!

So how do employers take deductions lawfully?  First, make sure the deduction is for a permissible purpose – no deductions for loss, breakage, or customer theft!  Some examples of permissible purposes are deductions required or authorized by state or federal law (such as taxes or garnishments) and deductions for contributions into automatic enrollment retirement plans.  These may be deducted without having an authorization form approved by the Commissioner of Labor.  Deductions may also be made if they are authorized by the employee, in writing, for medical, surgical or hospital care or service, without financial benefit to the employer and recorded in the employer’s wage record book.  This written authorization does not need to be approved by the Commissioner of Labor.  Any other deduction must be made pursuant to written authorization on a form approved by the Commissioner of Labor.

If you wish to make deductions requiring approval from the Commissioner of Labor, follow these steps:

  1. Draft a form that clearly explains the purpose of the deductions to be made and leaves room to fill in the dollar amounts to be deducted.  For items of benefit to the employer, such as uniforms or other equipment, you must ensure that the deduction does not result in the employee receiving less than minimum wage.  Spreading the payments out over time can help avoid this problem.  Be specific as to the nature of the deduction.   Do not include lines like “Other,” as these forms will not be approved!   You can use the sample form available on the Connecticut Department of Labor’s website to help you draft your own form.  Different sample forms are available for uniform rental/laundry service and for repayment of advances of vacation time or paid time off.  Remember, even if you do not make any changes, you must still obtain approval to use these forms!
  2. Include language explaining to the employee how to discontinue the payroll deduction if desired.  Make clear that the employee may still be required to repay any amount owed if the deduction is stopped.  This is particularly important if you offer services to employees that will be repaid over time.  For example, a veterinary office might allow employees to purchase care for their own pets, perhaps at a discount.  If the employee stops the payroll deduction used to repay this bill, the employee can still be billed as would a regular customer, but the form should specify this to ensure there is no confusion.
  3. Submit the form to the Connecticut Department of Labor for review.  Begin deductions only after receiving approval.
  4. Make sure the forms are kept up to date with new forms completed whenever an employee’s deductions will change.  Also, if you need to change the form to add new kinds of deductions for any other reason, you will need to have the form approved again.  With this in mind, be sure to draft your form with enough flexibility for future changes, while being specific enough to obtain approval.

Like several of the other laws discussed in this series of Connecticut Employment Laws You Didn’t Know Existed, compliance is not difficult if you know the law exists.  Our team of labor and employment law attorneys can educate you about the laws affecting your company and help ensure you are in compliance.

This is Part 1 in a 6-part series on Connecticut Employment Laws You Didn’t Know Existed.

Do you pay your employees at least weekly?  If you answered no, you are in good company.  Bi-weekly pay (paying employees every two weeks) is probably the most common choice of pay frequency.  However, a quirky feature of Connecticut’s wage payment statute makes weekly payment the default rule.  For most employers, the only way to pay less frequently than once a week is to obtain permission from the Commissioner of Labor.

Fortunately, it is very easy to request permission to pay bi-weekly.  Employers can simply fill out the form available at http://www.ctdol.state.ct.us/wgwkstnd/forms/paywaiver.htm, and within a few weeks, the Connecticut Department of Labor will respond.  The request is almost always granted.  This form can only be used by employers requesting permission to pay bi-weekly.  Employers that wish to pay less frequently (e.g. semi-monthly or monthly) can send a letter to the Connecticut Department of Labor’s Wage and Workplace Standards division stating the reason for the request.  However, such requests are less likely to be granted.  Paying less frequently than monthly is not permitted.

Continue Reading Connecticut Employment Laws You Didn’t Know Existed – Why Your Bi-Weekly Payroll is Probably Illegal . . . and How to Fix It

As summer approaches, many companies are beginning to hire students to work as unpaid interns.  While unpaid internships are a time-honored tradition, they are almost always illegal in the for-profit world.  Typically, the so-called “intern” is actually an employee who must be paid minimum wage and, if applicable, overtime.  Depending on state law, Workers’ Compensation and Unemployment might also apply to these individuals.  Recent years have seen a dramatic increase in enforcement surrounding this issue, and employers can no longer assume their unpaid internships will go unchallenged.  Like with most other employment laws, it does not matter if the individual agrees to an arrangement that is not permitted by law.  “The intern agreed to work unpaid” and “everyone in my industry does it” will not defeat a lawsuit or Department of Labor audit.

Many employers are under the mistaken impression that if the intern receives academic credit, there is no need to pay the intern.  This is not true.  Although some states require academic credit in order for the intern to be unpaid, this is never the sole factor.

According to the U.S. Department of Labor’s 6-part test, for-profit companies must pay interns at least minimum wage, unless all of the following criteria are met:

  1. The intern must receive training and the training  is similar to what would be given in a vocational school or academic educational instruction;
  2. The training is for the benefit of the intern;
  3. The intern does not displace regular employees, but works under their close observation;
  4. The employer derives no immediate advantage from the activities of the intern, and on occasion the employer’s operations may actually be impeded;
  5.  The intern is not necessarily entitled to a job at the conclusion of the training period; and
  6. The employer and the intern understand that the intern is not entitled to wages for the time spent in training.

Continue Reading Keep Your Unpaid Intern Away From the Photocopier!

The Obama Administration’s goal of increasing the minimum wage to $10.10 has for the moment stalled in the Senate.   A Republican led filibuster has all but killed the President’s hopes of signing the Bill, which would increase the minimum wage by the November mid-term elections.

Senate Republicans, citing concerns about the effects that an increase on minimum wage would have on economic growth, were able to whip up support behind the filibuster, forcing the Democratic majority to withdraw the Bill.

Immediately following the Bill’s withdrawal, President Obama expressed his disappointment and vowed to continue the push in securing the minimum wage increase, which was his primary goal in 2014.   Because the Bill was only withdrawn, the Senate may reintroduce it at any time.

As we reported earlier, Connecticut has already passed and signed a bill which will raise the State’s minimum wage to $10.10 by 2017.  The Bill which failed today in the United States Senate would have impacted other States where the minimum wage still follows the federal rate.

Seven (7) Long Island restaurants have consented to a settlement with the United States Department of Labor (“DOL”) that includes $1.6 million in back pay as well as over $110,000 in penalties and interest for willful violations of the Fair Labor Standards Act (“FLSA”).  Specifically, the DOL found the restaurants failed to pay employees a minimum wage, paid employees in cash, had illegal tip pools, and failed to keep records of all hours worked.

Continue Reading Dept. Of Labor Settlement Highlights Importance of Proper Wage and Hour Policies