On April 5, 2011, the United States Department of Labor ("DOL") published a Final Rule amending the regulations to the Fair Labor Standards Act ("FLSA") and other related legislation. The Final Rule contains several important developments. Two in particular impact private sector employers that pay employees based on the fluctuating workweek method of payment or utilize the tip credit. The Final Rule will take effect on May 5, 2011.
Important Change to the Fluctuating Workweek Regulation
A regulation to the FLSA has for more than 40 years provided an alternative method of paying overtime for nonexempt employees whose hours vary from week to week. Under this method of payment, the employee is paid a fixed weekly salary that is intended to compensate the employee for all hours worked, no matter how many or how few. In addition, the employer must pay the employee an additional premium for any overtime hours that must be at least 50 percent of the employee's regular rate of pay for that week. To utilize this method of payment, an employer must satisfy a number of other requirements set forth in the regulation.
For several years, the DOL has been considering "clarifying" the fluctuating workweek regulation as to whether an employer could pay bonuses or other premium payments to employees who were paid based on the fluctuating workweek method of calculating overtime. In its Final Rule, the DOL has taken the position that bonuses and premium payments (except for overtime premiums) are inconsistent with the fluctuating workweek method of payment.
The Final Rule states: "[W]hile we believe that the payment of bonus and premium payments can be beneficial for employees in many other contexts, we have concluded that unless such payments are overtime premiums, they are incompatible with the fluctuating workweek method of computing overtime." Overtime premiums are defined as "certain premium payments made by employers for work in excess of or outside of specified daily or weekly standard work periods or on certain special days." Accordingly, an employer risks losing the benefit of the fluctuating workweek regulation if it pays bonuses or other premium payments (such as a shift differential) to employees who are paid based on that method of calculating overtime.
Changes to Rules for Tipped Employees
The Final Rule also contains changes that will affect employers that have employees who receive tips. The regulations to the FLSA allow employers to pay a tipped employee less than the minimum wage, provided that the employee's wages and tips are equal to or greater than the minimum wage. The Final Rule increases the amount that an employer can claim as a tip credit to $5.12 to correspond to the increase in the federal minimum wage to $7.25 per hour. Accordingly, an employer that seeks to use the tip credit must pay its employees at least $2.13 per hour in cash wages. The Final Rule also reverses the DOL's position that there is a maximum amount an employer may require an employee to contribute to a tip pool. Tip pooling is the practice of gathering gratuities or a partial amount of those gratuities received from customers in a central pool for distribution to a group of employees. The Final Rule explains that the FLSA does not impose a maximum tip-pool contribution percentage. However, employers are required to notify employees of any required tip-pool contribution amount.
Day Pitney Alert
Day Pitney Alert
Doug Gillette and Bill Goddard will be featured panelists during the UConn School of Law's Symposium on Municipal Distress on Friday, September 15.
Day Pitney partner Francine Esposito will speak at the upcoming webinar "Workplace Leave Laws: Strategies to Navigate the Changing Landscape in the U.S." Taking place on Sept. 14 at 2 p.m., the webinar is the first in a series of webinars hosted by the Employment Law Alliance (ELA) on workplace leave laws around the globe.
Patrick McCarthy and Christopher Stracco spoke about Project Labor Agreements on Friday, February 10, at the New Jersey Institute of Continuing Legal Education's Annual 2017 Redevelopment Law Institute at the Renaissance Woodbridge Hotel in Iselin, New Jersey.
Day Pitney associate Arianna Mouré was featured in an article, "Practicing Law and Contributing to the Greater Good," published in the Fall/Winter 2018 edition of the Rutgers University School of Arts and Sciences Access Newsletter.
Rachel Gonzalez was mentioned in an article, "Unions set to begin voting on NJ Transit rail contract," in NJ.com. Gonzalez provided an explanation of the approval process concerning union agreements in connection with the NJ Transit rail unions voting on the proposed settlement to avert a strike.
Kate Coffey, Rachel Gonzalez and Peter Wolfson were mentioned in the "New Partners Yearbook 2016" in New Jersey Law Journal. This is the Law Journal's annual yearbook devoted to recognizing both newly promoted partners and newly hired lateral partners at law firms in New Jersey.
Patrick McCarthy was quoted in an article, “Former exec's conviction puts spotlight on safety for high-risk industries; Deadly mine explosion resulted in underwriting rethink by insurers,” in Business Insurance. McCarthy was quoted in connection with the significance of a case, in which Don Blankenship, the former CEO of Massey Energy Co., was acquitted of all felony charges, but convicted of a misdemeanor conspiracy charge for willfully violating U.S. mine health and safety standards that resulted in a 2010 explosion that killed 29 coal miners in West Virginia.
The Day Pitney alert, "Federal Contractors Must Provide Paid Sick Time in the Future," authored by Francine Esposito and Arielle B. Sepulveda was referenced in a Staffing Industry Analysts article, "New Bill Would 'Ban the Box' for Federal Contractors." In addition to the Fair Chance Act, the article discusses the executive order signed by President Obama that requires federal contractors to provide paid sick time leave. Esposito and Sepulveda noted that the requirement applies to all federal contracts awarded on or after January 1, 2017.