Author: Sarah Coenen

Compliance with the Fair Labor Standards Act is Good Business

Have you heard about the Department of Labor’s latest rule change? In this week’s blog, Epiphany Law attorney Sarah Coenen breaks down what the Fair Labor Standards Act means for your business.

Q: Can a salaried employee be entitled to overtime pay?

A: In general, regardless of whether an employee is paid an hourly or salary rate, he or she may be entitled to overtime pay. The Department of Labor (“DOL”), however, created an exemption under the Fair Labor Standards Act (“FLSA”) allowing certain employees to be exempt from receiving overtime pay.

Q: How do you know if an employee is qualified for the exemption?

A: To qualify for this exemption, the employee must:

  1. be salaried, meaning that he or she is paid a predetermined and fixed salary not subject to reduction because of variations in the quality or quantity of the work performed;
  2. be paid at least a specified weekly salary level; and
  3. primarily perform executive, administrative, or professional duties, as defined in DOL regulations.

Q: How will the Department of Labor’s 2019 update affect the rule?

A: The update raises the annual standard salary level from $23,660 to $35,568. This equates to the weekly rate increasing from $455 to $684. Therefore, an employee must have an annual salary level above $35,568, to be exempt from receiving overtime pay.

Q: Does the DOL update affect highly compensated employees (HCEs)?

A: Yes, the rule also increases the total annual compensation level for highly compensated employees (“HCEs”) from $100,000 to $107,432. HCEs are employees whose primary duty includes office/non-manual work and who customarily/regularly perform one or more of the exempt duties of an executive, administrative, or professional employee. For example, an employee may qualify as an HCE if he or she customarily and regularly directs the work of two or more other employees, even though he or she does not meet all of the other requirements in the standard exemption test.

Q: Are employers allowed to use commissions and incentive pay toward the employee’s salary?

A: Yes, the rule allows employers to use nondiscretionary bonuses and incentive pay (including commissions) to satisfy no more than 10 percent of an employee’s salary in order to qualify that employee under the exemption.

Q: What happens if the employee has not earned enough in nondiscretionary bonuses and incentive payments to retain his or her exempt status?

A: Then, the rule allows for the employer to have a “catch-up” payment at the end of the 52-week period. If the employer does not make up the “shortfall” during that one pay period, the employee is entitled to any overtime pay earned during the previous 52-week period.

Q: When does the new rule go into effect?

A: The new rule goes into effect on January 1, 2020.

Q: Why does this matter for me?

A: If you have any employees who are receiving a salary rate, you will need to re-evaluate those employee classifications to ensure that your business is in compliance with the new Fair Labor Standards Act rules by January 1, 2020.

Epiphany Law attorney’s can help you make sure your business is protected. For more information, contact us here.

Employment and Compliance Attorney
Sarah Coenen

About the Author

Sarah M. Coenen is an experienced business attorney with Epiphany Law. She focuses her practice on employment services including non-competition agreements, employee handbooks, compliance, hiring and termination. Sarah enjoys educating and empowering her clients to help them achieve their personal and business goals. You can learn more about Sarah’s background here.

Three Common Myths about HR and the Attorney’s Role

Most people understand the attorney-client privilege is a rule that protects the confidentiality of communications between lawyers and clients. This rule encourages transparency and allows an attorney to provide effective representation. But, not everyone understands that there are limitations and that the rule may be applied differently depending on a specific situation.

The attorney-client privilege rule can be especially complex in the world of human resources. There are some common misconceptions among employers. The following can help clear up some of the confusion.

Myth Since the head of our HR department happens to be an attorney, any of her notes from internal investigations will be protected.

Reality – Not exactly. Employers sometimes believe that having an attorney as the head of their HR department will protect their internal investigations from being disclosed. However, the privilege only applies to confidential communications between attorneys and their clients made for the specific purpose of obtaining or providing legal advice. This rule can not be applied to documents that were created in order to comply with a company’s policy or procedure. So, there is a chance that internal documents prepared by the HR department may be disclosed during litigation procedures.

Myth – My company has taken the appropriate steps to ensure that HR issues within the company will not become public knowledge.

Reality –Probably not. While thorough planning is essential and can certainly help limit your company’s liability, it still can’t guarantee that any documents created during an internal investigation will remain private. You’ll want to keep that in mind while creating all communications. Information from interviews that took place during a discrimination or harassment investigation could very well be considered ‘discoverable’ should there be a subsequent lawsuit.

Myth – Since my company has invested in knowledgeable and experienced HR professionals, hiring an outside attorney is unnecessary.

Reality – The best way to protect against legal claims is to hire a lawyer. Employers should keep in mind that discrimination and harassment suits are on the rise. But, when you hire an attorney for the specific purpose of providing legal counsel surrounding HR concerns, then all those communications between your company and lawyer would not be allowed to be disclosed.

The relationship between an employee and employer is heavily regulated and often difficult to navigate. Employment attorneys can help make sure you are in compliance with state and federal laws and often stop matters from escalating. To learn more about how an attorney can help protect your company’s best interest, visit https://epiphanylaw.com/contact-us/

Sarah Coenen, Employment Attorney

About the Author

Sarah M. Coenen is an experienced business attorney with Epiphany Law. She focuses her practice on employment services including: non-competition agreements, employee handbooks, hiring and termination. Sarah enjoys educating and empowering her clients to help them achieve their personal and business goals.

The Importance of the Employee Handbook

 

Employee handbooks
Employee Handbooks Protect Employers

An employee handbook serves as a guide for employees and employers. The handbook is a tool to provide clear expectations and rules.  It defines ground rules and explains what is and is not considered acceptable behavior. Done properly, an employee handbook is a great first line of defense for a variety of legal issues.

However, if an employee handbook is done improperly, it can lead to confusion, anger and lawsuits. The sections contained in the handbook need to be carefully worded in order to avoid those pitfalls.  Generally, laws regarding employees and employees are drafted in favor of the employee so without the protections offered in an employee handbook, the employer is open to more risk.

Although some federal regulations such as Title VII and the Americans with Disabilities Act do not go into effect until you have 15 or more employees, a business of any size can be sued for other employment related issues.

To minimize your risks, it is important to have a relationship with an employment law attorney who will update you of any federal or state required changes.

Other ways to minimize risks include an annual handbook review. As the world changes, you may need to create new policies that reflect the changes in the law and your employee handbook should reflect those changes.  For example, think of the changes to the workplace over the past few years like health care reform, more employees are able to work from home, working parents and the balance between home and work life, the use of personal mobile devices and so many others.

In addition, the handbook should be reviewed to make sure the documented polices that are included in the book are consistently followed and are a reflection of the culture of your work enviroment.  If the policies in the handbook are not followed and not a reflection of your work enviroment, you will have a weak defense if a dispute arises.

Remember, it’s not enough just to update the handbook.  Clearly communicating any change or policy update to all employees is also required.

Protect Your Business with a Business “Prenup”

If your business has two or more owners, you need a Buy-Sell Agreement.

A buy-sell agreement is simply a contract between two or more business owners that formally documents contingency plans if a life changing event occurs.  Some people refer to these agreements as “prenups” for business owners. In the agreement, the business owners agree upon what happens to the ownership structure of the company in the event of one owner’s death, divorce, disability, retirement or other life changing events.

Many business owners don’t realize until it is too late the importance of a buy-sell agreement.  For example, if an owner gets divorced, the business may become hostage to the marital dispute. Or if an owner dies, the surviving business owner(s) may inherit heirs for business partners, who care little about whether the business survives.

Without a buy-sell in place, you are opening yourself and your business up for unknown risks.  Protect yourself and your business from the unknown future with a buy-sell agreement. Ensuring that critical events are properly covered is essential to the long-term survival of your business.