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DOL Plans to Raise Salary Threshold on FLSA Exemptions

As I’ve written about previously, an employee is entitled to overtime pay unless the employee is meeting all of the Fair Labor Standard Act’s (FLSA) requirements. First, does the employee meet the salary threshold under the FLSA by making at least $455 a week in salary (called the “salary test”)? Second, is the employee performing the necessary duties to meet the “duties test,” such as supervising two or more employees or exercising significant discretion in an office setting? The salary threshold test sets the floor on the minimum amount of money that an employee must be paid before the FLSA permits an employer to claim an exemption and therefore NOT have to pay that employee overtime.

What is the current Salary Threshold under the FLSA?

Currently, the DOL has set that amount at $455 a week (about $24,000 a year). That’s a fairly low figure and hasn’t been raised in a number of years (and it’s not tied to inflation at all currently). But the U.S. Department of Labor recently announced that it plans to raise the salary threshold up to $35,000 a year. (Back in 2016, the Obama Administration tried to raise the threshold to about $47,000 a year, but that proposed rule change was put on hold by a federal judge.) The DOL will unveil the proposed rule at some point in the near future.

When will the DOL implement the new Salary Threshold?

The salary change won’t go into effect immediately. The DOL must first permit the public to comment on the proposed change and provide feedback. Management-side lawyers and lawyers representing the interest of employees will both have much to say on the new regulation. And there’s always the chance that businesses sue the DOL again to prevent implementation of the new rule.

Are you, as a South Carolina employee, meeting the current salary threshold?

For South Carolina employees, the question still remains: Have you been properly classified under the FLSA? If you are not getting overtime pay even if you are working more than 40 hours a week, then the questions to ask are whether you are meeting the current salary threshold of $455 a week and whether you are performing the actual duties of a salaried exempt employee (executive duties, administrative duties, or professional duties, primarily). If you don’t know, contact an experienced FLSA overtime attorney for a consultation today. And keep an eye on this blog for updates on the new DOL regulation as they develop.

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Tip Pooling Changes under the Fair Labor Standards Act

For many employees in the restaurant or hospitality business, the term “tip pooling” does not evoke fun aquatic romps through mounds of valuable currency like Scrooge McDuck diving into his glorious (and curiously soft and forgiving) lake of golden coinage.

Instead, for most employees (especially wait staff), tip pooling means that part or all of their tips goes into a collective pot and gets divided at the end of the day between all of the employees. I understand quite personally how such a violative act feels, since one Halloween, my mother pooled all of my and my siblings’ Halloween candy into one giant bowl, took her rather generous cut, and then doled out the remainder in tiny portions over what seemed like the next 12 to 14 years. So, essentially communism.

Anyway, all childhood trauma aside, new changes are afoot in the tip pooling realm

In March 2018, President Trump signed into law the Consolidated Appropriations Act of 2018 (CAA), which included a tiny provision on one page in a nearly 900 page law that affects the Fair Labor Standards Act and tip pooling. Before the CAA was passed, the U.S. Department of Labor had issued regulations that prohibited tip pooling when employees were paid at least minimum wage and the employee didn’t take a tip credit.

The new amendments to the FLSA prohibit managers and owners from partaking in shared tips, which most plaintiff’s employment lawyers considered wage theft and has been a fairly common practice. This rule applies regardless of whether the employee is taking a tip credit. (A tip credit is when the employee is paid $2.13 an hour, with the remainder of wages coming from tips. The difference between $2.13 and $7.25 is called a “tip credit,” because the employer gets credit for paying full minimum wage, even though that difference is paid by customers in the form of tips.)

The CAA also addressed tip pooling by officially permitting non-tipped “back of the house” employees, like cooks, dishwashers, and busboys (buspeople?), to participate in an otherwise valid tip pool. That means that they can share in tips earned by the “front of the house” employees, like waitresses and hostesses, as part of the tip pool.

Takeaways for Employers and Employees on Tip Pooling

The biggest practical change caused by this new law is for employers. Before March 2018, the law prohibited only employers who took a tip credit (i.e., paid their employees $2.13 plus tips) from taking tips or sharing in a tip pool with the employees. Now, however, Congress has restricted all employers. including supervisors and managers, from participating in tip pools with the tipped employees, regardless of whether the business takes a tip credit.

For employees, the same basic question will apply in determining the legality of a tip pool: Are the people taking part in a tip pool legally permitted to do so? (In other words, are only non-manager employees in the tip pool?) If there are any managers or supervisors in the tip pool unlawfully, then the tipped employee is still the victim of wage theft.

If you’re an employee participating in an employer-mandated illegal tip pool, you should seek legal advice on all of your rights and remedies under the law.

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Overtime Wage Theft in South Carolina

Types of Wage Theft in South Carolina: Unpaid Wages and Unpaid Overtime

Wage theft is the term used when employers and businesses fail to pay South Carolina employees all the wages that the employee earned. (At least, it’s the term used by me and other employee advocates; employers call it an “oopsie!”) Wage theft occurs both in traditional wages (weekly paycheck, commissions, accrued PTO) and in overtime and minimum wage cases under the Fair Labor Standards Act (FLSA). (I’ll refer to the FLSA claims as “overtime wage theft” for inflammatory purposes.)

If an employee should be getting paid overtime for the extra hours he or she is working, and the employer refuses to pay overtime, then the employer is engaging in overtime wage theft, which is illegal in South Carolina. (Also currently illegal in South Carolina? Playing pinball before you’ve reached the age of 18. But I’m a sweet-natured felon, don’t worry. )

Most of the wage theft cases I see in my practice come under either the South Carolina Payment of Wages Act or under the FLSA, which are the two laws covering wages or pay in South Carolina. I’ve blogged about wage theft under the South Carolina law before, so I’d like to focus this article on overtime wage theft under the FLSA.

Overtime Wage Theft Comes from Misclassification by the Employer

Most FLSA overtime wage theft claims come when an employer deliberately or negligently misclassifies an employee as exempt from overtime pay. In other words, the employer tells the employee, “You don’t get overtime pay [time and a half], no matter how many hours you work.” And that’s completely fine, if the employee is getting paid a genuine salary of at least $455 a month AND has the duties that meet the FLSA’s requirements to be exempt form overtime pay.

However, the problem arises when the employee clearly isn’t getting paid a salary OR clearly doesn’t work the managerial or administrative duties that would exempt him from the FLSA’s requirements, and yet the employer doesn’t pay overtime at all. In this case, if the employee is working more than 40 hours a week, the employer is getting the benefit of free or discounted labor by not having to pay the overtime premium. That’s where the overtime wage theft comes in (or “wage oopsies!” for all you defense attorneys).

Sometimes, this is a genuine oversight by the company. Perhaps it’s a small business with an owner that doesn’t understand the law, or it’s a close question as to whether the employee is entitled to overtime or not. Those cases do happen, but the law still requires a business owner to make sure that the employees are being paid properly. Often that means hiring a lawyer to vet wage practices and make sure the company is in compliance.

Because, the bottom line is, if the company has misclassified an employee, even if it wasn’t malicious, the company still has to pay to make it right.

Exempt vs. Non-Exempt & Employees vs. Independent Contractors

However, the more egregious examples of overtime wage theft include companies who deliberately misclassify employees as exempt from overtime just so that the companies can save money.

A common variation of this misclassification practice comes when the employer decides to classify employees as “independent contractors” instead of employees. The reason they do this is because independent contractors aren’t entitled to overtime pay or minimum wage under the FLSA, and the company doesn’t have to provide other benefits either. An employer who takes this step without the facts to support this decision risks a great deal of trouble and money later on.

Let Me Explain–No, There is Too Much. Let Me Sum Up.

The determination of whether an employee has been misclassified is extremely fact specific. If you believe you’ve been a victim of overtime wage theft, you should speak with an employment attorney immediately.

And if you believe you’ve engaged in youthful illegal pinballing, you should speak with a criminal defense attorney, because the State will (and should!) vehemently protect the innocent people of this State from wanton, profligate, and underage arcade gamers.