Comply Now or Pay Later: Failure to Heed New Labor Standards Laws Will Cost You
In past alerts and breakfast seminars, we discussed the substance of the Fair Labor Standards Act, Seattle’s Paid Sick and Safe Ordinance and Seattle’s Minimum Wage Ordinance. As anticipated, these laws were recently amended and the changes require your immediate attention. Although we will delve into the amendments in detail at our June 1, 2016 breakfast seminar, the following will provide you with important information for your internal review and discussion.
Fair Labor Standards Act
The Fair Labor Standards Act (“FLSA”) establishes, among other things, minimum wage and overtime pay standards. These standards apply to all employees unless the workers are (a) outside the FLSA’s definition of employee (for example independent contractors) or (b) they are otherwise explicitly exempt from the minimum wage and overtime provisions. Among the three tests that must be met to establish exempt status, one is the “salary test.” This requires that an employee be paid a certain minimum amount each week to maintain exempt status.
The minimum has long been $455 per week ($23,660 per year). However, under the new regulations set to go into effect this Fall, that number will jump to at least $970 per week ($50,440 per year). By nearly doubling the requirement, many of your current exempt employees who earn less than $970 a week will automatically lose their exempt status – potentially exposing your company to significant overtime obligations.
The importance of ensuring proper classification and compensation under the new rules is paramount; and there are steps you can take right now to prepare for the upcoming change. First, review job descriptions company-wide to determine whether current exempt positions are accurately classified. This is the perfect opportunity to make sure that your current exempt employees meet the “job duties test” required by the FLSA before you even turn to the question of salary requirements. Second, audit the wages of those employees who were previously misclassified as exempt or those who will lose exempt status when the salary requirement increases. Among the people that will lose their exempt status, consider the financial impact of giving them raises or making them non-exempt. Also, think about other exceptions or exemptions that might apply to a particular employee.
Seattle’s Paid Sick and Safe Ordinance
Paid Sick and Safe Time (PSST) requires that employers provide Seattle workers with paid sick and safe time for use when an employee needs time off for the employee’s or his/her family member’s illness or a critical safety issue, including domestic violence, sexual assault or stalking. New amendments to PSST, which went into effect on April 1, 2016, require that employers:
- Provide employees with a written copy of the employer’s PSST policy;
- Permit the use of accrued PSST time in fifteen (15) minute increments;
- Respect the rights of “occasional basis employees, ” which includes continuing coverage under the ordinance for as long as the employee works with that particular employer after the employee meets the 240 hour threshold in a benefit year;
- Honor an employee’s previously accrued PSST hours when the employer transitions to different a benefit year; Retain records for three years; and
- Retain employees’ PSST hours by a successor employer.
The Seattle Minimum Wage Ordinance
The Minimum Wage Ordinance (MWO) sets the minimum wage, which is gradually increasing to $15.00/hour in Seattle. Under the MWO, Schedule 2 employers (defined as businesses with fewer than 500 employees in the United States) are required to reach the $15 mark by 2019. Schedule 1 employers (businesses with 500 or more employees in the United States) are required to do the same by 2021. Under the new amendments to the MWO, which went into effect on April 1, 2016, employers must now count all employees worldwide to determine whether they are a Schedule 1 or Schedule 2 employers.
The Wage Theft Ordinance
The Wage Theft Ordinance allows the Office of Labor Standards (OLS) to investigate workers’ complaints of nonpayment of wages and tips. Pursuant to recent amendments, employers are now required to, among other things, provide written notice of “employment information” to all employees (starting April 1, 2016). This includes:
- The name of employer and any trade names used by the employer;
- The physical address of the employer’ s main office or principal place of business and, if different, a mailing address;
- The telephone number and, if applicable, email address of the employer;
- The employee’ s rate or rate of pay, and if applicable, eligibility to earn overtime;
- The employer’ s tip policy, with an explanation of any tip sharing, pooling or allocation policies;
- The employee’s pay basis (hour, shift, day week, etc..); and
- The employee’s established payday.
In addition to the specific amendments to each of the aforementioned ordinances, the City passed other amendments that apply equally to the MWO, WT and PSST (starting April 1, 2016). These include: (1) the creation of a private right of action for violations of these ordinance; (2) strengthened penalties and fines; and (3) increased protections against retaliation.
If you have any questions about complying with these amendments, please contact the attorney with whom you normally work. We also encourage you to attend our upcoming breakfast seminar, which will focus on this topic. That event will take place on June 1, 2016, from 7:30am-9:15am at Karr Tuttle Campbell. Formal invitation to follow.
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