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The Wage and Hour Wars Are you Ready?

Wednesday, July 13, 2016   (0 Comments)
Posted by: Lisa Graham
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 As a business owner it has been very difficult to ignore all the news about wage and hour issues.  They have become the latest hot button labor issue confronting employers.  Unlike some issues, payroll issues directly impact employers bottom line.  Last year and into 2016 employers were confronted with the minimum wage argument.  

Earlier this summer, the U.S. Department of Labor announced the new regulations on how overtime is going to be addressed and the equal pay issue has been looming as a political and legal touchpoint for a couple of years.  For restaurateurs, these changes are only magnified as they strike at the very core of your business structure.  Here are two areas that you should be reviewing so that you have a plan in place to address these issues

New Overtime Regulations:

When the USDOL announced the new rules concerning overtime in May, it automatically extended overtime potential to more than 4.6 million workers that were previously exempt.  The new rule will go into effect on December 1, 2016.  The first question that I am sure most of you are asking is, “How does this impact me?”.  The governing legislation for the overtime rules is the Fair Labor Standards Act.  Generally speaking, any employer who has annual gross sales in excess of $500,000 is covered by the FLSA and there is no small business exemption.  As a result, most employers would be required to show that their exempt employees meet the minimum “duties test” in order to avoid paying those employees overtime.  It is very important to remember that job titles do not determine an employee’s exempt status.  In general, the employee must meet the following criteria:

•       Be salaried and not subject to reduction based on quality of work

•      Under the new rules be paid in excess of $913 per week ($47,476 annually)

•      Meet the duties test required for exemption for executive, administrative, or professional duties.


The very first thing we encourage you to do, is to review your management employees duties and ensure that they meet the duties test.  When I was in the retail industry, we used to have several “quasi-management” positions that required a great deal of care when it came to overtime.  These individuals supervised other employees, but supervision alone is not a guarantee of successful application of the duties test.  In some cases, you are going to find that people that you currently consider exempt do not meet the exempt criteria. The US DOL website has the current duties test for each of the three “white collar” areas (executive, administrative, or professional) that can receive an exemption.


After reviewing the duties of each of your management employees, the next issue becomes their salary. When you start paying overtime on even a $15.00 hourly rate, it is going to add up quickly. Remember, if the employee’s weekly wages are in excess of the $913.00 threshold they will be exempt.  In some cases, the obvious solution will be to increase the salaries above the threshold.  However, for other employees the pay gap will be too wide to make them exempt with a salary increase. This will require a more intensive review of your management structure if you want to avoid paying overtime. 


Equal Pay Issues:

Recently there have been several stories in the news media concerning employees who have been terminated for discussing or comparing salaries.  The most recent Kansas story covered two employees who were dismissed for discussing their hourly wage.  One employee was male and the other female, with the male employee being paid $.25 more for what has been reported as same employment experience and job duties.  The single biggest lesson learned is that it is illegal to reprimand or dismiss employees who discuss their salaries.  It is also illegal to maintain a policy that speaks to this issue as well.  The National Labor and Relations Board has consistently ruled that such policies violate the employees’ right to “perform concerted activities for the betterment of working conditions or worker representation.”   The NLRB has ruled on this topic going back as far as 1980 and as most recent as 2014.  The rulings have been near unanimously in favor of the employee.  Keep in mind that this is not the same as an employee who divulges confidential information without consent.  This covers employees who willingly divulge their own information to other parties.


The more abstract issue contained in these various stories is the equal pay issue.  While this story involved gender, the same scrutiny is going to be applied to other social areas, including race and potentially sexual orientation.  If you have not already, you should communicate clearly to your hiring managers what parameters are allowed to deviate from a starting salary.  You want to be competitive and get the best people, but you also want it to be defensible if challenged.  The equal pay issue is going to be a major talking point in the upcoming Presidential election and it has already become a growing source of new labor litigation.


We encourage you to contact a KRHA Allied partner if you have specific questions regarding either of these topics or would like to see the relevant laws and regulations.

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