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U.S. DOL Proposes Increase for Salary Test under the FLSA

On August 30, 2023, the U.S. Department of Labor issued a notice for a proposed rule change under the Fair Labor Standards Act (FLSA). If the rule goes into effect, the DOL would increase the minimum salary amount that an employee must be paid in order to qualify as exempt from overtime pay for the Salary Test under the FLSA.

As I’ve mentioned before, in order for a company to avoid paying an employee overtime pay (1.5 times the regular hourly rate), the employee must be paid enough in salary to meet the Salary Test under the FLSA (currently at least $684 per week) and must perform certain duties to meet the Duties Test (executive duties, administrative duties, or professional duties, most commonly).

Under the proposed rule, the Department of Labor would be increasing the minimum salary of $684 per week up to the new amount of $1,059 per week. If enacted, the DOL estimates that approximately 3.4 million employees would be newly entitled to overtime pay (unless the company increased the employee’s pay to meet the new threshold).

At this point, the public is allowed to comment on the proposed rule change, but once the DOL moves forward with increasing the salary amount, we can expect to see significant litigation from companies and their lobbyists opposing the increase. And ultimately a court will have to decide whether the increase is appropriate and allowed under the DOL’s rulemaking authority. Stay tuned!

If you have any other questions about whether or not you’re entitled to overtime pay under the FLSA, please feel free to reach out to me directly at jsummerlin@hortonlawfirm.net for a more detailed exploration of your situation.

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South Carolina Overtime Lawyer Jeremy Summerlin Selected as Super Lawyer for 2021

As we all know by now, the primary purpose of this blog is to share my inclusion in Super Lawyers once a year. As your favorite FLSA overtime lawyer/blogger, I hold that rule near and dear to the place where the heart is traditionally located in a non-lawyer’s chest cavity. So, let us begin my yearly subtle bragfest at how “humbled I am to be included in this list” and “how honored I am to be included in a list with my fellow honorees” and “how appreciative I am for this opportunity for social media marketing.” Here we go…

Each year, the South Carolina Super Lawyers honors attorneys from around the state in their various practice areas. This year, I was selected for inclusion in the areas of Employment & Labor Law. I am so humbled and honored to be included on this list for the fourth year in a row, especially among the amazing list of my fellow employment lawyers that join me in this honor. I share this post not to merely garner likes on social media, but to make sure you all know about how humble I feel on social media.

Does this mean I’m famous? Of course it does! Does this make me a better lawyer than all other employment lawyers? Probably! Will I celebrate by offering free consults to everyone?

No. Absolutely not, no, don’t be silly.

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New Tip Rules From the U.S. Department of Labor

The U.S. Department of Labor recently announced that it will allow several new rules to go into effect regarding tips paid to employees under the Fair Labor Standards Act (FLSA). These rules were originally proposed while President Trump was still in office, but once President Biden was sworn in, the DOL placed these rules on hold to see if other changes needed to made before the rules went into effect. Now it appears that the DOL will move forward with part of the proposed rules, but not all of them.

These new rules (1) include “a prohibition on employers, including supervisors and managers, [against] keeping tips received by workers, regardless of whether the employer takes a tip credit,” and (2) allow an “employer that does not take a tip credit to include non-tipped workers, such as cooks and dishwashers, in nontraditional tip-sharing agreements.”

Rule Number 1 is a flat out prohibition on managers and supervisors from stealing tips from their employees (called “wage theft”). Managers and supervisors already get paid either a higher hourly wage or a salary, while the employees who typically receive tips make a much lower wage. For waiters and waitresses, that hourly wage can be as low as $2.13/hour. The DOL seeks to protect those lower wage earners from unscrupulous managers who seek to take tips that do not belong to them.

Rule Number 2 deals with what the DOL calls “tip pools,” where employees (typically a restaurant) combine all of their tips into a joint pool and then divide out the proceeds equally at the end of the night. There’s been a lot of confusion over whether backline/back of the house employees can be included in that tip pool, since most of those employees get paid a regular hourly wage while wait staff often gets paid $2.13 plus tips. Different courts have come to different conclusions, so this rule is designed to clear up any lingering confusion. So under this new rule, back line staff can only participate in the tip pool IF the restaurant pays all of its waiters at least a full minimum wage of $7.25/hour. If the restaurant pays $2.13/hour plus tips to wait staff (called taking a “tip credit”), then the employer cannot force waiters to pay part of their tips to cooks and kitchen staff. Period.

These new rules will likely take effect later this year, and I’ll provide an update at that point as well. In the meantime, if you are an employee whose tips are being taken by your manager or are being forced to share with the kitchen staff, you should probably speak with an FLSA lawyer in more detail.

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Increase to Minimum Wage under FLSA Stalled in Congress

Since South Carolina does not have a state-specific minimum wage, South Carolina employees are subject to the federal minimum wage of $7.25/hour, as set by the Fair Labor Standards Act (FLSA) and supporting rules and regulations. That minimum wage number has not changed since 2009, and since the minimum wage is not tied to inflation, it only changes if Congress says it does. (The salary test that is applied to salaried employees includes a specific threshold monetary amount of salary, but that amount can be changed via Department of Labor regulations and does not require Congress to act. Which is why the salary threshold actually changed and the minimum wage has not.)

The Biden Administration has pushed an increase to the minimum wage, and it attempted to follow through on this promise by attaching the increase to the latest coronavirus relief bill. However, through the legislative process, that proposal to increase the minimum wage was dropped. It remains to be seen whether and how hard the Democratic-controlled House and Senate will proceed with any further attempts at raising the minimum wage.

In the meantime, South Carolina employees are still governed by the current minimum wage of $7.25/hour. While this is a relatively low threshold of payment, South Carolina employers still screw up in abiding by the minimum wage, especially in the food service industry and issues involving tips, tip credits, and tip pools. If you are having issues with your employer paying proper minimum wage or abiding by the tip credit provisions, feel free to reach out to your friendly neighborhood South Carolina FLSA lawyer.

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Jeremy Summerlin Honored as Super Lawyer Rising Star

TrueOrFLSA blogger and South Carolina unpaid overtime lawyer Jeremy Summerlin was recently selected as an honoree for South Carolina Super Lawyers 2020. (Because it’s considered uncouth to one’s own horn, Mr. Summerlin, as author of this blog post, will proceed entirely in the third person, so as to mitigate the noisome effects of such self-tooting of horns.) Mr. Summerlin was honored as a Rising Star in the practice area of Employment & Labor law, and this was his third consecutive year receiving such an honor. No one yet knows just high his Star will Rise.

Upon hearing the news, Mr. Summerlin was characteristically humble yet still strikingly handsome, and he was heard to remark by this author, “I’m humbled to accept this prestigious reward, which is only granted to a single lawyer in the world each year probably, and not to most of the lawyers in South Carolina.”

He went on to assure his beloved readers that “such an award will not impact my level of humility moving forward, nor will I acknowledge any other people in a complimentary fashion, since I alone am responsible for this achievement and am therefore the greatest lawyer that has ever lived,” he said in what he will forever recall as a humble manner.

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New Overtime Rule Will Impact South Carolina Employees

The U.S. Department of Labor (“DOL”) recently announced a new Final Rule regarding compensation under the Fair Labor Standards Act (“FLSA”). Generally, the rule addresses how companies should calculate an employee’s “regular rate of pay,” including what other fringe benefits or payments should be included in that regular rate. The regular rate of pay is extremely important because that rate determines an employee’s overtime rate (1.5 x regular rate, called time and a half). The rule goes into effect tomorrow, on January 15, 2020.

The DOL updated this rule to add specific exclusions of certain types of benefits from the final regular rate calculation. So, for example, if an employer provides gym access or wellness programs to its employees, then the value of those benefits is NOT included in your regular hourly rate. The full list of exclusions can be found at this link.

The goal for this rule update is to clarify for employers what benefits can be excluded so that employers do not feel constrained in providing these types of benefits to its employees. Before the new rule, some employers may not have provided such benefits just because they didn’t want to have to add those benefits to an already-complicated calculation.

For employees in South Carolina, this will mean that your regular hourly rate of pay is calculated primarily by your wages (hourly or commission), plus some other benefits. If you have questions about whether you have been misclassified under the FLSA and would therefore be owed up to three years of unpaid overtime pay, then you should speak with an unpaid overtime lawyer in South Carolina immediately to determine your rights and your remedies.

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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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Proposed Law Banning Non-Compete Agreements Is Tied to FLSA

Senator Mark Rubio recently introduced federal legislation that would modify the FLSA and limit the enforceability of non-compete agreements across the nation, including South Carolina. (A non-compete agreement is a contract signed by an employee that prevents that employee from going to work for a competitor for a certain period of time after leaving his current employer. These types of agreements are no longer limited to higher wage earners; many minimum wage earners or other lower paid employees are being forced to sign them as well. ) The proposed law would modify the existing Fair Labor Standards Act in several interesting ways.

First, the law would prevent companies from making non-exempt employees sign non-compete agreements. In essence, if an employee does not qualify for one of the exemptions under the FLSA (i.e., if the employee is classified as “non-exempt” and is currently getting paid overtime), then the employee cannot be forced to sign a non-compete agreement. Nor would the employer be able to enforce a non-compete agreement against a non-exempt employee or attempt to enforce the non-exempt agreement at all, rendering those employees’ existing non-compete agreements void.

Second, the U.S. Department of Labor would be responsible for enforcing the new law. (The DOL is already responsible for enforcing the FLSA overtime and minimum wage requirements.) So an employee could report a business that violates the law to the DOL, and the DOL could investigate and potentially bring a lawsuit against the company. Further, the employee could bring his or her own lawsuit against the company trying to enforce the non-compete illegally, and the employee could seek damages for the violation.

Personally, I think the law is great first step in regulating the use of non-compete agreements–which companies often use to bully employees and suppress easy movement from one job to another higher paying job–especially for lower wage earners. Very often companies do this type of bullying in the name of “protecting trade secrets,” which is frankly ludicrous for most of the lower wage earners wage earners who would be most benefited by this new law. Jimmy John’s sandwich makers are not learning corporate trade secrets, and neither are many of the employees whose non-compete agreements I review. The existing FLSA exemptions also provide a ready-made categorization for who the law applies to and who it doesn’t. Many states (not South Carolina, unfortunately) have already taken steps to restrict or ban the use of non-competes, so perhaps Sen. Rubio’s legislation will continue that trend.

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Han Solo: Independent Contractor or Employee?

Was Han Solo an independent contractor or employee of the Rebel Alliance under the FLSA? You know you’ve always wanted to know the answer to this question! How  else can you expect to impress a beautiful girl unless you can provide a detailed legal and in-universe explanation for one position or another that does not violate sacred Star Wars canon? You can’t, of course, which is why you’re here. They don’t call me the Juris Doctor of Love for no reason. In fact, they don’t call me that for any reason at all. Or at all, period. Nonetheless, it’s on my business cards. 

Seriously though–and I do take this far more serious than is healthy–the answer depends on which movie we look at in the ever-increasing Star Wars film universe. So for this post, we will consider just the first Star Wars: Episode IV: A New Hope: The One Where Han Shot First (In Some Versions): A Star Wars Story: Being the First Part of the Lord of the Rings.

Oh, Han Solo:  smuggler, scoundrel, scruffy-looking nerfherder. Until the start of Star Wars: A New Hope, he’s a down-on-his-luck outlaw with a price on his head larger than a fanboy’s expectations of Episode IX. Until, that is, an agent of the Rebel Alliance, the only one Obi-Wan Kenobi, makes a proposal:  transport humans and cargo past the Imperial patrols and deliver them safely to Alderaan. Han Solo’s first question, logically, is whether he would be an employee or an independent contractor in this scenario, and given his business savvy, he immediately contacted a skilled employment law attorney in South Carolina for the answer. So…

What makes Han Solo an independent contractor or employee?

Control, control, you must learn that CONTROL is the key to determining whether the person is an independent contractor or employee. The Imperial Revenue Service (IRS) has issued guidance in making this classification. Two key factors noted by the IRS are control over the person’s behavior and control over the financial and business aspects of the employee’s job. In other words, is the person permitted to exercise complete discretion in getting the work done and in how the person gets paid? If not, then the person is more likely an employee.

In Mr. Solo’s FLSA lawsuit against the Rebel Alliance in imperial court, what does the court consider that weighs in favor of him being a contractor?

First, Plaintiff Solo has virtually no restrictions placed on his discretion in performing his mission. The only directions he receives from Mr. Kenobi? “No questions asked.” Solo has the discretion to determine time and location for departure (docking bay 94, of course), the means of transport (the Millennium Falcon),  and calculating the proper course to Alderaan, which, as we know, ain’t like dusting crops, boy. So the element of control (or lack thereof) over Solo’s behavior leans in favor of an independent contractor arrangement.

Second, Solo has no restrictions placed on the financial and business aspects of this arrangement. Solo remains free to use his own resources and tools to accomplish the mission, as he sees fit, and he can make all the upgrades and modifications to the Falcon that would be necessary. So this factor also also tends to support Solo’s status of independent contract. Also, his name is SOLO, so….

Can a person’s status change from independent contractor to employee?

Yes, if the level of control changes during the course of employment. So, in Captain Solo’s case, he begins as independent contractor, subject to the terms of payment of 2,000 credits now and 15,000 when they arrive safely at Alderaan.

However, the Force has other ideas, for upon arriving at where Alderaan USED to be, the mission changes. Solo’s ship, with its passengers hidden on board, is captured by the Empire, which leads to a rescue attempt of Princess Leia, a high-ranking member of the Rebel Alliance.

Once the Princess enters the picture, the level of control changes almost immediately. Princess Leia asserts control over the mission and begins bossing around Han Solo and Luke Skywalker (and even Chewbacca, the famous walking carpet himself) like she’s, well, like she’s royalty or something. At this point, Han Solo instantly becomes an employee of the Rebellion, pursuant to Princess Leia’s assertion of control over the mission. At that point, Han Solo becomes entitled to….

Overtime–Or, How Long It Takes to Become As Wildly Handsome as Me (i.e., it happened over time and with frequent surgery)

That’s right, the Rebel Alliance, as if it didn’t have enough trouble on its hands with fighting a war and all, now has to start tracking Han Solo’s hours worked so it can properly pay him overtime for all the hours he’s working to help save the Galaxy from the villainous Empire. (I recommend a time-tracking software such as Fettch Your Hours or Jabba Jabba Jobsite, both excellent options.) The Alliance, being the good guys, does not engage in wage theft and so takes its legal obligations seriously. After a polite request, Han Solo received all of his earned overtime pay for the many hours he spends fighting for peace and justice in the galaxy, and I didn’t even have to send an threatening letter to Mon Mothma that compares her to the Dark Lord of the Sith if she doesn’t comport with the law’s requirements.

Ultimately, if you or a smuggler you know is uncertain as to whether or not they should be getting paid overtime, send me a holo transmission immediately. I may not be your only hope, but I’ll certainly help you any way I can.

THE END

DIRECTED BY J.J. ABRAMS

WRITTEN BY JEREMY R. SUMMERLIN, E$Q

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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.