All posts tagged Department of Labor

A Guide to The DOL’s New Overtime Regulations


The Department of Labor has more than doubled the salary threshold for exempt employees to $47,476, which means anyone earning less than that must be eligible for overtime if they work more than 40 hours a week.

The increase equates to a minimum salary of $913 per week, compared to the current $455 per week – or $23,660 a year.

This means if you employ someone who is currently an exempt manager and they earn less than $47,476, they will be non-exempt starting Dec. 1, unless you give them a raise. If they work more than 40 hours a week, regardless of their duties, you will be required to pay them overtime.

The move by the DOL means that you’ll have to change your payroll systems to comport with the new standard or risk breaching wage and hour laws at a time when lawsuits for these types of violations have been on a steep rise.

The DOL estimates that some 4.2 million workers will become eligible for overtime under the new regulations.

The last time adjustments were made to the white-collar overtime exemption, in 2004, there was a surge in wage and hour litigation.

Experts say that these changes will likely see a similar rise due to employers making mistakes about the way time is kept or misunderstandings among employees about how bonuses are calculated (see below). It is therefore imperative that you as an employer adjust your payroll systems so that they comply with the new regulations when they take effect in December.

Here’s what you need to know about the new regulations:


  • Inclusion of bonuses

The final rule allows employers to include any bonuses and commissions (up to 10% of the salary) when calculating the salary figures.


  • Duties test unchanged

The new regulation does not change the “duties test,” which specifies what kind of employees can be classified as exempt. This will still include:

Executive, whose primary duty is managing an enterprise, or managing a customarily recognized department or subdivision of the enterprise

Administrative, whose primary duty is the “performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers”

Professional, whose work requires advanced knowledge, defined by the DOL as “work which is predominantly intellectual in character and which includes work requiring the consistent exercise of discretion and judgment”

Outside sales, whose primary duty must be making sales or obtaining orders or contracts.

Creative professional, whose primary duty is the “performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.”


  • Increase in salary for “highly compensated employees”

The new regulations also set the total annual compensation requirement for highly compensated employees subject to a minimal duties test to the annual equivalent of the 90th percentile of full-time salaried workers nationally, which is $134,004. That’s up from the current $100,00.


  • Regular increases

The new threshold will be updated every three years to make sure it stays at the 40th percentile of full-time salaries in the lowest income region of the country. Based on wage growth projections, that means the overtime threshold could rise to $51,000 by 2020, according to estimates from the White House.


Take action

There will be a lot to do and the deadlines for compliance may be tight. For example, to make cost-effective salary determinations for your company, you may need to take a close look at employee hours. To get a head start on the work, the law firm of Frankfurt Kurnit Klein & Selz recommends that employers consider the following steps now:

  1. Audit current classifications of employees as exempt or non-exempt and correct any misclassifications.
  2. Audit the hours worked by any current exempt employees who may fall beneath the proposed salary limit. If you do this, once the final rules are published, you will be in position to decide whether, for example, to increase certain employee salaries to a point at or above the new threshold – or to pay those employees overtime moving forward. If you decide to keep certain employees above the new salary limit (and not pay overtime), you may need to provide annual raises as the salary limit threshold changes.
  3. Determine how to best communicate changes to employees to maintain morale and reduce the risk of litigation.



Lawsuit defense

If you have not done so you should seriously consider purchasing employment practices liability insurance. This coverage can provide legal defense coverage and settlement and award coverage for actions taken by your employees over wage and hour and other human resources decisions or actions, such as alleged discrimina

Federal Agencies Stepping up Audits. Here’s What They Are Looking at

As the Affordable Care Act takes hold further, government agencies are stepping up their audits of health plans across the country.

With many employers still unclear over exactly what they need to do to fully comply with all of the sections of the ACA – from providing affordable insurance to reporting on their plans – the risk is great that you may be found not in compliance at least in some area.

There are a number of government entities that are responsible for auditing employer health plans, and they all have different areas of responsibility:

Department of Labor (DOL)

  • ACA
  • Employee Retirement Security Act (ERISA)
  • Health Insurance Portability and Accountability Act (HIPPA)


Department of Health and Human Services

  • Summary of Benefit Coverage compliance
  • HIPPA privacy, security and breach notification rules
  • Medicare secondary payer


Internal Revenue Service

  • ACA (also including reporting)
  • Misclassification of workers as independent contractors
  • COBRA issues
  • Tax issues concerning employee benefits


Equal Employment Opportunity Commission

  • Americans with Disabilities Act issues
  • Age Discrimination in Employment Act
  • Genetic Information Nondiscrimination Act


While one entity may audit an employer, all four are now cooperating with each other and sharing information. Health benefits attorneys have noted that if an auditor finds an infraction that may not be part of their agency’s auditing purview, they are passing the information on to other agencies.

For the purposes of this article we will focus on the audits that are most likely to happen, and the main triggers for these audits:


DOL audits

  • Adult children – The ACA requires that group health plans allow their enrollees to keep their grown children up the age of 26 on their family coverage plans. The DOL requires a sample of the written notice describing enrollment rights for dependent children up to age 26 who have used the plan since September 23, 2010.
  • Rescission of coverage If the plan has rescinded coverage, the DOL requires a list of all affected individuals and a copy of the written notice 30 days in advance of each rescission.
  • Grandfather status Employers that are retaining grandfathered plan status must provide documentation to substantiate that status, as well as a copy of the required annual notice distributed to participants advising of the plan’s grandfather protections.
    It’s been reported that the DOL seems to have a general disregard for grandfathered plans and may give them extra scrutiny.
  • Waiting periods – The ACA bars employers from requiring that new hires wait more than 90 days before they are offered health insurance. Expect an audit if you are not complying with these rules.


IRS audits

  • ACA reporting – Employers are required to self-report about their efforts to offer full-time employees compliant health insurance coverage. Failure to comply with the reporting requirement may result in penalties of $100 per incident up to $1.5 million.

Employers need to make sure that they comply with these reporting requirements.

Also, there are assessments exceeding $3,000 a year per worker if the coverage you are offering your employees is not affordable.   Even if you are offering what you think is affordable coverage to all of your workers, because people are paid different wages, coverage may not be affordable to those who are paid the least.

  • Not tracking hours ­– The standard for discerning if an individual is a full-time employee is that they work more than 130 hours per month. If you have a number of part-time employees whose hours vary month to month, it’s going to be difficult to gauge who is full-timer.
    The IRS allows employers to use a few different methods for tracking employee hours for the purposes of the ACA, but the variable-hour tracking method is the most complex and may invite additional IRS scrutiny.



The takeaway

The key is preparation for any employer that wants to pass an audit without incurring penalties.

We can work with you to ensure that you have the proper supporting documentation in place in case you are contacted for an audit.




Independent Contractor Classification Clarified amid Crackdown

On July 15, the U.S. Department of Labor (DOL) issued an administrator’s interpretation regarding the application of the Fair Labor Standards Act with respect to the misclassification of workers as independent contractors.

The new interpretation is required reading for any business that uses independent contractors to any degree – often or seldom. It’s also important as the government continues to crack down on companies that misclassify their employees as independent contractors, most recently evidenced by the decision that Uber drivers are employees, and not independent contractors.

The interpretation came after a ruling by the California Labor Commissioner’s Office that a driver for the ride-hailing service should be classified as an employee, not an independent contractor. The ruling ordered Uber to reimburse a driver $4,152.20 in expenses and other costs for the roughly eight weeks she worked as an Uber driver last year.

Some of the main points in the DOL’s interpretation are:

  • It is the DOL’s unequivocal opinion that “most workers are employees,” under the Fair Labor Standards Act.
  • It fully embraces the “economic realities” test (explained below) as the DOL’s preferred approach to determining whether a worker is an employee or a contractor.
  • It downplays the significance of an employer’s exertion of control over the tasks performed by the worker.
  • It reinforces the DOL’s pattern over the last several years of aggressively examining the classification of workers as contractors.


The “economic realities” test includes the following factors:

  • The extent to which the work performed is an integral part of the employer’s business;
  • The worker’s opportunity for profit or loss depending on his or her managerial skill;
  • The extent of the relative investments of the employer and the worker;
  • Whether the work performed requires special skills and initiative;
  • The permanency of the relationship; and
  • The degree of control exercised or retained by the employer


The changes are not so dramatic, however, and the interpretation should give employers a good roadmap to use when designating employees.

Despite the last item on the list, covering the degree of control the employer exerts over an independent contractor, the DOL actually de-emphasized it repeatedly in the interpretation. Up until this interpretation, degree of control had been a central part of assessing whether a contractor actually is an employee.

That said, because the agency is downplaying this now, it means that employers could be in for a few surprises and time will tell what factors are taking more precedence.

Ultimately, the goal of the economic realities test is to determine whether a worker is economically dependent on the employer (and is therefore an employee), or is really in business for him or herself (and is therefore an independent contractor). This new document should be your guidepost if you currently are using independent contractors or plan to classify someone as an independent contractor in the future.



Now Is the Time to Prepare for Health Plan Audits

Compliance requirements of the Affordable Care Act are gradually being implemented, and with each new provision that employers must comply with, the more you have to keep track of.

But 2015 is really when the rubber hits the road for ACA compliance. This is the year you’ll learn more than you ever wanted to about the various ACA coverage and reporting requirements.

There are three federal agencies in charge of ACA compliance: the Employee Benefits Security Administration (EBSA) of the Department of Labor (DOL), the Internal Revenue Service and the Department of Health and Human Services.

The main agency in charge of compliance will be EBSA and there are a number of areas the agency will be looking at.

Already, EBSA has set up a health benefits security project team to handle ACA enforcement. Getting numbers is difficult, but EBSA said in 2010 that it was hiring about 670 new investigators to help with matters such as ACA compliance audits. By now, hundreds of them are be on board, trained, and ready to investigate.

EBSA has the authority to conduct audits on benefit plans that are governed by the Employee Retirement Income Security Act (ERISA). DOL audits often focus on violations of ERISA’s fiduciary obligations and reporting and disclosure requirements.

The DOL may also investigate whether an employee benefit plan complies with ERISA’s protections for plan participants, such as the special enrollment rules or mental health parity requirements. Recently, the DOL has been using its investigative authority to enforce compliance with the ACA.

Penalties for noncompliance and other errors found during an audit can be steep. For example, during the 2013 fiscal year, more than 70% of audits resulted in monetary fines or other corrective action.



There are several factors that increase or indicate your likelihood of being audited.

Audits can be random or triggered for a variety of reasons. Some audits can be avoided through careful administrative efforts, while others can be initiated through no fault of your own.

Common triggers for a DOL audit include:

  • Enrollee complaints – If any of your plan’s enrollees complain to the DOL about potential ERISA violations, the plan will likely be subjected to an audit. According to a DOL audit summary, 775 new investigations in 2013 resulted from participant complaints.
  • Incomplete or inconsistent information – The DOL is more likely to investigate a plan that has incomplete answers on the plan’s Form 5500, or if information you report is inconsistent from year to year.


Another reason your plan might be selected for an audit is the DOL’s national enforcement priorities or projects, which focus investigative resources on certain issues.

According to the DOL, the following are areas of heightened importance for audits:

  • Major case enforcement – EBSA is focusing on major cases in order to best protect areas that have the greatest impact on plan assets and participants’ benefits.
  • Employee contributions initiative – EBSA is focusing on delinquent employee contributions in order to help protect employee contributions to their 401(k), health care and other plans.


But wait, there’s more!

In addition to the above, the DOL has several national enforcement projects that receive investigative emphasis:

  • Contributory Plans Criminal Project
  • Fiduciary Service Provider Compensation Project
  • Health Benefits Security Project
  • Rapid ERISA Action Team
  • Employee Stock Ownership Plans
  • Voluntary Fiduciary Correction Program


Remember, DOL audits can be triggered by mistakes you make, complaints by your employees (whether valid or not) or if your plan is swept up in an area on which the agency is focusing its enforcement efforts.


Be prepared

But even if you’re not at fault, if your plan is audited, you have to be prepared and have all of your documents and documentation in order.

The DOL has asked for the following in its audits during the last few years:

  • Plan documents for each plan, along with any amendments. (Content in all plan documents must comply with ERISA regulations.)
  • Trust agreement (if any), and all amendments.
  • Current summary plan descriptions.
  • Form 5500 and accompanying schedules for most recent plan year and previous three years.
  • Listing of all current service providers and those from the past three years.
  • All current contracts with administrative service providers on the plan, and the most current fee schedules.
  • All insurance contracts between plan and service providers.
  • Name, address and telephone number of plan administrator.
  • Sample HIPAA certificate of creditable coverage and proof of compliance with on-time issuance of COBRA notices.
  • Notice of special enrollment rights and record of dates when notice was distributed to employees.
  • Written eligibility criteria for plan enrollment.
  • Documentation regarding all mandatory employee notices, such as Statement of ERISA Rights, Women’s Health and Cancer Rights Act notice, etc.
  • Copy of most recent monthly bill for premiums from insurance company.
  • Copy of check, wire transfer or other method of payment for insurance premium.
  • Enrollment form(s) for the plan.
  • Employee handbook.
  • All documentation of claim adjudication and payment procedures.
  • Fidelity bond (if any).



Fines can be substantial.

ERISA’s reporting and disclosure requirements carry a fine of $110 per day, per person, per violation for every plan participant who was covered under a single contract.

The fine is $200 for plan participants covered by a family contract.

ERISA fines represent just one flag from the DOL auditor and can cost the plan sponsor dearly. Most fines for noncompliance under the ACA are not tax-deductible, either.


auditor cube rendition

Beware of the ACA Whistleblower Complaint

By now you should be aware of the various penalties that can be levied against employers for not providing health insurance to their full-time employees once the employer mandate takes full effect.

But are you aware of another liability contained in the Affordable Care Act – the whistleblower complaint?

The ACA prohibits an employer from discharging or in any manner discriminating or taking retaliatory action against any employee because the employee or an individual acting at the request of the employee has:

  1. Received a credit or a subsidy for purchasing health insurance coverage on a public exchange;
  2. Provided, caused to be provided, or is about to provide or cause to be provided to the employer, the federal government or the state attorney general, information regarding a violation of Title I of the ACA;
  3. Testified or is about to testify in a proceeding concerning an ACA violation. Or if they assisted or participated, or are about to assist or participate, in such a proceeding.
  4. Objected to, or refused to participate in, any activity, policy, practice or assigned task that the employee reasonably believes was in violation of any provision of the ACA.


The task of investigating whistleblower complaints is the responsibility of the federal Occupational Safety and Health Administration. Employees that feel they’ve been wronged in terms of the ACA have 180 days to file an administrative complaint with the OSHA Whistleblower Directorate.

So far there have been no Department of Labor (DOL) administrative tribunals for an ACA whistleblower complaint. That’s not surprising since the employer mandate has partly taken effect only this year for employers with 100 or more full-time or full-time equivalent employees.

While there have been no tribunals, the OSHA has received one complaint that was thrown out. Nonetheless, the complaint could be a reflection of what a complaint might look like in the future, after the employer mandate is fully implemented.


The case:

A woman employed as a “durational employee” by the Housing Authority of Columbus, Georgia, filed an ACA whistleblower complaint in August 2014.

She alleged that she was terminated in January 2014 – four months after she’d refused to sign and acknowledge that she understood “and agreed” with the terms of the company’s policy on health coverage for employees.

Those were laid out in a letter she’d received in September 2013, which stated that durational employees were ineligible for participation in the employer’s group health insurance plan and that only regular, full-time employees were eligible.

She said that after she had refused to sign, she received her first unsatisfactory performance evaluation and a significantly lower annual bonus based on the unsatisfactory review.

She alleged that adverse employment actions were the result of her refusal to accept the terms.

OSHA dismissed the complaint, on the grounds that it was filed to late – more than 180 days following the date of termination.

The woman appealed the decision to the DOL Office of Administrative Law, claiming that her complaint was timely because she had attempted, unsuccessfully, to file timely complaints within the 180-day limitations with other federal agencies, as well as with the White House.

But the administrative law judge threw out the complaint, saying the employer could not be held liable for retaliation prior to the effective date of the employer mandate.


The takeaway:

The case illustrates the most likely scenario under which an employee may gain ACA whistleblower protection after this year.

Other whistleblower complaints likely to surface in 2016 would concern complaints of adverse employment actions taken after an employer receives notice that one or more of its employees qualified for a tax credit or a subsidy for purchasing health benefits through a public exchange.

However, all complaints must be filed within 180 days of an adverse employment action.


whistle ref

Smartphones and the Wage and Hour Dilemma

Do you ever wonder if your non-exempt employees are sneaking a peek at work e-mail off the clock? Ever suspect their bosses of pressuring them to respond to calls and e-mails after the workday ends?

If those thoughts keep you up at night, it’s time to make sure your employees’ smartphones aren’t putting your organization at risk of violating wage and hour laws.

The proliferation of smartphones has led to a rapidly rising number of lawsuits by employees claiming they were required to work uncompensated on evenings and weekends when not on the clock. The lawsuits are often class actions stemming from overtime-eligible employees using smartphones to extend their workday without those after-hours tasks being compensated.

The problem for employers is that when one employee complains to the Labor Department that they are not being compensated for time working on their smartphones when away from work, the agency’s investigators won’t stop with the complaining employee. They also look at how many others are “similarly situated.”

A single employee’s complaint can turn in to a class action when all the other similarly situated employees are included.

Just a few minutes a day over months or years can add up to financial disaster if an employer has a number of employees regularly using their phones for uncompensated work.

In the last several years, the courts have seen a flood of lawsuits in which groups of employees claim the time they spend reading and responding to e-mail should be considered work time, and therefore paid.

The danger is that when a boss sends a worker a message off-hours and asks them to read something or send an e-mail, the employee will usually feel compelled to do as they’re told, even if they don’t want to. It’s unlikely a subordinate will refuse to a superior for many reasons, such as job security and also advancement possibilities. Who wants to look lazy when the go-getters are the ones who are recognized?

Employees often are expected to check their work e-mail, and it’s not too much of an overstatement to say many employees today are under pressure because they are required to respond to after-hours messages.

You might think that just a few minutes of after-hours work won’t cause a problem because the time is minimal. But when employees sue claiming they should be compensated for after-hours smartphone work, the employer typically uses the de minimis defense.

De minimis means very little, perhaps just a minute or two. The employer maintains that the time spent is de minimis, but it isn’t. Just five minutes a day adds up to almost a half hour a week. But there are precedent-setting court decisions that have said that even 30 minutes extra a week is not de minimis.

Also, besides federal law, you have our own state law to contend with.

Additionally, you may not even know that some employees are checking work e-mail at home whether they’re told to or not.

Just because the employer doesn’t require employees to stay tied to their phones doesn’t eliminate legal risk. The law defines work time as the time an employee is “suffered or permitted” to work.

So, an employer doesn’t have to require employees to answer e-mail and perform other tasks off the clock to run into trouble. Merely permitting that work without counting it as compensable time, puts the employer at risk.


What should you do?

The extension of work time made possible by smartphones and other electronic devices poses a new danger for employers.

To ensure you don’t’ find yourself the target of a wage and hour lawsuit, you need to put in a place a solid policy about non-exempt employees working on their smartphone after hours.

You should put the policy in place, communicate it to your staff in a meeting, as well as include the policy in your employee handbook. Passing out a memo on the matter is also helpful.

Once the policy has been communicated, you have to monitor and survey staff to make sure they are not breaching the rules.