U.S. DOL Proposes Revisions to Some FLSA Exemptions' Minimum Salaries and More

The announcement is only 285 pages, and you can read the entire Notice of Proposed Rulemaking Here.   The actual regulations are about 9 pages beginning on page 286 of the PDF.

I know you're reading headlines focusing on the salary test for exempt workers under the FLSA.   Yes, indeed the DOL proposes to raise that salary threshold for the exempt executive, administrative and artistic / learned professional exemptions.  That proposal is a salary of $921 / week or a minimum salary of $47,892 per year (unless you're in Samoa).  Here's the proposed general provision, a revision to 29 CFR 541.600:

To qualify as an exempt executive, administrative or professional employee under section 13(a)(1) of the Act, an employee must be compensated on a salary basis as of [EFFECTIVE DATE OF FINAL RULE] at a rate per week of not less than $921 (or $774 per week, if employed in American Samoa by employers other than the Federal government), exclusive of board, lodging or other facilities. As of [DATE TBD] on each subsequent year, such employee must be compensated on a salary basis at a rate per week of not less than the updated salary rate published annually by the Secretary in the Federal Register at least 60 days earlier (with the rate for American Samoa to be calculated at 84 percent of the updated salary rate, provided that when the highest industry minimum wage for American Samoa equals the minimum wage under 29 U.S.C. 206(a)(1), exempt employees employed in all industries in American Samoa shall be paid the full salary rate), exclusive of board, lodging or other facilities.

The proposal includes a way to increase the base salary without passing new regulations or laws. Under the proposal, the minimum salary will go up each year based on an announcement by the Secretary of Labor, to occur 60 days before the change. The change will be based on a calculation the DOL has not decided upon yet.  It will either rely on the "CPI-U" inflation index, or by adjusting the salary basis to maintain pace with actual wages paid to salaried workers.

The proposal retains the "highly compensated" exemption standard, which relaxes the duties test. But the "highly compensated" salary will increase to $122,148, again indexed in future years.

There will also be an hourly "computer exemption" rate of $27.63 for those employees who can otherwise satisfy the "computer" exemption.

The proposed regulations include explanations of how the salary test may be met, as well as language stating that additional hourly pay, bonuses, commissions, etc. above the minimum salary will not defeat the exemptions.

But wait, there's more.  The proposed regulations are all about salary.  But the DOL in its Notice is also "seeking input" on whether to change the "duties" tests for the exemption.  That is, the DOL is actively considering adopting California's standards regarding the white-collar exemption duties test.  California law, as you know, measures time spent on exempt duties and discourages "working managers" who "pitch in."

You don't believe me?  Sure you do. But here's an excerpt of the DOL's announcement regarding the duties test:

While the Department is not proposing specific regulatory changes at this time, the Department is seeking additional information on the duties tests for consideration in the Final Rule. Specifically, the Department seeks comments on the following issues:

A. What, if any, changes should be made to the duties tests?

B. Should employees be required to spend a minimum amount of time performing work that is their primary duty in order to qualify for exemption? If so, what should that minimum amount be?

C. Should the Department look to the State of California’s law (requiring that 50 percent of an employee’s time be spent exclusively on work that is the employee’s primary duty) as a model? Is some other threshold that is less than 50 percent of an employee’s time worked a better indicator of the realities of the workplace today?

D. Does the single standard duties test for each exemption category appropriately distinguish between exempt and nonexempt employees? Should the Department reconsider our decision to eliminate the long/short duties tests structure?

E. Is the concurrent duties regulation for executive employees (allowing the performance of both exempt and nonexempt duties concurrently) working appropriately or does it need to be modified to avoid sweeping nonexempt employees into the exemption? Alternatively, should there be a limitation on the amount of nonexempt work? To what extent are exempt lower-level executive employees performing nonexempt work?

If DOL follows through with this proposal, it will  - not hyperbole - drastically change wage hour law in states outside California. Those of you who know anything about California employment law, you know what will happen. For starters, there will have to be many, many conversions of now-exempt employees to non-exempt, resulting in huge overtime liability going forward, at the new, inflated wages caused by inflated minimum wage law. 

And second, for those employers that do not convert, FLSA collective actions will ensue like you have never seen before.  

These regulations are just a first step and may be revised, particularly based on comments the DOL receives. If you'd like to leave comments, the linked Notice provides instructions:

ADDRESSES: You may submit comments, identified by Regulatory Information Number (RIN) 1235-AA11, by either of the following methods: Electronic Comments: Submit comments through the Federal eRulemaking Portal http://www.regulations.gov. Follow the instructions for submitting comments. Mail: Address written submissions to Mary Ziegler, Director of the Division of Regulations, Legislation, and Interpretation, Wage and Hour Division, U.S. Department of Labor, Room S-3502, 200 Constitution Avenue, N.W., Washington, D.C. 20210. Instructions: Please submit only one copy of your comments by only one method. All submissions must include the agency name and RIN, identified above, for this rulemaking. Please be advised that comments received will become a matter of public record and will be posted without change to http://www.regulations.gov, including any personal information provided. All comments must be received by 11:59 p.m. on the date indicated for consideration in this rulemaking. Commenters should transmit comments early to ensure timely receipt prior to the close of the comment period as the Department continues to experience delays in the receipt of mail in our area. For additional information on submitting comments and the rulemaking process, see the “Public Participation” section of this document. For questions concerning the interpretation and enforcement of labor standards related to the FLSA, individuals may contact the Wage and Hour Division (WHD) local district offices (see contact information below). Docket: For access to the docket to read background documents or comments, go to the Federal eRulemaking Portal at http://www.regulations.gov.

It will be interesting to see if the DOL can issued these regulations before the November 2016 election. If they can't, it will be interesting to see what the new president / DOL secretary says about this issue. 

Stay tuned....

9th Circuit Taketh Away in an Amended Opinion

We posted about the Ninth Circuit's post-Wal-Mart v. Dukes decision in Wang v. Chinese Daily News here.   This was an overtime class action involving newspaper employees. The Court of Appeals in the earlier opinion remanded the case to the district court for reconsideration of its class certification decision after Wal-Mart v. Dukes.

The plaintiffs apparently sought a rehearing. The Court issued an amended opinion instead.  The Court softened some of its language in the first opinion.  For example, it removed this line, quoted from its own precedent, addressing the plaintiffs' burden of proof on a motion for class certification:

Plaintiffs must show “significant proof that [CDN] operated under a general policy of [violating California labor laws].” Ellis, 657 F.3d at 983 (quoting Wal-Mart, 131 S. Ct. at 2553 (alteration omitted)).

The Court in the first opinion foreclosed class certification for injunctive relief Fed. R. Civ. Pro. 23(b)(2)

Further, it appears that none of the named plaintiffs has standing to pursue injunctive relief on behalf of the class, as none of them is a current CDN employee. See Wang, 623 F.3d at 756. We therefore reverse the district court’s class certification under Rule 23(b)(2).

In the new opinion, the Court opened the door to injunctive relief:

It appears that none of the named  plaintiffs has standing to pursue injunctive relief on behalf of the class, as none of them is a current CDN employee. See Wang, 623 F.3d at 756. However, because the Rule 23(b)(2) class was certified by the district court while they were current employees, the class certification with respect to injunctive relief may survive if there are identifiable class members who are still employed by CDN.

The Court's new opinion also deletes the section of the prior opinion called "Damages."  In the first opinion the Court wrote this, which could have been helpful to defense lawyers in class action cases:

in Wal-Mart, the Supreme Court disapproved what it called “Trial by Formula,” wherein damages are determined for a sample set of class members and then applied by extrapolation to the rest of the class “without further individualized proceedings.” Wal-Mart, 131 S. Ct. at 2561. Employers are “entitled to individualized determinations of each employee’s eligibility” for monetary relief. Id. at 2560. Employers are also entitled to litigate any individual affirmative defenses they may have to class members’ claims. Id. at 2561. 

Poof. That language is gone from the amended opinion. The Court mentions in the new opinion that it expresses no opinion regarding damages.
The case is Wang v. Chinese Daily News and the amended opinion is here. 

Ninth Circuit Interprets Learned Professional Exemption

The State of Washington's Department of Social and Health Services employ social workers, whom the agency classifies as exempt under the Fair Labor Standards Act.  The state relies on the "learned professional exemption," which means "an employee whose primary duties require 'knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction.'” 29 C.F.R. § 541.300(a)(2)(I).

The state's requirements for social worker positions included:

at least a “[b]achelor’s degree or higher in social services, human services, behavioral sciences, or an allied field,” as well as eighteen months as a Social Worker 1 or two years’ experience in an equivalent position. Candidates for Social Worker 3 must meet the same educational requirements and have additional work experience. Within one year of their appointment, new employees in these positions must complete a formal training program that includes four weeks of classroom instruction and two weeks of field instruction.

The state also had guidance regarding when equivalent work experience could substitute for specialized degrees.

Reversing the district court, the court of appeals decided that the social worker position was not "exempt" automatically and required a trial to find out the facts.  The court explained:

while social workers no doubt have diverse jobs that benefit from a multi-disciplinary background, 6 the “learned professional” exemption applies to positionsthat require “a prolonged course of specialized intellectual instruction,” not positions that draw from many varied fields. While particular coursework in each of the acceptable fields may be related to social work, DSHS admits that it does not examine an applicant’s coursework once it determines that the applicant’s degree is within one of those fields. For the “learned professional” exemption to apply, the knowledge required to perform the duties of a position must come from “advanced specialized intellectual instruction” rather than practical experience. 29 C.F.R. § 541.301(d). The requirement of a degree or sufficient coursework in any of several fields broadly related to a position suggests that only general academic training is necessary, with the employer relying upon apprenticeship and experience to develop the advanced skills necessary for effective performance as a social worker.

So, the issue is not whether a job requires a college degree generally.  The issue is whether the job requires a college degree in a particulars skill that is directly related to the job.

The case is Solis v. State DSHS and the opinion is here.

Pre-Bar Admission Law Grads Can Be Exempt

Matthew Zelasko-Barrett graduated law school and obtained a job with Brayton-Purcell, a large, Marin County firm. Before passing the bar and becoming a licensed lawyer, he was designated a Law Clerk II; after admission he became an associate.  After quitting, he decided to sue Brayton-Purcell, claiming he was "mis-classified" as exempt during his time as a Law Clerk II.

Although licensed, salaried lawyers qualify as exempt, so do "learned" professionals.  The associate's principal argument was that because licensed professionals qualify as exempt under one part of the definition, unlicensed lawyers cannot.  The court of appeal rejected that argument.

It bears noting that the Law Clerk II's duties practically mirrored  a licensed associate's, with the exception of signing documents as a lawyer, court appearances, etc.  Had the Law Clerk II's duties been more clerical, this case might have come out another way.

The court here also heavily relied on a 9th Circuit decision, in which the Court of Appeals held that certain accountants were exempt, even though they were not licensed as CPAs.  CPA is another category of licensed professional. See Campbell v. Pricewaterhouse Coopers, LLP (E.D.CA 2009) 602 F.Supp.2d 1163, 1172, revd. (2011) 642 F. 3d 820.  The district court held that the accountants were non-exempt, but the court of appeals reversed and held they were. 

That means this case has more applicability than just to law firms.  The other licensed professionals are: "medicine, dentistry, optometry, architecture, engineering, teaching, or accounting."  Again, unlicensed professionals will have to pass the duties test of the exemption and receive the required salary.

The case is Zelasko-Barrett v. Brayton-Purcell LLP and the opinion is here.