Employers Not Required to Submit Pay Data or Follow Higher Salary Basis Threshold for Exempt Employees

Q.  What is the status of the EEOC’s requirement that we submit pay data with our annual EEO-1 Form?  Also, have there been any updates on the lawsuit blocking the DOL’s rule raising the salary basis for certain non-exempt employees?

A.  As we reported previously, the EEOC, as part of its effort to detect and remedy pay discrimination, amended its EEO-1 Form to require that employers with 100 or more employees submit detailed pay data on their workforce.  On August 29, 2017, the OMB sent a memorandum to the EEOC, staying implementation of this requirement.  Thus, at least for now, employers may limit the information provided on the EEO-1 Form to data on race, ethnicity and gender by occupational category (but not data on pay or hours worked).

There is similar relief for employers on the DOL overtime issue.  As we reported in a previous blog post, the United States District Court for the Eastern District of Texas granted a preliminary injunction last November, blocking the implementation of the Department of Labor’s amendments to the overtime provisions of the Fair Labor Standards Act.  On August 31, 2017, the Court took a further step, granting summary judgment blocking the rule.  The Court concluded that the Department of Labor exceeded its authority in enacting a rule raising the minimum salary threshold for executive, administrative and professional exemptions.  This likely is the official end to President Obama’s Final Overtime Rule, although President Trump may revisit the issue of the minimum salary threshold in the future.

For more information on these issues and their impact on employers, please see our Client Alert.

Lee Tankle

Summer Internships: To Pay or Not to Pay?

Q.  My company is thinking about hiring a summer intern. Is there a requirement that we pay the intern, or can we hire him or her on a voluntary basis?

A.  Now that the weather is getting warmer, many companies are looking at their workforce needs during the summer months. Summer internships provide an excellent way for interns to get much needed “real world” job experience, while helping employers by adding another set of hands to complete projects that have not been completed during the rest of the year.

But must the employer pay for this assistance?

In most instances, the intern must be paid at least minimum wage and overtime for time worked above 40 hours in a workweek. Thus, payment of a small stipend, that does not meet minimum wage requirements, will not be enough.  The Fair Labor Standards Act defines the term “employ” very broadly as including anyone who is “suffered or permitted to work.”  Internships in the “for-profit” private sector will most often be viewed as employment.

There is an exception, however, for interns who receive training for their own educational benefit, if the training meets certain criteria. Courts looks to the following six-part test to determine whether an internship can be voluntary:

  1.  The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
  2. The internship experience is for the benefit of the intern;
  3. The intern does not displace regular employees, but works under close supervision of existing staff;
  4. The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
  5. The intern is not necessarily entitled to a job at the conclusion of the internship; and
  6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

If all of the factors listed above are met, the intern is not considered to be “working,” and the Wage Act’s minimum wage and overtime provisions do not apply.

Thus, if the internship program is structured around a classroom or academic experience (such as when the intern receives college credit for the program), as opposed to the employer’s actual operations, then it is more likely that the internship will be viewed as an extension of the individual’s educational experience.

Likewise, if the employer is providing job shadowing opportunities that allow an intern to learn certain functions under the close and constant supervision of regular employees, but the intern performs no or minimal work, the activity is more likely to be viewed as a bona fide education experience and payment is not necessary.

Conversely, if the intern displaces a regular employee and is expected to perform productive work, then the internship is considered to be “employment” and must meet minimum wage and overtime requirements.

Be aware that the test for determining whether an internship is volunteer work is interpreted quite narrowly.  Before hiring that summer intern, think through the above test carefully to see if the internship qualifies for the exception.  Most interns must be paid for their time.

Furthermore, while some employers try to get around the minimum wage laws by hiring their intern as an independent contractor, that relationship can be subject to scrutiny if the relationship is not classified correctly. As a general rule, if the employer expects the intern to work at the job site and provides supervision, the intern will be considered to be an employee and not an independent contractor.

– Tracey E. Diamond

 

A New Year’s Present for New York Employees: Minimum Wage and Exempt Status Salary Threshold Increases

Q: As a New York employer, what do I need to know about the increases to the minimum wage and the exempt salary threshold?

A: This is a timely question, since both the minimum wage and exempt salary threshold increased, effective December 31, 2016.

 Minimum Wage

The minimum wage for many New York employers increased to $9.70/hour. The minimum wage for large employers in New York City (11 or more employees) increased to $11.00/hour, and to $10.50/hour for small employers in New York City (10 or less employees).  The minimum wage for employers in Nassau, Suffolk, & Westchester Counties is now $10.00/hour.

And that’s not the end. The minimum wage will increase each year until it reaches $15 in each location, pursuant to the following schedule:

Location 12/31/17 12/31/18 12/31/19 12/31/20 2021*
NYC – Large Employers $13.00 $15.00
NYC – Small Employers $12.00 $13.50 $15.00
Nassau, Suffolk, & Westchester Counties $11.00 $12.00 $13.00 $14.00 $15.00
Remainder of New York State $10.40 $11.10 $11.80 $12.50 *

Starting in 2021, the annual increases will be published by the Commissioner of Labor on or before October 1.

If an employee works in two or more different minimum wage locations, the employer may pay either the highest rate for all hours worked, or pay each hour worked in each location at the applicable minimum wage for that location.

Fast food workers and tipped food service workers are subject to different minimum wage rates and increases.

Overtime Exempt Salary Threshold

In addition to the minimum wage increases, the overtime exempt salary thresholds for New York administrative and executive employees were increased to a salary of $825/week ($42,900 annually) for large employers in New York City, $787.50/week ($40,950 annually) for small employers in New York City, $750/week ($39,000 annually) for employers in Nassau, Suffolk, and Westchester counties, and $727.50/week ($37,830 annually) for employers in other New York counties.

New York employers should be mindful that even though the federal increases in the exemption salary thresholds have been blocked for the time being, the New York increases are higher than the existing federal thresholds, and thus New York employers must follow the state’s higher thresholds. Thus, New York employers need to increase salaries for those exempt employees who do not meet the new threshold, or reclassify them as non-exempt.

The salary thresholds for exempt status in New York will continue to increase each year until they reach $1,125/week, pursuant to the following schedule:

Location 12/31/17 12/31/18 12/31/19 12/31/20 2021
NYC – Large Employers $975.00 $1,125.00
NYC – Small Employers $900.00 $1,012.50 $1,125.00
Nassau, Suffolk, & Westchester Counties $825.00 $900.00 $975.00 $1,050.00 $1,125.00
Other New York Counties $780.00 $832.50 $885.00 $937.50

Jessica Rothenberg

Employers are Thankful for Injunction Blocking Overtime Rules

As many were planning their turkey dinners and slipping away for the long weekend, a Texas federal judge granted a nationwide preliminary injunction last Tuesday, blocking the implementation of a higher salary threshold for exempt status of white collar workers.  For more information about this important development, please click here.

–Tracey E. Diamond