Update on Publication of the New FLSA Overtime Regulations

Thursday, March 31, 2016

The final overtime rule is edging closer to release: the U.S. Department of Labor (USDOL) has sent its final changes for determining which workers are eligible for overtime pay to the Office of Management and Budget (OMB) for an administrative review.  Procedurally, this is the final step before a new regulation is published as a final rule.  OMB’s final review could take several months or just a few weeks.  Once complete, the final rule will be published in the Federal Register and take effect within 60 days of publication.

Commentators believe that the final rule will work its way quickly through OMB and most likely be published by July 7, meaning it would take effect on Labor Day, Sept. 5.  That has obvious symbolic meaning.  Alternatively, considering other significant events taking place this fall, if the rule is published on September 2 -- the Friday before Labor Day -- it will take effect on November 1, the day prior to Election Day.

Although the proposed regulations were issued in July 2015, the differences between those proposed regulations and the final rule won't be made public until the final rule is actually issued.

According to the Unified Agenda and Regulatory Plan, published in November 2015 by OMB, the earliest the final rule could be released would be in July. Timing is important. Under the Congressional Review Act, a joint resolution from both houses of Congress and the President can undo laws and rules passed during the final 60 legislative days of the previous Congress.  In other words, the Obama Administration must work quickly so that the regulations take effect before President Obama leaves office and to protect the new regulations from being overridden, if a Republican wins the White House.

Employers ought to be planning now for implementation of the new regulations.  Among the changes likely to be reflected in the new regulations when they are published include:

  • The salary threshold under which employees would be required to receive overtime pay (regular hourly rate x 1.5 for all hours worked beyond 40 hours in a given workweek) would be the 40th percentile of average weekly earnings in the U.S. The USDOL has projected that the 40th percentile weekly wage in the final rule will be $970, or $50,440 per year for a full-time employee.  This represents a significant jump from where it currently stands -- $23,660.
  • This new salary-level threshold will be annually updated, based either on the percentile or indexed to inflation.
  • For highly compensated employees (considered exempt without regard to any duties test), the new annual salary threshold will be $122,148, which is up from the current level of $100,000.

It remains to be seen whether changes in the applicable duties test will be incorporated into the new regulations.  No proposed changes to the duties test were reflected in the proposed rule published in 2015.

To avoid paying overtime to employees who would need to be reclassified as nonexempt, employers might consider increasing the employees’ salaries to a level above $50,440.   Alternatively, employers might considering reducing the hours of employees who would be newly non-exempt and eligible to receive overtime.  A third option is to adjust the hourly rates of newly non-exempt employees downward so that, when their additional overtime pay is considered, their overall weekly compensation remains unchanged.  Most employers will implement some combination of these tactical options in order to control the financial implications of the new regulations.

New Developments in Medical Marijuana and the Workplace

Tuesday, March 1, 2016

According to the National Conference of State Legislatures, twenty-three states now have medical marijuana laws on the books.  The conventional wisdom is that these laws bring with them greater protections for employees who are users of medical marijuana.  Court rulings over the last several years, however, have shown that this conventional wisdom is not always correct and that not all state medical marijuana laws are created equal.

For example, last summer the Colorado Supreme Court held that although Colorado law allowed for the use of medical marijuana, that law did not prevent an employer from terminating a medical marijuana user who had tested positive for marijuana in violation of the company’s zero-tolerance drug policy.  Reaching a similar conclusion, a federal district court in Washington recently dismissed an employee’s discrimination complaint and found that the law in Washington does not require employers to accommodate the use of medical marijuana where they have a drug-free workplace policy.  Swaw v. Safeway, Inc. (W.D. Wash. 2015).  In Swaw, the court pointed to an earlier 2011 decision from the Washington Supreme Court, which held that Washington’s medical marijuana law “does not regulate the conduct of a private employer or protect an employee from being discharged because of authorized medical marijuana use.”

That courts in Colorado and Washington (and California and Oregon, to name a few others) have construed medical marijuana laws in favor of employers does not mean that employers in other states with medical marijuana laws can assume their courts would reach similar interpretations.  This is because the medical marijuana laws in some states, such as Washington and Colorado, simply de-criminalize medical marijuana without providing any specific employment protections.  Other states, however, such as Maine, include specific protections that prohibit employers from taking adverse action against an employee based on his or her status as a medical marijuana user.  Consequently, court rulings from “de-criminalization” states should not be viewed as indicative of how a court would rule in another jurisdiction, such as Maine, where the applicable law expressly provides for some level of employment protection for medical marijuana users.

Although Maine’s courts have had little opportunity to weigh in on the issue of medical marijuana, Maine’s Department of Labor has recently issued a report that recommends several changes to the state’s drug testing law.  The report is the culmination of a workgroup that was convened by MDOL to explore a number of issues relating to substance use and abuse in the workplace, including the medical use of marijuana. The report, which is available here, recommends two changes.  The first change is directed at streamlining the process to approve drug testing policies and recommends the use of a uniform drug testing policy, which would be prepared by MDOL and used by all employers in the state. The second change involves replacing the “probable cause” standard for drug testing with a program whereby employers would receive training to detect impairments, regardless of their cause, and employers would then have the option to refer the alleged impairment case to a “preferred occupational provider” to confirm the impairment and make recommendations to address or accommodate the cause.