Massachusetts Employment Law Update Tuesday, October 22, 2019, - PowerPoint PPT Presentation

O’Connor & Drew P.C. ■ Auto Symposium 2019 Massachusetts Employment Law Update Tuesday, October 22, 2019, Sheraton Boston Needham Hotel Presented by: Jeffrey A. Fritz jfritz@fisherphillips.com (617) 532-9325 fisherphillips.com

Today’s Agenda  The Sleepy’s Debacle  USDOL New Overtime Rules  Paid Family & Medical Leave fisherphillips.com

The Sleepy’s Debacle fisherphillips.com

The Sleepy’s Debacle The History  MA Overtime Statute excludes commissions from “regular rate of pay”  Overtime rate = 1.5 x RR  3/14/03 DLS Opinion Letter  So long as commissions satisfy minimum wage and overtime obligations ( i.e. , MA min wage for all hours up to 40 and 1.5x MA min wage for all time worked over 40 hours), the employer is in compliance  12/21/09 DLS Opinion Letter  Reiterates position:  In computing the overtime rate for an employee who is paid on a 100 percent commission basis, the employee’s total earnings for purposes of overtime calculation must exclude commissions. However, pursuant to 455 CMR § 2.03(3), the employee’s regular hourly rate must not be less than the minimum wage. These two provisions must be read harmoniously to effectuate a consistent body of law. A plain reading of the two provisions compels the conclusion that such an employee be paid at least the equivalent of minimum wage (currently $8* per hour) for the first 40 hours, and time and one-half minimum wage (i.e., $12* per hour) for all hours worked over 40 in a given workweek. fisherphillips.com

The Sleepy’s Debacle The History  454 CMR § 27.03(3) – Overtime Rate (1/15)  Whether a nonexempt employee is paid on an hourly, piece work, salary, or any other basis, such payment shall not serve to compensate the employee for any portion of the overtime rate for hours worked over 40 in a work week , except that this limitation only applies to the “one half” portion of the overtime rate (one and “one half” times an employee’s regular hourly rate) when overtime is determined on a bona fide fluctuating workweek basis  2016 and 2018 DLS Topical Outlines fisherphillips.com

The Sleepy’s Debacle The Case  One of a number of cases on the issue since new regs  Recoverable draw of $125 per day, which always equaled or exceeded minimum wage & 1.5x min wage for all time worked over 40 and/or on Sunday  9/17 Putative class action filed in MA Superior Court  10/17 Removed to USDC MA  6/18 Federal lawsuit stayed and 2 questions certified to SJC: fisherphillips.com

The Sleepy’s Debacle The Case 1. If 100% commission-paid inside sales employee works more than 40 hours, is s/he entitled to any additional comp specifically for OT hours worked when total comp (through draws and commissions) is equal to or greater than 1.5x the employee’s regular rate or at least 1.5x the min wage for all hours worked over 40?  If yes, how do you calculate? 2. Same question for Sunday pay. fisherphillips.com

The Sleepy’s Debacle The Decision  “We conclude that draws and commissions cannot be retroactively allocated as hourly and overtime wages and Sunday pay even if these draws and commissions equaled or exceeded the minimum wage for the employees’ first forty hours of work and one and one-half times the minimum wage for all hours worked over forty hours or on Sunday.”  “Rather, the employees are entitled to separate and additional payments of one and one-half times the minimum wage for every hour the employees worked over forty hours or on Sunday.” fisherphillips.com

The Sleepy’s Debacle The Decision  “We recognize that the [DLS] opinion letters are less than a model of clarity and may have misled the employers.”  Decision based largely on the “purpose” of the overtime law:  reduce the number of hours of work  encourage the employment of more persons  compensate employees for the burden of a long workweek  Interprets new regulation to prohibit retroactive “crediting” of payments against OT obligations when “made for a different purpose” (but acknowledges language is confusing) fisherphillips.com

The Sleepy’s Debacle Is This Retroactive?  Three-Factor Test  whether new principle established whose resolution was not clearly foreshadowed  whether retroactive application will further the rule  whether inequitable results, injustice, or hardships will be avoided by a holding of non-retroactivity  If retroactive,  3-year statute of limitations  Class actions  Automatic treble damages  Attorneys’ fees costs (yours and theirs) fisherphillips.com

The Sleepy’s Debacle If Retroactive  Example:  Assume ten 100% commissioned Salespeople each earned $15K in commissions each month (amounting to $180K annually)  Assume each worked 50 hours per week  OT due per Salesperson per week = $180 ($18/hr x 10 hrs)  x 52 wks/yr x 3 yrs = $28,080  x 10 Salespeople = $280,800  x 3 (auto trebling) = $842,400  plus attorneys’ fees and costs (yours and theirs) fisherphillips.com

The Sleepy’s Debacle Can This Be Fixed?  Through the courts?  Through the legislature?  Retroactively?  Prospectively? fisherphillips.com

The Sleepy’s Debacle What Should You Do Now?  Hope Sleepy’s decision not held retroactive (and/or you’re not sued)  Limit or eliminate overtime of commissioned employees  Pay additional $18* per hour (separate and apart from commissions) for all time worked since May 9, 2019:  over 40 hours per week, and/or  on a Sunday (or a MA Blue Law premium pay holiday*)  Consider paying additional $12 per hour (separate and apart from commissions) for any time worked up to 40 hours per week  Assess finances over time and make any necessary adjustments to commission level  Assess whether to pay historical single “damages” to avoid treble  Increase amounts to keep up with minimum wage hikes in coming years fisherphillips.com

USDOL New Overtime Rules fisherphillips.com

USDOL New Overtime Rules The Basics  White Collar Exemptions  Executive  Administrative  Professional  Not salespeople, parts counter, mechanics, etc.  Duties Test  Salary Basis Test fisherphillips.com

USDOL New Overtime Rules Duties Tests  Executive Exemption  Primary duty is management of department or sub-department  Supervises work of 2 or more full-time employees  Has authority to hire and fire  Administrative Exemption  Primary duty is performance of work directly related to management policies or general business operations (staff v. production work)  Primary duty includes exercise of discretion and judgment with respect to matters of significance fisherphillips.com

USDOL New Overtime Rules Salary Basis Test  Fixed amount of compensation each pay period on a weekly, or less frequent, basis that is not reduced based on variations in quality or quantity of work  Since 2004, $455 per week ($23,660 per year)  Limited bases for deductions, such as:  Absent from work for one or more full days for personal reasons other than sickness or disability  Absent from work for one or more full days due to sickness or disability if made in accordance with bona fide plan, policy, or practice of providing compensation for salary lost due to illness  Offset amounts received as jury or witness fees, or military pay  Be careful: improper deductions can jeopardize exemption fisherphillips.com

USDOL New Overtime Rules Highly Compensated Employees  Earns total annual compensation of $100,000*  Primary duty includes performing office or non-manual work  Customarily and regularly performs at least one of the white collar duties  Paid on at least same salary basis fisherphillips.com

USDOL New Overtime Rules Beginning January 1, 2010  Salary threshold increases from $455 to $684 per week  $23,660 to 35,568 annually  HCE annual salary increases to $107,432  Employers can use nondiscretionary bonuses and incentive payments (including commissions) paid at least annually to satisfy up to 10% of salary threshold (i.e., $68.40)  Not for HCE  No change to Duties Tests  Expect more frequent updates fisherphillips.com

Status of USDOL Overtime Rule What Should You Do Now?  Review your pay plans  Are they truly exempt currently?  Would they continue to be exempt after FLSA changes go into effect?  Any inappropriate or undefined deductions? Are you being straightforward and clear?  Make any changes necessary to ensure compliance  Rule change opportunity to dilute impact of other “fixes?” fisherphillips.com

Exposure for Violations  Back wages (assume 3-year statute of limitations)  Liquidated damages (double back wages) under FLSA  Automatic triple damages under MA Wage Act  Attorneys’ fees and costs  Interest  Civil monetary penalties (amounts adjusted annually)  Possible criminal penalties  Court-ordered compliance in future (possible contempt) fisherphillips.com

Paid Family and Medical Leave fisherphillips.com