FLSA Salary Threshold Increases, Other Proposed Changes To Rules & Enforcement Alert Health Care Employers To Confirm Salaried Employee Defensibility |

FLSA Salary Threshold Increases, Other Proposed Changes To Rules & Enforcement Alert Health Care Employers To Confirm Salaried Employee Defensibility

Overtime awards like the $152,000 in back wages and liquidated damages a Bronx Urgent Care, P.C. (“Bronx”) must pay for wrongfully misclassifying as exempt and routinely failing to pay overtime to nine employees for hours over 40 in a workweek (“overtime”) and recently announced increases in the salary threshold required for salaried employees strongly signal the need for all medical practices and other health care providers to reassess and re-verify the defensibility of their classification and pay practices for each salaried employee of their organizations and related management services organizations to confirm each salaried employee both the earnings and job duties requirements to qualify as an exempt employee under the Fair Labor Standards Act (“FLSA”). The precautionary warning sent by the judgment comes on the heels of the announcement by the Department of Labor Wage and Hour Division (“WHD”) of two increases in the minimum salary that an employer must pay an employee who otherwise satisfies the job duties requirements for payment by an employer on a salaried basis between July 1, 2024, and January 1, 2025. The salaried classification reviews both should confirm current fulfillment of each salaried classified employee and identify and begin preparations for necessary adjustments to classifications or salary for any salaried employee currently earning less than the higher minimum salary requirements set to take effect this Summer.

Bronx $152,000 Back Pay & Liquidated Damages Award

The Brox overtime judgement is part of a growing number of enforcement actions targeting health industry employers for overtime and other labor and employment violations. See, e.g., Nearly $900K FLSA Backpay Award Warns Other Home Health Employers.

On May 10, 2024, the U.S. District Court for the Southern District of New York ordered Bronx Urgent Care P.C. to pay $152,000 – $76,000 in back wages and an equal amount in liquidated damages – to the affected workers. The court also affirmed $8,000 in civil money penalties the WHD assessed by because the court found the FLSA violations willful. In addition to the wage recovery, damages and penalties assessed, the court order also forbids Bronx from future FLSA violations.

The judgment resulted after a WHD investigation found the employer operating Bronx, its owner Basil Bruno, and operations manager Samuel Singer violated the FLSA by misusing the salaried employee exemption and failing to pay time and a half overtime pay for overtime hours worked to nine employees improperly treated as salaried.

WHD Raising Salary Threshold Salaried Exemption

The FLSA requires employers to treat and pay each employee as an hourly employee subject to the minimum wage, overtime, and recordkeeping requirements unless the employer proves that the employee qualifies as exempt. To treat an employee as a salaried employee exempt from the FLSA requirements, an employer bears the burden of proving both that the employee’s salary meets or exceeds the required salaried threshold and that the actual duties and responsibilities of the employee fulfill the job duties test.

The judgment follows WHD’s April 23, 2024, adoption of a final rule that will twice increase the salary threshold of two upcoming increases to the minimum salary an employee must earn to qualify for treatment as an exempt employee eligible for the employer to pay on a salaried basis. On July 1, 2024, the Final Rule will increase the salary threshold from the current required annual equivalent salary threshold of $35,568 to an annual salary of $43,888. On January 1, 2025, the Final Rule further increases the salary threshold to an annual salary equivalent of $58,656.

The impending changes mean the Final Rule will prohibit an employer from paying any employee on a salaried basis and must comply with the FLSA’s minimum wage, overtime, and recordkeeping requirements for any employee whose an annual equivalent salary is less than $43,888 after June 30, 2024 or less than $58,656 after December 31, 2024. Consequently, employers that currently pay employees whose job duties fulfill the job duties test paid less than the applicable salary threshold must either increase the employees’ salaries above the threshold or reclassify and compensate the employee as non-exempt employees, subject to the FLSA’s minimum wage and overtime requirements.

WHD and private litigation challenges overturning health industry and other salaried classification and other wage and hour practices demonstrate that many organizations rely upon inaccurate or overly optimistic perceptions of their ability to defend their salaried employee characterizations. Defending even the most realistically grounded salaried worker classification would become even more difficult if proposed changes to WHD proposed changes to its “White Collar” exemption rules announced earlier this year. When considering whether to raise salaries or reclassify, a health care or other organization should conduct documented compliance reviews on both workers the organization directly employs and any workers providing services to the organization through management services organizations, employee leasing, staffing, manpower, consultant, independent contractor, or other similar service arrangements where the potential exists for reclassification of the worker as a employee of the employer or the employer as a joint employer of the employee taking into account, the more aggressive regulatory and enforcement positions of the Biden Administration that make defending salaried characterizations more difficult for employers.

The process should both realistically assess the defensibility of the classification and capture documentation of the employer’s compliance efforts, as this documentation can help mitigate exposure to willfulness penalties in the event the WHD or a court rejects the salaried classification of a particular employee in the future.The review of each salaried employee’s classification should begin with a review of whether each salaried employee currently meets the job duty and salaried threshold tests to qualify for salaried status. If the review raises concerns about the defensibility of any employee’s current salaried classification, the organization should work with counsel to pursue options for resolving potential exposures.

An employer should conduct this review on all salaried employees, not just those whose current salary is below the current or upcoming increased minimum salaried threshold level. Reevaluation of the defensibility of all salaried workers classification is recommended because many employers mistakenly misclassify workers as salaried rather than hourly due to an overly optimistic misunderstanding of the duties requirements for a worker to qualify as salaried. The risk of misclassification is heightened under the current administration’s enforcement policies. Employers currently aggressively classifying workers as salaried currently are at risk for FLSA wage and hour backpay, penalty, interest, and enforcement cost liability for record-keeping and overtime violations for misclassified workers under the FLSA and other applicable federal and state laws. Raising the salary of a misclassified worker will only make matters worse by increasing the overtime liability that the employer will be required to pay for failure to pay overtime after the salary increases take effect. As the impending salary threshold increases will heighten already the already high enforcement interest of the WHD and private class action and individual litigants, employers are cautioned to consider their heightened risks of enforcement when evaluating the aggressiveness of their current and future salaried classification and other worker classification and pay practices.

For More Information

We hope this update is helpful. For more information or help about these or other health or other legal, management, or public policy developments, please get in touch with the author Cynthia Marcotte Stamer via e-mail or via telephone at (214) 452 -8297.

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About the Author

Recognized by her peers as a Martindale-Hubble “AV-Preeminent” (Top 1%) and “Top Rated Lawyer” with special recognition LexisNexis® Martindale-Hubbell® as “LEGAL LEADER™ Texas Top Rated Lawyer” in Health Care Law and Labor and Employment Law; as among the “Best Lawyers In Dallas” for her work in the fields of “Labor & Employment,” “Tax: ERISA & Employee Benefits,” “Health Care” and “Business and Commercial Law” by D Magazine, Cynthia Marcotte Stamer is a practicing attorney board certified in labor and employment law by the Texas Board of Legal Specialization and management consultant, author, public policy advocate and lecturer widely known for 35 plus years of compliance, risk management, regulatory affairs, operations, strategy and other work with health, employee benefits, insurance, hospitality, retail, construction and other clients, public policy leadership and advocacy, coaching, teachings, and publications.

A Fellow in the American College of Employee Benefit Counsel, Co-Chair of the American Bar Association (“ABA”) International Section Life Sciences and Health Committee and Vice-Chair and Chair Elect of its International Employment Law Committee, Chair of the ABA TIPS Section Medicine & Law Committee, Past Chair of the ABA Managed Care & Insurance Interest Group, Scribe for the ABA JCEB Annual Agency Meeting with HHS-OCR, past chair of the ABA RPTE Employee Benefits & Other Compensation Group and current co-Chair of its Welfare Benefit Committee, and Chair of t and Che ABA Intellectual Property Section Law Practice Management Committee, Ms. Stamer has decades of experience advising employers, investigating and helping employers to defend wage and hour, worker classification, discrimination and other labor and employment, employee benefits and other compliance.

Ms. Stamer’s work throughout her career has focused heavily on working with health care and managed care, life sciences, health and other employee benefit plan, insurance and financial services and other public and private organizations and their technology, data, and other service providers and advisors domestically and internationally with legal and operational compliance and risk management, performance and workforce management, regulatory and public policy and other legal and operational concerns. Her experience includes extensive involvement advising clients about preventing, investigating and defendingWHD, CAS, Davis-Bacon and other federal and state wage and hour and other compensation; EEOC, OFCCP, DOD, HUD, HHS and other Civil Rights Act, Section 1557 and other federal and state discrimination; EBSA, IRS, and PBGC employee benefit and compensation; DEA and other Justice Department; CDC, OSHA and other safety and other compliance, investigations, audits, lawsuits and other enforcement actions as well as advocacy before Congress and regulators regarding federal and state equal opportunity, equity and other laws.

For more information about Ms. Stamer or her health industry and other experience and involvements, see www.cynthiastamer.com or contact Ms. Stamer via telephone at (214) 452-8297 or via e-mail here.

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