How Come You Don’t Get Paid Overtime?

Do you remember when you were an hourly employee and you received “time and a half” for hours worked over forty? Your boss needed you to work and you needed the money. Life was good. A great exchange of extra money for your valuable time.

But now, you are older, wiser, more educated, more experienced and now paid on a “salary”. So what happens when your boss asks you to work over 40 hours? You work… but you don’t get paid.

So whatever happened to overtime pay?

Odds are high, you don’t receive overtime and aren’t required to. In fact, a study done by the Economic Policy Institute (“EPI”) reported that only 11% of American workers are required to receive overtime. This is generally because:

  1. Your position is likely “exempt” under the current definitions of executive, administrative, and professional employees[1] and
  2. Your annual income does not fall below $23,660 ($455 per week) to qualify for mandatory overtime under the Federal Labor Standards Act (“FLSA”).

The FLSA, passed in 1938, gives the Federal Department of Labor (“DOL”) authority to promulgate regulations and enforce federal labor laws. However, the last update to the overtime dollar amount threshold occurred in 1975. As a result, most businesses are able to require “overtime” be performed by the employee without extra pay.

If this strikes you as unfair, then regardless of your political affiliation, you have a friend in the White House. On March 13, 2014, President Barack Obama issued a presidential memorandum calling for revisions of the DOL’s regulations that could have a major impact on salaried workers in America. These revisions are expected this Spring.

The President has called for revisions of the exemptions for “executive, administrative, and professional employees” (often referred to as “white collar” exemptions). These exemptions, in addition to the $455 per week regulations, have been criticized widely and allowed for low-wage positions to be exempt from overtime (i.e. “Assistant Managers” or “Shift Supervisors” at popular fast food restaurants, despite performing the same or similar duties as hourly employees).

So what does this all mean to you? Well, the Economic Policy Institute equates the current $455 per week, $23,660 per annum rate to $984 a week or $51,168 in today’s dollars. Meaning, employers paying less than $984 per week, may be required to pay non-exempt employees overtime if the new regulations adjust to these amounts and definitions are updated. This could have a substantial economic impact on white collar workers either directly in the form of additional compensation for additional hours worked (or reduced hours) or indirectly through increased hiring to fulfill a previous unpaid need.

[1] These are just a few of the positions excluded from the FLSA and state Minimum Wage Acts. The Minimum Wage Act and FLSA have different minimum wage and overtime exemptions. In addition, the Minimum Wage Act does not include many of FLSA amendments, namely, amendments passed in late 1940s.

Overtime laws vary widely from state to state.  If you have questions or concerns whether you are paid appropriately, you should seek legal advice from an employment lawyer.

Non-compete Agreements Popping Up in Uncommon Industries

If you think non-competes are just for executives and scientists, you should add the guy who makes your sandwich at Jimmy John’s. The Huffington Post recently reported that Jimmy Johns is one of a number of low-wage-field companies requiring non-compete clauses with workers. The New York Times and The Seattle Times similarly reported on the increased use of non-compete clauses for such positions as hair stylists, event planners, and camp counselors.

Generally, non-compete agreements are specific provisions in the employee’s contract that restrict an employee from working for a competitor after his or her employment ends. Non-competes are usually limited in scope, duration, and geography (i.e. Doctor may not practice anesthesiology for 1-year within a 5 mile radius upon leaving employment).[1] The agreements can have a significant impact on an employee seeking part-time work during or full-time work after his employment ends.

In Washington, non-compete agreements must be “reasonable and lawful.”[2] Generally, two factors are used to determine whether a non-compete is reasonable: the geographic scope of the restraint and the time period for which an employee is restrained.[3] Washington Courts recognize the competing interests of an employee’s desire and right to work after leaving employment and an employer’s interest in protecting an established client base and investment in employee training.

However, the growing trend in low-wage workers being subject to non-competes has garnered increased criticism as examples of employers using unfair leverage over low-wage workers; low wage workers who routinely lack the bargaining power or benefit of a lawyer in drafting a more reasonable agreement.

For further reading, see San Diego Law Professor Orly Lobel’s book on the rise of non-competes in “Talent Wants to Be Free: Why We Should Learn to Love Leaks, Raids, and Free Riding.”

[1] See also Emerick v. Cardiac Study Ctr., Inc., P.S., 170 Wash. App. 248, 258, 286 P.3d 689, 694, as amended (Aug. 8, 2012), review denied sub nom. Emerick v. Cardiac Study Ctr., Inc., 175 Wash. 2d 1028, 291 P.3d 254 (2012) (Washington courts have not yet held that restrictive covenants between physicians are unenforceable).

[2] See Wood v. May, 73 Wn.2d 307, 313, 438 P.2d 587 (1968)

[3] See, e.g. Alexander & Alexander, Inc. v. Wohlman, 19 Wn. App. 670, 688, 578 P.2d 530 (1978) (100-mile restriction to apply only to customers of employer’s Seattle office);

Simple Questions to Reduce Employer Wage Liability

There has been a widely reported increase in wage and hour litigation in Washington State and employers have cried foul at the cost of this litigation.[1] However, Washington employers should not be overwhelmed with the complexity of wage and hour laws as Washington has played a historic role in protecting hourly workers.[2]

When Washington employers take on the responsibility of an employee, they have an affirmative duty to understand the changing wage and hour laws and how they affect their policies and rights of their employees. Nevertheless, employers could greatly reduce their liability for wage litigation by regularly asking themselves these five simple questions:

  1. Are we paying employees the current minimum wage?
  2. Are we paying employees all of straight time earnings for hours worked under 40 hours in a fixed seven-day workweek?
  3. Are we paying employees one and one-half times the regular rate of pay for all hours worked over 40 hours in a fixed seven-day workweek?
  4. Are we giving employees a 10-minute break or intermittent breaks at the end of the third hour of work and are we giving employees a 30-minute unpaid meal period for working more than 5 hours? (Alternatively, are you compensating employees who work during these periods?)
  5. Are we paying employees at least once a month?

These simple questions do not attempt to capture the detail of exemptions, administrative codes, statutes, and case law. Nonetheless, as an attorney who regularly represents employees against employers for wage claims, these simple questions asked regularly would dramatically reduce employee-employer wage litigation.

[1] Washington-based Federal Justice Center reported 8,126 federal wage-and-hour lawsuits were filed between April 1, 2013, and March 31, 2014, See also More Workers Are Claiming Wage Theft, New York Times, Greenhouse, Steven published August 31, 2014 available here.

[2] See Parrish v. West Coast Hotel Co., 185 Wash. 581, 55 P.2d 1083 (1936), Washington Supreme Court upholding the constitutionality of a Washington minimum wage law for women and children. See Also Court in Larsen v. Rice, 100 Wash. 642, 171 P. 1037 (1918); Spokane Hotel Co. v. Younger, 113 Wash. 359, 194 P. 595 (1920). Parrish was affirmed by the United States Supreme Court in West Coast Hotel Co. v. Parrish, 300 U.S. 379, 57 S. Ct. 578 (1937), overruling Adkins v. Children’s Hospital, 261 U.S. 525, 43 S. Ct. 394 (1923), which struck down a similar District of Columbia law on substantive due process grounds.