Staying up to date on federal and state labor laws can be difficult. But business owners should be up to date on both. Change is inevitable, as new labor laws arise and reinterpretations of old laws emerge. But ignorance of a law is never acceptable. You’re responsible for keeping current on labor laws or risk an expensive wage and hour lawsuit. To learn more about how you can stay up to date, we reached out to wage and hour experts.1
How to stay updated on federal and state employment and labor laws
Don’t let new state and federal labor laws catch you off guard. Here’s how to stay up to date on the latest changes.
Staci Ketay Rotman
Littler Mendelson PC
Michael S. Kun
Epstein Becker & Green
Mark S. Goldstein
Reed Smith, LLP
Jonathan M. Young
Greenberg Traurig, LLP
What can employers do to stay updated on federal and state labor regulations?
Business owners can use online resources and the news to keep an eye on the laws and audit their business practices. The Society for Human Resource Management (SHRM) offers HR news, and the Department of Labor (DOL) offers FLSA tips and guidelines. If you can afford it, you can hire an HR expert or consult an employment counselor to help you. If you cannot afford employment counsel, Nolo offers free resources on employment law.
“Federal, state, and local laws regarding employment are constantly evolving,” says Young. “Many jurisdictions have different laws, and employers risk a class-action suit for failing to comply with them.”
He noted that state and local laws aim to cover employees in areas where federal laws may be insufficient or lacking. Business owners should also perform regular audits of their current practices, to ensure they’re up to date. This is especially so when companies have workers in multiple states or cities with differing laws. If that’s the case for your business, avoid adopting a one-size-fits-all mentality for your employment practices.
What does the DOL regulate?
The DOL creates and regulates federal labor laws that promote the welfare and support of job seekers, employees, and retirees. The DOL creates and oversees a variety of measures. The DOL also:
- Administers laws and sets industry standards for working conditions.
- Protects retirement and healthcare benefits for employees.
- Helps employers find workers, and employees find jobs.
- Tracks national economic measurements for employment and wages.
- Administers federal labor laws on minimum wage and overtime pay.
- Sets national requirements for the prevention of employment discrimination.
- Administers unemployment insurance for unemployed job seekers, and other income support for employees and employers.
What are the general differences between state and FLSA regulations?
The Fair Labor Standards Act (FLSA) is a federal law that sets standards for overtime eligibility, child labor, the minimum wage, and employer record-keeping. When state and local governments deem federal laws insufficient for their constituents, they create their own laws.
Commonly, state and local governments create laws to address economic instability. For example, the local government may set a higher minimum wage to address the rising cost of living in their city. This has happened in major metropolitan areas like New York City, Seattle, and San Francisco.
At times, local, state, and federal laws conflict. In these circumstances, the FLSA recommends business owners follow the standard that better benefits the employee.
What was the most recent change to federal labor regulations?
The most recent change on a federal level was the increased overtime threshold. In January 2020, the DOL increased the threshold from $23,660 per year ($455 per week) to $35,568 per year ($648 per week). This change made 1.3 million more U.S. workers eligible for overtime pay.
How can employers comply with the 2020 overtime rule?
The best way to comply with the overtime change is to review your existing overtime policy and start tracking employee time. Tracking employee time will help you determine when employees have reached or exceeded 40 hours in the workweek. Employers can take several other steps to comply, depending on their situation and each employee’s status. Follow these steps:
1. Review roles and yearly earnings for hourly employees.
Depending on your employee’s role and pay rate, they may now qualify for overtime pay if they fall below the new threshold. If they do, you will need to change the employee’s status from exempt to nonexempt. And you will need to pay them overtime (time-and-a-half) for all time worked over 40 hours in a workweek. You should review each employee’s status to ensure you have them classified appropriately.
2. Review your existing overtime policy or create one.
Include clear instructions for when employees can work overtime, and how workers can get overtime authorized in advance. This step will be crucial for employers working on tight margins. Place your revised overtime policy near your employee time tracking policy, and go over changes with your workforce. If you don’t have an overtime policy, your employment counsel can help create one that works for your business. Employment or labor law counselors can help you better understand overtime rules, Rotman says.
3. Review and approve employee time cards weekly.
This step can help you ensure your paying employees for all time worked. Tracking employee time will allow you to see when employees work overtime and how much. Awareness of overtime worked per week can help you revise and better enforce your overtime policy.
4. Track, report, pay any back wages and taxes for now-overtime-eligible employees.
If now-eligible employees have worked overtime since the overtime rule changed, employers are obligated to pay any back wages or taxes. Or face a costly wage and hour lawsuit. Business owners should consult an accountant or bookkeeper to determine how best to pay out back wages and applicable taxes. If business owners are proactive in paying out back wages and taxes, they may avoid a lawsuit altogether. Speak with your employment counsel if you have concerns.
5. Raise the annual salaries of employees, changing their classifications from exempt to nonexempt.
If your employees are on the cusp of the new threshold, raising their salaries may help you avoid overtime payments altogether. But you’ll still be liable for back pay and taxes for any overtime worked between January 1, 2020, and the date of their pay raise.
What industries are most at risk of violating overtime rules?
The industries that may be more affected include hospitality, retail, and many small businesses. Typically, these industries offer a lower salary or hourly employee pay rates. The increased threshold will apply to many employees working within these industries.
Kun and Goldstein agree that small businesses may feel the sting of the new requirement. Goldstein also believes that nonprofits and educational institutions may struggle to comply due to tight budgets. He believes the overtime rule could “result in those businesses slashing hours or staff, hiking prices, or some combination of the same.”
Will employers see more labor lawsuits as a result of the 2020 overtime rule?
FLSA lawsuits were up 417% between 1997 and 2017. Of those violations, 83% came from overtime violations. In 2018, the Wage and Hour Division (WHD) recovered a record $304 million in back wages from FLSA violations for that year. Yet, only 55% of employers were aware of the overtime proposal, according to the 2019 State of Time Tracking Report. If a lack of knowledge about the change persists, it could haunt many small business owners.
Meet the experts
Staci Ketay Rotman, shareholder at Littler Mendelson PC, advises and represents employers in all aspects of labor and employment law. She represents clients before federal and state courts and administrative agencies, as well as in arbitration proceedings. Rotman has experience with class actions, multi-plaintiff litigation, TRO/preliminary injunctions and trials. She uses her litigation experience to counsel employers on how best to achieve their business objectives while minimizing the risks of litigation. She also advises and represents employers on the Fair Labor Standards Act and related state statutes, ranging from worker classification audits to claims alleging unpaid wages.
Michael S. Kun is a member of Epstein Becker Green in the Employment, Labor, and Workforce Management practice. And he’s the national Chairperson for the firm’s Wage and Hour practice group. Kun speaks to professional and business groups on a variety of employment topics, and he is the co-editor of the wage and hour defense blog. Kun is a co-creator of the Wage & Hour Guide for Employers app, which provides employers with access to federal and state wage and hour laws.
Mark S. Goldstein is a senior associate in the New York office of Reed Smith and a member of the firm’s Labor and Employment team. Goldstein’s practice defends employers in a wide range of employment litigation matters. Goldstein has provided workplace training to managers and human resources personnel and has drafted employee handbooks and individual workplace policies for compliance with federal, state, and local laws.
Jonathan M. Young focuses his practice on labor and employment matters. He has worked on a variety of cases, focused on wage and hour claims, class action benefit claims, class action contract and tort cases, state Attorney General investigations, commercial litigation, Department of Labor investigations, and banking settlements.