The Employer’s Wage and Hour Advisor

On August 23, 2024, the Fifth Circuit struck down the U.S. Department of Labor’s (“DOL”) “80/20” rule on how tipped employees must be paid under the Fair Labor Standards Act (“FLSA”). This is welcomed news for employers in the restaurant and hospitality sectors as navigating this complex rule can be challenging. However, employers should beware that there are a growing number of states that have done away with the tip credit entirely and require full minimum wage payments for all work.

Many employers remain unaware that employees making over six figures can still be entitled to overtime pay under the federal Fair Labor Standards Act (the “FLSA”).  While there is a separate exemption for highly compensated employees (the “HCE exemption”), which reduces the showing that must be made under the “duties” portion of this exemption, a question arose as to whether the “salary basis test” still applied under the HCE exemption.  In Helix Energy Solutions Group, Inc. v. Hewitt, the U.S. Supreme Court recently resolved that question, holding that the salary basis test did indeed apply to the HCE exemption.  This ruling reinforces the importance of providing sufficient weekly or monthly guaranteed compensation to even some of the most well-paid employees, and not relying solely on commissions or another compensation structure unless some other exemption would apply.

Recently, the Wage and Hour Division of the Department Labor (“DOL”) proposed regulations designed to implement President Biden’s Executive Order 14055, concerning the nondisplacement of qualified workers under federal service contracts (the “Order”).  The Order requires federal contractors and subcontractors to offer qualified service employees working on a contract the right of first refusal of employment under a successor contract when a service contract expires and a follow-on contract is awarded for the same or similar services.  The Order is intended to reduce disruption and offer a seamless transition for experienced employees already familiar with the Federal Government’s personnel and requirements.

As companies continue to struggle with staffing shortages, many employers may consider offering bonuses or other incentives to employees as a means of attracting talent to their workforce.  While this may be a prudent and effective means of hiring and retaining employees, companies should be aware of the potential overtime implications arising from awarding certain bonuses to nonexempt employees.