SERVING OUR CLIENTS AND COMMUNITY DURING COVID-19

Articles Posted in Overtime Pay

Governor Phil Murphy has signed into law several bills that will significantly expand protections for New Jersey workers. The new legislation includes a package of bills that aim to protect the rights of workers who have been misclassified as independent contractors.  The new law provides for penalties against employers who misclassify their workers as independent contractors instead of employees.

IMG_3012-300x176The punitive aspect of the new law aims to encourage employers to appropriately designate employees as such, and therefore affording them the legal protections provided to employees under various state and federal employment laws. However, this controversial bill has sparked much debate regarding the future of workers in the “gig” economy. Opponents of the law contend that the new law will create significant financial burdens on businesses who will then in turn refuse to employ these workers.

New Jersey employment law distinguishes between two types of workers: employees and independent contractors. While regular employees enjoy and have access to wage theft protections, overtime pay, workers’ compensation, unemployment benefits, sick and family leave, health and safety, and anti-discrimination protections, independent contractors receive no such benefits. Historically, employers were required by law to pay tax contributions on employee’s wages only, and not those of independent contractors. This resulted in a scenario where it is enticing for employers to classify, and perhaps even misclassify, workers as independent contractors under any circumstance. The new legislation aims to combat such conduct and improve protections for misclassified workers.

The Pennsylvania Supreme Court recently found that a federal standard of calculating overtime is non-complaint with its state wage and hour laws. Specifically, the Court found that the Fluctuating Work Week (FWW) method of calculating overtime wages, adopted under the Fair Labor Standards Act, does not adequately compensate non-exempt employees at a time and half rate for hours worked over the standard 40 hour work week, as required by Pennsylvania Minimum Wage Act (PMWA). The FWW methods is currently used by many companies throughout the U.S., including New Jersey. Because of the similarities between Pennsylvania and New Jersey state wage and hour and wage payment laws, this decision may impact the rate at which some New Jersey’s employees are payed for their over time work.

New Jersey Employment LaywersUnder the FWW method of calculating over time, it is permissible for an employer to calculate a non-exempt employees’ wages in the following way:

  1. The employee works hours that fluctuate from week to week;

The U.S. Labor Department has proposed new rules that include increasing the minimum salary threshold level for executive, administrative and professional exemptions and the minimum total annual compensation level for the “highly compensated employee” exemption under the Fair Labor Standards Act.  The new proposal would raise the minimum salary thresholds to $970 a week (i.e. $50,440 a year) from the current $455 per work ($23,660 a year).  The passing of this new rule, which is expected, would amount to a huge victory for employees across the country.

The present $455 salary threshold has not been updated since 2004 and has left certain low salaried managerial or office work workers in an unfair situation of being exempt from receiving overtime pay.  In announcing the proposed overtime rules change, the US Department of Labor specifically identified jobs such as convenience store managers and fast food assistant managers as being required to work 50-60 (or more) hours a week and be compensated as little as $23,660 a year, which is less than the poverty level for a family of four.  These employees can be paid a minimum salary of $23,660, and not be paid any additional compensation for overtime hours worked. It has been estimated the change in law will help 5 million workers become overtime eligible and will increase employees’ wages across the country by $1.3 billion.  The US Department of Labor has submitted the change to the Office Management and Budget (OMB), The OMB has 30 to 90 days to review and then publish the rules in the federal register as final.

In addition to increasing the salary threshold, the US Department of Labor has also proposed to increase the total annual compensation requirement needed to exempt highly compensated employees to $122,148 annually and to establish a mechanism to automatically update the future salary and compensation levels.

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