When employers know the law and maintain a compliance plan, the results are usually positive. But when employers either ignore or are unaware of the most current laws and regulations, the result can be costly in the form of government investigations and penalties.

Car-care business owners and operators need to be aware of and prepared for the proposed changes to the Department of Labor (DOL) overtime rule, the current regulations on absences for exempt employees, and the new requirements for hazardous communication safety data sheets.

THE DOL’S PROPOSED NEW OVERTIME RULE

The new overtime rule proposal by the DOL’s Wage and Hour Division increases the minimum salaries for exempt employees.

An exempt employee is typically either an executive, administrative, professional, or highly compensated employee. Keep in mind that all four of these categories are as defined and determined by the government.

The DOL’s position is that the current minimum salaries to qualify for an exemption under the Fair Labor Standards Act (FLSA) are too low for the modern workforce. The DOL’s Notice of Proposed Rulemaking on the overtime issue expressed that currently a convenience store manager, fast food manager, and some office workers might be expected to work 50 or 60 hours a week without receiving overtime pay.

The DOL also requested comment from the public on the question of whether revisions to the current “duties tests,” which determine whether an employee is within one of the four exempt categories, are necessary in order to ensure that these tests fully reflect the purpose of the exemption.

The proposed rule will certainly affect businesses involved in several aspects of the car-care services industry. The final rule will most likely be implemented in mid-2016, as the DOL plans to rely on data from the first quarter of 2016 in setting the new salary levels.

A Result of Inflation

The change in policy by the DOL is primarily a reaction to the effect of inflation over time. The DOL expressed that current regulations have left in place an exception to overtime eligibility originally meant for highly competitive executive, administrative, and professional employees.

Under the law, prior to the proposed rule going into effect, a white-collar employee must be paid at least $455 per week (equivalent to $23,660 annually for a full-year employee) to qualify as an exempt executive, administrative, or professional employee.

The Department proposes to set the standard salary level at the 40th percentile ofweekly earnings for full-time salaried workers. For the year 2016, the DOL estimates that this may be about $970 a week, or $50,440 a year.

Anticipating Your Response as an Employer

The proposed changes will threaten the exempt status of millions of employees across the United States. Specifically, the DOL estimated that the proposed rule would change the exempt status of five million workers within the first year of its implementation.

As of the first quarter of 2016 the rule is not yet final but, in preparation, business owners and operators need to consider a number of factors.

For example, the job descriptions and categorization of employees may need to be amended after the change goes into effect.

Employers will also need to evaluate whether it is cost effective to pay an employee more money in salary (at least the $50,440 the DOL estimates), or instead continue to pay that employee at a per hour rate with the option of paying overtime rates for work exceeding 40 hours per week.

COMPLYING WITH FLSA REGULATIONS ON EXEMPT EMPLOYEES

Despite all the current attention on which workers will fall under an exempt status moving forward, it is important to ensure your compliance with the current FLSA regulations on partial and full-day deductions for exempt employees.

Exempt Employees and Partial Day Absences

Consider this circumstance: An exempt employee takes less than a full day off from work. Then, you as the employer, take a partial day deduction for the time away from work.

This type of employer action is improper. The FLSA regulations make it clear that employers generally cannot dock their exempt employees pay for absences of less than a day without jeopardizing the exemption.

Although, in the hypothetical above, the exemption may be maintained if the partial day deductions were “isolated or inadvertent,” and if the employer reimburses the employees for the improper deductions.

Federal regulations have laid out several factors the government considers in determining whether an employer has an actual practice of making improper deductions, or if the deductions were isolated and inadvertent.

These factors include the number of improper deductions, the time period during which they were made, and whether the employer has a clearly communicated policy permitting or prohibiting such deductions.

However, the federal regulations clearly state that the factors listed do not limit other factors the DOL or other agencies may consider. Thus, it is important for business owners and their HR staff to seek legal advice before receiving a DOL letter alleging improper deductions.

Employers can even request short training sessions from the DOL itself, or from their state’s workforce commission or similar governmental training program.

In the case where an employer inadvertently finds itself investigated by a government agency, it should communicate through legal counsel that it has become aware of the error, has reimbursed the involved employees (if it has already done so), and highlight any reasons explaining why the deductions were isolated and inadvertent.

It is important to make it clear to the government that active steps have been taken to comply with the FLSA, emphasizing a good faith effort to correct the issues.

Exempt Employees and Full Day Absences

The FLSA does permit deductions for absences of one or more full days occasioned by sickness or disability, if the deduction is made in accordance with a bona fide plan.

For example, the DOL has clarified that bona fide leave plans include those that provide 40 hours of paid time off after an employee has completed one full year of employment.

When an exempt employee’s full day off is due to personal reasons other than sickness or disability (e.g., sporting events and weddings) deductions from pay for one or more full days are permitted under the FLSA.

HAZARDOUS COMMUNICATION SAFETY DATA SHEETS

Finally, those in the car-care industry especially need to be aware of the Occupational Safety and Health Administration (OSHA) and its new requirements for all Safety Data Sheets (SDSs) to be in a uniform format, including specific section numbers, headings, and associated information.

The Hazard Communication Standard (HCS) requires chemical manufacturers, distributors, or importers to provide SDSs (formerly known as Material Safety Data Sheets or MSDSs) to communicate the hazards of hazardous chemical products.

The revised HCS requires employers to update their workplace labeling and hazard communications program, and to provide additional employee training for newly identified physical or health hazards by June 1, 2016. An overview of the phase-in dates may be accessed at https://www.osha.gov/dsg/hazcom/hazcom-faq.html.

SDSs for chemical products must be readily accessible to employees, and the date of preparation or the last revision to the sheets must be included in Section 16 of the document. In addition, The SDSs now must be broken down into 16 separate sections with specified titles.

It is not uncommon for OSHA to audit businesses to ensure compliance with these types of requirements. Employers should ensure their SDS compliance before they are instructed to do so by the government.

One option is to hire a firm to conduct a mock OSHA compliance investigation. A labor and employment specialist can then provide feedback and services to ensure up-to-date compliance.

Jacob M. Monty is the managing partner of the Houston-based Monty & Ramirez LLP. Monty is board certified in labor and employment law by the Texas Board of Legal Specialization. He regularly advises employers on a wide array of labor and employment issues. Monty & Ramirez LLP is an employment, labor, and business immigration law firm. Please visit www.montyramirezlaw.com for more information.