Brunini Law

Christopher R Fontan

U.S. Department of Labor Unveils Newest Effort to Expand Employee Overtime Eligibility

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To borrow a phrase from the incomparable Yogi Berra, “[i]t’s like déjà vu all over again.” On Wednesday, August 30, 2023, the United States Department of Labor (“the DOL”) released its newest Proposed Rule that, if implemented, would broaden federal overtime pay regulations to cover millions of additional workers who are currently exempt from overtime eligibility.  Entitled Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees, the Proposed Rule seeks to dramatically increase the standard salary level and the highly compensated employee total annual compensation threshold, as well as providing a built-in updating mechanism that would allow for automatic updating of all the thresholds.

 

New 2023 Proposed Rule

Under its new Proposed Rule, the DOL seeks to significantly raise the exempt salary threshold from $684 per week to $1,059 per week.  Stated another way, U.S. employees would need to earn $55,068 or more per year to be exempt from overtime pay – a change the agency says would impact 3.6 million workers who are currently exempt from overtime eligibility.  Additionally, the new Proposed Rule would make the following changes:

  • Automatically update the salary threshold every three (3) years.
  • Raise the threshold for the “highly compensated employee” exemption to $143,988 (from the current threshold of $107,432).
  • Apply salary thresholds in U.S. territories that are subject to federal minimum wage with some exceptions for American Samoa.

The Proposed Rule seeks to update the regulations that govern which executive, administrative, and professional employees (the so-called “white collar” workers) are entitled to minimum wage and overtime pay protections under the Fair Labor Standards Act (“the FLSA”).  The FLSA requires employers to pay its “non-exempt employees” overtime (1.5x the workers’ “regular rate of pay”) for all hours worked in excess of forty (40) per week.  See 29 U.S.C. § 207.  The DOL’s regulations implementing the FLSA sets forth a variety of employment classifications that are “exempt” from the FLSA’s overtime requirement—including employees performing executive, administrative, and/or professional job duties.

Since the 1940’s, in order for an employee to qualify as an exempt, “white collar” employee, he/she had to meet three “tests”:

  • The employee must be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed;
  • The amount of salary paid must meet a minimum specified amount; and
  • The employee’s job duties must primarily involve executive, administrative, or professional duties (as defined by the regulations).

 

Stroll Down Memory Lane

Until rather recently, the DOL’s last update to these regulations came in 2004, when the agency set the minimum salary threshold at $455 per week (or $23,660 per year).  Then, in May 2016, the Obama-era DOL kicked off a highly-contentious legal fight when it attempted change to the overtime rule by nearly doubling the minimum salary level from $23,660 to nearly $48,000 per year.  At the same time, the 2016 proposal would have also increased the total annual compensation requirement needed to exempt “highly compensated employees” to $134,004 annually (previously set at $100,000), established a mechanism for automatically updating the minimum salary level every three years and allowed employers to use nondiscretionary bonuses and incentive payments to satisfy up to 10% of the new standard salary level.

Ultimately, the May 2016 proposal was challenged in court.  On November 22, 2016, the U.S. District Court for the Eastern District of Texas enjoined the DOL from implementing and enforcing the proposal. On August 31, 2017, the court granted summary judgment against the DOL, invalidating the May 2016 proposal.  Currently, the Department is enforcing the regulations that have been in place since 2004, including the $455 per week standard salary level.

Ultimately, the Trump-era DOL formally rescind the Obama-era DOL’s 2016 proposal with its own new Proposed Rule, issued on March 7, 2019.  The Trump-era Proposal was formally adopted in 2020.  With its passage, the DOL officially raised the minimum salary level for exempt employees to $679 per week, or $35,308 annually—the level it currently sits at today.  Additionally, the 2020 rule change allowed employers to count nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10% of the standard salary level test (provided such bonuses are paid annually or more frequently); and increased the total annual compensation requirement needed to exempt “highly compensated employees” to $107,432 annually.  Additionally, the 2020 rule change did not adopt any changes to the standard duties test for the white collar exemptions.

 

Moving Forward

Make no mistake—the DOL’s goal with the new Proposed Rule is to increase the number of employees eligible for overtime. As with the prior proposals, observers feel the number could rise well above the projected increase.  If implemented, the Proposed Rule will undoubtedly result in greater expense or operational change for many employers as they struggle to deal with a shrinking pool of workers who are eligible for an exemption from the overtime pay.

This newest Proposed Rule from the DOL is sure to face its own set of legal hurdles, especially in the face of an election cycle.  Experts predict another battle over whether or not the DOL actually possesses the statutory authority to issue a salary-basis or salary-level test.  The Proposed Rule is also still subject to a lengthy comment period before any final implementation.

In the meantime, employers are encouraged to be proactive and engage their legal counsel to begin planning for the change now.  Preparations should include auditing current practices and projecting the cost of change and FLSA compliance under the anticipated new framework. This includes evaluating the possibility and effects of significantly higher operating costs.

Brunini’s Labor & Employment specialists are monitoring these events and will update you accordingly.  In the meantime, feel free to contact any member of Brunini’s Labor & Employment Practice Group if you wish to discuss.

 

 

 

 

 

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Federal Government Releases New Form I-9 for U.S. Employers

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Federal Government Releases New Form I-9 for U.S. Employers

By:  Chris Fontan

 

On August 1, 2023, the U.S. Citizenship and Immigration Services (“USCIS”) released its newest version of the federal Form I-9.  U.S. employers are allowed to continue using the previous version of the Form I-9 through October 31, 2023.  However, starting on November 1, 2023, all employers are required to use this new, updated form.

 

Updates to the Form I-9

The USCIS made a number of material changes to the Form I-9 with this latest update, including:

  • Reducing Sections 1 and 2 to a single page; previously, these sections took up two pages.
  • Relocating Section 1 (Preparer and/or Translator Certification area) to a separate, standalone supplement for employers to provide to its applicants or employees as needed.
  • Revising the Lists of Acceptable Documents page—for use with Section 2—to include:
    • Adding some acceptable receipts, and
    • Providing guidance and links to information on automatic extensions of employment authorization documentation
  • Moving Section 3 (Reverification and Rehire area) to a standalone supplement for employers to utilize as needed.
  • Including a checkbox that allows employers to indicate that they have examined an applicant’s/employee’s Form I-9 documentation remotely pursuant to newly authorized virtual procedures (as opposed to traditional physical examination).

 

The updated Form I-9 virtually cuts its instruction section in half, reducing it from fifteen pages down to eight pages.  Additionally, the form has also been re-designed to be fillable on mobile devices, such as tablets and other smart phones.

 

Remote Verification

 

The biggest change with the new Form I-9 is the ability for employers to indicate they “virtually” examined an applicant’s/employee’s identity and employment authorization documents—as opposed to the traditional method of reviewing these documents in person. To participate in the remote examination option, employers must:

 

  • Be enrolled in E-Verify and be in good standing,
  • Examine and retain “clear and legible” copies of all documents,
  • Conduct a live video interaction with the employee during the verification process, and
  • Create an E-Verify case if the employee is a new hire.

 

Employers who were participating in E-Verify and created cases for employees whose documents were examined virtually between March 20, 2020, and July 31, 2023, may choose to use the new alternative procedure to satisfy the physical document examination requirement by August 30, 2023. Note however, that employers who were not enrolled in E-Verify during the COVID-19 flexibilities time frame must complete an in-person physical examination by August 30, 2023.

While the new Form I-9 is shorter and more streamlined, employers and job applicants are advised to use caution.  While the Form I-9 began as a one page document, it has existed as a multi-page form for over a decade.  As a result, experts fear that employees or employers will accidentally supply information for each other’s sections, which is prohibited under federal law. In addition, there is an increased likelihood that employees and employers will make more mistakes in completing the document, which could lead to serious consequences since individuals execute the Form I-9 “under penalty of perjury.”

 

In addition, questions also remain concerning the remote verification option.  For example, how and where should employers note whether employees that went through remote verification over the prior three years have brought in new documents?  Do employers need to document and retain proof of the video call required for virtual review on file?  Employers are advised to remain alert for further guidance on these and additional issues from USCIS in the coming months.

 

Brunini’s Labor & Employment specialists are monitoring these events and will update you accordingly.  In the meantime, feel free to contact any member of Brunini’s Labor & Employment Practice Group if you wish to discuss.

 

 

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New Overtime Rule Proposal from Department of Labor Slated for Spring 2019

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Last week, the Trump Administration published its Fall 2018 Unified Agenda of Regulatory and Deregulatory Actions.  In it, the Trump Administration formally announced  the U.S. Department of Labor’s (“DOL”) intention to issue a Notice of Proposed Rulemaking (NPRM) in March 2019 “to determine the appropriate salary level for exemption of executive, administrative and professional employees.”  In its Spring 2018 Regulatory Agenda, the Administration had previously targeted January 2019 for the release of the NPRM.

Many will recall the rapid flurry of activity that accompanied the DOL’s previous attempt to overhaul the overtime exemptions to the Fair Labor Standards Act. In May 2016 , the Obama-era DOL “finalized” a change to the overtime rule that would have doubled the minimum salary level for the so-called “white collar” exemption from $23,660 to nearly $48,000 per year.  The proposed Final Rule never took effect.  Between May 2016 and November 2016, over 20 states and 50 business groups filed separate lawsuits  seeking to block enforcement of the Rule.

Then, in November 2016, a federal judge in Texas entered a nationwide preliminary injunction  blocking implementation of the highly controversial Rule—less than 10 days before the Rule was slated to take effect.  President Trump took office in January 2017, and the “new” DOL pushed the pause button on revisions to the overtime Rule.  In August 2017, U.S. District Judge Amos Mazzant of the Eastern District of Texas officially invalidated  the proposed Final Rule, thus temporarily halting the government’s highly-controversial attempt to expand overtime eligibility for millions for public and private sector employees.

Since that time, Labor Secretary Alexander Acosta, who assumed the post in late April 2017, repeatedly indicated that he favored some increase of the minimum salary threshold for exemption. In July 2017, the DOL began seeking public comment on a freshly revised overtime rule, publishing a Request for Information in the Federal Register.  The comment period closed in September 2017.

So, it appears that the Trump Administration is finally ready to unveil its proposal to revise a rule that was last modified in 2004 (and before that, in 1975). So what should employers expect in a new overtime rule?

  • Likely an increase in the minimum salary for exemption – but not nearly as drastic as the 2016 proposed Rule. Most commentators expect the increase to be something in the low-to-mid $30,000s. This would be consistent with Secretary Acosta’s comments on the issue, but still considerably lower than the increase proposed by the Obama Administration. Notably, the Society for Human Resource Management (SHRM) officially endorsed modestly raising the threshold to $32,000. Such an increase would still be lower—in some cases, significantly lower—than the current state law minimum salaries for exemption, such as New York (where the state minimum for exempt executive and administrative employees is set to climb to $58,500 at the end of 2018).
  • Modernization of examples within the Rule for application to the current workplace. With its most recent revision in 2004, the DOL included a number of new examples to assist employers in applying the tests. It would make sense to revisit those examples, and to consider additional examples, given how the workplace has evolved in the last 15 years.

Many commentators feel that the new proposed rule—whatever it may be—is not likely to take effect until early 2020. In all likelihood, the Trump Administration’s DOL will give employers plenty of lead time to plan and prepare for any increases in the minimum salary for exemption.  Regardless, employers need to be mindful of the potential changes and ready to implement them when the time comes, as 2019 looks to be an eventful year.

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Mississippi’s New Construction Lien Law

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Effective April 11, 2014, the Governor signed into law legislation that  substantially revises and expands construction lien law in Mississippi.  This article discusses some of the most important features of that legislation.

The new law grants a “special lien” upon the real estate or other property for which labor, services, materials, tools, appliances, machinery or equipment was provided by prime contractors, first and second tier subcontractors, materialmen (including equipment suppliers), registered architects and land surveyors and professional engineers.  This lien may attach to the owner’s real property if the labor, materials, etc. were furnished at the request of the owner, design professional, prime contractor or first tier subcontractor.  The lien is limited to the amount due the lien claimant under a written or oral contract and includes interest on the principal amount due.  No such lien, however, exists for a prime contractor or first or second tier subcontractor not properly licensed by the State Board of Contractors or for a party who contracts with such unlicensed entity.  At the owner’s request, proof of proper licensing must be provided.

This legislation requires compliance with filing procedures; failure to comply results in the lien being unenforceable.  First, assuming there has been substantial compliance by the claimant with its contract obligations, the claim of lien must be filed with the chancery clerk in the county where the property is located within 90 days after the claimant last performed labor or services or provided materials or equipment.  The lien must include a statement that the claim of lien expires and is void within 180 days of its filing if no “payment action” is filed within that time.  (A “payment action” is defined as “a lawsuit, proof of claim in a bankruptcy case, or a binding arbitration.”)  The lien must also notify the owner of the property on which the lien is filed of the owner’s right to contest the lien.  A section of the law provides language for the lien filing, including the date for its potential expiration and the owner’s right to contest it.

Second, not later than 2 business days after the lien is filed, the claimant must send a copy of the lien to the owner by registered or certified mail or by overnight delivery through the postal service or commercial delivery company with directions for delivery on the next business date following the date it is received by the courier service.  If the owner is an entity on file with the Secretary of State’s office, a copy of the lien should be sent to that entity’s address or to that entity’s registered agent’s address.  If the owner’s address can’t be found, a copy should be sent to the prime contractor as agent for the owner.  If the lien claimant is not the prime contractor, a copy of the lien must also be sent to the prime contractor or its registered agent in the same manner prescribed for sending notice to the owner.

Third, a “payment action” must, within 180 days from the date of filing the claim of lien, be commenced in county, circuit or chancery court against the party with whom the claimant contracted.  When the payment action is commenced, a lis pendens notice must be filed with a copy sent to the owner and prime contractor.  The lien statutes do not affect the parties’ right to arbitration but arbitration must be commenced within 180 days of filing a claim of lien.  Commencement of a “payment action” is not required if the owner has not paid the prime contractor and the claimant cannot secure a final judgment against the party with whom it contracted because (a) that party has been adjudicated a bankrupt, (b) is dead or (c) there is an enforceable “pay-if-paid” clause making payment not yet due the claimant.

If the debtor-party has been adjudicated a bankrupt, is dead, or there exists an enforceable pay-if-paid clause, the lien claimant may proceed in an action against the owner of the property, if such action is filed within the same 180 day period and the claimant files a lis pendens notice with a copy to the owner and prime contractor.  Any judgment entered in such action attaches only against the real property and imposes no personal liability on the owner of the property.  Certain rights and defenses such as specified due diligence steps are unaffected by an action against the owner.

A claim of lien may be amended by filing an amendment in the prescribed form and the amendment relates back to the original date of filing.  Notice of the amendment must be given in the same manner as an original claim of lien.

The lien is subordinate to tax liens, superior to all other liens, deeds of trust, mortgages and encumbrances filed after the notice of lien, but subordinate to those filed prior to the notice of lien.  Foreclosure of any prior deeds of trust or other liens extinguishes subordinate construction liens but such subordinate liens have rights in any excess proceeds received by the foreclosing lienholder.

The law recognizes a category of “construction mortgages,” i.e., deeds of trust,  mortgages, assignments of leases and rents, fixture filings and other security agreements affecting real property to the extent they secure a loan to acquire, or finance the repair or construction of an improvement to, real property.  If a construction mortgage is filed prior to the notice of claim of lien, it is superior to the latter if the construction mortgagor either obtains a sworn statement from the owner that no work has been performed on, or no materials or equipment have been delivered to the real property or a sworn statement from the prime contractor, or owner, if no prime contractor  regarding payment for work, materials, equipment or services provided.  Priority for such construction mortgages extends to loan advances made both before and after the filing of a notice of claim of lien.

Assuming compliance with filing requirements, in any proceeding against the owner to enforce the lien, the party with a direct contractual relationship with the lien claimant need not be joined as a necessary party but may be made a party.  At any time prior to judgment, any other interested parties may intervene to oppose establishing the lien or to assert any claim they may have against the lien claimant.  If the lien claimant prevails, judgment shall be entered for the amount of the claim, plus interest and cost.  In its discretion, the court may award reasonable costs, interest and attorneys’ fees to the prevailing party in any such action against the owner to enforce a lien against the property.

All liens created by the new law “shall have an equal priority” and be paid first out of the proceeds of the sale of the property or money collected from the owner and, if such proceeds are insufficient to satisfy the liens in full, the proceeds and money shall be distributed pro rata or as otherwise ordered by the court.  The aggregate amount of liens shall not exceed the contract price between the owner and prime contractor.  Moreover, if payments have been made in reliance upon lien waivers issued by lien claimants or sworn statements of the prime contractor that the agreed price or reasonable value of the labor, services or materials have been paid or waived in writing by the claimant, the total amount of all liens in favor of subcontractors and material suppliers not in privity of contract with the owner shall not exceed the unpaid balance of the contract amount between the owner and prime contractor at the time the first notice of lien is filed.

Likewise, if payments have been made in reliance upon lien waivers issued by lien claimants or sworn statements by the contractor that the agreed price or reasonable value of the labor, services or materials have been paid or waived in writing by the claimant, the total amount of liens in favor of design professionals not in privity of contract with the owner shall not exceed the unpaid balance of the contract price between the owner and design professional in privity with the owner at the time the first notice of lien is filed.

Upon written request of the owner, the prime contractor is required to provide a list of all first and second tier subcontractors, material and equipment suppliers.  Upon written request by the prime contractor, all first and second tier subcontractors are required to provide the prime contractor the same information.  Any party willfully refusing to provide the requested information within a reasonable time forfeits its lien right.  Any prime contractor or first or second tier subcontractor who fails to pay any materialman, equipment supplier or subcontractor having direct privity with it, in accordance with the terms of any written agreement, shall forfeit its right to a lien.

Any person having a right to a lien but not in privity with the prime contractor, or if no prime, with the owner, who provides labor, services, materials or equipment to improve the property shall give written notice to the prime contractor or, if no such prime, to the owner, within 30 days of first providing labor, services, materials or equipment.  The notice is required to be by email (with a confirmed receipt), registered or certified mail or by the postal service or other overnight courier service and must include the name, address and telephone number of the potential lienor, the name and address at whose instance the party furnished such goods or services, the name and location of the subject project and a description of the goods or services and, if known, the contract price or anticipated value of such goods or services.  Any person not in privity with the prime contractor who fails to provide the required 30 day notice forfeits its right to a lien, but this requirement for the 30 day notice to the prime contractor does not apply to single-family residential construction.

If a waiver and release is executed, for example by a subcontractor, and the owner pays the prime contractor who fails without good cause to pay the subcontractor the amount set out in the waiver and release, the prime contractor will be liable to the unpaid subcontractor for 3 times the amount in the waiver and release.  “Good cause” includes any defense available pursuant to the terms of the contract between the parties.  This treble damage provision, however, does not apply to single family residential construction.

Special rules apply for single family residential construction.  If an owner pays the prime contractor or design professional in privity with the owner, such payment shall be an absolute defense to any claim of lien to the extent of the payment and to the extent the owner has not received a pre-lien notice at least 10 days before a claim of lien is filed.

Special rules also relate to improvements to real property made under a contract with the property’s lessee.  If the improvement is not in violation of the lease, the lien attaches to the improvement and to the unexpired term of the lease, and the lienor has the right to avoid forfeiture of the lease by paying rent to the lessor and may, under some circumstances, remove the building or improvement, if it can be done without injuring the real property.

The lien created by the new legislation shall be dissolved and unenforceable if either the owner, the purchaser from the owner or the construction lender can show that payment by either of them was made in reliance upon a lien waiver signed by a claimant or was made in reliance upon a sworn statement by the prime contractor that the agreed price or reasonable value of the labor, services, materials or equipment has been paid or was waived in writing by the lien claimant.  If the prime contractor’s sworn statement is willfully and falsely made, any party injured by it has a cause of action against the prime contractor for 3 times their actual damages that result from the false statement.

The law provides a method for bonding off a lien.  Before or after foreclosure proceedings are begun, the owner or prime contractor may discharge the lien by posting a bond in the amount of 110% of the amount claimed by the lien.  The party filing the bond is required to give the lien claimant statutory notice of the bond within 7 days, including providing the claimant a copy of the bond.

Any waiver of a right to claim a lien or file a claim against a bond is unenforceable and void if the waiver is in advance of furnishing labor, services or material.  When, however, a claimant is requested to execute a waiver and release in exchange for a progress or final payment, the form shall substantially follow the terms set out in the statute.

If a lien claimant fails to commence a lien action within 180 days from the date of filing the claim of lien, the lien becomes unenforceable.  The lien could also expire “within 90 days after a notice of contest is filed” if no notice of commencement is timely filed in response to a notice of contest.  When the lien is fully satisfied, the lien holder is required to file a cancellation with the chancery clerk and failure to file the cancellation within 15 days after written demand to do so subjects the lien holder to liability of no less than $500 per day plus attorneys’ fees and costs to any party injured thereby.

An owner (or its agent or attorney) or prime contractor (or its agent or attorney) may shorten the 180 days for commencement of a payment action by recording in the chancery clerk’s office the notice substantially set out in the statute, along with proof of delivery to the lienor and by sending a copy of the notice of contest to the lien claimant via the statutory method of delivery, within seven days of filing the same.  Thereafter, the lien shall be extinguished by law upon the earlier of 90 days after filing the notice of contest or 180 days from the date of the lien if no payment action is filed in that period.

The new law prescribes the method for computing time and the method for judgments establishing the lien and ordering the property sold for satisfaction of the judgment by special writs of execution.  A penalty for falsely and knowingly filing a claim of lien maybe assessed at 3 times the amount of the claim, to be recovered by every party injured thereby, if an action is brought within 180 days of the filing of the claim of lien.  In addition, a person injured by the wrongful filing of a claim of lien may, on 7 days’ notice, ask a court to expunge the lien.

Significantly, when a prime contractor gives a payment bond with the same protection for subcontractors and material suppliers as required for public work the payment bond stands as substitution for the lien rights of first and second tier subcontractors and material suppliers.