If I Could Pay You Less, I Would

Grace: 00:00:00

Hey, it's Grace, and this is Frogmore Stew.

Open: 00:00:03

Put my heart, yeah My heart belongs to South Carolina

Open: 00:00:17

Ladies Before I started comedy, I used to work at McDonald's making minimum wage. Do you know what it means when somebody pays you minimum wage? You know what your boss was trying to say? It's like, Hey, if I could pay you less, I would, but it's against the law.

Grace: 00:00:35

If there's one thing politicians love to talk about, it's the small business owner. They love to invoke Main Street and how political beliefs directly affect small business owners. The reason they do this is because everyone knows a small business owner or they are one themselves. And it personalizes politics in a way that big corporations can't be, and it invokes a feeling of community.

Grace: 00:01:01

Those small businesses have to work within both the state standards and requirements as well as the federal standards and requirements. And there's a federal law called the Fair Labor Standards Act that covers things like child labor and record keeping, but it also guarantees a federal minimum wage and overtime pay.

Grace: 00:01:21

The federal minimum wage is 7. 25. Yes, you heard that right. And in order for that to be changed, Congress must do it. This is where politics gets into business. Many states have a higher minimum wage set for their state. South Carolina, however, does not. Our state minimum wage is also 7. 25 an hour. The Democrats believe that setting a higher minimum wage forces companies to pay a basic living wage.

Grace: 00:01:49

And the Republicans believe that the government shouldn't force these types of requirements on businesses and that the market will set the pay based on supply and demand of employees. There's another part of getting paid, though, that's at the center of what we're going to talk about today. And it too falls under the Fair Labor Standards Act.

Grace: 00:02:07

It's salaried employees. So hang in there with me. This is actually really interesting. In July of this year, the minimum salary requirement was increased and is set to be increased again in January. So unlike the minimum wage being determined by Congress, the Department of Labor sets a minimum salary amount that determines whether or not you should receive overtime, even if you are paid a salary.

Grace: 00:02:32

It gets a little confusing because salaried employees are divided into two different categories and that determines whether or not this rule applies to them. They're called exempt and non exempt. So for your employer to be exempt from paying you overtime. You have to meet three standards, and those three standards once met are sometimes referred to as the white collared exemption.

Grace: 00:02:56

Number one, salary basis. The employee regular receives a predetermined amount. Number two, it's a salary of a certain threshold. This is your minimum base salary. And number three, that your position requires you to do specific duties in order to be considered exempt. For example, Does the position allow someone to supervise the work of at least two other employees?

Grace: 00:03:19

Or does this person have a specialized degree or higher learning? Is it a position that directly impacts the company, like human resources, that requires independent thinking and analysis? So let's put this in real speak. Secretaries, paralegals, that type of work means that you likely aren't overseeing other employees.

Grace: 00:03:39

Even though you may meet the other criteria, you are still being paid a salary. And that means that you are not exempt from the overtime rules. Your boss must pay you overtime if you work more than 40 hours a week. If you are not exempt and you are paid a salary, there is a minimum salary level set by the Department of Labor.

Grace: 00:04:00

And if you make that salary below, your employer must keep track of the number of hours you work weekly. Thank you And if you go over 40 hours a week, then the employer is required to pay you overtime of time and a half. In April, the U. S. Department of Labor issued a final rule that included a two step raise of the federal minimum salary requirement for exempt employees under the Fair Labor Standards Act.

Grace: 00:04:26

In July of this year, the minimum salary requirement to be considered for overtime went from 35, 000 annually. to 43, 000 annually. And in January of 2025, this coming January, the minimum salary requirement will increase to 58, 000 annually. That is a 15, 000 jump in six months. On its face, that sounds enormous, but the minimum salary requirement doesn't mean that's what you have to pay your employees.

Grace: 00:05:01

It only means that is the minimum you have to pay without paying them overtime. So if you're a business owner or you run a nonprofit, this sounds on the surface like you have to raise your employees minimum salary. That is how it will be spun by many politicians or it will be spun as workers rights.

Grace: 00:05:21

But before we fall for the talking points, let's talk to a labor attorney to understand what this actually does and how it affects both business owners and their employees. Nicole Brunecki is our guest today. Nicole has extensive experience working for both plaintiffs and defendants specializing in employment and wage law.

Grace: 00:05:40

Nicole was named a Super Lawyer Rising Star in 2021 and 22, and that followed Top 10 Under 40 Award for New York Personal Injury Attorneys. Nicole, welcome to Frogmore Stew.

Nicole: 00:05:52

Thank you for having me.

Grace: 00:05:54

I've gone through and read all this stuff and I'm still super confused about it. This is not my wheelhouse, but basically, can you tell us what this rule by the Department of Labor means and why it's important that people pay attention to it?

Nicole: 00:06:08

Sure. So let's start by explaining what are exempt employees and non exempt employees. As the general rule, people work and get paid by the hour and people who get paid by the hour pursuant to FSLA, which is the Fair Labor Standards Act. If you work above 40 hours a week, you are supposed to get paid overtime, which is one and a half times your regular hours.

Nicole: 00:06:31

Hourly wage, which, as we know, the hourly wages are also subject to minimum wage rules, but that is a separate topic. Once you exceed the threshold of 40 hours a week, you're supposed to get paid the overtime premium and this is a standard treatment of any worker. However, there is a category of workers that was carved out that.

Nicole: 00:06:52

Are not bound by overtime rules, and these are workers who come to work and just perform their duties and to get paid a set amount of money called the salary, regardless of how many hours a week they work. And usually, these are workers that are under this general umbrella of administrative workers that could be.

Nicole: 00:07:13

People who do managerial work, the secretary probably can fall under this category. So there's a, there's an hourly wage person, and then there's a salaried person, but the salaried person is divided into two different things. One is exempt and one is non exempt. Yes, and and these people are simply not bound by overtime rules and this new rule increases the salary threshold.

Nicole: 00:07:40

There was a weekly minimum before of 684 dollars that is now increased to 844 and if you have a person who is making that amount or more. Then you do not have to pay them overtime. However, if your employee is an administrative employee, as I said before, and does not earn that amount, then these people are supposed to receive overtime now.

Nicole: 00:08:04

And this is the difference that. The legislation you mentioned is about.

Grace: 00:08:08

And so to determine legal guidance through this, it's the exempt part that's changing. So to be specific, if you are a non exempt salaried employee, essentially your employer has to still keep track of how many hours you work a week.

Nicole: 00:08:26

Am I saying this right? The way that you classify employees that has not changed. What employers can do right now is one of two things, right? They can either. Increase the weekly pay for the salaried employees to meet the threshold, but then they don't have to worry about the counting of the hours and any potential claims for overtime or what they can do is they can change their classification.

Nicole: 00:08:50

But that would probably also raise questions as to whether this was proper or not. And as a litigator, I can tell you that the categories of analyzing if someone is an administrative worker is very fact specific. And we have. Years of litigation sometimes over these issues as to whether someone is properly classified or not.

Nicole: 00:09:09

So I would say maybe suddenly changing classification of your employee in order to avoid these additional payments is not the best idea in most cases. But as I said, they can increase the threshold and the problem is over. Or if not, then they can try changing classification, which is not the best thing to do, or they simply have to start tracking hours and paying these people over time.

Grace: 00:09:30

So let's say it's someone that sells clothing on a sales floor and they're non commissioned based, their salary. But if they work 40 hours or less a week and they're on salary, it's, it doesn't affect anything, right?

Nicole: 00:09:42

So you're absolutely right. However maybe the example, I think the, in the setting that you use, that person should be probably working hourly regardless, but if it replaced the person selling clothes with a secretary or a paralegal or something like this, then everything else you said would be absolutely correct.

Grace: 00:09:57

Okay. Paralegal is a good example. So paralegals some weeks, maybe they work 38 hours, but then the next week there's a huge case going on and they're working. 50 hours. Is it based on weekly hours or is it based on pay period?

Nicole: 00:10:11

They would be paid every two weeks and they would be paying a salary that probably does not take into account, as I said, how many hours they work.

Nicole: 00:10:19

If they have a heavier week, they will have to stay at work and they would still make the same amount of money. I actually have personal experience in that field and I was actually Thinking about that a lot when I was a paralegal and I had to work so many hours and my salary was the same every week, what you told me earlier that there, and you spoke with a lot of employers who are concerned when we analyze this change, I know it's definitely favorable to workers.

Nicole: 00:10:44

A hundred percent is favorable to workers in terms of employers. If there is a small business, I think the likelihood of a small business, even having that problem is to begin with pretty slim because small businesses usually don't have the need to have people work so many hours just as a general rule.

Nicole: 00:11:04

But I think this would affect big companies that were using the previous rule to their advantage, which is what I said earlier. I worked for a big law firm, never got paid any overtime, but I had to work what normally would constitute overtime. So I think if we think about the big businesses, they, yes, they may be losing some money right now, but their workers definitely would benefit from this rule.

Nicole: 00:11:23

Small businesses would be negatively affected, but the scale of that is, I don't think it is that significant.

Grace: 00:11:29

Do you think that this will have an effect to incentivize employers not to pay higher wages guaranteed in a salary, knowing that the way that this rule is set up, that if they have to work. A lot of hours during the month of December versus in June and July when they're probably have lighter hours just to balance it out throughout the year.

Nicole: 00:11:50

I think you're raising it an excellent point because in light of this change, which is pretty substantial, especially if you have a lot of employees. They have to look at the nature of their operations and of the scope of duties of these people. And they have to structure it in a way that the employee will be made whole and that they will spend as little money as possible.

Nicole: 00:12:08

So if you have a business that has operations that fluctuate, you have to make your decision between the three options that you have based on. The nature of your operations. So that's smart business ownership comes into play, or simply grab your phone, call an attorney, get a consultation and pick the right way to handle that in light of the new rule.

Nicole: 00:12:28

But I think that there's enough time to think about how to implement this based on specifically how your business operates and choose the right way to approach it. Because maybe there are employees who, yes, it's worth to give them an extra 200 because the amount of hours you'll get out of them will be worth it.

Nicole: 00:12:44

But maybe there's another employee in the company that probably have overtime maybe once a month, and it's better to pay that person overtime that once a month than to pay them 200 more per week. So it really depends on a lot of factors, but you have to look at how your business operates.

Grace: 00:13:01

The other thing that's fascinating to me is that the Department of Labor is able to make these sorts of changes and yet the federal minimum wage is still 7. 25. That's crazy.

Nicole: 00:13:12

I know. There was an attempt in Texas by a judge to block this rule from going into effect nationwide and it did not go through. It only remained in effect for Texas government employees, but perhaps there will be some further legal challenges to this. But we all know that this is how our government functions.

Nicole: 00:13:31

We have these institutions within the government and they're able to provide a rules and regulations like this. So it's just part of our political system. This time, as I said, it's a crazy time to do something like this because we have this inflation going on and businesses are really struggling to keep up with the expenses because.

Nicole: 00:13:49

And even if you net the same amount of money that you netted before, the expenses went up. So you're not really ending up with any profits at the end of the day. And right now on top of that, they're also releasing a rule that's increasing salaries for people. So it may be a hard time.

Grace: 00:14:07

My understanding of the Texas law is that they sued and the state of Texas as an employer Got a preliminary injunction, right?

Grace: 00:14:14

They don't have to follow the rule from the department of labor as an employer, but that didn't apply to any of the private businesses within the state or any other state.

Nicole: 00:14:24

You're right. It's solely with regard to government workers and solely with regard to the state of Texas. There was an attempt to make that a nationwide, but that attempt did not work.

Grace: 00:14:32

Yeah, this is a political podcast. And so one of the things I always look at is how each of the parties are going to spin this. Because in some ways, this is similar to the Chevron deference case where the Supreme Court basically ruled that the alphabet soup of agencies can't come in and make these types of decisions.

Nicole: 00:14:52

So this is a major rule coming out of. At one of those agencies, but I think from an employer perspective, yes, it seems pretty drastic, but from an employee standpoint, this is a middle class employee rule that is going to benefit many people. Absolutely. And to your question as to how these parties will spin, and I think we all know the answer, the Democrats will be emphasizing that this is for the people.

Nicole: 00:15:18

Republicans will say this is against business owners and against our economy because of businesses are so overburdened. So, we'll see how they discuss that. But I think so far, hasn't that really been raised in any of these campaigns.

Grace: 00:15:32

The reality is it's really only if you have employees that are working overtime that you have on salary and it's below 58,000.

Grace: 00:15:40

It really isn't that big of a change other than the bottom amount. And I feel like that's not going to kill a business.

Nicole: 00:15:49

That's what I said at the very beginning. I think that even though this really looks scary on a surface, I think that there's not a lot of small businesses that will be affected by this because not a lot of small businesses have need for.

Nicole: 00:16:04

Administrative workers working crazy hours. This is usually bigger companies who, as I said, even from my personal experience prior to this role, we're definitely using the fact that they could have people in administrative positions working crazy hours and would be under no obligation whatsoever to pay them any overtime.

Nicole: 00:16:24

These big companies break bigger profits. They should not be that affected. And small businesses, if they are affected, they still have the three options. So I think it does look scary, but it should not be that terrible.

Grace: 00:16:37

I always like to get ahead of these things a little bit. So it's not so scary when you start hearing one liners from the politicians so that we know what we're hearing when we hear it.

Grace: 00:16:47

That's a very good approach. It's so great to have you on. I really appreciate it. You've clarified so many things and really value your opinion. Thanks Nicole. Much.

Nicole: 00:16:56

Grace was very nice to meet you and I was happy to be here with you.

Grace: 00:16:59

That's all the stew for today. Talk to you next week.

TJ: 00:17:01

The Frogmore Stew podcast is written and hosted by Grace Cowan.

TJ: 00:17:16

Editing and I. T. support by Eric Johnson, produced by T. J. Phillips with the Podcast Solutions Network.