Changes Ahead for Minimum Wage and Unpaid Internships

1. The extent to which the parties understood there was no expectation of compensation (any promise of compensation suggests an employee relationship)
2. The extent to which the internship provides training similar to clinical, hands-on or other training in an educational environment
3. The tie between the internship and the intern’s formal education program, such as through integrated coursework or the receipt of academic credit
4. The internship’s alignment with the academic calendar and accommodation of the intern’s academic commitments
5. The extent to which the internship is limited to the period in which it provides the intern with beneficial learning
6. The extent to which the intern’s work provides significant educational benefits and complements, rather than displaces, the work of paid employees
7. The extent to which the parties understand that there is no entitlement to a paid job at the conclusion of the internship

While this new ruling allows for more unpaid interns, it does so under the expectation that the internship is primarily beneficial to the intern and that there is a significant educational tie between the intern’s educational program and the internship. Work with your clients to examine current intern positions and assess how they line up with the Court’s new test.

Worker Classification
Earlier this year, the U.S. Department of Labor’s Wage and Hour Division issued guidance in efforts to clarify the employee vs. contractor debate. Under the new Guidance, most workers are classified as employees under the Fair Labor Standards Act. Classification as an independent contractor is largely dependent upon the individual operating a truly separate business operation and any one employer not being solely responsible for direct income or referral work for the individual.

When determining if workers are truly employees or independent workers, you and your clients should still look at the “economic realities test,” which considers:

1. The extent to which the work performed is an integral part of the employer’s business
2. The worker’s opportunity for profit or loss depending on his or her managerial skill
3. The extent of the relative investments of the employer and the worker
4. Whether the work performed requires special skills and initiative
5. The permanency of the relationship
6. The degree of control exercised or retained by the employer

Proposed Overtime Exemptions 
As previously reported, the DOL has proposed changes that would change the minimum salary threshold to be exempt from overtime pay. The new minimum salary threshold would be $50,440, almost double what it is now. The deadline for public comments on the proposed overtime wages rule was last month, but experts expect the final rule to be released in early 2016, although there is no hard deadline. If passed, an anticipated 4.6 million white collar employees and 36,000 highly compensated employees will become eligible for overtime pay.

Since the change could cause significant changes to your clients’ payroll, it’s a good idea to start discussing the potential impact of these changes now. Advise your clients to review work hours for their employees and assess if it would be beneficial to give raises to any employees that are near the threshold and likely to work more than 40 hours per week. Keep in mind the reclassification from exempt to non-exempt could affect the benefits employees are now eligible for, so you should review ACA compliance with your clients as well.

The new rule is also likely to bring changes to how remote work, such as checking email or taking phone calls, is classified, which could drive new or updated HR policies. While this is primarily something that your clients and their HR team will need to work out together, it’s important for you to discuss the likely implications on how payroll is processed moving forward.

If there will be a significant increase in non-exempt employees, you may want to work with your clients to upgrade their current time tracking and payroll systems, as well as the current payroll services your firm provides.

With changes to internship status, minimum wage and overtime pay, it’s a good idea to set aside time with each of your clients to review how these changes impact them. For additional information on payroll laws by state, check out this guide on SurePayroll’s website: http://www.surepayroll.com/online-payroll/payroll-by-state.asp.