BSCR Firm News/Blogs Feed

Department of Labor announces final rule expanding federal overtime protections.

23 May 2024

ABSTRACT: The U.S. Department of Labor’s final rule expanding protections under the Fair Labor Standards Act is estimated to increase overtime eligibility for four million workers and puts in place mechanisms to automatically increase salary thresholds every three years.

For the first time since 2019, the U.S. Department of Labor announced a final rule that expands overtime protections for millions of salaried workers by increasing thresholds required to exempt employees from federal overtime pay requirements.

Under the Fair Labor Standards Act (FLSA), eligible salaried employees are to be compensated at a rate of 1.5 times their regular salary for work beyond the normal 40-hour workweek. Salaried workers whose income exceeds the threshold amounts set by the Department of Labor are excluded from these overtime protections. The Department periodically updates these thresholds based on federal income data. The Department’s newest final rule, which will go into effect on July 1, 2024, increases the previous threshold amounts and implements a mechanism so that thresholds will automatically increase in the future.

New Overtime Threshold Requirements

The final rule announced on April 23, contains three central provisions expanding overtime protections.

Beginning on July 1, 2024, the Department of Labor will update the standard salary level for exemption from its current level of $35,568 per year, to $43,888 per year, and beginning January 1, 2025, to $58,656 per year. This reflects the 35^th percentile of weekly earnings of full-time salaried workers in the lowest-wage Census Regions based on data collected by the U.S. Bureau of Labor and Statistics. This is an increase from the previous 2019 rule which set the threshold at the 20^th percentile of weekly full-time salaried employees in the lowest-wage Census Region. The new rule allows workers earning more than $684 per week, but less than $844 per week to be eligible for federal overtime protections.
The highly compensated employee total annual threshold will increase from $104,432 per year, to $132,964 on July 1, 2024, and to $151,164 beginning on January 1, 2025. This reflects the 85^th percentile of full-time salaried workers nationally.
The final rule will also include a mechanism to automatically increase the threshold amounts starting on July 1, 2027, and every three years thereafter, based on more current earnings data.

Exempt Employees

Section 13(a)(1) of the FLSA provides an exemption for “any employee employed in a bona fide executive, administrative, or professional capacity” under what is commonly referred to as the “white-collar” or executive, administrative, or professional (EAP) exemption. To fall under the EAP exemption, employees must generally meet three tests: 1) they must be paid a salary that is a predetermined fixed amount not subject to reduction based on the quantity of work performed; 2) they must be paid at least a specific weekly salary level; and 3) they must primarily perform executive, administrative, or professional duties as set out under the Department’s regulations in 29 CFR 541.

Impact

The Department estimates that in the first year the new rule will allow some 4 million currently exempt workers to become eligible for overtime protections, resulting in approximately $1.5 billion in annual transfers from employer to employees. It also estimates employers will accrue approximately $1.4 billion in direct costs to implement the new regulations in the first year.

The impact of the final rule will be an increase in federal overtime protections, narrower unintended EAP exemptions, and clearer guidance for employers on how to pay employees for overtime hours. Employers will now have the choice to either increase wages for salaried employees to maintain their existing exempt status, reduce or eliminate overtime hours, pay the 1.5 times overtime premium, or reduce base salaries to offset new overtime pay.

The Department has long recognized a need to regularly update earnings thresholds to ensure they remain useful in helping distinguish between exempt and non-exempt employees. A new mechanism in the final rule will regularly update the thresholds to eliminate issues that can arise if the Department does not adequately update threshold amounts over long periods of time. For example, between 1975 and 2004, threshold levels remained stagnant while the federal minimum wage continued to increase, resulting in a federal minimum wage earner’s income exceeding the long test salary level for a 40-hour workweek.

The final rule will not apply to the special salary levels currently set in U.S. territories or the special weekly base rate for employees in the motion picture producing industry.

Baker Sterchi Welcomes 2024 Class of Summer Law Clerks

22 May 2024

Baker Sterchi is pleased to welcome its 2024 class of summer law clerks.

Samantha Palumbo joins our Kansas City office as a rising 3L student at the University of Kansas School of Law, where she serves as Executive President of the Student Bar Association and is a member of the First-Generation Professionals. She also does pro bono work at the Expungement Clinic through Kansas Legal Aide and is a recipient of the Merit Scholarship. Palumbo previously served as a district scheduler at the U.S. House of Representatives for the Office of Congresswoman Rosa L. DeLauro and completed a legal internship at the Kansas Department of Transportation. She earned her undergraduate degree in anthropology and political science from Roger Williams University.

Abrianna Steele joins our St. Louis office as a rising 3L student at Saint Louis University School of Law, where she is a member of the Black Law Students Association, Women Law Students’ Association and Saint Louis University Law Journal. Steele is a recipient of Mound City Bar Foundation’s Inaugural Equity Scholars and completed a judicial internship with the Hon. Jennifer M. Phillips at the 16th Circuit Court of Jackson County, Missouri. She also previously held the position of Fair Housing Tester for the Equal Housing Opportunity Council, a paid volunteer opportunity. Steele earned her undergraduate degree in history at the University of Texas at Austin.

Supreme Court Clarifies the "Transportation Worker" Exemption in the Federal Arbitration Act

21 May 2024

ABSTRACT: The Federal Arbitration Act carves out “transportation workers” from its requirement that contractual arbitration agreements be enforced. In Bissonnette v. LePage Bakeries, the U.S. Supreme Court ruled unanimously that whether someone is an exempt transportation worker under the FAA depends on the type of work performed, and not whether the employer is in the transportation industry.

Factual Background

Truck drivers Neal Bissonnette and Tyler Wojnarowski signed an agreement to arbitrate when they purchased the rights to distribute Flowers Foods, Inc. products in certain parts of Connecticut. Flowers is the second largest producer and marketer of packaged bakery foods in the United States, including the famous brand “Wonder Bread.” Throughout the distribution process, Flowers would bake bread and buns and send them to a warehouse in Connecticut where the Petitioners would pick them up and distribute them to local shops within Connecticut.

Bissonnette and Wojnarowski brought a class action lawsuit claiming Flowers had underpaid them and other drivers in violation of state and federal law. Flowers asked the district court to dismiss the case or send it to binding arbitration, as stated in the arbitration agreement. The District Court dismissed the case in favor of arbitration, ruling that the plaintiffs waived their right to sue in court, and that the putative class members were not a “class of workers engaged in foreign or interstate commerce” necessary to exclude them from arbitration.

The FAA and Transportation Workers - Historical Background

In 1925, Congress passed the FAA to enforce arbitration agreements within the United States. § 2 of the FAA states generally that arbitration agreements “shall be valid, irrevocable, and enforceable …” However, at the time, certain industry groups already had sophisticated dispute resolution processes, so Congress carved out certain classes of people exempt from the FAA’s coverage. Those classes of people included seaman and railroad employees. Thus, Congress crafted the § 1 exemption to the broad authority in § 2 stating: “nothing herein contained shall apply to contracts of employment of seaman, railroad employees, or any other classes of workers engaged in foreign or interstate commerce.”

The § 1 exemption became known as the “transportation worker exemption”. Before Bissonette, the Supreme Court had interpreted this exemption only twice within the past one hundred years. In 2001, the Supreme Court ruled in Circuit City Stores Inc. v. Adams that § 1 exempts from the FAA only “contracts of employment of transportation workers”. In 2023, the Supreme Court ruled in Southwest Airlines v. Saxon that a Southwest baggage ramp supervisor was within “a class of workers engaged in foreign or interstate commerce” and thus exempt from the FAA because the employee was a “member of a class of workers based on what she does at Southwest, not what Southwest does generally”.

Bissonnette

On appeal to the Second Circuit, Flowers successfully argued that Bissonnette and his peers were not “transportation workers” because they worked in the “bakery industry,” not the “transportation industry,” thus the exemption under § 1 of the FAA did not apply, and the workers were required to adhere to the arbitration agreement. A month after the Second Circuit’s Bissonnette decision, the United States Supreme Court decided Saxon, and the Second Circuit granted panel rehearing in light of Saxon. After the Second Circuit affirmed its original decision, the Supreme Court agreed to review the case.

Unanimously, the Supreme Court reversed the Second Circuit’s decision because Circuit City and Saxon did not interpret the § 1 exemption to apply as an industry-wide exemption. Rather, the Supreme Court reasoned that Congress meant what it said when drafting the § 1 exemption to include only the kind of employees that shared similar characteristics to seaman and railroad workers.

Thus, the Supreme Court clarified “a transportation worker is one who is actively engaged in transportation of goods across borders via the channels of foreign or interstate commerce. In other words, any exempt worker must at least play a direct and necessary role in the free flow of goods across borders.”

Takeaways

A careful reading of Bissonnette magnifies what the Court did not decide. The Court expressed no opinion regarding whether the Petitioners themselves were transportation workers within the Court’s clarified rule. Arguably, they were not because their activities were Connecticut-based, and they did not engage in foreign or interstate commerce. Although some worker's rights advocacy groups have heralded Bissonnette a “win” for workers, the Court’s focused ruling—which clarifies the exemption’s requirements—limits § 1 to its appropriately narrow scope.

We invariably expect wage claim litigation to rise after the Court’s ruling but expect arbitration agreements to remain in full force and effect with respect to most workers’ claims.

"Unpacking Noah's Ark: Lessons in Unfair Labor Practices and Good-Faith Negotiations"

20 May 2024

ABSTRACT: In Noah’s Ark Processors, LLC, the NLRB ruled that the company engaged in unfair labor practices by failing to negotiate in good faith, refusing to compromise, withholding relevant bargaining information, and prematurely declaring an impasse during negotiations with the United Food and Commercial Workers’ Union. The NLRB also found that the company had unlawfully threatened and terminated ten workers for participating in an unauthorized work stoppage. As a result, the NLRB called for severe remedies, which were upheld by the Eighth Circuit Court of Appeals.

The dispute in Noah’s Ark Processors arose following the expiration of the previous collective-bargaining agreement between the company and the UFCW. Negotiations ensued, but the company’s representative, an administrative assistant lacking decision-making authority, hindered progress. Consequently, the Union filed charges with the NLRB, prompting a court-issued injunction compelling Noah’s Ark to resume negotiations.

However, throughout the resumption of negotiations, Noah’s Ark repeatedly presented regressive offers that deviated from previous agreements and sought to roll back established benefits for employees. These offers included proposals to eliminate binding arbitration for labor grievances, subcontract existing operations, cut vacation days, and limit holiday pay. Despite minor concessions on certain issues, the company remained steadfast in its refusal to compromise on critical matters, such as working hours and arbitration of grievances. After only two months of negotiations, Noah’s Ark declared another impasse and implemented their proposals.

The Union reacted by filing another complaint. An administrative-law judge found that Noah’s Ark's had failed to negotiate in good faith and prematurely declared an impasse. In addition to issuing another bargaining order to keep negotiating with the union, the ALJ ordered Noah’s Ark to provide backpay to the ten terminated employees, reimburse the union for bargaining expenses, and required its CEO to read a remedial notice at an all-employee meeting. The Board adopted the ALJ’s remedies and imposed additional remedies including ordering Noah’s Ark to mail a copy of the remedial notice to every employee, post the notice in its plant, and allow NLRB representatives to inspect the facility for up to a year.

On appeal, the Eighth Circuit rejected the company’s argument that the Board’s extraordinary remedies requiring reimbursement of bargaining expenses and reading of a remedial notice by the CEO were unjustified. Concluding that “the remedies in question are not beyond those that have been imposed in other extreme cases” – and additionally noting that Noah’s Ark had failed to properly preserve this issue for appeal by raising it before the Board – the Court granted enforcement of the Board’s order in its entirety.

The NLRB’s General Counsel has urged its regional offices to pursue the “full panoply” of remedies for employer unfair labor practices, and the Noah’s Ark case makes it clear that especially in cases involving egregious facts, that approach will be followed. While the NLRB and Eighth Circuit decisions break no new ground, they serve as a reminder that the duty to bargain in good faith lies at the core of the National Labor Relations Act, and that bad-faith, “take it or leave it” collective bargaining will not pass legal muster.

Kyle Roehler to Moderate on Marijuana Implications at ALFA Hospitality & Retail Seminar

20 May 2024

On May 30, Baker Sterchi Member Kyle Roehler will moderate a session titled “Recreational and Medical Marijuana at a Tipping Point—An Examination of its Implications,” at the ALFA International Hospitality & Retail Practice Group Seminar in Los Cabos, Mexico.

The session will examine some of the recent legislation and latest developments in legalized marijuana, as well as Gram Shop Laws, THC beverages, lessons learned from early state adopters and liability, insurance and employment implications for not only businesses whose principal business is marijuana, but also the retail and hospitality industries.

Roehler defends corporations, insurance companies and trucking companies in state and federal courts throughout the Midwest and the nation. His practice focuses on catastrophic personal injury defense, transportation, and insurance coverage and extra-contractual liability. Roehler frequently speaks at national conferences on topics related to personal injury, trucking and bad faith litigation. He earned his law degree from the University of Kansas School of Law and is admitted to practice in Missouri and Kansas.

Baker Sterchi is the Kansas City, Missouri and Overland Park, Kansas, member firm of ALFA International, a premier global legal network of 140 independent law firms. The network provides educational programs across various practice areas for attorneys and clients associated with its member firms.

Defense Succeeds in Reducing Damages in Rear-End Collision Trial

17 May 2024

On April 24, 2024, one of the newest members of Baker Sterchi’s team, a first-year Associate, successfully defended a rear-end collision case in the Small Claims Division of the Circuit Court of Jackson County, Missouri.

The incident occurred when the client was driving the wrong way on a one-way street and stopped in front of the plaintiff's car, causing plaintiff to stop as well. Subsequently, another vehicle rear-ended the plaintiff’s car, but that defendant was dismissed from the case due to lack of service.

The focus of the defense was on the determination damages to plaintiff’s vehicle. Our Baker Sterchi team member successfully limited the plaintiff’s damage claim to well below the amount requested. The court concluded that the total damages should be based on the lower estimate provided by the defense, which was accepted as the most reliable evidence during the trial.

Update: High Court Finds CFPB Funding Structure Constitutional Once and For All

17 May 2024

ABSTRACT: Yesterday the U.S. Supreme Court overturned the 2022 Fifth Circuit Opinion holding the CFPB’s self-funding structure unconstitutional, providing clarity to courts and enforcement agencies across the nation about the CFPB’s authority for rulemaking and enforcement.

The U.S. Supreme Court issued a 7-2 Opinion yesterday finding the funding structure of the Consumer Financial Protection Bureau (“CFPB”) constitutional. In so doing, the Supreme Court overturned the Fifth Circuit’s holding finding the opposite. The case was initiated and made its way through the appellate courts on behalf of Community Financial Services of America (“CSFA”), a group representing the interests of payday lenders.

The CFPB Payday Lending Rule that started this years-long legal battle is found at 12 S.F.R. § 1041.8 and prohibits what the CFPB described as the “unfair and abusive” practice by lenders of initiating subsequent payment transfers from consumer bank accounts after two consecutive failed attempts, in an effort to prevent excessive overdraft fees. Baker Sterchi previously discussed the Fifth Circuit’s holding and subsequent legal complications in prior posts.

The challenge to the CFPB’s funding structure centered on the powers granted to the CFPB under Dodd-Frank, which allows it to operate with funds from the Federal Reserve as opposed to funding approved by Congress.

The Supreme Court rejected CSFA’s argument that the funding structure violates the Appropriations Clause under the U.S. Constitution. Justice Thomas penned, "Under the Appropriations Clause, an appropriation is simply a law that authorizes expenditures from a specified source of public money for designated purposes. The statute that provides the bureau's funding meets these requirements. We therefore conclude that the bureau's funding mechanism does not violate the Appropriations Clause."

Justices Alito and Gorsuch dissented, with Alito warning that the majority opinion “upholds a novel statutory scheme under which the powerful Consumer Financial Protection Bureau may bankroll its own agenda without any congressional control or oversight."

The Supreme Court’s Opinion will impact numerous cases and enforcement actions that have been in limbo across the country as the Court’s decision was awaited. Much industry discussion has been centered around an assumption that the Fifth Circuit would be upheld and the question of how far the Supreme Court would reach in undermining previous CFPB enforcement actions. With the Supreme Court’s decision reversing the Fifth Circuit, those discussions are put to rest, at least until another constitutional challenge to the CFPB is raised.

Scott Kreamer Elevated to President-Elect of Lawyers for Civil Justice

16 May 2024

Scott Kreamer, Managing Member of Baker Sterchi, was elevated to President-Elect of Lawyers for Civil Justice (LCJ) during the recent Spring Membership Meeting held in Washington, D.C.

LCJ, a coalition of defense bar organizations, law firms and corporations, focuses on initiatives such as enhancing multi-district litigation reforms, establishing expert evidence standards, allocating discovery costs effectively, modernizing privilege log requirements and safeguarding the right to file documents under seal.

Recently, LCJ advocated for the amendment of Federal Rule of Evidence 702, governing expert testimony in federal courts. The resulting amendment, effective December 1, 2023, introduced significant changes aimed at enhancing the standards for the admissibility of expert testimony. Specifically, the amendment emphasizes that expert testimony may only be admitted if the proponent demonstrates to the court that the proffered testimony is more likely than not to meet the admissibility requirements set forth in the rule.

Kreamer’s practice focuses on commercial, construction, financial services, insurance and product liability matters. In addition to his role with the LCJ, he is an active member of the Federation of Defense and Corporate Counsel (FDCC) and DRI, having previously served as chairman of the board and president for FDCC, and as a member of the Board of Directors for DRI. He is also a Fellow in the American College of Trial Lawyers, having tried more than 30 cases in state and federal courts.

Baker Sterchi Welcomes Jennie Simons in St. Louis

16 May 2024

Baker Sterchi welcomes Jennie Simons as a senior attorney in the firm’s St. Louis office. Her practice encompasses various practice areas, including insurance coverage, personal injury, premises liability and product liability. Simons has represented both individuals and corporate clients in over 50 jury trials.

Simons obtained her law degree from Florida Coastal School of Law and holds an undergraduate degree from the University of Kansas. She is licensed to practice law in Missouri, Illinois and Florida.

Alena Johnston Joins Baker Sterchi in St. Louis

15 May 2024

Alena Johnston has joined Baker Sterchi’s St. Louis office as an associate, with a practice focused on premises liability, personal injury and insurance coverage. While in law school, she served on the American Bar Association Journal of Labor and Employment Law. Johnston also participated in the Saint Louis University Criminal Defense Clinic, gaining valuable experience representing clients in both state and federal courts.

Johnston earned her law degree from Saint Louis University School of Law and holds an undergraduate degree from Saint Louis University. She is admitted to practice in Missouri.