The ongoing scandal involving Wells Fargo Bank demonstrates that although the wheels of justice often turn slowly for security industry employees, they can in fact turn. It also shows that the Financial Industry Regulatory Authority (FINRA) has FINRA Form U-5 abuses firmly on its radar. That is good news for security industry employees who have been damaged by an employer that filed false and defamatory information on a FINRA Form U-5 report when they were terminated.

If you work in the securities industry and believe your former employer included false and defamatory information on your FINRA Form U-5, you should contact us. Kilgore & Kilgore has been successful in getting the defamation expunged from a FINRA Form U-5 and in recovering compensatory damages from the employer on behalf of our clients. Click here to connect with a Kilgore & Kilgore attorney for a free evaluation of the facts of your case: Contact Kilgore & Kilgore.

Consumer Financial Protection Bureau Fines Wells Fargo Bank

Over the last several months, the Wells Fargo Bank scandal has produced an alternating series of revelations and investigations. In September 2016, the Consumer Financial Protection Bureau (CFPB) fined Wells Fargo Bank $185 million. The CFPB alleged that Wells Fargo Bank employees created more than 2 million bank accounts or credit card applications without their customers’ knowledge or permission. Wells Fargo Bank staff was reportedly motivated to open these fake bank accounts by pressure from supervisors to meet corporate goals and obtain incentive compensation rewards.

Wells Fargo Bank Reports Fired Employees on FINRA Form U-5

Wells Fargo Bank said it fired about 5,300 retail banking employees since 2011 for creating the fake bank accounts and applications. Approximately 600 of the fired employees were registered with FINRA. Wells Fargo Bank was required to file a FINRA Form U-5 within 30 days of firing the wrongfully terminated FINRA-registered employees. The FINRA Form U-5 must include details regarding the reasons the employee was fired. Of those 600 FINRA-registered employees that were fired, at least 207 were reportedly terminated for issues related to the fake bank accounts scandal. Each received negative comments from Wells Fargo Bank on his or her FINRA Form U-5 report that could be construed as defamation.

Terminated Employees Claim Defamation by Wells Fargo Bank in their FINRA Form U-5 Reports

In October, NPR reported that some Wells Fargo Bank employees said they were fired for trying to blow the whistle on the fake bank accounts scandal. The interviewed employees said they were fired or pushed to resign after resisting pressure to sell unwanted products to customers and for reporting unethical practices. The employees said that after they blew the whistle and refused to sell unwanted products, Wells Fargo Bank wrote false and defamatory information on their FINRA Form U-5s. As a result, they were not able to find new jobs in the securities industry. According to the New York Times, Wells Fargo Bank allegedly wielded the FINRA Form U-5 as a weapon “with little regard for the damage that inaccurate or imprecise allegations could inflict on people’s careers.”

Negative FINRA Form U-5 Reports Make It Almost Impossible to Get a New Job in the Securities Industry

FINRA allows the public to access the FINRA Form U-5 information about securities industry employees. The goal of the FINRA Form U-4 and FINRA Form U-5 system is to hold financial advisers, brokers and bankers who sell securities accountable for wrongdoing. However, negative information on a FINRA Form U-5 makes it difficult, if not impossible, for a securities industry professional to get a new job in the securities industry.

Please refer to our previous blog post titled “Compensatory Damages from FINRA Form U-5 Defamation Claims” by clicking here Previous FINRA Post. Kilgore & Kilgore’s FINRA attorneys assist clients through the FINRA arbitration process. We have been able to get false and defamatory information expunged from a FINRA Form U-5. Our employment lawyers Dallas have also been successful in helping employees file claims against their former employers for defamation and wrongful termination.

Going through the FINRA arbitration process to expunge false and defamatory information on a FINRA Form U-5 involves a different process from other employment claims of this nature. Our attorneys can successfully handle the complexities of the FINRA arbitration process.

U.S. Senators Highlight Potential Wells Fargo Bank FINRA Form U-5 Abuse

Once NPR reported that Wells Fargo Bank had allegedly used the FINRA Form U-5 reports to silence or retaliate against employees, the U.S. Congress took note. In November, the Senate Banking Committee openly questioned if Wells Fargo Bank used unfavorable FINRA Form U-5 filings as a means of retaliating against employees who attempted to blow the whistle on the fake bank accounts problem.

“These accounts raise questions about the accuracy of Wells Fargo’s form U-5s for employees who were fired for engaging in illegal activity and for employees who appear to have been fired for blowing the whistle on illegal activity at Wells Fargo,” the senators wrote.

FINRA Investigates Potential Wells Fargo Bank FINRA Form U-5 Abuse

In December, it was reported that FINRA was asking former Wells Fargo Bank employees to contact FINRA if they have issues regarding the reasons they were fired. FINRA had also announced that it planned to look into the FINRA Form U-5 filings regarding the 207 former Wells Fargo Bank employees that are FINRA-registered.

“Recent news reports have highlighted several former Wells Fargo Bank employees who believe that they were terminated from the bank for reporting or refusing to engage in allegedly fraudulent account-opening activities,” FINRA explained in a press release.

“Further, the reports indicate that a subset of these individuals who were also registered with FINRA to conduct securities activities have raised concerns that they did not receive a copy of their Form U-5 termination notice within 30 days of being terminated as required … or that their Form U-5 contained inaccurate or incomplete comments related to the reason for the termination,” it said.

FINRA said it wants to “review the facts and circumstances surrounding these allegations.”

This scandal at a high profile company such as Wells Fargo Bank focuses attention on FINRA. Congress is taking potential false and defamatory information on the FINRA Form U-5 statements seriously. If you think a previous employer included false and defamatory information on your FINRA Form U-5, contact an experienced Kilgore & Kilgore FINRA attorney.

Kilgore & Kilgore Attorneys Have Won Compensatory Damages in FINRA Form U-5 Cases

In FINRA arbitration proceedings, compensatory damage awards have been won by Kilgore & Kilgore attorneys. False and defamatory information has been expunged from FINRA Form U-5. To obtain such an award is a complex legal process involving FINRA rules and procedures plus state defamation law. Kilgore & Kilgore can provide the legal experience needed. To learn more about our securities industry and FINRA law practice, click here: Dallas FINRA Attorney. To get started on a free review of the facts of your case, click here: Contact Kilgore & Kilgore.

In a recent case, a public employee was demoted by his supervisor because of his perceived support of a local political candidate, creating a case of unlawful retaliation. The U.S. Supreme Court overturned a prior federal court decision in this case. The U.S. Supreme Court held that a public employee may claim a violation of constitutional rights under Section 1983 where there is an improper motive. In this case, the employee showed that the supervisor took an adverse action against the employee based on an improper motive, even though the supervisor made factual mistakes regarding the employee’s conduct. This decision changes how such retaliation claims are brought against public employers.

Was Retaliation a Factor in Your Situation?

The employment lawyers at Kilgore & Kilgore represent employees in a variety of retaliation and wrongful termination disputes. If you believe your employee rights have been violated, and wish to know more about our employment law practice, click here Employment Law Practice to learn more about the laws governing employee rights. To connect with an employment lawyer for a free review of the facts of your case, click here to connect with us Contact Kilgore & Kilgore.

Public Employer’s Motive Is Essential Factor in Determining if an Employee’s Constitutional Rights Were Violated

The U.S. Constitution’s First Amendment generally prohibits government officials from terminating or demoting public employees because of their engagement in political activity that is constitutionally protected. For example, with limited exceptions, public employers cannot dismiss or retaliate against employees who support a particular political candidate or political party.

In April 2016, the U.S. Supreme Court decided a case in which Jeffrey Heffernan, a police officer in Paterson, New Jersey, was demoted. The demotion occurred because his supervisor incorrectly believed that he had supported a particular candidate in the city’s mayoral election. Heffernan brought a lawsuit in federal court claiming that he was illegally demoted for a political action constituting a protected activity. Heffernan argued that his supervisor had deprived him of a right secured by the Constitution. The lower court ruled against Heffernan because such court found that he had not actually engaged in any protected activity. However, the U.S. Supreme court disagreed and reversed that ruling.

In the case of Heffernan v. City of Paterson, New Jersey, Heffernan’s bedridden mother asked Heffernan to pick up a campaign sign for Lawrence Spagnola, a candidate for mayor running against the incumbent, Jose Torres. Torres had appointed the city’s police chief as well as Heffernan’s supervisor. Word quickly spread throughout the police force that Heffernan had picked up a Spagnola sign. The next day, Heffernan was demoted from detective to patrol officer. Heffernan’s supervisor demoted him because of his perceived support for Spagnola. However, Heffernan was not involved in Spagnola’s campaign. He merely picked up the campaign sign for his mother. Heffernan’s supervisors made a factual mistake regarding his activity.

U.S. Supreme Court Reverses Federal Court Decision

In Heffernan v. City of Paterson, New Jersey, with a 6-2 opinion, the Supreme Court disagreed with the lower court and reversed. In this case, Heffernan’s employer made a factual mistake. The Supreme Court found that it was the motive of the supervisor, and the facts as understood by the employer, that mattered. The Supreme Court concluded that it was the employer’s reason for demoting Heffernan that mattered for purposes of determining any violation of the law under Section 1983.

Even though his employer made a factual mistake about Heffernan’s conduct, Heffernan was nevertheless entitled to challenge his employer’s action. This was because his employer wanted to prevent him from engaging in a protected activity. To prevail, an employee such as Heffernan must prove an improper motive by the employer.

Justice Thomas, joined by Justice Alito, dissented in the Heffernan case. The dissent argued that Heffernan would actually have to engage in a protected activity in the first place in order to sustain his claim. Heffernan’s perceived support of Spagnola’s campaign was not sufficient, according to the dissent. Because Heffernan was not actually engaged in any constitutionally protected activity, these justices believed that the employee had no cause of action under Section 1983. The justices contended that the demotion of Heffernan by his supervisor might be callous, misguided or wrong, but not unconstitutional.

After Heffernan, a public employee is not required to show that he actually engaged in a protected activity in order to support a claim of retaliation under Section 1983. Instead, where the employer make a factual mistake regarding the employee’s conduct, the employee must show that the employer took adverse action against him based on an improper motive.

Our Employment Lawyers Handle Retaliation Cases

Employment laws can be challenged, are redefined, and evolve accordingly. If you wish to know more about the employment law practice of Kilgore & Kilgore, including retaliation cases, check out the many articles we have written by clicking here Employment Law Articles. If you wish to have an employment lawyer review the facts of your case for free, click here and submit a Contact Us form Contact Kilgore & Kilgore.

When broker-dealers and other securities industry businesses terminate employees, the persons fired often feel like they are at a disadvantage. This is due to the potential for defamation from the FINRA Form U-5. Most businesses keep reasons for terminations private. However, the reasons for terminations are public in the securities industry business because of the regulatory oversight of the Financial Industry Regulatory Authority (FINRA).

FINRA Form U-5 Allows Public Scrutiny

All securities industry employers are required to file a FINRA Form U-5 within 30 days of an employee termination. This FINRA Form U-5 states the reason for the termination. It must also detail such matters as whether the employee was the subject of consumer complaints or under internal investigation or external investigation for alleged violation of securities industry rules and regulations. The terminated employee has no legal right to provide input regarding the content of the FINRA Form U-5. Therefore, he or she is at the mercy of the employer and the regulatory oversight of FINRA. When the employer includes misleading or false information on the FINRA Form U-5, it can severely damage the terminated employee’s chances for future employment in the securities industry.

Wrongfully Terminated Securities Industry Employees Take Note

If you work in the securities industry and believe your ex-employer included false and defamatory information on your FINRA Form U-5, you should contact a Kilgore & Kilgore attorney to review the facts of your case. Kilgore & Kilgore attorneys have experience with this type of claim. Kilgore & Kilgore attorneys have also been successful in getting the defamation expunged from a FINRA Form U-5. Winning these claims has given back their lives to broker-dealers hurt by the regulatory process. Click here to connect with a Kilgore & Kilgore attorney Contact Kilgore & Kilgore.

In most cases, you cannot contest a FINRA Form U-5 through a lawsuit in court. You must go through the FINRA arbitration process. Kilgore & Kilgore has several attorneys experienced with the FINRA arbitration process and Texas defamation law.

FINRA Form U-4 and FINRA Form U-5

FINRA has regulatory oversight over all securities industry companies that do business with the public. Every individual who works on securities-related matters is required to register with FINRA by submitting a FINRA Form U-4. By filing a FINRA Form U-4, employees agree to settle all disputes with their employers through the FINRA arbitration process. Additionally, the FINRA Form U-4 authorizes securities industry employers to furnish information regarding the history of all employees at the firm and reasons for termination.

Former Employees with FINRA Form U-5 in Public Files

When an employee is terminated, the securities industry employer is required to state the reasons for termination in a FINRA Form U-5. If the terminated employee violated any securities industry rules or regulations, the employer must provide an explanation of the violations. Also, the employer must explain if the terminated employee was under any internal investigation for the violation. The employer must also disclose whether there are any consumer complaints against the employee. The securities industry employer must file the FINRA Form U-5 within 30 days of the termination. The FINRA Form U-5 is stored in FINRA’s Central Registration Depository (CRD) and made accessible to all FINRA member firms. Together, FINRA Form U-4 and FINRA Form U-5 lay the foundation for how FINRA Form U-5 defamation claims must proceed.

FINRA Form U-5 Defamation

Sometimes, when an employer is unhappy with an employee, the employer places false and defamatory information in the FINRA Form U-5. This can have disastrous consequences for the employee. First, all potential new employers have access to, and will certainly review, the FINRA Form U-5. This makes it difficult, if not impossible, for the terminated employee to get another job in the securities industry. Second, potential customers have access to the FINRA Form U-5. Experienced investors often review this public information. Even when a terminated employee manages to get a new job in the securities industry, it is difficult to recruit new customers. When an employer with a bone to pick fires an employee and puts false information in the FINRA Form U-5 disclosure, it can be devastating. It can sabotage a career. This happens more often than you would think.

Compensatory Damage Awards and Expungement of Defamation from the FINRA Form U-5

The aggrieved ex-employee can take legal measures to claim damages and get the defamatory information removed from his or her FINRA Form U-5. He or she can file a claim against the former employer for defamation. Moreover, he or she can request an expungement of the defamatory information on the FINRA Form U-5. Processing such a claim is different from a typical defamation claim. Not just any attorney can successfully handle such a claim. The FINRA Form U-4 requires that all such claims between FINRA member businesses and their registered employees go through FINRA arbitration proceedings. This includes employment disputes that may have an effect on the professional record of a member firm’s employee—including FINRA Form U-5 defamation claims.

FINRA Form U-4 Provides the Basis for a Defamation Claim

The basis for defamation claims by FINRA Form U-4 employees is the false or inaccurate information reported on a FINRA Form U-5. Employees may also request that FINRA expunge such false information from its Central Registration Depository (CRD) records. Terminated employees must file an arbitration demand with FINRA within six years of the recording date of the FINRA Form U-5 in the CRD. One to three individuals chosen by the parties typically comprise the arbitration panel. It generally takes about one year to complete the arbitration process. FINRA arbitration hearings and the evidentiary record are not open to the public. The only information publicly released are the parties’ names, the nature of the claims, the arbitrator’s conclusory findings, and the remedy granted.

State Law Governs the Right to Damages in Defamation Claims

A FINRA arbitration panel hears and rules on FINRA Form U-5 defamation cases. However, state law governs the legal elements of the claim. This means that state law governs the elements of the defamation claim of the employee. State law also governs the defenses available to the employer. And, state laws are not all the same. Damages may include compensatory damages, punitive damages, lost value of benefits, emotional distress, attorneys’ fees, and a recommendation to expunge or amend the FINRA Form U-5.

Accordingly, attorneys often accompany FINRA Form U-5 defamation claims with other claims including wrongful termination, interference with business opportunities, and breach of contract.

The Absolute Privilege Rule

One of the most important rulings the FINRA arbitration panel will make is whether the employer is entitled to an absolute privilege or qualified privilege under the relevant state law. Due to the mandatory nature of the FINRA Form U-5 disclosure requirements and the public benefits they provide, some state courts have ruled that employers are entitled to an absolute privilege. Absolute privilege means that the person making the statement has the absolute right to make that statement at that time, even if it is defamatory. In other words, the person making the defamatory statement is immune from a defamation lawsuit. This makes it very difficult if not impossible to win a claim against them.

In other states, including Texas, either a qualified privilege applies or the law is unclear. A qualified privilege raises the bar for a wrongfully terminated employee to prove a claim. For example, it may be necessary to show the employer was malicious or reckless rather than merely negligent in the FINRA Form U-5.

Kilgore & Kilgore Attorneys Have Won Damage Awards in FINRA Defamation Claims

Despite the presence of a qualified privilege in many states, FINRA arbitration panels have granted significant monetary damage awards and expungement to aggrieved ex-employees. To obtain such an award is a complex legal process involving FINRA rules and procedures plus state defamation law. Kilgore & Kilgore can provide the legal assistance needed. Kilgore & Kilgore attorneys have won damage awards and expungements through FINRA arbitrations. To learn more about Kilgore & Kilgore’s securities industry and FINRA law practice, click here Kilgore & Kilgore Securities Fraud and FINRA Dispute Practice. To get started on a free review of the facts of your case, click here Contact Kilgore & Kilgore.

Arbitration is an Alternative System of Dispute Resolution

Arbitration is a private, alternative system of dispute resolution. In arbitration, the parties present their claims and defenses to one or more arbitrators who decide the matter. Typically, an arbitrator is an attorney or former judge who is paid a fee by one or more parties to serve as the arbitrator. The allocation of fees and expenses between the parties is typically outlined in the arbitration provision in the parties’ employment contract.

Many employers require their employees and executives to sign employment contracts or employment agreements that contain an arbitration provision. Generally, an arbitration provision requires an employee to assert any claims she or he might have against his employer in arbitration, rather than in state or federal court. An arbitration provision is usually, but not always, enforced by the courts.

Our Employment Lawyers Have Extensive Experience with Arbitration

Bill Masterson, a Kilgore & Kilgore attorney, recently successfully set aside an arbitration agreement in court. Bill Masterson argued that the arbitration agreement be voided because the employee who signed the agreement spoke only Vietnamese. The agreement was written in English. The case, Sang Nguyen v. Doskocil Manufacturing Company Inc., was heard recently in the Tarrant County court. The court ruled that, since the plaintiff did not understand the arbitration agreement, it must be set aside. If you have a question about arbitration or an arbitration provision in your employment agreement, click here Contact Kilgore & Kilgore to connect with an employment lawyer for a consultation.

Kilgore & Kilgore’s employment lawyers counsel and represent employees and executives who have arbitration agreements with their employers. We have litigated the enforceability an arbitration provisions. We have represented numerous executives in arbitration proceedings.

There are several private and non-profit organizations that administer arbitration proceedings. These organizations are often identified in an arbitration provision. Such organizations often supply a list of arbitrators that may be used for arbitration. In addition, these organizations often have their own procedural and discovery rules for arbitration.

Arbitration Compared with Trial

One significant difference between arbitration and trial is that the employee or plaintiff is no longer entitled to the right of trial by jury. A trial by jury usually is an employee or plaintiff’s right when a case proceeds in a courthouse. Some jurists or employers believe that arbitration is a faster, more efficient, and less expensive system of resolving disputes. However, in reality, arbitration proceeds at the same pace as a traditional court case. The legal and factual issues in arbitration can be just as complicated as in a court case. Arbitration proceedings are like formal court cases. Both processes can require pleadings, motions, discovery, and hearings. Both can be active for over a year. Thus, arbitration is often no less expensive or time-consuming than a traditional court case.

Arbitration May Be More Relaxed than a Formal Courtroom Trial

At the final hearing in arbitration, the parties present their evidence and examine their testifying witnesses in front of the arbitrator. While there is a fact finder, there is no judge in a black robe, courtroom, or jury. Instead, the final hearing is like an informal trial. The arbitration hearing may be held in an office or hotel conference room. Often, an arbitration provision identifies a specific city where the arbitration is to be conducted.
The rules of evidence may be relaxed at final arbitration hearings. After the final hearing, the arbitrator renders a decision. The arbitrator can also award monetary or other relief to a prevailing party. Often a prevailing party must go to court to enforce an arbitrator’s award. The legal standard in court for overturning an arbitrator’s award is extremely high.

Some Arbitration Agreements May Be Unenforceable

Some arbitration agreements prohibit employees from asserting collective arbitration or collective action in any forum. Many arbitration agreements require employees to bring claims, such as overtime pay claims, only through individual, piecemeal arbitration proceedings. Employers try to force this requirement on their employees to make it difficult for them to organize together and to assert a class action claim.
In an opinion dated May 26, 2016, the U.S. Court of Appeals for the Seventh Circuit held that an arbitration agreement between an employer and its employees for overtime pay claims violates the National Labor Relations Act, or NLRA. The Court also held that such an agreement is unenforceable under the Federal Arbitration Act, or FAA. The case is Lewis v. Epic Systems Corporation.

NLRA, FAA, Worker Rights and Arbitration

The NLRA was enacted in 1935 and provides workers with collective bargaining rights. The NLRA was designed to level the playing field for workers and their employers. Section 7 of the NLRA permits employees to engage in concerted activities for the purpose of collective bargaining or other mutual aid or protection. Section 8 of the NLRA enforces Section 7 by stating that any interference by an employer with an employee’s rights under Section 7 is an unfair labor practice.

In Lewis, the Seventh Circuit read the phrase concerted activities broadly to include collective or class remedies. Thus, the Seventh Circuit held that the arbitration agreement at issue in Lewis, which prohibited collective action, was unenforceable and in violation of Sections 7 and 8 of the NLRA.

The Seventh Circuit in Lewis also concluded that the NLRA was not in conflict with the FAA. The Seventh Circuit decided that because the arbitration provision at issue was illegal under the NLRA, the FAA did not require its enforcement. This Court also determined that the right to collective action in Section 7 is substantive, rather than merely procedural. An arbitration agreement that requires a party to waive a substantive right is unenforceable.

Courts are Split

The Lewis opinion is the law only in the Seventh Circuit. That means it is the law only in the federal courts in Wisconsin, Illinois, and Indiana. Texas, on the other hand, is within the Fifth Circuit. Thus, the Lewis opinion is not the law in the federal courts in Texas. In fact, the Fifth Circuit, in D.R. Horton, Inc. v. NLRB, came to the opposite conclusion from the Seventh Circuit. It held instead that Section 7 of the NLRA did conflict with the FAA.

There is a conflict of opinions in the federal circuits. They do not agree regarding the enforcement or not of arbitration and waiver provisions such as those at issue in Lewis and D.R. Horton. Thus, it may be up to the U.S. Supreme Court to decide this issue at a future date.

To learn more about our employment law practice, click here Employment Lawyer. To contact us for a consultation with an employment lawyer, click here Contact Kilgore & Kilgore.

Employment Lawyers Can Help White Collar Workers Understand the New Labor Rule as it Affects New Eligibility for Overtime Pay

Employment lawyers will soon be busy helping non-exempt employees understand a new rule from the U.S. Department of Labor. This new rule extends the right to overtime pay to 4.2 million additional white collar workers in its first year. In May, President Obama and Secretary of Labor Thomas Perez announced the publication of the Department of Labor’s new rule updating the overtime regulations that apply to white collar workers. We can define these white collar workers as executive, administrative, and professional (called EAP) workers. This also includes certain computer and outside sales employees under the Fair Labor Standards Act. The new rule will become effective on December 1, 2016.

Experienced Employment Lawyers

Our employment lawyers counsel employees covered under the Fair Labor Standards Act. We have litigated numerous unpaid overtime pay claims on their behalf. If you believe that you have a claim against your employer for unpaid overtime pay, click here Contact Kilgore & Kilgore to connect with an employment lawyer for a free review of the facts of your case.

Fair Labor Standards Act Protects American Workers

The Fair Labor Standards Act was originally signed into law by President Franklin Roosevelt in 1938. It provides several important protections for American workers. The Fair Labor Standards Act requires the payment of a minimum wage and overtime pay for eligible employees. Currently the Fair Labor Standards Act’s minimum wage is $7.25 per hour. We can define non-exempt employees as those covered by the Fair Labor Standards Act who are eligible for overtime pay. They are entitled to pay at a rate not less than one and one-half times their regular pay rates for time worked in excess of 40 hours in a workweek. The U.S. Department of Labor administers and enforces the Fair Labor Standards Act.

Exempt Employee Definitions

Under the U.S. Department of Labor’s regulations, an EAP worker is generally exempt from the overtime pay protections of the Fair Labor Standards Act if he or she meets three requirements.  First, the worker must receive a fixed, invariable salary.  Second, the worker’s salary must equal or exceed a specified amount. Third, the worker’s job primarily involves executive, administrative, or professional duties.

Since 2004 and up to December 2016, the weekly salary level for an EAP worker was $455 or $23,660 annually. Bona fide EAP workers who received a fixed annual salary of $23,660 or more were exempt from overtime pay under the Fair Labor Standards Act

Under the new rule, the U.S. Department of Labor will increase the salary level to the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region, the South. That level is $913 per week or $47,476 annually. Under the new rule, an employer must pay its salaried EAP workers $47,476 or more annually in order for them to be exempt from overtime pay under the Fair Labor Standards Act. Under the new rule, salaried EAP workers who earn less than $47,476 annually are entitled to overtime pay if they work more than 40 hours in a workweek.

Thousands of Workers in Texas Affected

The U.S. Department of Labor estimates that under the new rule over 370,000 currently-exempt EAP workers in Texas will be entitled to overtime pay. This is only if they work more than 40 hours in a work week. This assumes their employers do not raise their salaries to the new threshold to make them exempt.

Female Workers Affected By the New U.S. Department of Labor Rule

The new rule, according to the U.S. Department of Labor’s estimate, will mean that American workers will earn an additional $1.2 billion in pay. U.S. Department of Labor estimates that approximately 56 percent of affected workers are women and that 61 percent are age 35 or older.

Highly Compensated Workers Also Affected

The new rule also raises the total annual compensation level for Highly Compensated Employees (HCE) above which they would not be eligible for overtime pay. The new HCE salary level will increase from $100,000 to $134,004 annually. In 2020, the salary thresholds for EAP and HCE workers will be updated automatically every three years. The new rule allows employers to use other income received by these workers toward the HCE compensation level. Income from discretionary bonuses, incentive payments, or commissions can satisfy up to 10 percent of the new threshold. However, these payments must be made at least on a quarterly basis.

Employment Practices May Change

Many employers may change their practices as a result of this new rule. With this in mind, employers may be concerned about a potential jump in overtime pay. First, employers could increase some salaries to the new salary threshold to make non-exempt employees exempt. Second, employers may limit some workers to 40 or fewer hours per workweek to avoid overtime pay. Third, employers may reclassify their white collar workers to non-exempt hourly workers. In such cases, hours will be closely monitored and restricted. Nevertheless, some employers could simply choose to pay overtime to their newly non-exempt, salaried workers for their hours worked in excess of 40 in a workweek.
Kilgore & Kilgore has employment lawyers with the skill and experience to counsel and represent you in an unpaid overtime claim ay against your employer. To learn more about our overtime pay employment practice, click here Dallas Wage and Hour Lawyer. To contact us for a free review of the facts of your case with an employment lawyer, click here Contact Kilgore & Kilgore.