New Federal Overtime Rules and Your Cannabis Labor Expenses

Cannabis employment lawyerFederal wage and hour laws apply to cannabis businesses as they would to any other business. Federal wage and hour laws are governed by the Federal Fair Labor Standards Act (FLSA). The FLSA requires employers pay overtime compensation to non-exempt employees who work more than 40 hours per week. Generally, employers are required to pay overtime wages to workers who earn less than $455 per week ($26,600 annually). The FLSA provides the minimum salary requirement for paying overtime. States are allowed to enact additional protections. If the state’s protection results in higher pay for the worker, the state protections are enforced over the FLSA. Many states have additional protections and you should always check your local jurisdictions to determine overtime compensation requirements.

In May 2016, at the direction of President Obama, the Federal Department of Labor (DOL) raised the salary threshold for overtime pay to $913 per week ($47,476). Meaning employers had to pay overtime wages to workers who were making less than $913 per week. The changes caused panic among employers and employees. Employers faced significant increased labor costs because employers would now have more employees eligible for overtime compensation. Employees were afraid employers would decrease their hours to avoid the new salary minimum.

Before the changes could go into effect, several states and business advocate groups asked for a preliminary injunction to stop the changes. A Federal judge granted the injunction on November 22, 2016 and the changes never took effect. The DOL appealed the decision to the Fifth Circuit, but recently asked the Court to stay the appeal to allow the current administration to pass new rules.

In July 2017, the DOL asked for public comment concerning the wage threshold limitation. The DOL received more than 14,000 comments. On October 30, 2017, the DOL confirmed new overtime rules were coming. It is expected the new salary level will be in the low $30,000 range.

If the projections are accurate, employers will be required to pay overtime wages to non-exempt employees making under $30,000. The increased minimum threshold salary will increase the number of employees eligible for overtime compensation. The expected changes are not as drastic as the ones passed in May 2016 but they may create additional labor costs—especially in retail businesses with hourly employees. Cannabis employers who employ hourly employees should evaluate their labor expenses now to determine if their risk for increased labor costs if the minimum salary threshold is increased. Employers should make a plan now to deal with increased labor costs, keeping employees happy, and keeping their cannabis business running smoothly.

One response to “New Federal Overtime Rules and Your Cannabis Labor Expenses”

  1. The Obama proposal applied overtime for both exempt and non-exempt, I think. Are you saying/speculating that the new proposal would not have the (about) $30,000 threshold apply to exempt employees?

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