A version of this article was originally published in the January 2015 issue of The HR Specialist. It is reprinted here with permission.

The start of a new year is always a good time to survey the landscape and see what is on the horizon. 2015 promises to provide: legislative battles over increases to the minimum wage, increased wage and hour litigation and proposed regulations that could dramatically narrow the overtime exemptions under the Fair Labor Standards Act (FLSA).

Minimum Wage Battles

President Obama has called on Congress to raise the national minimum wage from $7.25 to $10.10 an hour. He signed an executive order raising the minimum wage to $10.10 an hour for individuals working on new federal service contracts.

Philadelphia’s Mayor Nutter followed suit, signing an executive order increasing the minimum wage for most individuals working for city contractors or first-tier subcontractors to $12.00 per hour effective January 1, 2015. The executive order applies to the following categories of contractors or subcontractors with five or more employees: (1) public agencies that receive contracts of $10,000 or more from the city in a 12-month period; (2) for-profit contractors with annual gross receipts of more than $1,000,000 that receive contracts for $10,000 or more in a 12-month period for services to the city (except contracts that are incidental to the delivery of products, equipment or commodities); (3) nonprofit contractors that receive contracts for more than $100,000 in a 12-month period for services to or for the city (except contracts that are incidental to the delivery of products, equipment or commodities); (4) recipients of city leases, concessions or franchises; and (5) City financial aid recipients. There are limited exceptions from the coverage of the executive order. Employers that are contractors or subcontractors of the City of Philadelphia should carefully review their contracts and subcontracts to determine whether they are covered by this executive order.

Since 2009, Pennsylvania’s minimum wage has remained the same as the federal minimum wage rate of $7.25 an hour. However, 20 other states will increase their minimum wage this year, and, by the end of the year, every neighboring state will have a minimum wage higher than that of Pennsylvania. Governor–elect Wolf has also advocated raising the state minimum wage to $10.10 an hour. Nevertheless, with the legislature now controlled by Republicans, it is unlikely any increase will pass this year.

Wage and Hour Litigation

In the most recent 12-month period for which data is available, the number of wage and hour lawsuits filed in federal court increased almost 5 percent over the prior period. Last year, more than 8,000 such cases were filed. This pattern of year-over-year increases has continued for almost a decade. There is no reason to believe that wage and hour litigation will decline in 2015. Moreover, the U.S. Department of Labor (DOL) has requested a budget increase to allow it to hire 300 additional investigators to investigate and pursue wage and hour claims.

How can an employer reduce the risk of wage and hour litigation? First, Pennsylvania employers should be cognizant of the differences between federal and state wage and hour laws. For example, unlike federal law, Pennsylvania does not allow for an hourly exception for computer professionals. Employers should be aware that, where state wage and hour law is more generous to employees than federal law, state law will control.

Second, employers should review the bases for categorizing any employees as exempt from the minimum wage or overtime requirements of federal or state law. So-called misclassification is the basis for many wage and hour claims.

Third, employers should ensure that their non-exempt employees do not work “off the clock.” Compensable time includes any time that an employer suffers or permits an employee to work. Such time may include time spent by the employee during meal breaks and/or after regular business hours doing such things as answering phone calls or responding to emails. Employers must ensure that non-exempt employees do not perform such work or, if they do perform such work, that they are paid for their time. Employers must keep accurate time records for all non-exempt employees.

Fourth, employers should be careful to correctly calculate the “regular rate of pay” on which overtime is based. Employers should include commissions and non-discretionary bonuses.

FLSA Regulations

In March 2014, President Obama directed the Secretary of Labor to “modernize and streamline” the existing overtime regulations. The DOL has suggested that the proposed regulations will be issued in February 2015.

We anticipate that the proposed changes will include an increase in the minimum salary threshold level for exemptions. The present minimum salary level is $455 per week or $23,660 per year. Research funded by the DOL recommended that the salary level be increased to $970 per week or $50,440 per year. We also expect that the DOL may propose narrowing the scope of the white-collar exemptions (administrative, executive and professional) by requiring that exempt employees perform exempt duties at least 50 percent of their work time. Once the rules are proposed, there will be a public comment period, after which the DOL will respond to those public comments and may revise the proposed regulations. The Office of Management and Budget must also review and approve of the proposed regulations before they are published in the Federal Register. As a result, any proposed changes to the regulations would likely not take effect before the second half of 2015.