6/2/2016

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The New (and Final) FLSA Overtime Regulations

Diane M. Juffras Drake Maynard

School of Government Drake Maynard Human Resources Services, LLC

UNC-Chapel Hill Chapel Hill, NC

The New Overtime Rule

• $913 per week

• $47,476 per year

The New Overtime Rule

• Effective December 1, 2016

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The Current Overtime Rule: What is It?

Current Requirements for Exemption from Overtime:

• the position must be paid on a salary basis;

• the position must be paid a minimum of $466 per week ($23,660 annually); and

• the position’s duties must satisfy either the executive, administrative or professional duties test.

The New Overtime Rule: What is It?

New Requirements for Exemption from Overtime:

• the position must be paid on a salary basis;

• the position must be paid a minimum of $913 per week ($47,476 annually); and

• the position’s duties must satisfy either the executive, administrative or professional duties test.

Executive Duties Test

• Management as primary duty

• Supervision of two or more employees

• Hiring, firing or promotion authority

or

• hiring, firing or promotion recommendations given particular weight.

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Administrative Exemption

1. Primary duty is performance of office or nonmanual work directly related to management or general business operations of the employer

2. Performance of such work includes the exercise of discretion and independent judgment on matters of significance

The Professional Exemption

Four Separate Tests:

• Learned Professional

• Creative or Artistic Professional

• Teacher

• Computer Professional

The Actual Changes: What Are They?

Increase in the minimum salary threshold from $455/week to $913/week

• In annualized terms, that’s an increase from $23,660 to $47,476

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$913 Per Week

Salary threshold test:

Meant to be a “bright line rule”

Current v. New Salary Threshold

$455/week

• Just below current poverty level for a family of four

• 12th percentile of F/T salaried workers

$913/week

• Double the current poverty level for a family of four

• 40th percentile of F/T salaried workers

In 1975, $250/week was the 65th percentile of F/T salaried workers.

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Automatic Updating

Every three years beginning January 1, 2020• Estimate of $984 ($51,168) for 2020

Highly Compensated Employees

Current

• Salary Threshold of $100,000 per year

New

• Salary Threshold of $134,004• Estimate of $147,524

for HCE in 2020

Computer Professionals

Current

• Computer professional may be salaried or may be paid $27.63/hour

New

• No change to minimum hourly rate for computer professional

• Salaried computer professional must earn at least $913/week

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Some Considerations for Community College and Public Colleges and Universities

• Salary threshold and salary basis tests do not apply to bona fide teachers. • No change

• Adjuncts qualify as teachers, as do graduate student teaching assistants.• No change

• Coaches whose primary duty is instruction in the sport qualify as teachers.• No change

Some Considerations for Community College and Public Colleges and Universities

Postdocs will usually satisfy the Professional Duties Test and are also subject to the Salary Threshold and Salary Basis Tests.

Some Considerations for Community College and Public Colleges and Universities

• DOL generally considers research assistants to be students, even where they receive a stipend.

• Contrast with interns: http://canons.sog.unc.edu/internships-under-the-fair-labor-standards-act/

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Some Considerations for Community College and Public Colleges and Universities

Academic administrators are exempt if they are paid a minimum salary equal to the entering salary for teachers at their institution.

• No Change

Some Considerations for Community College and Public Colleges and Universities

Employees of educational institutions whose job duties are not unique to an educational setting but are found elsewhere in government and business are subject to the standard tests for exempt status.

Nondiscretionary Bonuses

Current New

• Nondiscretionary bonuses may be included in calculation of up to 10% of minimum salary threshold

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Other Proposed Changes?

• General changes to the duties tests.

• Possible requirement that any exempt position spend a minimum percentage of time on exempt duties

• Possible upper limit on the amount of time any exempt position may spend on nonexempt duties

• Prohibition on concurrent performance of exempt and nonexempt duties

• Return to the long and short duties tests

ALL REJECTED

No Changes Proposed or Adopted to:

• Comp time

• 207(k) exemption

• Fluctuating workweek

• Rules governing on-call time, training time, travel time and other rules governing compensable time

Remember

• Minimum salary for all exempt status positions will be $47,476 per year. NO EXCEPTIONS!

• Positions that make less than that minimum CANNOT be exempt, regardless of duties.

• Positions that were exempt but become nonexempt because of salary must be compensated for working overtime.

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Management of New Regulations

Your organization needs:

• A communication plan

• Decisions by management on significant questions

• Preparation by Human Resources and management to implement these decisions

Your Communication Plan

1. Develop a communication strategy NOW2. Develop a communication plan that addresses these

issues: Why your organization is making these changes What being non-exempt means versus being exempt Loss of status in becoming non-exempt Loss of flexibility in non-exempt status

3. Recognize that there is no such thing as TOO much communication

4. Use every type of media (in-person, email, web) to communicate

5. Include how management and HR will deal with rumors

Issues that Will Raise Questions

• Why your organization is making these changes

• What being non-exempt means versus being exempt

• How to deal with loss of flexibility in non-exempt status

• Telecommuting/teleworking changes

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Issues that Will Raise Questions

• How to deal with loss of status in becoming non-exempt

• How to deal with exempt and non-exempt employees in same classification

• Why some employees got a pay raise to stay exempt and others didn’t

• Role of HR, management, supervisors and employees in implementing new overtime work rules

Your Implementation Plan - I

Decisions on handling these issues:

• Exempt and non-exempt employees in same classification

• Choosing whose pay to increase to keep exempt status

• Changes, if any, to policy on overtime work

• Changes in telecommuting policy/status

Your Implementation Plan - II

• Where communication will come from – in what form?

• Who will receive and respond to employee questions?

• Who will provide information and training to supervisors and employees on policy changes (telecommuting, overtime work)

• A timeline for providing information to everyone, making decisions, communicating decisions and implementing those decisions, providing training

• Clear understanding and communication about WHO is responsible for WHAT and WHEN

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Questions and Answers

Why is your organization making these changes?

Because the U. S. Department of Labor has revised the minimum salary level for a position/employee to be exempt from overtime compensation.

Questions and Answers

What policy changes will occur as a result of these new rules?

You need to be open and consistent. In the beginning be prepared to say “We’re reviewing a lot of possibilities. When decisions are made, we’ll communicate that to everyone.”

And when decisions are made, communicate them.

Questions and Answers

What’s the difference between exempt and non-exempt status?

• Be prepared to explain the concepts of work week, overtime, and overtime compensation (either pay or paid time off, depending on your organization.)

• Be prepared to talk about the difference in record-keeping between the statuses.

• Be prepared to talk about any benefits differences.

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Timekeeping for the Newly Nonexempt

Were they required to keep track of their time when they were exempt?

Basic timekeeping for nonexempt employees:

• Beginning of the work day or shift

• End of the work day or shift

• Uncompensated meal breaks

• Uncompensated rest periods (rest periods of longer duration than 20 minutes).

Timekeeping for the Newly Nonexempt

• How do you currently handle e-mails and phone calls taken at home by nonexempt employees?

• How do you handle other kinds of remote work?

• Will you be able to get the Newly Nonexempt to record that time?

• Will you need special e-mail and phone call logs for the Newly Nonexempt?

Timekeeping for the Newly Nonexempt

The challenge of explaining the concept of compensable time

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Weekly Queries

1. Did you take or make any phone calls after hours or from home this week?

2. Did you respond to any e-mails on your phone while “out on the town” this week?

3. Did you respond to any e-mails from home this week?

4. Did you work on any reports or other documents after hours or from home this week?

5. Did you take an uninterrupted 30-minute lunch break?

6. Were you on-call this week?If so, did you respond to any calls?

Questions and Answers

Why don’t I have the same flexibility now that I am non-exempt?

• Be prepared to explain that exempt employees are paid the same amount regardless of time worked and non-exempt employees are paid by the hour and paid extra for hours worked beyond 40.

• Be prepared to explain that practices that formerly occurred (such as early/late arrival-leaving) will be affected because of overtime compensation issues.

• Be prepared to explain (and enforce) that non-exempt employees are not expected to read work email or respond to work-related telephone calls unless specifically required to do so.

Questions and Answers

Why have I been demoted (moved to non-exempt status)?

• Be prepared to explain this is not a demotion in any sense, just a change to reflect federally-mandated changes in employment regulations.

• Be prepared to explain that any perceived loss of status is not tied to any policy or expectation of the organization.

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Questions and Answers

Employee X got a pay raise and stayed exempt. I became non-exempt. Why?

• Be prepared to explain how your organization made these decisions. Remember, salaries and pay increases are public information.

How Will You Handle. . .

Exempt and non-exempt employees in same class?

• Decision needs to be made in advance of effective date.

• Decision: whether non-exempt employees will be asked/allowed to work overtime.

• Decision: will 40 hours+ work be limited to exempt employees.

• Will what you do be perceived as fair?

How Will You Handle. . .

The role of management, supervisors and HR in managing overtime work and compensation

1. Decide what, if any, change to current policy or practice will occur

2. Put change in overall communication plan

3. Train all parties on responsibility and accountability for controlling overtime work

4. Develop process for periodically “refreshing” this information with all parties

5. Make sure communication plan addresses what employees need to know on this topic

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Unauthorized Overtime

If the Newly Nonexempt are supervisors or

department heads, from whom will you require them

to get permission to work overtime?

Unauthorized Overtime

What will you do to enforce compliance with

overtime policies?

Training and Providing Information

Training is essential for supervisors and managers in:

• Controlling overtime

• Record-keeping for non-exempt employees

• Information provided to employees

Information is essential for employees about:

• Why this is occurring

• The difference between exempt/non-exempt

• Organization’s policy on overtime work

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Down the Road

• Who will monitor salaries to insure that exempt status is maintained when salary floor automatically rises?

• Will your organization revisit pay increases to regain exempt status?

• Will there be periodic “refreshers” on exempt/non-exempt status, overtime work and compensation and relevant organizational policy?

Things That Have Not Changed

• The requirement that a position satisfy a duties test, be paid on a salary basis and earn the minimum salary threshold in order to be exempt.

• Duties tests

• Nonexempt employees still owed overtime after 40 hours worked in a workweek.

• Government employers may still use comp time: 1 ½ hours of paid time off in lieu of cash overtime.

• 207(k) exemption for LEOs and firefighters

• Fluctuating workweek

• All those tricky rules governing compensable time

Things That Have Changed

• Minimum salary required for position to be exempt from overtime:• $913 per week or $47,476 per year

• $134,004 for HCEs

• Inclusion of nondiscretionary bonuses such as longevity pay in meeting up to 10% of salary threshold

• Automatic updating

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