[PPT] - Exempt or Non-Exempt? That is the Question Making Business Sense of PowerPoint Presentation

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September 2, 2015

Exempt or Non-Exempt? That is the Question…

Making Business Sense of Wage-Hour Laws and Litigation

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Richard A. Millisor

Partner

rmillisor@laborlawyers.com

Fisher & Phillips LLP

Cleveland, Ohio Office

(440) 838-8800

Atlanta Boston Charlotte Chicago Cleveland Columbia Columbus Dallas Denver Fort Lauderdale Houston Irvine Kansas City Las Vegas Los Angeles Louisville Memphis New England New Jersey New Orleans Orlando Philadelphia Phoenix Portland San Diego San Francisco Tampa Washington, DC

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Relationship Between Federal and State Law

Fair Labor Standards Act Ohio Minimum Fair Wage Standards Law

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Exemptions Under the Federal (and Ohio) Law

Exemptions (“White Collar”)

Executive Administrative Professional Outside Sales

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Proposed FLSA “White Collar” Exemption Changes

If you raise the salary threshold to the 40th percentile

f earnings of all full-time salaried workers – by 2016

the threshold would $970/week ($50,440/year) per DOL estimate.

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Proposed FLSA White Collar” Exemption Changes

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What you need to know today (Blaring headlines notwithstanding):

Although unknown, we expect:

New Proposed salary thresholds to survive final rule
No major changes to duties tests

These provisions are not in effect. The exemption rules have not yet been changed. Employers are not required to do anything differently for the moment. Comment Period Now Closed. Final Regulations likely in early-Spring 2016.

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What you need to do:

 Evaluate any exempt position earning less then $50,000  Options to convert non-exempt status with (or without) increasing overall compensation:

Convert to hourly non-exempt (with or without onetime adjustment)
Covert to salary fluctuating work week non-exempt (with or without
netime adjustment)
Increase salary threshold to save exempt status

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Coming Soon

More on white collar exemptions

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The Basics: What the Laws Require

FEDERAL Ohio

Minimum Wage Unless exempt, employees must receive at least the minimum wage for every hour worked in each work week. The federal minimum wage is $7.25/hr, and no increases are currently planned. These amounts are applicable to the compensation calculations discussed in Chapter 6, “Exemptions under the Federal Law”. All employees must receive at least the state minimum wage, $7.95, effective 01/01/14, for every hour worked. The minimum wage will increase to $8.10, effective 01/01/15. Beginning in 2006, the Ohio Constitution was revised to require that each September the wage will increase and be implemented January 1st

f each year. The increase is tied to inflation.

Overtime Unless exempt, employees must receive at least one and one-half times their “regular rate of pay” for all hours worked in excess of 40 in each work week. The “regular rate” consists of all compensation, including commissions and incentives. Same. Exemptions The federal law contains eight different exemptions from minimum wage, overtime and record keeping or from overtime only that allow dealers to avoid paying overtime to certain employees who meet specific qualifications. Same. Record Keeping Employers must keep an accurate record of the hours worked by each non-exempt employee each day and each week and a record of the amounts paid and deducted. Records must be retained for three years. Same. Child Labor The law limits the hours of work and job duties of minors under 18 years

f age.

The law limits the hours of work and job duties of minors under 18 years

f age and closely tracks the restrictions under the federal law.

Most Favorable Provision The provision of the federal, state or local law most favorable to the employee applies. That means an employer in Ohio must ensure that it is complying with federal, Ohio and even local laws.

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What Constitutes “Hours Worked”?

Travel Time Training Time Meal and Rest Breaks Work Performed Away from Employer Time Worked at Other Related Employer Time Spent Performing Additional Duties Unapproved Overtime On Call Time Holidays, Vacation, Sick Pay Medical Treatment/Drug Test Compensatory Time Off (“Comp Time”) Time Spent Changing Into and Out of Employer- Provided Uniforms Overtime Due Only After 40 “Hours Worked” in the Work Week

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Time Records Under Federal and Ohio Law

Who is required to Keep a Time Record? What is Required to be Recorded? How Should you Keep a Record of Hours Worked? How Should Time Card Be Corrected? Employees who Punch in Early and Work Unauthorized OT? What About Rounding? What About Automatic Meal Period Deductions? What About Docking Pay for Reporting Late

r Other Disciplinary

Infraction?

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Executive Exemption

Is in charge of a department or sub-department, and Supervises the work of two or more full time employees, and Receives a salary or guarantee

f at least $455/wk, and

Has the authority to hire and fire.

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Executive EXEMPT

Dealer Dep’t Manager

NOT EXEMPT

Ass’t Manager CSI Manager Lot Manager Inventory Manager Finance Manager

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Administrative Exemption

Primary duty is performing office or non-manual work related to management policies or general business

perations, and

Exercises discretion and independent judgment with little

r no supervision

(holds a position of responsibility), and Receives a salary or guarantee of at least $455/wk.

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Administrative

EXEMPT

Finance Human Resources Manager Office Manager Tax Quality Control Purchasing Advertising/Marketing Safety and Health Labor Relations Government Relations

NOT EXEMPT

Admins Accounts Payable Accounts Receivable Clerical Workers Employees who do not Exercise Sufficient Discretion

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Professional Exemption

Performs duties requiring advanced knowledge in a field

f science or learning

requiring specialized instruction, and Consistently exercises discretion and independent judgment , and Receives a salary or guarantee of at least $455/wk.

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Highly-Compensated Employees

Performs any one of the exempt duties of an executive, administrative, or professional employee. Is guaranteed total annual compensation of at least $100,000 per year, and Receives a salary or guarantee of at least $455/wk, and Performs office or non-manual work, and

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Can we “dock” a salary?

“Salary basis of pay” means that an employee receives a fixed,

predetermined amount, subject to very limited deductions, for any week in which any work is performed.

“Docking” destroys the overtime exemption for executive,

administrative, professional, and highly compensated employees.

However, docking is permissible for all other categories of

employees.

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“Salary Basis” Safe Harbor

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Calculating Overtime

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Options Available to Reduce Overtime Costs

Limit The Employee To A Maximum Of 40 Hours Per

Week

Restructure The Employee’s Job Duties To Bring Him

Within One Of The Exemptions To Overtime

Restructure The Employee’s Pay Plan To Pay Him

Entirely On Commissions And Thereby Make Him “Commission-paid” Under The Federal And Ohio Law

Use A Fluctuating Rate Pay Plan
Base Overtime Payments Only On Hours Actually

Worked Reducing the Cost of Overtime

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Deductions from Wages

Federal

0 hrs 40 hrs 50 hrs

PERMITTED DEDUCTION

$18.00 $12.00 $7.25

Example: Non-exempt employee is paid $12.00 per hour and works 50 hours. The maximum deduction that may be made under the federal law is the difference between the employee’s hourly rate and current minimum wage for the first 40 hours worked. The deduction may not affect any overtime due. $12.00 - $7.25 = $4.75 x 40 hrs = $190.00 See Restrictions on Deductions from Salaries of Executive, Administrative, and Professional Employees

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Meals and Rest Breaks

Not Required unless minor or nursing mother.
Compensable unless 30min for meal, 20 minute for break

and completely relieved of duty.

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Thank you! Questions?

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