PAY TIME: Proposed Changes to FLSA Salary Threshold & - - PowerPoint PPT Presentation

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PAY TIME: Proposed Changes to FLSA Salary Threshold & Developments in Pay Equity

Presented by: Anne G. Bibeau, Esq. Anne-Lise Gere, SPHR, HR Advisor & Consultant, GERE Consulting Associates

AGENDA AGENDA

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Topics:

• 1. FLSA Basics
• 2. Proposed Salary Threshold Increase
• 3. FLSA Exemptions
• 4. Pay Equity

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FLSA Basics

• Administered by Wage and Hour Division (WHD) at

Department of Labor (DOL)

• Minimum wage
• Overtime
• Recordkeeping
• Child labor standards
• Private and public sector employers
• Special rules apply to state and local government

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Overtime

• Non-exempt employees
• Paid for all hours above 40 per week
• Overtime rate = 1.5 x “regular rate”
• Regular rate = total compensation for week ÷ total hours worked
• No comp time for private employers

Non-Exempt Employees

• Employees are non-exempt unless an exemption applies
• Exemption implies:
• No overtime pay required
• No compliance with minimum wage
• Non-Exempt is the default classification
• Exemption has to be justified

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Exempt Employees

• Three main exemption categories = “White Collar Exemptions”

a) Executive b) Administrative c) Professional

• Other possible exemptions:

a) Outside Sales b) Computer Professional c) Highly Compensated Employee (HCE)

• Certain trainees and apprentices
• Seamen
• Employees of certain seasonal amusement or recreational

establishments

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Who Is Exempt?

Three-part test for white collar exemptions:

• 1. Paid on a salary basis
• 2. Salary meets the salary threshold ($23,660 => $35,803)
• 3. Satisfy a duties test

SALARIED EXEMPT

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Duties Test - Executive Exemption

• Primary duty = management of company, department or

subdivision

• Executive must customarily and regularly direct the work of two
• r more other employees
• Executive must have authority to hire / fire or make such

recommendations

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Duties Test - Administrative Exemption

• Primarily performs office or non-manual work related to the

management or general operations of the employer

• Customarily and regularly exercising discretion and

independent judgment with respect to matters of significance.

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Duties Test - Professional Exemption

• The Professional’s primary work requires:
• [Learned] knowledge of an advanced type, in a field of

science or learning acquired through a prolonged course of specialized intellectual instruction; or

• [Creative] invention, imagination, originality or talent in a

recognized field of artistic or creative endeavor.

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Duties Test - Outside Sales

• Primary duty = selling or obtaining
• rders or contracts
• Must be customarily and regularly

engaged away from the employer’s place or places of business.

• No FLSA salary requirements for
• utside sales exemption.

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• Computer systems analysts, computer

programmers, software engineers or other similarly skilled workers in the IT field

• Job titles not determinative.
• Excludes employees engaged in the

manufacture or repair of computer hardware.

• Different salary threshold
• Salary basis at least $455/week

OR

• $27.63 per hour.

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Duties test - Computer Professional

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“Highly Compensated” Exemption

• Total annual compensation of $100,000 or more.
• Includes at least $455 per week on a salary basis.
• Excludes benefits.
• Primary duty: office or non-manual work.
• Customarily and regularly performs at least one of the exempt

duties/responsibilities of executive, administrative, or professional employees.

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• Technology Director
• Supervises 5 programmers
• Designs software
• Salary: $45,000
• Incentive bonuses ($20,000

last year)

• Is David exempt?

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Meet David

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Site Superintendent Duties:

• Supervises one part-time employee and
• ne full-time employee.
• Sometimes works weekends.
• Has an associate degree in mechanics.
• Answers calls after hours.
• Framing, occasional carpentry work .
• Prepares cost estimates, budgets, and

work timetables.

• Deals with city inspectors, permitting.
• Unloads material deliveries.
• Allowed to write employees up for

infractions, but an employee needs multiple write-ups before being at risk for termination by Michael’s supervisor.

• Salary: $85,000 per year
• Is Michael exempt?

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Meet Mitchell

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Executive Assistant to the Director Duties:

• Manages the complex calendar and scheduling of

Director.

• Drafts and prepares reports for board meetings.
• Has a master’s degree in strategic marketing.
• Enters data in accounting software and prints

reports.

• Has authority to commit director to public events,

interviews, and meetings.

• Conducts business meetings for the team on behalf
• f Director when necessary.
• Has the authority to commit the company to financial

investments and contractual agreements with vendors.

Salary: $70,000 per year Is Trinity exempt?

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Meet Trinity

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Salary Threshold – How Did We Get Here?

• Last increase to exemption salary – 2004
• Obama area proposal (2016)
• $913/week ($47,476/year)
• Texas Court issued injunction prohibiting implementation of rule.
• Trump administration dropped support for the rule.
• New Rule – Effective January 1, 2020
• Increase to $35,568/year ($684/week)

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2019 - More Changes

• Highly Compensated Employee (HCE) total annual compensation
• From $100,000 to $107,432.
• No automatic increases of exempt salary.
• DOL “committed” to review threshold every 4 years.
• No change to duties tests.

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2019 - More Changes

• Up to 10% salary threshold may be met with nondiscretionary

bonuses, incentives, and commissions paid annually or more frequently.

• May make one final “catch-up” payment to meet salary

threshold annually.

a. For HCE, catch-up payment is due during the last pay period or within one month after the end of the 52-week period. b. For all other exempt employees, the catch-up payment is due by first pay period after the end of the 52-week period.

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Get Ready For Higher Exemption Level

• Identify “At Risk” exempts (between $23,660 and $35,568)

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Get Ready For Higher Exemption Level

• Identify “At Risk” exempts (between $23,660 and $35,568)
• Track hours actually worked
• Run the numbers
• Different scenarios: Reclassification / Increase pay
• Consider impact on overtime/benefits
• Communicate with affected employees
• Train supervisors
• Update payroll system

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Best Practice – Job Descriptions

• Identify position as exempt or non-exempt.
• If exempt
• include in list of essential job functions qualifying for FLSA exemption
• Do NOT identify the specific exemption

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Salary Basis: Permissible Deductions

Initial or terminal week of employment. FMLA absences Full-day disciplinary, unpaid suspensions Full-day absences for personal reasons Full-day absences for sickness Offset jury/witness fees or military pay Penalties imposed for major infractions of safety rule

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Salary Basis: Prohibited Deductions

xPartial-day absences (other than FMLA) xDeductions for quality or quantity of work

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Non-Exempt Employees

• All time worked must be compensated
• Common problems:
• Off the clock work
• After-hour email/text/call

Out to Lunch

• Acme Co.
• 30-minute lunch and two 15-minute breaks
• Payroll automatically deducts 2.5 hours from each employee’s

hours each week for lunches

Equal Pay Act: pay discrimination “on the basis of sex”

• Prima facie case of pay discrimination under the Equal Pay Act:
• Different wages for an employee of the opposite sex
• For equal work on jobs requiring equal skill, effort, and responsibility
• Performed under similar working conditions
• Skill: experience, training, education, and ability
• Effort: physical and mental exertion
• Responsibility: degree of accountability
• Employer’s defense: (1) seniority system, (2) merit system, or (3)

“differential based on any factor other than sex.”

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Other Pay Discrimination Laws

• Title VII: prohibits discrimination based on sex, race, color,

national origin, religion, and genetic information

• ADA: prohibits discrimination based on disability
• ADEA: prohibits discrimination based on age (40 or older)

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• Rizo discovered that a new

employee, a man, hired to do similar work was making $13,000 more than her.

• Employer: we set starting

pay based on salary history from past employment. That’s a “factor other than sex.”

Rizo v. Fresno County Office of Education (9th Cir. Apr. 9, 2018)

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• 9th Circuit: salary history, either alone or with other

factors, is not a “factor other than sex.”

• A “factor other than sex” must be a legitimate, job-related

factor such as employee’s experience, educational background, ability, or prior job performance.

• SCOTUS:

Reversed because “federal judges are appointed for life, not for eternity”

Rizo, cont’d

Spencer v. Va. State Univ., 919 F.3d 199 (4th Cir. 2019)

• Plaintiff alleged that she was paid less than male professors

and cited two men as comparators.

• Plaintiff was unable to establish that she performed “equal” work

requiring “equal skill, effort, and responsibility,” because the men taught graduate level classes and worked more hours.

• University based the wage differential on a factor other than

sex: the men were former administrators and the University had a policy of paying former administrators who became professors 9/12ths of their administrator salary.

• Fourth Circuit: plaintiff failed to show a prima facie case of wage

discrimination.

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QUESTIONS?

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The information in this presentation is for general information about the topics discussed, and is not legal or tax advice. Nor does any exchange of information associated with this presentation in any way establish an attorney-client relationship.

Thank You!

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Anne-Lise Gere 757.303.1635 | 757.240.4402 annelise@gereconsulting.com

Anne G. Bibeau 757.446.8517 abibeau@vanblacklaw.com

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