The New Overtime Rules: WHAT JOBS IN YOUR ORGANIZATION ARE EXEMPT FROM OVERTIME? WHAT YOU NEED TO KNOW C A P E M A Y C O U N T Y C H A M B E R O F C O M M E R C E N O V E M B E R 1 7 , 2 0 1 6 P R E S E N T E D B Y : J O H N M A R C E L L I AN O T A L E N T M A N A G E M E N T S O L U T I O N S , L L C So much uncertainty . . . . What changes to the recently amended FLSA overtime rules will ultimately be approved? Effective date? Minimum salary levels? Automatic increases? Trump says he wants exemption for “small business” The current administration will not back off- despite challenges from Congress and business groups to delay, amend or delete the new rules entirely; including a delayed effective date. It is not likely that anything will be done before Trump becomes President. 2 1
Where does that leave us now? December 1 st deadline for compliance with new rules Failure to comply could result in back pay awards, penalties and legal fees Is there a bright side? The DOL has essentially forced employers to review all of their jobs to determine if they are truly exempt from overtime. Why? Even if the new rules are ultimately struck down or amended, employers could still be subject to investigation by the DOL for violations of the current rules. 3 Are you in compliance with the current rules? Example: Joe the Bartender/Supervisor Is paid a salary of $32,000 / year; $615 / week Has seniority- he is “in charge” of the bar when he is working Works 55 to 60 hours per week I s not paid overtime; he is classified as “exempt” But is Joe really exempt based on FLSA rules currently in force? 4 2
Is Joe really exempt? The Salary Level Test Current Minimum Salary: $23,660 / year; $455 / week Joe’s current salary is $32,000 / year so he qualifies under the current Salary Level Test The Duties Tests or “White Collar Exemptions” o Executive o Administrative o Professional o Certain Computer-related jobs o Outside Sales 5 The Administrative Duties Tests For Supervisory/Management positions: Office or non-manual work which is Directly related to management or general business operations of the employer or its customers, and A primary component of which involves the exercise of independent judgement and discretion about Matters of significance 6 3
The Administrative Duties Tests What does “Matters of Significance” mean for someone in a supervisory position? o Interviewing, selecting and training employees; o Setting rates of pay and hours of work; o Maintaining production or sales records; o Evaluating employee performance, handling employee grievances, or disciplining employees; o Planning the work and determining work techniques; o Planning budgets; o Monitoring work for legal or regulatory compliance; o Providing for safety and security in the workplace. 7 So . . . . Is Joe really exempt? Joe is a Bartender; not a Supervisor What if the DOL investigated Joe’s employer? o Based on a salary of $32,000 / year or $15.38 / hour, Joe’s overtime rate is $23.07 / hour. o If he worked an average of 15 hours of overtime / week for 50 weeks / year, he would be entitled to back pay of $17,302 / year. o With a look-back period of up to 5 years; Joe could potentially receive a check for more than $86,000. In addition, the restaurant could be subject to penalties and legal fees. 8 4
Are there others? In addition to Joe, are there other employees of the restaurant who have been misclassified as exempt and not paid overtime? The DOL may review payroll records going back 5 years to determine if there are other employees who have been denied overtime pay- including people no longer working at the restaurant . 9 The DOL has become more aggressive. . . . Conducted almost 9,000 Wage & Hour investigations in 2015 Settlements averaged $8,800 42% of investigations were initiated by the DOL Wage & Hour Division ; they don’t just respond to complaints. 79% of the investigations initiated by WHD resulted in awards and penalties for violations. These investigations increasingly target small and mid-size companies. 10 5
So what do you need to do now? Create job descriptions and ensure that all of your employees are properly classified based on the Salary Level and Duties Tests. Begin to review strategies for compliance with the new overtime regulations: o Option: Increase salaries for exempt employees to the new minimum. Be sure to use the Duties Tests . o Option: Do not increase salaries but hire additional staff to ensure no one works more than 40 hours per week. Example: if you currently have 3 exempt employees who each typically work 50 hours / week (total of 150 hours), hire a 4 th employee to work 30 hours per week and limit the current employees to 40 hours. 11 What challenges could this create? How to manage the impact of increased labor costs. Recordkeeping for all hours worked Salary compression: raising salaries to the new minimum but not raising salaries for those already above the minimum. Managing off-hours work: How to manage staff who check email and take phone calls outside of core work hours. If allowed and employees exceed 40 hours, they must be paid overtime. Employee morale: will currently exempt employees feel like they have been demoted? Communication is key! 12 6
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