The New Overtime Rules: WHAT JOBS IN YOUR ORGANIZATION ARE EXEMPT - - PDF document

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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

The New Overtime Rules:

So much uncertainty . . . .

 What changes to the recently amended FLSA

• vertime 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.

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Where does that leave us now?

 December 1st 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.

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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  Is not paid overtime; he is classified as “exempt”

 But is Joe really exempt based on FLSA rules

currently in force?

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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”

• Executive
• Administrative
• Professional
• Certain Computer-related jobs
• Outside Sales

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The Administrative Duties Tests

For Supervisory/Management positions:

 Office or non-manual work which is  Directly related to management or general business

• perations of the employer or its customers, and

 A primary component of which involves the exercise

• f independent judgement and discretion about

 Matters of significance

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The Administrative Duties Tests

 What does “Matters of Significance” mean for

someone in a supervisory position?

• Interviewing, selecting and training employees;
• Setting rates of pay and hours of work;
• Maintaining production or sales records;
• Evaluating employee performance, handling employee grievances,
• r disciplining employees;
• Planning the work and determining work techniques;
• Planning budgets;
• Monitoring work for legal or regulatory compliance;
• Providing for safety and security in the workplace.

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So . . . . Is Joe really exempt?

 Joe is a Bartender; not a Supervisor  What if the DOL investigated Joe’s employer?

• Based on a salary of $32,000 / year or $15.38 / hour,

Joe’s overtime rate is $23.07 / hour.

• 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.

• 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.

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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.

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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.

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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:

• Option: Increase salaries for exempt employees to the

new minimum. Be sure to use the Duties Tests.

• 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 4th employee to work 30 hours per week and limit the current employees to 40 hours.

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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!

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