Exempt or Non-Exempt? That is the Question … Making Business Sense of Wage-Hour Laws and Litigation Richard A. Millisor Partner rmillisor@laborlawyers.com Fisher & Phillips LLP Cleveland, Ohio Office (440) 838-8800 September 2, 2015 Atlanta Boston Charlotte Chicago Cleveland Columbia Columbus Dallas Denver Fort Lauderdale Houston 1 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
Relationship Between Federal and State Law Fair Labor Standards Act Ohio Minimum Fair Wage Standards Law
Exemptions Under the Federal (and Ohio) Law Exemptions (“White Collar”) Executive Administrative Professional Outside Sales
Proposed FLSA “White Collar” Exemption Changes If you raise the salary threshold to the 40 th percentile of earnings of all full-time salaried workers – by 2016 the threshold would $970/week ($50,440/year) per DOL estimate.
Proposed FLSA White Collar” Exemption Changes
What you need to know today (Blaring headlines notwithstanding): Employers are not Comment Period The exemption rules These provisions are required to do Now Closed. Final have not yet been not in effect. anything differently Regulations likely in changed. for the moment. early-Spring 2016. Although unknown, we expect: • New Proposed salary thresholds to survive final rule • No major changes to duties tests
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: o Convert to hourly non-exempt (with or without onetime adjustment) o Covert to salary fluctuating work week non-exempt (with or without onetime adjustment) o Increase salary threshold to save exempt status
Coming Soon More on white collar exemptions
The Basics: What the Laws Require FEDERAL Ohio Minimum Wage Unless exempt, employees must receive at least the minimum wage for All employees must receive at least the state minimum wage, $7.95, every hour worked in each work week. The federal minimum wage is effective 01/01/14, for every hour worked. The minimum wage will $7.25/hr, and no increases are currently planned. These amounts are increase to $8.10, effective 01/01/15. applicable to the compensation calculations discussed in Chapter 6, Beginning in 2006, the Ohio Constitution was revised to require that “Exemptions under the Federal Law”. each September the wage will increase and be implemented January 1 st of each year. The increase is tied to inflation. Overtime Unless exempt, employees must receive at least one and one-half times Same. 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. Exemptions The federal law contains eight different exemptions from minimum Same. wage, overtime and record keeping or from overtime only that allow dealers to avoid paying overtime to certain employees who meet specific qualifications. Record Keeping Employers must keep an accurate record of the hours worked by each Same. non-exempt employee each day and each week and a record of the amounts paid and deducted. Records must be retained for three years. Child Labor The law limits the hours of work and job duties of minors under 18 years The law limits the hours of work and job duties of minors under 18 years of age. of 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.
What Constitutes “Hours Worked”? Work Performed Meal and Rest Travel Time Training Time Away from Breaks Employer Time Worked at Time Spent Unapproved Other Related Performing On Call Time Overtime Employer Additional Duties Time Spent Medical Compensatory Holidays, Vacation, Changing Into and Treatment/Drug Time Off (“Comp Sick Pay Out of Employer- Test Time”) Provided Uniforms Overtime Due Only After 40 “Hours Worked” in the Work Week
Time Records Under Federal and Ohio Law How Should you Keep Who is required to What is Required to a Record of Hours Keep a Time Record? be Recorded? Worked? Employees who How Should Time Punch in Early and What About Card Be Corrected? Work Unauthorized Rounding? OT? What About Docking What About Pay for Reporting Late Automatic Meal or Other Disciplinary Period Deductions? Infraction?
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 of at least $455/wk, and Has the authority to hire and fire.
Executive NOT EXEMPT EXEMPT Ass’t Manager Dealer CSI Manager Lot Manager Inventory Manager Dep’t Manager Finance Manager
Administrative Exemption Primary duty is performing office or non-manual work Exercises discretion Receives a salary or related to and independent (holds a position of guarantee of at management judgment with little responsibility), and least $455/wk. policies or general or no supervision business operations, and
Administrative NOT EXEMPT EXEMPT Finance Admins Human Resources Manager Office Manager Accounts Payable Tax Quality Control Accounts Receivable Purchasing Advertising/Marketing Clerical Workers Safety and Health Labor Relations Employees who do not Exercise Sufficient Discretion Government Relations
Professional Exemption Performs duties requiring advanced Consistently Receives a salary or knowledge in a field exercises discretion guarantee of at least of science or learning and independent $455/wk. requiring specialized judgment , and instruction, and
Highly-Compensated Employees Performs office or non-manual work, and Receives a salary or guarantee of at least $455/wk, and Is guaranteed total annual compensation of at least $100,000 per year, and Performs any one of the exempt duties of an executive, administrative, or professional employee.
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.
“Salary Basis” Safe Harbor
Calculating Overtime
Options Available to Reduce Overtime Costs Reducing the Cost of Overtime • 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
Deductions from Wages Federal $18.00 $12.00 PERMITTED DEDUCTION $7.25 0 hrs 40 hrs 50 hrs 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
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.
Thank you! Questions? 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 24 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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