Is Y our Business or Organization Prepared for the New Overtime Rules? T uesday, August 30, 2016 Woodlake Country Club Presented by Monmouth-Ocean Development Council & Greater T oms River Chamber of Commerce
IS Y OUR BUSINESS PREPARED FOR THE NEW OVERTIME RULES? Kathleen M. Connelly, Esq. Lindabury, McCormick, Estabrook & Cooper 53 Cardinal Drive Westfield, NJ 07091 kconnelly@lindabury.com
FLSA OVERTIME BASICS Employers must pay OT to eligible employees for all hours worked in excess of 40 hours in a given workweek No obligation to pay OT for work in excess of 8 hours in a workday Workweek and workday must be regularly scheduled and maintained
Who is Eligible for OT? All employees (FT/ PT) unless they qualify for a statutory exemption under the FLSA/NJWHL Executive, administrative, professional and “highly compensated” employees (the “White Collar” exemptions) Outside sales employees Commissioned sales employees in retail Computer professionals Drivers, driver's helpers, loaders and mechanics Farmworkers Salesmen, parts - men and mechanics in automobile dealerships Seasonal and recreational establishments not operate for more than seven months in any calendar year, OR during preceding calendar year, average receipts for any 6 mos. were not more than 33.3% of avg. receipts for the other 6 mos.
THE DOL ’S CHANGES TO THE WHITE COLLAR EXEMPTIONS
THE WHITE COLLAR EXEMPTIONS The “white collar” exemptions Executive Administrative Learned Professional Highly compensated employee 12/ 1/ 16: New USDOL rules substantially overhauling the WC exemptions Estimated to increase the ranks of OT-eligible employees by 5 million
EXECUTIVE EXEMPTION Duties test (unchanged) Management of the business (or department/ subdivision) Customarily directs the work of 2 or more FT’s (or equivalent) Authority to hire/ fire (or recommendations given significant weight) Exercises discretionary power in the performance of the job Salary basis test (doubling) from $455pw/ $23,660 to $913pw/ $47,476 automatic updates so threshold stays at 40% of weekly earnings for FT salaried workers
PROFESSIONAL EXEMPTION Duties test (unchanged) Learned Professional Work requiring advanced knowledge in science/learning ; predominantly intellectual; Consistent exercise of discretion and judgment; Advanced knowledge acquired by a prolonged course of specialized instruction; Creative Professional Work requiring invention, imagination, originality or talent in artistic or creative endeavor; Salary basis test (doubling) from $455pw/ $23,660 to $913pw/ $47,476 automatic updates so threshold stays at 40% of weekly earnings for FT salaried workers
ADMINISTRATIVE EXEMPTION Duties test (unchanged) Office/non -manual work directly related to policies or business operations; Assists executive or performs work under generalized supervision along specialized or technical lines; and Salary basis test (doubling) from $455pw/ $23,660 to $913pw/ $47,476 automatic updates so threshold stays at 40% of weekly earnings for FT salaried workers
HIGHLY COMPENSATED EMPLO YEE EXCEPTION Duties test (unchanged) Performance of office or non - manual work Customarily performs at least one of the duties of an executive , administrative or professional employee Increased salary basis from $100,000 to $134,004 automatic updates so threshold stays at 40% of weekly earnings for FT salaried workers
POTENTIAL CONSEQUENCES OF RULE CHANGE Significant number of employees will lose exempt status Employer must immediately begin hourly record keeping on reclassified employees Employer must vigilantly monitor new, non-exempt employee’s work Before/after scheduled hours During breaks Weekends Via smartphone
STEPS TO T AKE NOW Identify exempt positions that will fall below new salary thresholds ($47,476/ $134,004) Understand how many hours these employees are working p/w Determine whether the salary of these employees should be bumped up to preserve exemption Establish a zone for those close to threshold who will be bumped up? Target certain positions for increase (e.g., those where OT is necessary and will be significant? Reclassify all as non - exempt?
STEPS TO T AKE NOW Determine the hourly rate of pay for those employees who will be reclassified as non-exempt Current salary ÷ 40? Lower hourly rate to account for predicted OT in an effort to maintain current compensation? For highly compensated employees that will not meet $134,004, determine if the duties of position meet the executive, administrative or professional exemptions rather than this relaxed standard
STEPS TO T AKE NOW Review ALL positions to assess whether they are properly classified Violations rampant Increased enforcement efforts/lawsuits Back pay liability for 2 or 3 years Attorney fees There has never been a better time!
STEPS TO T AKE NOW Consider changing job duties for positions that may lose exemptions (so long as salary test met) T ransfer duties that trigger OT to employees who will retain the exemption to minimize OT liability Eliminate duties that trigger OT Consider additional FT/ PT staff to offset OT for those positions where significant OT may be expected
STEPS TO T AKE NOW Implement and enforce adequate time - keeping mechanisms 33% not required to input hours employers will now have to track hours of reclassified employees manual timesheets are unreliable; electronic timekeeping should be the norm Require prior approval before working OT prohibit “working through” lunch prohibit clocking in early/or out late to make up time or catch - up on work regularly check time records and discipline offenders
STEPS TO T AKE NOW Develop a communication strategy now Loss of status “Watching the clock” requirements Loss of freedom Loss of income
VOLUNTEERS For profit: not permitted Nonprofit Non - employee Nature of the entity receiving services No “compensation” of any sort (except reimbursements, etc. ) No expectations of benefits Whether the activity is less than FT Whether regular employees are displaced Whether services are offered freely without coercion , and Whether services are of the kind typically associated with volunteer work .
VOLUNTEERS Nonprofit Employees: may not volunteer to provide services that are similar to regular job duties. cannot direct employee to perform volunteer work during the employee's normal working hours, even if duties are different BUT , if individual volunteers in a part of a nonprofit which is commercial and serves the public (stores/ restaurants), the DOL does not recognize them as volunteers
UNPAID INTERNS For Profit training is similar to that which would be given in a vocational/academic school ; training is for the benefit of the intern (credits, etc.) intern does not displace employees , but works under their close observation; employer derives no immediate advantages from the intern and, on occasion, its operations may be impeded; intern is not entitled to a job at the conclusion of the internship; and, employer and the intern understand that the intern is not entitled to wages. Nonprofit: more latitude because can work as volunteer, but don’t have intern displace employees or perform work that would otherwise be performed by employees work in a commercial operation (e.g., store) of organization no compensation of any kind
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Lindabury, McCormick, Estabrook & Cooper is a mid- sized general practice law firm located in Central New Jersey. The Firm provides litigation and transactional counsel to a broad spectrum of clients, including global private and public corporations, national commercial insurance firms, health care institutions, trade associations, employee benefit funds, banks and financial institutions, nonprofit organizations, privately held businesses, professional corporations, and individuals in the New Jersey and Mid- Atlantic region.
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