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 VanBlackLaw.com 1
Topics: 1. FLSA Basics 2. Proposed Salary Threshold Increase 3. FLSA Exemptions 4. Pay Equity AGENDA AGENDA VanBlackLaw.com 2
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 VanBlackLaw.com 3
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 VanBlackLaw.com 5
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 VanBlackLaw.com 6
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 VanBlackLaw.com 7
Duties Test - Executive Exemption • Primary duty = management of company, department or subdivision • Executive must customarily and regularly direct the work of two or more other employees • Executive must have authority to hire / fire or make such recommendations VanBlackLaw.com 8
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. VanBlackLaw.com 9
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. VanBlackLaw.com 10
Duties Test - Outside Sales • Primary duty = selling or obtaining orders or contracts • Must be customarily and regularly engaged away from the employer’s place or places of business. • No FLSA salary requirements for outside sales exemption. VanBlackLaw.com 11
Duties test - Computer Professional • 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. VanBlackLaw.com 12
“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. VanBlackLaw.com 13
Meet David • Technology Director • Supervises 5 programmers • Designs software • Salary: $45,000 • Incentive bonuses ($20,000 last year) • Is David exempt? VanBlackLaw.com 14
Meet Mitchell Site Superintendent Duties : • S upervises one part-time employee and one 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? VanBlackLaw.com 15
Meet Trinity 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 of 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? VanBlackLaw.com 16
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) VanBlackLaw.com 17
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. VanBlackLaw.com 18
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. VanBlackLaw.com 19
Get Ready For Higher Exemption Level • Identify “At Risk” exempts (between $23,660 and $35,568) VanBlackLaw.com 20
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 VanBlackLaw.com 21
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 VanBlackLaw.com 22
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 VanBlackLaw.com 23
Salary Basis: Prohibited Deductions xPartial-day absences (other than FMLA) xDeductions for quality or quantity of work VanBlackLaw.com 24
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.” 27
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) 28
Rizo v. Fresno County Office of Education (9th Cir. Apr. 9, 2018) • 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.” 29
Rizo, cont’d • 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” 30
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