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

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