The Impact of the New DOL OT Rules Presented by: Sharon L. Sellers, SHRM-SPC SLS Consulting, LLC

Agenda Fair Labor Standards Act Who is Covered The Rules – Including the New Revisions Effective Dates What to Do Now Getting Your House In Order Copyright 2016 SLS Consulting, LLC

Fair Labor Standards Act Copyright 2016 SLS Consulting, LLC

History… At the time – Depression Era, mid-1930’s – High Adult Male Unemployment – over 20% – Women and Children were Exploited (paid very low wages; ¼ of U.S. Children worked) – Many factories worked employees 60+hrs/wk – Wages had been cut from $11/wk to $4/wk Copyright 2016 SLS Consulting, LLC

Employment Laws – Wage & Hour - FLSA Copyright 2016 SLS Consulting, LLC

Employment Laws – Wage & Hour - FLSA Ceiling – After 40 hours, Overtime Copyright 2016 SLS Consulting, LLC

Employment Laws – Wage & Hour - FLSA Floor – Minimum Wage Ceiling – After 40 hours, Overtime Copyright 2016 SLS Consulting, LLC

Employment Laws – Wage & Hour - FLSA Floor – Minimum Wage Ceiling – After 40 hours, Overtime Children playing – Child Labor Laws Copyright 2016 SLS Consulting, LLC

Employment Laws – Wage & Hour - FLSA Floor – Minimum Wage Ceiling – After 40 hours, Overtime Children playing – Child Labor Laws Also includes who’s NOT in the house – Independent Contractors Copyright 2016 SLS Consulting, LLC

Who is Covered? Copyright 2016 SLS Consulting, LLC

Who is Covered? Copyright 2016 SLS Consulting, LLC Enterprise – Revenue of $500,000 or more in ordinary commercial activities Does NOT include contributions, membership fees or dues MUST include revenue generated by sales through selling of goods and services, thrift stores, etc. (fair competition with a “for profit”) ALWAYS applies to hospitals; institutions primarily engaged in the care of older adults and people with disabilities who reside on the premises; schools for children who are mentally or physically disabled or gifted; federal, state, and local governments; and preschools, elementary and secondary schools, and institutions of higher education

Who is Covered? Copyright 2016 SLS Consulting, LLC Individuals An employee: Who engages in interstate commerce Who engages in the production of goods for interstate commerce Whose work involves or relates to the movement of persons or things across state lines

Who is Covered? Copyright 2016 SLS Consulting, LLC Does your employee Routinely make telephone calls out of state? Send s to people or organizations out of state? Order supplies from out of state? Receive goods, services, or contributions from people out of state (marketing, clerical, accounting)? Then this person is Covered under FLSA

Who is Covered? Copyright 2016 SLS Consulting, LLC How would someone NOT be covered? If you had an employee who was an intake counselor who only worked with clients from within the state and who did not make phone calls/ s outside of the state or order or receive goods, then the employee MAY not be covered by FLSA on an individual basis

The Rules – Including the New Revisions Copyright 2016 SLS Consulting, LLC

FLSA –2016 For purposes of this presentation, we will review the FLSA rules regarding: – Overtime Pay – Employee Classifications of Exempt and Non-Exempt Copyright 2016 SLS Consulting, LLC

Overtime Rules Technically, all employees are considered not exempt from overtime (“non-exempt”) UNLESS their job duties fall into one or more exemptions Federal law states that non-exempt employees must be paid at 1 ½ times their hourly wage for all hours worked over 40 hours per week (some state exceptions, for example, California requires overtime for any hours worked over 8 hours/day) State-Differs Rule – If the State law and the Federal law differs, go with the one that most “protects” (benefits) the employee Copyright 2016 SLS Consulting, LLC

Overtime Rules under FLSA Exempt – Exempt from overtime For most positions – – Employee paid on a Salary Basis* – At a Certain Salary Level amount changed with new rule – Performs Certain Job Duties (TITLE does not matter) *Salary Basis does not apply to Outside Sales Persons, Doctors, Lawyers, Teachers. It does not apply to certain Computer Employees (software) as long as they make $27.63 per hour. Copyright 2016 SLS Consulting, LLC

Overtime Rules under FLSA Salary Basis Must pay the person the same base amount each week if they work any part of the week. You cannot “dock” an employee if they leave early, come in late. You CAN have a non-exempt salaried employee. You continue to pay their base pay, monitor their hours worked, and pay them overtime for any hours worked over 40 per week. Copyright 2016 SLS Consulting, LLC

Overtime Rules under FLSA Non-Exempt – “not exempt” from overtime – Are paid on an hourly basis or a salary basis – Are paid overtime of a rate of at least one-and-one-half times the regular hourly rate for any hours WORKED over 40 per week Overtime is based on hours WORKED, not hours paid, so paid leave hours are not included Some additional issues with paying employees will be discussed at the conclusion of today’s presentation. Copyright 2016 SLS Consulting, LLC

Overtime Rules – the Exempts Executive Exemption: Be compensated at least $455/wk or $23,660/yr – Manages the enterprise of a department Directs the work of 2 or more employees Can or recommends hiring and firing Or owns 20% equity interest in enterprise Copyright 2016 SLS Consulting, LLC

Overtime Rules – the Exempts Executive Exemption: Be compensated at least $455/wk or $23,660/yr – $913/wk or $47,476/yr Manages the enterprise of a department Directs the work of 2 or more employees Can or recommends hiring and firing Or owns 20% equity interest in enterprise Copyright 2016 SLS Consulting, LLC XXXXXXX

Overtime Rules – the Exempts Administrative Exemption: Be compensated at least $455/wk or $23,660/yr – Performs administrative (office) work Be required to exercise discretion and independent judgment with respect to “matters of significance” Copyright 2016 SLS Consulting, LLC

Overtime Rules – the Exempts Administrative Exemption: Be compensated at least $455/wk or $23,660/yr – $913/wk or $47,476/yr Performs administrative (office) work Be required to exercise discretion and independent judgment with respect to “matters of significance” Copyright 2016 SLS Consulting, LLC

Overtime Rules – the Exempts Professional Employee Exemption: Be compensated at least $455/wk or 23,660/yr Intellectual, consistent exercise of discretion and judgment Advanced knowledge in science or learning Usually a prolonged course of specialized instruction Copyright 2016 SLS Consulting, LLC

Overtime Rules – the Exempts Professional Employee Exemption: Be compensated at least $455/wk or 23,660/yr Be compensated at least $913/wk or $47,476/yr Intellectual, consistent exercise of discretion and judgment Advanced knowledge in science or learning Usually a prolonged course of specialized instruction Copyright 2016 SLS Consulting, LLC

Overtime Rules – the Exempts Creative Employee Exemption: Be compensated at least $455/wk of $23,660/yr Performs work requiring invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor Copyright 2016 SLS Consulting, LLC

Overtime Rules – the Exempts Creative Employee Exemption: Be compensated at least $455/wk or 23,660/yr Be compensated at least $913/wk or $47,476/yr OR paid at least $27.63 per hour Performs work requiring invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor Copyright 2016 SLS Consulting, LLC

Overtime Rules – the Exempts Computer Professional Exemption: Be compensated at least $455/wk or 23,660/yr OR paid at least $27.63 per hour Primarily engaged in one or more of several computer-related functions specified in the regulations such as software engineers (NOT manufacture of computers) Copyright 2016 SLS Consulting, LLC

Overtime Rules – the Exempts Computer Professional Exemption: Be compensated at least $455/wk or 23,660/yr Be compensated at least $913/wk or $47,476/yr OR paid at least $27.63 per hour Primarily engaged in one or more of several computer-related functions specified in the regulations such as software engineers (NOT manufacture of computers) Copyright 2016 SLS Consulting, LLC

Overtime Rules – the Exempts Outside Sales Exemption: Minimum salary requirement does NOT apply Have the primary duty of making sales or obtaining orders or contracts for services or for the use of facilities Customarily and regularly be engaged away from employer’s business. Copyright 2016 SLS Consulting, LLC

Overtime Rules – the Exempts The JOB TITLE really means little. The Salary and the Duties are the primary elements Copyright 2016 SLS Consulting, LLC

Overtime Rules – the Exempts Highly Compensated Employee – Performs at least one duty of executive, administrative, etc. Earns at least $100,000 – NOW $134,004 This is based on the top 10% of those salaries paid across the country Copyright 2016 SLS Consulting, LLC

Bonuses Copyright 2016 SLS Consulting, LLC Discretionary Bonuses cannot be counted toward Salary determination

Bonuses Copyright 2016 SLS Consulting, LLC Nondiscretionary Bonuses NOW can be counted – Limited to 10% of salary Must be paid at least quarterly “Catch-up” is allowed per quarter – no later than the pay period immediately after quarter

Effective Dates Copyright 2016 SLS Consulting, LLC December 1, 2016 – Effective Date of the New Rule except The Department of Labor is, however, implementing a limited non-enforcement policy for providers of Medicaid-funded services for individuals with intellectual or developmental disabilities in residential homes and facilities with 15 or fewer beds. This non-enforcement period will last from December 1, 2016, to March 17, January 1, 2020 – Automatic update to new Salary Level based on the bottom 40 th percentile of the salaries in the lowest geographic area (currently the South). Update will continue every 3 years. Highly Compensated Employee level will also be updated every 3 years. Protecting Workplace Advancement and Opportunity Act (S and H.R. 4773) are bills currently in Congress

What to Do Now Copyright 2016 SLS Consulting, LLC

How to Comply: If an exempt is no longer eligible due to the Salary Level: 1.Make former exempts non-exempt and pay them overtime – figure new pay – Current salary divided by 2080 (40 hours/week times 52 weeks)= hourly rate [$45,000 = $21.63 per hour] – Figure in the overtime when computing the new hourly rate (for 50 hour/wk manager making $45,000, 2080 hr/year plus 10 OT hours times 1.5 times 52 = =2860. Divide $45,000 by 2860 =$15.73 per hour) Copyright 2016 SLS Consulting, LLC

How to Comply: If an exempt is no longer eligible due to the Salary Level: 2.Increase pay to the minimum required amount to keep them exempt– example, $47,476 3.Make them non-exempt, but tell them not to work overtime – That includes no phone calls, texts, s, etc. Reminder = you CAN continue to pay the employee on a salary basis, but you will need to monitor time and pay them additional compensation for hours worked over 40 per week Copyright 2016 SLS Consulting, LLC

How to Comply: Start NOW coming up with a way for your former exempts to record time (this is good practice for many reasons). The DOL states that it is not a requirement to have a Time Clock, but you should somehow record the hours worked (both you and the employee need to agree that the method is an accurate recording of hours worked) Look at your policies – Do you have an Electronic “down time” policy? Are there rules regarding when to call in someone? (probably should be anyway) Apps to restrict access to servers during off hours? To create but not send s to non-exempt employees except during working hours? Copyright 2016 SLS Consulting, LLC

Getting Your House In Order Copyright 2016 SLS Consulting, LLC

Were They Classified Correctly? Some organizations have misclassified their employees in the past. Now is your chance to double check to make sure your employees are correctly classified. – If change is due to the NEW rule – explain to the employees that the rules have recently changed – If change is because you have been misclassifying them all along – recommend you discuss with an attorney and pay them owed backpay Copyright 2016 SLS Consulting, LLC

What is “Comp Time”? Comp Time is a term generally used to refer to the practice of allowing an employee to take extra time off in exchange for previously working extra hours. There are no laws requiring employers to provide comp time to exempt employees It is not lawful to provide a comp time arrangement to non-exempts in exchange for not paying the employees overtime pay in the private sector (allowable in government) Copyright 2016 SLS Consulting, LLC

What Else Should I Watch For? Working “off the clock” – is not legal for employees if they are performing their same duties (or other compensable duties) as they would if they were “on the clock” Coming in early, working during lunch, staying late – all compensable even if not approved by management. You must pay them (if non- exempt), but you can discipline them if they aren’t going by the policy Copyright 2016 SLS Consulting, LLC

What Else Should I Watch For? Volunteering – You should not accept volunteers for performing duties that would be in competition with a for-profit. – Eg. A Thrift Store that receives revenue for selling goods should not allow people to volunteer to work in the store. The store competes with for-profit entities and, therefore, must pay its employees just as a for-profit store would. – A charity who gives away food or clothing to those in need may have volunteers. Employees CAN volunteer for the same organization but it must be a volunteer position and not an extension of the paid job Copyright 2016 SLS Consulting, LLC

“Hours Worked” for Overtime Includes ANY time working for your organization – whether approved or not: – Answering business telephone – Checking business s – Sending or receiving a business phone call on cell – Sending or receiving a business related text message Copyright 2016 SLS Consulting, LLC

Common Questions Can I still pay my non-exempt on a salary basis? Doesn’t education count toward determination? In order to avoid paying overtime, can I just keep my paid employees to 40 hours and “back fill” the time to volunteers? Copyright 2016 SLS Consulting, LLC

Common Questions Where can I get more information? Go to the DOL website: Copyright 2016 SLS Consulting, LLC

Thank You!