Employee Classification & Overtime Rules Healthcare Financial Management Association Northeastern New York Chapter Sanjeeve K. DeSoyza, Esq. April 13, 2016

to USDOL Overtime Regulations Proposed Changes to USDOL Overtime Regulations

Sept. 4, 2015 Comment Period Ended (247,064 comments ) The Timeline Sept. 4, 2015 Comment Period Ended (247,064 comments ) June 30, 2015 NPRM March 2016 Proposed Rules sent for OMB Approval March 13, 2014 President’s Directive to Update Rule July 6, 2015 Rule Published DOL Review June 2016? Final Rule Issued

“White-Collar” Exemptions Executive Administrative Professional Outside Sales Three tests: Salary Basis Salary Level Duties

“White-Collar” Exemptions A brief look back: Last revised in 2004 Eliminated long/short duties test Increased minimum salary level to $455 per week USDOL received over 75,000 comments and spent 13 months reviewing

Proposed FLSA Regulations USDOL issued new “proposed” regulations on June 30, 2015 Significant changes to FLSA’s minimum salary levels

Proposed Salary Threshold Increase FLSA Minimum Salary Level NOW: $455 per week ($23,660 per year) PROPOSED: $970 per week ($50,440 per year) Compare with New York Labor Law NOW: $675 per week ($35,100 per year) * Remember: There is no New York Labor Law salary minimum for “professional” employees.

Highly Compensated Employees “Highly Compensated Employee” Threshold Now: $100,000 per year Proposed: $122,148 per year No specific New York Labor Law counterpart

“Duties” Test No changes proposed, but…. USDOL sought comments about whether changes are necessary What, if any, changes should be made? Should employees be required to spend a minimum amount of time performing work that is their primary duty? What minimum? Looking to follow California’s model? What will happen?

What Could It Mean? Potential loss of exemption for front-line managers, particularly in smaller establishments Limits opportunities for exempt employees to engage in non-exempt work for training purposes and to assist in “all-hands-on-deck” situations 

Annual Indexing & Automatic Increases Automatic annual updating based on either: Percentile of earnings (40th percentile of weekly earnings for full-time salaried workers); or Inflation as measured by consumer price index Would require employers to perform annual assessment and adjustment to preserve exempt status of workers

Non-discretionary Bonuses USDOL sought comments on whether to allow nondiscretionary bonuses, such as certain production or performance bonuses, to satisfy a portion of the standard salary test requirement

Proactive Risk Management and Transition Strategies

Proactive Risk Management Step 1: Self Audit Consider benefits of attorney-client privilege Consider applicable state laws Review salary levels and duties Review CBA(s) Identify and evaluate part-time “exempt” employees Document reclassification decisions

Proactive Risk Management Step 2: Roll-Out Changes Determine timing of changes/re-classification Develop action plan and employee communications Educate supervisors Anticipate and be prepared to answer questions and complaints

Proactive Risk Management Step 3: Training & Compliance Recordkeeping Meal periods (New York Labor Law) Restrictions on working outside of normal work hours Overtime restrictions

Concerns Associated with Maintaining Exempt Status Must satisfy whatever duties test is adopted Additional oversight necessary if “percentage-of-time- rule” adopted Salary must meet applicable new threshold Increased costs Threshold will escalate year after year

Concerns Associated with Maintaining Exempt Status Budgeting annual automatic increases and planning for implementation May have very short notice! Negative morale: On supervisors On other employees May be required to provide poor performing employees with raises to preserve exempt status * Do not forget to issue Wage Theft Protection Act notices when necessary!

Concerns Associated with Reclassification to Non-Exempt Setting the “new” pay rate Potential for significantly higher costs (overtime) if standard workweek exceeds 40 hours Morale concerns Less autonomy and scheduling flexibility for re- classified employees Limiting overtime and avoiding off-the-clock work Is this even practicable given the worker’s duties and responsibilities?

Transition Considerations Convert salary to hourly Transition to “fluctuating workweek” salary Transition to “salaried non-exempt” * Do not forget to issue Wage Theft Protection Act notices when necessary!

NY Minimum Wage Increase and Paid Family Leave

New Minimum Wage Increases Budget deal reached March 31, 2016 NYC large employers (11 or more employees): $11.00 on 12/31/16 $13.00 on 12/31/17 $15.00 on 12/31/18 NYC small employers (10 or fewer employees): $10.50 on 12/31/16 $12.00 on 12/31/17 $13.50 on 12/31/18 $15.00 on 12/31/19

New Minimum Wage Increases Employers in Nassau, Suffolk, and Westchester Counties: $10.00 on 12/31/16 $11.00 on 12/31/17 $12.00 on 12/31/18 $13.00 on 12/31/19 $14.00 on 12/31/20 $15.00 on 12/31/21 (cont’d)

New Minimum Wage Increases Employers in the remainder of the state: $9.70 on 12/31/16 $10.40 on 12/31/17 $11.10 on 12/31/18 $11.80 on 12/31/19 $12.50 on 12/31/20 Thereafter, minimum wage will continue to rise toward $15.00 depending on its economic impact Increases could be suspended if they are hurting the economy Assess economy in upstate NY to determine rate of increase that is best suited to grow the upstate economy

Paid Family Leave in NY Included in March 31, 2016 budget deal Effective January 1, 2018 Eligible after 6 months of employment Up to 12 weeks of paid leave (phased in) Qualifying reasons: Bond with new child (birth, adoption, or foster) Care for seriously ill family member Address issues arising from a family member’s military service Applies to all employers Employee’s job must be held open (cont’d)

Paid Family Leave in NY Weekly benefit amounts (% of employee’s AWW): 1/1/18: 50% (8 weeks) 1/1/19: 55% of AWW (10 weeks) 1/1/20: 60% of AWW (10 weeks) 1/1/21: 67% of AWW (12 weeks) Maximum weekly benefit amounts: 1/1/18: 50% of SAWW 1/1/19: 55% of SAWW 1/1/20: 60% of SAWW 1/1/21: 67% of SAWW **SAWW calculated by NYSDOL ($1,266.44) (cont’d)

Paid Family Leave in NY Funded entirely by employees: $0.70 to $1.40 per week (phased in) No employer contribution

Questions?

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The information in this presentation is intended as general background information on labor and employment law. It is not to be considered as legal advice. Employment law changes often and information becomes rapidly outdated. All rights reserved. This presentation may not be reprinted or duplicated in any form, without the express written authorization of Sanjeeve K. DeSoyza, Esq.