1. PRESENTED BY DONNA GABEL HUMAN RESOURCES MANAGER ALEXANDER CITY HOUSING AUTHORITY NEW FLSA White-Collar O.T. Exemption Requirements

2. Disclaimer This presentation, related documents, contents, and comments are for informational and “best practices” purposes only and should not be construed as official interpretation of any laws, regulations, requirements, or compliance; or legal advice or legal opinion. You are urged to consult related government agencies or your attorney concerning your own situation and any specific legal questions you have may have. Donna Gabel is a Human Resources Manager with the Alexander City Housing Authority.

3. Agenda FLSA - A Walk Down Memory Lane It’s August…But December’s Coming More Proposed Legislation OMG – What Do I Do Now? Decision Time Round-table Discussions & Q&A

4. The FLSA provides “White Collar” exemptions from minimum wage and O.T. requirements  Executive  Administrative  Professional  Outside sales  Certain computer-related positions Exemptions are defined at 29 C.F.R. Part 541 (See WHD Fact Sheet #17A) FLSA – A Walk Down Memory Lane Today’s Focus

5. Exemption status - not determined by job title or method of pay or employment contract Three Tests for White Collar O.T. Exemption: 1. Salary Level – how much you are guaranteed? 2. Salary Basis – method by which you are paid 3. Duties – what the position does FLSA – A Walk Down Memory Lane…

6. Salary Level Test - Must be paid a “guaranteed minimum” without regard to # hours worked  Currently, not less than $455/wk; $910/bi-wkly; $985.83 semi-mthly; $1,971.67 mthly; $23,660 annually (new salary threshold coming) Salary Basis Test - Must be paid on a salary or fee basis…cannot be paid by the hour

7. FLSA – A Walk Down Memory Lane… Duties Test:  Primary duty - office (not including clerical duties) or non- manual work  Primary duty – directly related to management or general business operations of the employer or customers  Primary duty – exercises discretion and independent judgment related to matters of significance  May commit the employer in financial or contractual matters  Executive exemption must supervise at least 2 FTEs; supervision not required for administrative exemption

8. NEW O.T. REGULATIONS EFFECTIVE DATE Thursday, December 1, 2016

9. It May Be August, but December’s Coming… New Regulations – Salary Threshold  Based on the 40 th percentile of weekly earnings of full-time salaried workers in the lowest wage Census region (which happens to be in the South)  New salary threshold of $913/week ($47,476 annually) *100.66% increase over the current $455/week ($23,660 annually)  Require tri-annual updating of the salary threshold based on inflation or wage growth over time.

10. New Regulations – Salary Threshold Cont’d. Up to 10% of the minimum salary level may come from:  Non-Discretionary  Bonuses  Incentive Pay  Commissions  Must be paid at least quarterly or more frequently

11. Highly Compensated Employees Total annual compensation increasing from $100,000 to $134,004 Guaranteed minimum salary of $913 per week is required Subject to a minimal duties test, i.e. they customarily and regularly perform at least one of the duties of an exempt executive, administrative, or professional employee.

12. What Has NOT Changed? Salary Basis Test Duties Test Ineligible Pay Deductions – “No Docking Rule” Timekeeping Requirements Regulations Regarding Part-Time Employees

13. New Proposed Legislation “Overtime Reform and Enhancement Act” (OREA) Introduced by Congressman Kurt Schrader (Oregon) Add a phase-in provision  salary threshold in steps over next 3 years   to $35,984 on 12/01/2016   to $39,780 on 12/01/2017   to $43,628 on 12/01/2018   to $47,476 on 12/01/2019 Eliminates the automatic update every 3 years without going through the normal rulemaking process.

14. Proposed Legislation… “Overtime Reform and Enhancement Act” (OREA) To become law, OREA must  Be approved by both houses of Congress (CRA - Congressional Review Act)  Survive a presidential veto (or garner enough support to override a veto) Not likely to happen  Congress is on recess until after Labor Day  If signed into law, would not automatically overturn the rule  Secretary of Labor would have to rewrite existing regulations. (This rewrite took nearly a year.) What should you do?…continue planning to implement the new salary threshold 12/01/2016.

15. Must be paid the minimum salary threshold($455/wk. – soon to be $913/wk.) Primary duty - management of an enterprise or recognized department or subdivision thereof  Recruiting, training, directing work of, performance evaluations, grievances, discipline, budget control, legal compliance, etc. Customarily and regularly directs the work of 2 or more full- time employees or their equivalent (FTEs) Authority to hire and fire other employees, or whose suggestions and recommendations in change of status of other employees is given particular weight Executive Exemption

16. Must be paid the minimum salary threshold($455/wk. – soon to be $913/wk.) Primary duty – office or non-manual work directly related to the management or general business operations of the employee or employer’s customers, such as, but not limited to: Finance, accounting, budgeting, auditing Insurance, quality control, purchasing, procurement Personnel management, H.R., benefits, labor relations Computer network, internet & database administration Legal and regulatory compliance Administrative Exemption

17. Administrative Exemption Cont’d. Exercises discretion and independent judgment with respect to matters of significance.  Comparison and evaluation of possible actions and taking action  Level of importance and consequence of work performed  Authority to formulate, affect interpret, or implement management policies and operating practices  Carries out major assignments in conducting the operations of the business  Work affects business operations to a substantial degree

18. Administrative Exemption Cont’d.  Authority to commit employer in matters having significant financial impact  Provides consultation and advice to management  Involved in strategic planning  Represents the company when handling complaints and grievances  Authority to make independent choice, free from immediate supervision  Does not mean unlimited authority or complete absence of review

19. 1. Review ALL Current Exempt Job Descriptions List Essential Responsibilities – purpose for the position Duties Test Is Primary duty office, non-manual work directly related to management or general business operations? Is Primary duty exercises discretion and independent judgement in matters of significance? Supervises staff – not required for the Administrative Exemption Salary Basis Test – must be paid on a salary or fee basis What Do I Do Now?

20. 2. Determine exemption qualification for each position Best Practice…Use an exemption determination worksheet for every position and keep it in your Agency position files. Determine which positions qualify as “exempt” and which positions must be reclassified as “non-exempt”. Remember…FLSA does NOT require any position be classified exempt. What Do I Do Now?

21. 3. Determine exempt positions impacted Identify exempt positions that will require a salary increase to the $47,476 minimum threshold to maintain exempt status Include the additional 10% compensation discussed earlier, if applicable. What Do I Do Now?

22. 4. Compare and evaluate financial impact for ALL costs – exempt vs. non-exempt  Increased base pay if “exempt”  Increased benefit costs if “exempt” – retirement, life insurance, LTD, STD, annual/sick leave, FICA, etc.  Increased overtime if “non-exempt” - Review hours currently worked by exempt staff  Compare total cost for hourly rate plus overtime vs. exempt with increase to $47,476 threshold What Do I Do Now?...

23. 5. Determine residual impact if re-classified Employee relations / employee morale New non-exempt employee may now feel less “valued” May resent reclassification, time-recording requirements Job satisfaction – Job performance could suffer Flexibility no longer available Undermine authority some positions must have Could be viewed differently by other employees What Do I Do Now?...

24. 6. Review & Update Personnel Policies Overtime / Approval to work OT “Off-the-clock” work Mobile devices Travel, on-call pay, required meal and rest periods Comp Time in lieu of O.T. pay What Do I Do Now?...

25. 7. Conduct legal analysis under attorney- client privilege WHD O.T. Exemption Compliance Employment Agreements Employment Contracts Labor Unions What Do I Do Now?...

26. Bright Idea!

27. 8. Communication and Education – Imperative!!  Prepare talking points and FAQs  Clearly communicate in advance to newly classified nonexempt employees the “what”, “why”, “when”  Review overtime policy with new nonexempt staff  Train reclassified employees in timekeeping policy and procedures  Be prepared – anticipate negative perception What Do I Do Now?...

28. 9. Make changes effective on or before December 1, 2016  12/01/16 is a Thursday  Middle of pay week, pay period???  Split rate of pay???  Start of pay week/period that includes 12/1/16???  Earlier is okay, such as FYB 10/1/16 What Do I Do Now?...

29. 2 OPTIONS Increase exempt annual salaries to at least $47,476 (remember…automatic tri-annual inflation adjustments) Convert to nonexempt status (Pay time-and-a-half for all hours that exceed 40 hours worked each 7-day workweek) OR

30. If overtime becomes regularly necessary, consider…  Restructuring workloads and positions  Transferring responsibilities  Adding part-time employees to lessen the workload

31. NEXT CHANGE ???? January 1, 2020 Note: Will be published in the Federal Register and at www.dol.gov/whd

33. Donna Gabel Human Resources Manager Alexander City Housing Authority 2110 County Road Alexander City, AL 35010 (256) 329-2201 ext. 205 (256) 329-6535 Fax Email: donnagabel@alexcityhousing.org Contact Information