1. Century City, California 90067
The New Overtime Regulations: Is Your Company Ready for the December 1, 2016 Change?
Presented by:
R. Eddie Wayland
King k Ballow
Tennessee Office:
315 Union Street
Suite 1100
Nashville, Tennessee 37201
Office: (615)
Fax: (888)
California Office:
1999 Avenue of the Stars
Suite 1100
Century City, California
Office: (424)
Fax: (888)
These materials, discussion and comments have been abridged from laws, court decisions,
and administrative rulings and should not be construed as legal advice on specific situations or subjects.

3. The DOL Overtime Overhaul
New DOL rule significantly changes overtime regulations for professional, administrative, and executive (supervisory) exemptions
See DOL Fact Sheet: Final Rule to Update the Regulations
Salary basis test
$455 per week currently ($23,660 per year)
Will be $913 per week ($47,476 per year)
Primary duties test
No changes made by new rule

4. The DOL Overtime Overhaul
Executive (supervisory) exemption
Administrative exemption
Professional exemption
The DOL Tests
Salary basis test
Duties test

5. Executive (Supervisory) Exemption Duties Test
The employee’s primary duty must be managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise;
The employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent; and
The employee must have the authority to hire or fire other employees, or the employee’s suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight.
See DOL Fact Sheet #17B

6. Administrative Exemption Duties Test
The employee’s primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and
The employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.
See DOL Fact Sheet #17C

7. Learned Professional Exemption Duties Test
The employee’s primary duty must be the performance of work requiring advanced knowledge, defined as work which is predominantly intellectual in character and which includes work requiring the consistent exercise of discretion and judgment;
The advanced knowledge must be in a field of science or learning; and
The advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction.
See DOL Fact Sheet #17D

8. Salary Basis Salary must meet or exceed the required threshold amount
An employee is paid on a salary basis if he or she “regularly receives each pay period on a weekly, or less frequent basis, a predetermined amount constituting all or part of the employee’s compensation, which amount is not subject to reduction because of variations in the quality or quantity of the work performed”
Subject to a few exceptions, an exempt employee must receive the full salary for any week in which the employee performs any work, regardless of the number of days or hours worked
See DOL Fact Sheet #17G

9. Salary Basis Some deductions from pay that are permissible:
When an exempt employee is absent from work for one or more full days for personal reasons other than sickness or disability;
For absences of one or more full days due to sickness or disability if the deduction is made in accordance with a bona fide plan, policy or practice of providing compensation for salary lost due to illness;
To offset amounts employees receive as jury or witness fees, or for military pay;
For penalties imposed in good faith for infractions of safety rules of major significance; or
For unpaid disciplinary suspensions of one or more full days imposed in good faith for workplace conduct rule infractions.

10. The DOL Overtime Overhaul
Highly Compensated Employees (HCE)
The rule increases the total annual compensation requirement needed to exempt HCEs from $100,000 to $134,004—or the 90th percentile of salaried workers’ weekly earnings
Employees must receive at least $913 per week on a salary or fee basis [the remainder of the total annual compensation may include commissions, nondiscretionary bonuses, and other non-discretionary compensation]

11. The DOL Overtime Overhaul
HCE Duties Test:
The employee’s primary duty includes performing office or non-manual work; and
The employee customarily and regularly performs at least one of the exempt duties or responsibilities of an exempt executive, administrative or professional employee.
See DOL Fact Sheet #17H

12. The DOL Overtime Overhaul
Automatic increase
DOL’s new rule automatically updates the salary thresholds every three years
The thresholds are based on the 40th percentile (in the lowest-wage Census Region) and 90th percentile (nationally) of earnings for full-time salaried workers

13. The DOL Overtime Overhaul
Non-discretionary bonuses/incentive compensation under new rule
New rule permits non-discretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the standard salary level for the executive, administrative, and professional exemptions
For an employer to take a credit toward the weekly salary requirement, the bonus needs to be paid quarterly or more frequently
Employer can make a “catch-up” payment no later than the first pay period after the end of the quarter
Discretionary bonuses are not part of the salary level test

14. Effective Date
The new rule becomes effective December 1, 2016

15. Effective Date
Congress has introduced legislation to block implementation of the rule. The president can—and likely will—veto that legislation
Bill recently introduced in the House of Representatives (H.R. 5813) would phase in the new rule over the next three years and eliminate the automatic update of the salary threshold
Bill introduced in the Senate by Lamar Alexander (S. 3464) would phase in the new rule over five years, require an independent study of the rule after the first year of implementation, and eliminate the automatic update of the salary threshold

16. Effective Date
House of Representatives recently passed a bill (H.R. 6094) that would delay implementation of the new rule for six months (i.e., June 1, 2017)
The White House has already said it would veto the legislation should it pass the Senate
Two lawsuits filed in Eastern District of Texas alleging that the new rule is unlawful
One filed by 21 states, the other filed by several business groups. These cases were consolidated.
The assigned judge, Amos L. Mazzant, is an Obama appointee.
Plaintiffs filed a motion for a preliminary injunction. The hearing is Nov. 16.
Plaintiffs filed motion for summary judgment. DOL must respond by Nov. 18.

17. Potential Hidden Overtime
Waiting Time
“Generally, the facts may show that the employee was engaged to wait (which is work time) or the facts may show that the employee was waiting to be engaged (which is not work time)”
Example: Secretary who reads book while waiting for dictation or a fireman who plays checkers while waiting for an alarm is working during such periods of inactivity
See DOL Fact Sheet #22

18. Potential Hidden Overtime
On-Call Time
Whether the employee must remain on the employer’s premises while on call is an important factor in determining whether the on-call time is compensable
Constraints on an employee’s freedom factor into the analysis
See DOL Fact Sheet #22

19. Potential Hidden Overtime
Rest and Meal Periods
“Bona fide meal periods (typically 30 minutes or more) generally need not be compensated as work time. The employee must be completely relieved from duty for the purpose of eating regular meals. The employee is not relieved if he/she is required to perform any duties, whether active or inactive, while eating”
See DOL Fact Sheet #22

20. Potential Hidden Overtime
Travel Time
Home to Work Travel: Ordinary home to work travel is not work time
Home to Work on a Special One Day Assignment in Another City: Travel time is work time but employer may deduct usual commute time
Travel That is All in a Day’s Work: If travel is part of employee’s principal activity (such as travel between job sites during workday), then it is work time
See DOL Fact Sheet #22

21. The DOL Overtime Overhaul
What employers should do now:
Audit and review status of exempt employees regarding job status and duties test to identify any possible borderline situations
Review and update job descriptions according to results of audit, and form a plan of action for possible conversion of some employees to non-exempt status
Review weekly hours worked for exempt employees making less than required amount to determine possible financial impact of maintaining exempt status or possible conversion to non-exempt status (hidden overtime and other considerations)

22. The DOL Overtime Overhaul
What employers should do now:
Consider financial and operational impact of complying with new salary guidelines or paying less for non-exempt employees (incentive program implications, etc.)
Consider possible change in hours and structuring of pay regarding possible change in status for affected employees
Increased salaries
Hiring additional people
Salary for specified hours per week
Fluctuating work-week
Job classification and pay

23. Questions & Answers