1. ARE YOU IN OR ARE YOU OUT? Webinar Wednesdays An FLSA Refresher
Anna Elento-Sneed
August 2016
envision, strategize and actualize

2. Please consult an attorney if you have specific legal issues.
Disclaimer
This presentation is provided for informational purposes only and is not intended and should not be construed to constitute legal advice.
Please consult an attorney if you have specific legal issues.

3. DISCUSSION TOPICS Definition of an Exempt employee
Exemptions under the Fair Labor Standards Act
Difference between FLSA and State wage and hour laws

4. DEFINITION OF EXEMPT EMPLOYEE
Exempt vs. Nonexempt Employees
“Exempt” employee
Exempt from minimum wage and/or overtime provisions
“Non-exempt” employee
Employer must keep accurate records of time worked
Employee must (a) receive a minimum wage; and (b) receive overtime pay for hours worked above 40 in a work week
Minimum wage is set by state law for non-union employees

5. DEFINITION OF EXEMPT EMPLOYEE
Tests for Exempt Employees under FLSA (federal)
Primary Duties Test
Must meet tests set in regulations
Salary Basis Test
Currently, must provide guaranteed minimum salary of $455 per work week ($23,660 per year)
Effective 12/1/2016 the guaranteed minimum salary for an exempt employee will be $913 per work week ($47, 476 per year)

6. DEFINITION OF EXEMPT EMPLOYEE
Primary Duties Test
Refers to principle, main, major or most important duty employee performs
Relative importance of duties
Amount of time spent on exempt work
Employee’s relative freedom from direct supervision
Relationship between employee’s salary and wages paid to other employees
Time spent not sole test, although 50% or more of time spent performing exempt work satisfies requirement
Regulations also provide other guidelines

7. FLSA EXEMPTIONS Federal Exemptions Special Regulations Executives
Administrators
Professionals
Computer employees
Outside sales persons
Special Regulations
Teaching professionals
Creative professionals
Specific industries
Airline industry
Motor carrier industry
Automotive sales
Etc. (check with legal counsel)

8. FLSA EXEMPTIONS Test for Executives Minimum salary of $455 per week
Effective 12/1/16, minimum salary of $913 per week
Primary duty is:
Management of enterprise or recognized department or subdivision,
Customarily & regularly directs work of 2 or more full-time employees, and
Authority to hire or fire, or recommendations on hiring, firing, advancement, promotion or other changes of status given “weight”

9. FLSA EXEMPTIONS Parameters for Executives
Individuals who own 20% or more of equity and who actively manage are exempt
Regs have examples of “management” activities
If employee “manages” a department, must be a department or subdivision that has a permanent status or continuing function
Can have more than 2 managers per department
Must have 2 FTE per manager
No overlap of employees or hours

10. FLSA EXEMPTIONS Parameters for Executives
Manager makes recommendations, must review:
Whether it’s part of employee’s duties to make recommendations, and
The frequency with which the recommendations are made, requested or relied upon
Employee does exempt & nonexempt work
Exempt employee is responsible
Nonexempt employee ordered to do both

11. Test for Administrators
FLSA EXEMPTIONS
Test for Administrators
Minimum salary of $455 per week
Effective 12/1/16, minimum salary of $913 per week
Primary duty is:
Performance of office or non-manual work directly related to management or general business operations of employers or customers
Includes exercise of discretion & independent judgment on matters of significance

12. Parameters for Administrators
FLSA EXEMPTIONS
Parameters for Administrators
Related to management or business operations
Assisting with running or servicing of employer’s business, or
Management of general business operations of employer’s customers
Regs give examples

13. Parameters for Administrators
FLSA EXEMPTIONS
Parameters for Administrators
Discretion & independent judgment
Whether employee has authority to make independent decision on matters of importance or consequence
Decision made free from immediate direction or supervision
Decision made after comparing and evaluating possible courses of conduct

14. FLSA EXEMPTIONS Parameters for Administrators
Factors on discretion/judgment
Authority to formulate, affect, interpret, implement management policies or practices
Carriers out major assignments
Work substantially affects business operations
Authority to commit the company resources
Authority to waive policies & procedures
Authority to negotiate & find company
Consults or provides expert advice to management
Involved in planning business objectives
Investigates & resolves significant issues
Represents company in grievances or complaints

15. Parameters for Administrators
FLSA EXEMPTIONS
Parameters for Administrators
Judgment must involve more than use of established techniques, procedures or application of specific standards
Routine or clerical work doesn’t qualify
Does not have to be “final” decision-maker
Regs contain examples

16. Test for Professionals
FLSA EXEMPTIONS
Test for Professionals
Minimum salary of $455 per week
Effective 12/1/16, minimum salary of $913 per week
Primary duty is:
Knowledge of an advanced type in field of science or learning customarily requiring prolonged, specialized intellectual instruction; or
Invention, imagination, originality or talent in field of artistic or creative endeavor

17. FLSA EXEMPTIONS Parameters for Learned Professionals
Advanced knowledge used to analyze, interpret or make deductions from varying facts; beyond high school knowledge
Refers to traditional professions
Specialized academic training is prerequisite to entrance into profession
Excludes occupations where individual only have general knowledge and skills gained through apprenticeship or performance of routine mental, manual, mechanical or physical processes
Regs provide examples

18. FLSA EXEMPTIONS Test for Computer Employees
Minimum salary of $455 per week or $27.63 per hour
Effective 12/1/16, minimum salary of $913 per week (?)
Primary duty is:
Application of systems analysis techniques and procedures
Design, development, documentation, analysis, creation, testing or modification of systems or programs
Design, development, documentation, analysis, creation, testing or modification of operating systems
Any combination of above

19. Parameters for Computer Employees
FLSA EXEMPTIONS
Parameters for Computer Employees
Job titles not determinative; focus is on whether individual performs duties/functions
Exemption does not include employees engaged in manufacture or repair of hardware or related equipment
Individuals who simply use computers or programs do not qualify

20. Test for Outside Sales Employees
FLSA EXEMPTIONS
Test for Outside Sales Employees
Primary duty is:
Making sales or
Obtaining orders or contracts for services or for use of facilities for which consideration is paid; and
Who is customarily and regularly engaged away from the employer’s place of business

21. FLSA EXEMPTIONS Parameters for Outside Sales
Sales involves transfer of title to tangible property or tangible & valuable evidence intangible property
Includes obtaining orders or contracts, consignments, shipment for sale, or other disposition
Work that is incidental to or done in conjunction with sales is part of exempt work
Sales done at customer’s place; can include hotel rooms or trade shows

22. Parameters for Outside Sales
FLSA EXEMPTIONS
Parameters for Outside Sales
Promotional work done in conjunction with outside sales or solicitations is exempt
Drivers who sell and deliver may qualify only if their primary duty is to make sales
Look at specifics of each case
Regs give examples

23. FLSA: SALARY BASIS TEST
Salary Requirement
Paid full salary/week
Salary excludes board, lodging, etc.
Special exceptions from minimum salary for certain categories
Deductions Limited
Must fall into specific situations
Requires written policy
Improper deductions converts exempt employee to non-exempt employee

24. FLSA: CHANGES IN SALARY BASIS TEST
Raises minimum salary requirements for bona fide executive, administrative, and professional employees (the “white collar exemptions”)
From $455 per week ($23,660 per year) to $913 per week ($47,476 per year) for full-time salaried workers
Effective date is December 1, 2016
Raises overtime exemption for highly compensated employees (HCE employees)
From $100,000 to $134,004 per year
Nondiscretionary bonuses, incentive payments and commissions may be considered as part of salary for purposes of meeting threshold, provided they are paid at least quarterly
Only applies to non-HCE employees
Maximum amount of bonuses, incentive payments and commissions that may be counted toward the threshold is 10% of the salary requirement (i.e. $91.30 per week or $1, per quarter)
Establishes automatic updates in salary threshold every three years
Minimum salary requirement is pegged to 40th percentile of FT salaried works in lowest-wage Census region
HCE threshold is pegged to 90th percentile of FT salaried workers nationally
Automatic updates begin January 1, 2020
USDOL will post new salary levels 150 days in advance of their effective date, beginning on August 1, 2019

25. FLSA vs. STATE LAW Exempt Categories Under Hawaii Wage & Hour Law
Bona fide executives
Bona fide administrators
Bona fide supervisors
Bona fide professionals
Outside salespersons
Outside collectors
State regulations have their own duties tests and salary tests

26. RECONCILING FEDERAL & STATE LAW
If federal and state have concurrent jurisdiction, agencies will apply law that is more favorable to the employee
Hawaii exercises jurisdiction if exempt employee’s guaranteed compensation is less than $2000/month ($24,000/year)

27. FINAL THOUGHTS Wage and hour law is heavily regulated
Check federal and state regulations before you classify someone as exempt
Remember there are also restrictions in handling of salary for exempt employees
Penalties for failure to properly classify, or to properly handle salary, are significant
If in doubt, check with legal counsel
If you want more information on calculation of pay, let us know