Advanced Payroll Concepts, LLC

Advanced Payroll Concepts, LLC
Fair Labor Standards Act Review and 2016 Final Rule Update

Who am I? Lawrence Bailliere, MBA, EA, SPHR 25 Yrs in Employer Services in Tucson ADP 1st PEO in Tucson (CheckMate) Advanced Payroll Concepts 2008-Present (Tucson Based - Payroll and HR Services)

Presentation Overview Overview of the FLSA Key changes of the 2016 Final Rule Compliance Steps and Advice Arizona Wage Payment Policy

FLSA Major Provisions Coverage Minimum Wage Overtime Pay Youth Employment Recordkeeping

Two types of coverage: Enterprise coverage: If an enterprise is covered, all employees of the enterprise are entitled to FLSA protections; and Individual coverage: Even if the enterprise is not covered, individual employees may be covered and entitled to FLSA protections

Business is covered FLSA enterprise if: It has sales made or business done of no less than $500,000 (the Annual Dollar Volume or “ADV” threshold). It has two or more employees engaged in interstate commerce or in the production of goods for commerce.

Interstate Commerce includes: Making out-of-state phone calls; Receiving/sending interstate mail or electronic communications; Ordering or receiving goods from an out- of-state supplier; Handling credit card transactions

FLSA Issues and Concerns: Suffered Time Waiting Time On-Call Time Meal and Rest Periods Training Time Travel Time

Wait Time Concerns: Counted as hours worked when employee is unable to use the time effectively for his or her own purposes; and Time is controlled by the employer Not counted as hours worked when employee is completely relieved from duty; and Time is long enough to enable the employee to use it effectively for his or her own purposes

On Call Time Concerns: On-call time is hours worked when employee cannot use that time effectively for his or her own purposes Ex: Employee has to stay so close to the employer’s premises On-call time is NOT hours worked when: Employee is required to carry a pager Employee is required to leave word at home or with the employer where he or she can be reached

Meal Periods: Meal periods are not hours worked when the employee is relieved of duties for the purpose of eating a meal (over 20 minutes) Rest periods of short duration (normally 5 to 20 minutes) are counted as hours worked and must be paid

Training Time: Time employees spend in meetings, lectures, or training is considered hours worked and must be paid, unless Attendance is outside regular working hours Attendance is voluntary The course, lecture, or meeting is not job related The employee does not perform any productive work during attendance

Travel Time: Ordinary home to work travel is NOT work time Travel between job sites during the normal work day IS work time Special rules apply to travel away from the employee’s home community

Overview of Overtime (FLSA) Employers must pay non-exempt employees: Minimum wage + Overtime for all hours worked over 40 in a workweek Exempts certain white-collar employees from minimum wage and overtime pay requirements

Overview of the FLSA (cont.) To be an Exempt Employee under the FLSA: Salary Test: Employee must be paid a predetermined and fixed minimum salary that is not subject to reduction because of quality or quantity of work performed. Duties Test: Employee's job duties must primarily involve Exempt Level Job Duties as defined by the regulations.

Overview of the FLSA (cont.) Exempt Level White Collar “Duties” under the FLSA: Executive Employees Administrative Employees Professional Employees Outside Sales Employees Computer Employees

Highly Compensated Employees To be an exempt Highly-Compensated Employee (HCE): Employee is paid more than $100,000 (current) per year Employee performs office or non-manual work Employee customarily and regularly performs one identifiable executive, administrative or professional duty.

Salary Test Fixed payments through time Without regard to amount of time or quantity worked No “Improper Deductions”!

Background of 2016 FLSA Changes In March 2014, President Obama issued a memorandum directing the DOL to "modernize and simplify" the FLSA's overtime and minimum wage requirements The DOL engaged in an outreach program, conducting a series of listening sessions to determine how to best "modernize and simplify" the rules

Final Rule On May 23, 2016, the Final Rule was published in the Federal Register Changes go into effect on December 1, 2016 Changes only affect the Salary Test

New Salary Requirements Raises the salary level from $455 per week to $913 per week ($47,476 per year) Raises the salary level requirement for HCEs from the current rate of $100,000 per year level to $134,004 per year

Inclusion of Bonuses and Commissions The DOL will now permit nondiscretionary bonuses and incentive payments (including commissions) to count toward the salary level requirement for EAPs Examples: – Retention bonuses – Commission payments based on a fixed formula

Inclusion of Bonuses and Commissions (cont.) Can only count toward 10% of salary Must be paid at least quarterly Allows for a quarterly "catch-up" payment This does not: Allow discretionary bonuses to count toward the salary level requirement Change the HCE requirement to receive at least the salary level requirement each pay period

Automatic Updates Salary and compensation thresholds will automatically update every 3 years – 40th percentile for EAPs – 90th percentile for HCEs The DOL will publish updated rates at least 150 days in advance January 1, first automatic update – Estimated to set the salary level requirement at: • $984 per week ($51,168 per year) for EAPs • $147,524 per year for HCEs

Not Changed! Duties Tests Improper Deductions

Act Now! The Final Rule will become effective December 1, 2016 Employers should analyze current exempt level positions, plan and communicate changes to employees

Audit Employee Duties Consider using this as an opportunity to review the standard duties of affected employees

Your Options Either: Increase pay for exempt level workers to meet new salary level or Reclassify employees as hourly non-exempt

Communication Plan out the communication/reasoning: "This is required by law“ "This is not a demotion“ "This is the company's effort to maintain the employees' take home pay"

Some folks in Arizona Want in on the Action! Proposition 206 “Fair Wages and Healthy Families Act” Voter referendum – November 8th Minimum Wage Sick Time

Prop 206 Minimum Wage $10.00 on 1/1/17 $10.50 on 1/1/18 $11.00 on 1/1/19 $12.00 on 1/1/20

Prop 206 Paid Sick Time Employer with 15+ employees 40 hours per year Sick Time Employer with less than 15 employees 24 hours per year Sick Time

Prop 206 What fun would new regulations be if they didn’t have: Posting Requirements Notice Requirements Lots of detailed rules! Wages indexed to COLA’s moving forward

WAIT A MINUTE! Back to the Future? Arizona already has a Minimum Wage! 11/7/06 – AZ Voters approved Prop 202 “Raise the Arizona Minimum Wage for Working Arizonans Act.” Effective January 1, 2007, the AZ ICA was given the authority to implement Min Wage

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