1. FLSA Overtime Expansion Effective December 1, 2016
Dee Byrd, CPP , PHR, SHRM-CP
CPC
October 12, 2017

2. Fair Labor Standards Act (FLSA)
Federal minimum wage $7.25/hour
Overtime: At least 1.5 times the rate of pay for hours worked over 40 in workweek
Recordkeeping
Child labor
Break time for nursing mothers
Equal pay for women

3. FLSA Changes
Overtime protections extended to workers making less than $47,476 per year ($913/week)
Threshold not prorated for part-time employees
Teachers, physicians & attorneys exempt from rule
Current threshold $23,660 ($466/week)
Salary threshold updated every three years
Threshold will be 40th percentile of earnings in lowest wage region of country (currently south)
Effective December 1, 2016

4. Current versus New $455/week $913/week
Just below current poverty level for family of four
12th percentile of salaries
Almost all jobs pass the duties test
Double current poverty level for family of four
40th percentile of salaries
More jobs that would be otherwise exempt

5. Who is covered under FLSA
Employees who work for certain businesses or organizations (or "enterprises") are covered by the FLSA. These enterprises, which must have at least two employees, are:
(1) those that have an annual dollar volume of sales or business done of at least $500,000
(2) hospitals, businesses providing medical or nursing care for residents, schools and preschools, and government agencies

6. FLSA Coverage, cont.
In addition, employees in nonprofits are covered by the FLSA whose work regularly involves ‘interstate commerce’.
Interstate commerce includes:
Sending letters out-of-state
Travel to other state
Regularly making out-of-state calls
Handling records of interstate transactions

7. Applying Overtime Exemption Test

8. Who Must be Paid Overtime Under FLSA
Employees are subject to the overtime provisions of FLSA unless they meet the requirements of an overtime exemption test

9. 3 Steps in Applying Exemption Test New Rule: Eff 12/1/2016
Rate of pay
To be exempt must make at least $913/week ($47,476/year)
Salary basis
Must regularly receive predetermined weekly compensation that is not docked based on hours worked (exceptions for FML, discipline and jury duty)
Government employers can pay on salary basis and require use of leave time
If paid hourly than must be subject and get 1.5 OT
Standard duty tests
Executive
Administrative
Professional
Must meet all three requirements to be exempt from overtime

10. Salary
Salary Basis
Employee must be paid a predetermined and fixed salary that is not subject to deduction due to variations in quantity or quality of work (no docking rule)
Exception: Public employers may dock exempt employees who miss work and have used all paid leave.
Salary Level
Employee must earn a certain minimum salary per week.

11. Standard Duty Tests Executive Administrative Professional
To be exempt from overtime requirements, a job must pass three exemption tests; 1) the pay rate test, 2) the salary basis test and 3) one of the below duty tests
Executive
Administrative
Professional
The employee’s “primary duty” must be
managing the enterprise, or
managing a customarily recognized department or subdivision of the enterprise, and
managing 2 fulltime employees
The employee’s “primary duty” must include
the exercise of discretion and independent judgment
with respect to matters of significance.
The employee’s “primary duty” must be to primarily perform work that either
requires advanced knowledge in a field of science or learning, or that
requires invention, imagination, originality, or
talent in a recognized field of artistic or creative endeavor.

12. Exemption Test Example
Example # 1: Current rule
Example # 2: New rule, effective 12/1/2016

13. Exemption Test – Current Rule Example 1
BUDGET ANALYST: Responsible for the budgeting functions and related financial systems in the Division. Position has a key responsibility for complex budget issues. Position regularly serves a critical role in the design and coordination of high level Division-wide projects. Position provides consultation, technical assistance, and coordination in the preparation and execution budgets which may utilize multiple funding sources. issues.  The position is one of only two positions within the Division with the competency level to perform budget and finance duties.
Meets Requirement ?
Administrative exemption
Budget Analyst
Yes
Paid at least $455/week?
Actual pay: $41,552 or $799/week
Paid on a salaried basis?
Paid on a salary basis
Exercises discretion and independent judgment with respect to matters of significance.
Discretion: Design and coordinate division-wide projects
Matters of significance: Division budget and financial systems
This job meets all 3 exemption tests and may be exempt from the OT requirements of FLSA

14. Exemption Test – New Rule Example 2
BUDGET ANALYST: Responsible for the budgeting functions and related financial systems in the Division. Position has a key responsibility for complex budget issues. Position regularly serves a critical role in the design and coordination of high level Division-wide projects. Position provides consultation, technical assistance, and coordination in the preparation and execution budgets which may utilize multiple funding sources. issues.  The position is one of only two positions within the Division with the competency level to perform budget and finance duties.
Meets Requirement ?
Administrative exemption
Budget Analyst No
Paid at least $913/week ($47,476 annually)?
Actual pay: $41,552 or $799/week
Yes
Paid on a salaried basis?
Paid on a salary basis
Exercises discretion and independent judgment with respect to matters of significance.
Discretion: Design and coordinate division-wide projects
Matters of significance: Division budget and financial systems
This job does not meet all 3 exemption tests and therefore must be subject to the OT requirements of FLSA

15. Exemption Test – New Rule Example 3
BUDGET ANALYST
Meets Requirement ?
Administrative exemption
Budget Analyst
Yes
Paid at least $913/week ($47,476 annually)?
Actual pay: $55,000 or $1,058/week
Paid on a salaried basis?
Paid on a salary basis
Exercises discretion and independent judgment with respect to matters of significance.
Discretion: Design and coordinate division-wide projects
Matters of significance: Division budget and financial systems
In example 3, above, the employee is performing the same job as the employee in example 2. Example 3 employee meets all 3 parts of the exemption test due to a higher salary. The employee in example 3 may be considered exempt from the OT requirements of FLSA. Employee in example 2 MUST be subject to the OT requirements of FLSA.
Two employees performing same job can have different FLSA OT status.

16. Other factors affecting overtime

17. FLSA Workweek
An employee's workweek is a fixed and regularly recurring period of 168 hours -- seven consecutive 24-hour periods.
Workweek does not need to coincide with the calendar week.
Workweek may begin on any day and at any hour of the day.
Different workweeks may be established for different employees or groups of employees.
Averaging of hours over two or more weeks is not permitted.
Normally, overtime pay earned in a particular workweek must be paid on the regular pay day for the pay period in which the wages were earned.

18. Workweek Examples Sunday, 12:00 AM (midnight) – Saturday, 11:59 PM
Monday, 12:00 AM (midnight) – Sunday, 11:59 PM
Thursday, 12:00 AM (midnight) – Tuesday, 11:59 PM

19. Compensable Hours Suffered or Permitted
Compensable hours are time employees are "Suffered or Permitted" to work. Work performed is counted as work time and must be paid regardless of whether employer approved work time. Example Employee voluntarily continues to work at the end of the shift to finish an assigned task or to correct errors. The reason is immaterial. The hours are work time and are compensable.

20. Teleworking Understand employee teleworking practices
Checking s and making phone calls remotely and after hours. COMPENSABLE!

21. Recordkeeping
Employer must keep certain records for each FLSA subject employee
Employee's full name and social security number.
Address, including zip code.
Birth date, if younger than 19.
Sex and occupation.
Time and day of week when employee's workweek begins.
**Hours worked each day.
**Total hours worked each workweek.
Basis on which employee's wages are paid (e.g., "$9 per hour", "$440 a week", "piecework")
Regular hourly pay rate.
Total daily or weekly straight-time earnings.
Total overtime earnings for the workweek.
All additions to or deductions from the employee's wages.
Total wages paid each pay period.
Date of payment and the pay period covered by the payment.
**Must track hours worked (and other info) for all newly subject employees. Make sure that processes are in place.

22. Business Challenges

23. Challenge - Exempt and Subject in Same Job
Exempt and subject employee in same job
Example two accountants performing same work. One exempt from OT and other employee subject to OT because salary below $47,476
Can leave as is
Can increase pay to maintain exempt status
Can voluntarily make exempt employee subject (will increase OT cost).

24. Understanding OT Costs
Overtime must be paid for all hours worked over 40, whether approved or unapproved
Manage OT costs
Cover for unplanned absences
Understand costs of newly subject employees
Watch for time worked remotely on s, phone calls etc
Include matching employer contribution costs, i.e. retirement
Estimate potential OT costs
Consider tracking hours of exempt employees to estimate liability

25. Raise salaries above the new threshold to reduce OT
Alternatives
Raise salaries above the new threshold to reduce OT
Could cause salary compression issues with other employees
Consider sustainability of increasing salaries. Salary threshold will increase every 3 years
Make no changes and pay OT
Restructure work assignments to manage OT
Add additional staff to reduce OT

26. Understand your workforce
How many exempt employees make less than $913/week ($47,476/year)
Which employees work overtime
How much overtime do these employees work?
How much would this overtime cost?

27. Added Risks US Dept of Labor conducting more agency- initiated audits
Increased in penalties for non-compliance
Higher fines for willful violations than unintentional errors
Deter violators and benefit employers following the law
Increase fines to keep up with inflation. Many fines have not increased since 1990.
Possible sanctions are a fine of up to $10,000 and up to six months in prison.

28. Preparation for Employees and Supervisors
Set up system for supervisors to approve time worked
Provide talking points to communicate affected employees
Train supervisors
Understand how to manage workload to avoid working overtime

29. Employee Communication
Changes driven by changes in federal law
Moving from exempt to subject is not a demotion
Importance of tracking hours worked

30. Questions???

31. Disclaimer
Note: This information is provided for information and is not formal advice. Consult a legal professional for advice on individual circumstances.