dol final rule - overtime
TRANSCRIPT
DOL Final Rule: The Bottom Line for Small Business
SEPTEMBER 15, 2016Sarah Alexander, PHR, SHRM-CP
Owner / HR Business Partner
Objective• CLARITY – DOL Final Rule guidelines• DEFINITION – Exempt vs. Nonexempt, EAP, 3 Factor test, Catch up provisions• IMPACT – Money, Managers, Motivation• COMMUNICATION – Who? When? How?• NEXT STEPS – Where to go from here?
DOL Final Rule • $47,476 or $913/week• HCE $134,004• Nondiscretionary bonus and incentive payments to satisfy up to 10%
of the new standard salary level• Effective Date – December 1, 2016• Auto updates every 3 years first January 2020
Employer Options for Compliance
• Reclassify employee(s) and pay overtime for overtime work• Reclassify employee(s) and limit employee(s) hours to 40 per week• Raise employee(s) salaries above the new threshold• Evaluate and realign hours and staff workload
How did we get here?
• DOL (gov. body), WHD (division) & the FLSA (Act) – in fiscal year 2015, WHD had 21,138 cases with violations, $246 million in back wages, affecting over 240,000 employees
• BLURRED LINES - job duties test no longer sufficient in defining exempt status• WORKING HOURS & HOURLY WAGES - workplace flexibility has lead to
overworked/underpaid • COST OF LIVING - last change to salary level in 2004 while the average cost of
living has increased over 26% over the last 10 years
What does it all mean?
• Non-exempt vs. Exempt • EAP Exemptions – Executive, Administrative, and Professional (Learned &
Creative), Highly Compensated Executive• 3 Factor Test – salary basis, salary level, job duties• Primary Duties • Non-Discretionary bonuses• Catch Up Provision
Executive ExemptionExemption Salary Level Test Salary Basis Test Duties Test
Executive At least $913 / week ($47,476 / year)
• At least 90% of the salary level ($822 / week) must be paid on a “salary” basis
• Up to 10% ($91 / week) may be satisfied with nondiscretionary bonuses or incentive payments
• Primary duty must be managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise
• Must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent
• Authority to hire or fire other employees, or suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight.
Administrative ExemptionExemption Salary Level Test Salary Basis Test Duties Test
Administrative • At least $913 / week ($47,476 / year)
• “Academic administrative personnel” may qualify with a salary at least equal to the entry salary for teachers at their educational establishment.
• At least 90% of the salary level ($822 / week) must be paid on a “salary” or “fee” basis
• Up to 10% of the salary level ($91 / week) may be satisfied with nondiscretionary bonuses or incentive payments
• 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.
Professional ExemptionExemption Salary Level Test Salary Basis Test Duties Test
ProfessionalSalary Level & Salary Basis requirements do not apply for doctors, lawyers, and teachers
• At least $913 / week ($47,476 / year)
• At least 90% of the salary level ($822 / week) must be paid on a “salary” or “fee” basis
• Up to 10% of the salary level ($91 / week) may be satisfied with nondiscretionary bonuses or incentive payments
Learned Professional • 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 must be customarily acquired by a prolonged course of specialized intellectual instruction.
Professional ExemptionExemption Salary Level Test Salary Basis Test Duties Test
ProfessionalSalary Level & Salary Basis requirements do not apply for doctors, lawyers, and teachers
• At least $913 / week ($47,476 / year)
• At least 90% of the salary level ($822 / week) must be paid on a “salary” or “fee” basis
• Up to 10% of the salary level ($91 / week) may be satisfied with nondiscretionary bonuses or incentive payments
Creative Professional• The employee’s primary duty
must be the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor
• Generally includes such fields as, music, writing, acting and the graphic arts
HCE ExemptionExemption Salary Level Test Salary Basis Test Duties Test
Highly Compensated Executive
• $134,004 per year in total compensation, including payment of at least
$913 / week
• 100% of the standard salary level ($913 / week) must be paid on a “salary” or “fee” basis
• The remainder of the HCE total annual compensation requirement may be paid in nondiscretionary bonuses or incentive payments (including commissions)
• The employee’s “primary duty” must be office or non-manual work
• Must “customarily and regularly” perform any one or more of the exempt duties or responsibilities of an executive, administrative, or professional employee
Computer ExemptionExemption Salary Level Test Salary Basis Test Duties Test
Computer • At least $913 / week ($47,476 / year), or at least $27.63 / hour
• At least 90% of the salary level ($822 / week) must be paid on a “salary” or “fee” basis unless the employee is paid on an hourly basis and receives at least $27.63 / hour
• Up to 10% of the salary level ($91 / week) may be satisfied with nondiscretionary bonuses or incentive payments
• The employee must be employed as a computer systems analyst, computer programmer, software engineer or other similarly skilled worker in the computer field
Computer Exemption (cont.)Exemption Salary Level Test Salary Basis Test Duties Test
Computer The employee’s primary duty must consist of: • The application of systems
analysis techniques and procedures, to include consultation
• The design, development, documentation, analysis, creation, testing or modification of computer systems or programs
• The design, documentation, testing, creation or modification of computer programs related to machine operating systems
OUTSIDE
SALES
The employee’s primary duty must be making sales (as defined in the FLSA), or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer; and
The employee must be customarily and regularly engaged away from the employer’s place or places of business.
The salary requirements of the regulation do not apply to the outside sales exemption. Exempt from both minimum wage and overtime requirements.
COMMISSION
the employee must be employed by a retail or service establishment, and
the employee's regular rate of pay must exceed one and one-half times the applicable minimum wage for every hour worked in a workweek, and
more than half the employee's total earnings in a representative period must consist of commissions.
Retail and service establishments - defined as establishments 75% of whose annual dollar volume of sales of goods or services (or of both) is not for resale and is recognized as retail sales or services in the particular industry.
The salary requirements of the regulation do not apply to the commission based exemption. Exempt only from overtime requirements.
Business Impact – Money, Managers, Motivation
MONEY• 4.2 million workers extended right to overtime pay• According to the Department of Labor, employers will
spend an estimated $592.7 million to comply with the new rule and it will cost $254.5 million for businesses to become familiar with the regulation; then another $160.1 million to make necessary adjustments; and $178.1 million in managerial costs.
• In addition, the DOL estimated the cost from employers to workers will be $1.48 billion, with $1.39 billion of that resulting in more overtime compensation or increased salaries
• Have you evaluated your options and calculated your costs?
Map provided by the Department of Labor
47476
5 hours of OT/week 10 hours of OT/week 5 hours of OT/week 10 hours of OT/week
5hrs X 50 wks = 250 hrs
10hrs x 50 wks = 500 hrs
5hrs X 50 wks = 250 hrs
10hrs x 50 wks = 500 hrs
250 hrs x $25.25 = $6,312.50
500 hrs x $25.25 = $12,625
250 hrs x $28.85 = $7,212.50
500 hrs x $28.85 = $14,425
$35,000 + $6,312.50 = $41,312.50
$35,000 + $12,625 = $47,625
$40,000 + $7,212.50 = $47,212.50
$40,000 + $14,425 = $54,425
$35,000 annual salary($16.83/hour, OT rate $25.25/hour)
$40,000 annual salary($19.23/hour, OT rate $28.85/hour)
Business Impact – Money, Managers, Motivation
MANAGERS• Change in Status (Self & Employees) • Perception • Communication• Training • Job and Workplace Changes• Resetting Expectations
Business Impact – Money, Managers, Motivation
MOTIVATION• Keep it simple• Communicate, Train, and Follow up• Minimize change • Make adjustments• Up the rewards
While we are on the subject…
INDEPENDENT CONTRACTORS• DOL – economic realities test• IRS – 20 Factor Test
Next Steps• Perform cost analysis on employees that are below the designated salary level• Redesign/Revamp comp structure to alleviate salary compression• Review status change impact on employee benefits - contact broker/rep to see how changes will
affect employees• Update handbooks/develop policies - OT approval procedures, timekeeping procedures, PTO
accruals, remote work, business travel• Communicate with affected employees• Document status changes in writing• Hire new employees to fill gaps• Procure timekeeping system that meets business needs - mobile access for remote workers, "auto"
timekeeping• Train managers & employees on timekeeping system & procedures
Questions?Please contact us:
(865) 679-1980
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