PROPOSED NEW FEDERAL OVERTIME REGULATIONS AND WHAT THEY MEAN FOR YOUR FIRM

Transcription

1 PRSA Counselors Academy Webinar PROPOSED NEW FEDERAL OVERTIME REGULATIONS AND WHAT THEY MEAN FOR YOUR FIRM Thursday, March 17, 2016 Michael C. Lasky Jessica Golden Cortes Partner/Co-Chair Public Relations Law [Presentation Title Goes Here Type it in the Master Slide] 2016 Davis & Gilbert LLP Partner Labor & Employment jcortes@dglaw.com

2 WHY IS THIS WEBINAR IMPORTANT TO YOU?

3 PREPARING FOR THE CHANGES: BEST PRACTICES Projected release date for Final Rule By July 2016 if not late Spring, with implementation by the end of

4 PREPARING FOR THE CHANGES: BEST PRACTICES Begin preparing NOW Employers may have as little as 30 to 60 days to comply before new regulations go into effect 3

5 FEDERAL OVERTIME REGULATIONS

6 CURRENT LAW»To qualify for white collar exemption (executive, administrative and professional employees) - Predetermined and fixed salary not subject to reduction due to variations in quality/quantity of work performed (salary basis test) - At least $455/week or $23,660 annually (salary level test) - Employee primarily performs executive, administrative or professional duties (duties test) 5

7 CURRENT LAW»To qualify for highly-compensated employee (HCE) exemption - Total annual compensation of at least $100,000 - At least $455/week on a salary or fee basis - Perform office or non-manual work - Regularly perform at least one of the exempt duties of an executive, administrative, or professional employee 6

8 SUMMARY OF PROPOSED CHANGES»Issued on July 6, 2015» White collar exemption - Salary level increased to $970/week, or $50,400 annually - Will automatically increase based on percentiles of earnings for full-time salaried workers or changes in inflation with the purposes of remaining at 40 th percentile nationwide of weekly earnings for full-time salaried workers 7

9 SUMMARY OF PROPOSED CHANGES - NO specific change to duties test disclosed However, DOL requested comment on whether the duties test appropriately distinguishes between exempt and non-exempt employees - NO change to tests for outside sales employees, teachers, lawyers and doctors 8

10 SUMMARY OF PROPOSED CHANGES»Highly-Compensated Employee exemption - Total annual compensation estimated to be at least $122,148 (including commissions and non-discretionary bonuses/compensation) - Will automatically increase annually based on percentiles of earnings for full-time salaried workers or changes in inflation Meant to reflect the 90 th percentile of full-time salaried workers 9

11 SUMMARY OF PROPOSED CHANGES»DOL requested and received comments on - Whether incentive compensation and non-discretionary bonuses should be considered to satisfy salary level test - Whether commissions should be included as part of incentive compensation and non-discretionary bonuses to satisfy salary level test 10

12 SUMMARY OF PROPOSED CHANGES - Modification to duties test E.g., Should employees be required to spend a minimum amount of time performing exempt duties to qualify for exemption? - Mechanism for updating salary level Fixed percentile of earnings of full-time salaried workers vs. inflation 11

13 POTENTIAL IMPACT OF NEW REGULATIONS Overtime is poised to become an even bigger issue for employers 12

14 POTENTIAL IMPACT OF NEW REGULATIONS»Approximately 5 million employees may no longer qualify as exempt»employers in states with wage-and-hour laws that are more restrictive than FLSA will need to determine how the new regulations affect employee classifications in those states 13

15 IMPACT ON PR INDUSTRY» PRWeek March 2016 Salary Survey ( - Nationwide median salary by title Account Executives (AE) - $48,800 Assistant Account Executives (AAE) - $40,750 Account Coordinators (AC) - $37,500 14

16 IMPACT ON PR INDUSTRY»The Official Public Relations Salary & Bonus Report 2015 Edition (based on 2014 comp) ( - Data break down by 8 key metro areas, e.g., New York, Atlanta, Chicago, Los Angeles, Boston, Houston, Washington, D.C., San Francisco Area of PR specialty, e.g., consumer, corporate/financial, health/med/pharma, tech, public/gov t affairs, social media 15

17 IMPACT ON PR INDUSTRY»The Official Public Relations Salary & Bonus Report 2015 Edition - Most junior position reviewed is Account Executive (AE) /Account Associate (AA) - Potential for different classifications for AE/AAs based on region - E.g., AE/AA concentrating in Health/Med/Pharma - New York: Range $55,000 - $68,000 - Atlanta: Range $48,000 - $58,000 - Washington, D.C.: Range $40,000 - $55,000 16

18 IMPACT ON PR INDUSTRY»The Official Public Relations Salary & Bonus Report 2015 Edition - Senior Account Executive (SAE)/Senior Account Associate (SAA) compensation should also be reviewed - Data reflects that in the Southeast, Midwest and Southwest companies are paying SAEs/SAAs a salary range of $45,000 - $60,000 17

19 NEW YORK AND CALIFORNIA»New York already requires at least $675/week ($35,100 annually) to executives and administrative professionals»california already requires at least $800/week ($41,600 annually) 18

20 PREPARING FOR THE CHANGES: BEST PRACTICES»Analyze your workforce to determine which employees will be affected - Track employee hours to assess options for compensation under the new regulations 19

21 PREPARING FOR THE CHANGES: BEST PRACTICES»Consider whether to - Increase salary and bolster qualifying job duties to maintain exemption (one-time fix may not be enough) - Reduce salary to balance anticipated overtime payments (consider impact on morale) - Maintain salary and reassign certain duties to an existing or new employee to ensure that the affected employee does not work more than 40 hours/week 20

22 PREPARING FOR THE CHANGES: BEST PRACTICES - Convert the affected employee to non-exempt, and pay overtime when incurred Note: Hourly rate may be modified to match employee s current compensation level - Remember to disseminate new WTPA forms in NY and CA 21

23 PREPARING FOR THE CHANGES: BEST PRACTICES»Consider impact on flexible working arrangements and/or limiting remote connectivity for affected employees»revise job descriptions to minimize non-exempt duties for EAP and HCE employees and make sure descriptions are followed in practice»consider adjusting workweek periods for certain groups of employees - E.g., Thursday to Wednesday instead of Monday to Sunday 22

24 PREPARING FOR THE CHANGES: BEST PRACTICES»Review, and if necessary, revise policies addressing overtime, proper time reporting, offthe-clock work and acceptable use of work-related devices, so that they are ready to distribute to affected employees when new regulations go into effect»consider feasibility of adopting fluctuating workweek pay method 23

25 PREPARING FOR THE CHANGES: CONSIDER THE FLUCTUATING WORKWEEK METHOD»Permits employers to pay non-exempt employees a fixed salary even if the employee s hours fluctuate from week to week»overtime then paid at an additional one-half the regular rate of pay»may allow employers to continue paying affected employees on a salary basis and also minimize overtime costs 24

26 PREPARING FOR THE CHANGES: CONSIDER THE FLUCTUATING WORKWEEK METHOD» Requirements - Hours must fluctuate from week to week - Fixed salary that does not vary with number of hours worked during the week (excluding overtime premiums) - Fixed salary results in regular rate that is equal to or more than minimum wage - Clear mutual understanding between employer and employee that fixed salary is compensation for the workweek, regardless of number of hours worked 25

27 PREPARING FOR THE CHANGES: CONSIDER THE FLUCTUATING WORKWEEK METHOD»Other considerations - Employers need to track hours for FWWM employees - Certain states, such as California, prohibit use of FWWM - Payment of shift differentials, commissions and performance bonuses may invalidate FWWM NY - Performance bonuses held not to invalidate FWWM - Employee morale - Risk of miscalculation 26

28 RISK OF OFF-THE-CLOCK CLAIMS: TRAIN YOUR MANAGERS»Newly non-exempt employees may be entitled to overtime pay for off-the-clock work (e.g., time spent answering calls and s after regular work hours) - DOL has turned its attention to off-the-clock use of electronic devices by non-exempt employees, particularly with rise of use of portable electronic devices 27

29 RISK OF OFF-THE-CLOCK CLAIMS: TRAIN YOUR MANAGERS»Possible defense De minimis exception - Employers do not have to pay for de minimis (negligible) amounts of work performed outside of working hours that are infrequent and insignificant and cannot be practically recorded for payroll purposes E.g., Occasionally answering an /call, or monitoring a device 28

30 RISK OF OFF-THE-CLOCK CLAIMS: TRAIN YOUR MANAGERS - But if it is the employee s regular practice to respond to calls/ s, employer expects response off-hours, and doing so is part of employee s job exception does not apply - Test: (1) Practical administrative difficulty of recording such time; (2) size of the claim in aggregate; (3) whether work was performed on regular basis 29

31 RISK OF OFF-THE-CLOCK CLAIMS: TRAIN YOUR MANAGERS»Possible defense Incidental preliminary and postliminary activities - Employers not required to pay for activities which are preliminary or postliminary to employee s principal activity and occur before or after the employee s usual working hours E.g., Downloading/reading s regarding next day s work assignments - Such activities are compensable if they are an integral and indispensable part of the employee s principal duties 30

32 RISK OF OFF-THE-CLOCK CLAIMS: TRAIN YOUR MANAGERS»Possible defense Lack of actual or constructive knowledge - To be compensated for off-the-clock work, employees must show that the employers had actual or constructive knowledge that they were performing such work - /phone records may be relevant, especially if employer regularly reviews such information for productivity or verification purposes 31

33 QUESTIONS? Michael C. Lasky Jessica Golden Cortes Partner/Co-Chair Public Relations Law Special Basics of Issues Advertising for Apps and Relying Marketing on Advertising Law to Generate Revenue 2016 Davis & Gilbert LLP Partner Labor & Employment