Getting Ready for the New Overtime Rules

Transcription

1 Getting Ready for the New Overtime Rules Presented by: Alex Maultsby 300 North Greene Street, Suite 1400 Greensboro, NC 27401

2 Classification: Exempt vs. Non Exempt Why does it matter? Exempt employees are excluded from overtime pay requirements Non-exempt employees are entitled to overtime (not exempt from the FLSA)

3 FLSA Exemptions In order to be classified as exempt under the white collar exemptions, three requirements must be met: Minimum Salary Currently = not less than $455/wk Paid on a salary basis without any improper deductions Exempt Duties

4 FLSA Exemptions Employees are exempt from the Act entirely if they fall within the Motor Carrier exemption Any employee with respect to whom the Secretary of Transportation has power to establish qualifications and maximum hours of service Driving in interstate commerce Performing safety-sensitive functions

5 White Collar Exemptions Executive, administrative, and professional Highly compensated, computer, and outside sales

6 White Collar Exemptions Executive Management of enterprise or dep t Direct the work of 2+ FT employees Authority to hire/fire or recommend action Currently -- Salary of at least $455/wk

7 White Collar Exemptions Administrative Office or non-manual work related to mgmt, operations, or customers Primary duty = exercise discretion and judgment with matters of significance Currently -- Salary of at least $455/wk

8 White Collar Exemptions Professional Learned Professional Primary duty = work requiring advanced knowledge, that is predominantly intellectual, and requires exercise of discretion and judgment Advanced knowledge is in a field of science or learning Prolonged course of specialized academic training Currently Min. salary or fee basis of at least $455/week

9 White Collar Exemptions Professional Creative Professional Primary duty is work that requires invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor Currently -- Salary of at least $455/wk

10 White Collar Exemptions Highly Compensated Employees Office/non-manual work Currently must be paid $100k or more annually and at least $455/wk on salary/fee basis Regularly perform at least one of the duties of an executive, administrative, or professional employee identified in the exemption test

11 White Collar Exemptions Outside Sales Primary duty is making sales or obtaining orders or contracts for services; and Regularly work away from employer s place of business. Not subject to minimum salary requirement.

12 White Collar Exemption Computer Employee Currently -- Salary of at least $455/week or fee basis of at least $27.63 per hour Computer systems analyst, programmer, software engineer, or other similarly skilled worker performing specified duties relating to analysis, development, design, testing, etc.

13 New FLSA Overtime Rules Nuts & Bolts For Executive, Administrative, & Professional Exemptions Raises salary threshold >100% From $455 per week equivalent of $23,660 per year To $913 per week equivalent of $47,476 per year

14 New FLSA Overtime Rules Nuts & Bolts For Highly Compensated Employees Raises total annual compensation requirement From $100,000 To $134,004 or the 90 th percentile of full-time salaried workers nationally

15 FLSA Coverage Motor Carrier Act Exemption from Overtime Mandatory overtime compensation does not apply to any employee with respect to whom the Secretary of Transportation has power to establish qualifications and maximum hours of service Driving a vehicle over state lines is the clearest example of driving in interstate commerce but it is not required (look to practical continuity of movement)

16 FLSA Coverage Motor Carrier Act Exemption Exemption may apply to all drivers if all drivers were likely or reasonably have been expected to drive in interstate commerce Does the employee s position affect safety of operations?

17 Wells v. AD Transport Express, 2016 WL (ED Mich. 2016) Wells worked as driver and as troubleshooter (desk job) Argued that he did not drive interstate much and should received overtime Court applied 4 month rule He had driven interstate within 4 months No overtime

18 Mazzarella v. Fast Rig, (3d Cir. 2016) Overtime claim Hauling fracking water within PA Testimony that sometimes fracking water pumped from ponds and hauled out of state Not enough to prove practical continuity of movement. Entitled to overtime.

19 FLSA Collective Actions Potential Claims Low hurdle for a plaintiff to overcome to get a class certified and notice sent out to potential members Defense costs quickly add up in defending a lawsuit FLSA collective action claims are rising in all industries but it appears that the transportation industry is a major target

20 FLSA Collective Actions Potential Claims Employees are entitled to unpaid overtime and possibly two-times that amount as liquidated damages Employees are also entitled to reasonable attorney fees and costs

21 Collective Actions Koehler v. Freightquote.com, 2:12-cv (D KA 2016) Proposed settlement of class for $5.1M Judge rejected for nondisclosure/confidentiality restrictions and disagreed with payment to class reps $1.7M of this was attorney s fees

22 New FLSA Overtime Rules Nuts & Bolts USDOL will increase the salary threshold every 3 years By January 1, 2020 Standard salary threshold expected to be > $51,000 Continuing to increase every 3 years thereafter

23 Identify Exempt Positions Under Threshold Identify exempt positions where employees make less than $47,476 Can include non-discretionary bonuses and commissions Up to 10% of required salary level If paid quarterly or more frequently For exempt positions making less than new threshold Feasible to raise salaries?

24 Analyze Options If No Longer Exempt Option A: Divide current salary by 40 hours, and pay at an hourly rate And pay overtime pay, when applicable Option B: Convert EE to hourly, based on actual hours works Attempt to make net cost the same Using lower rate to account for expected overtime **Requires reliable information about hours worked

25 Analyze Options If No Longer Exempt Option C: Convert EE to salaried non-exempt And pay overtime pay, when applicable Option D: Institute a fluctuating workweek method And pay overtime pay (at half regular rate) for hours in excess of 40 in a workweek Must have: varying work schedules, fixed salary, regular rate above minimum wage, mutual understanding, consistent with state law

26 Reclassification of EEs: Factors To Consider Costs to absorb and manage overtime Morale issues Potential inconsistencies if EEs in same position classified differently because paid differently based on seniority, local economics, other factors Workload shift from hourly to exempt managers Potential use of independent contractors

27 Reclassification of EEs: Factors To Consider Potential effects on benefits Examples: accrual of PTO rules relating to year-end cash-outs LTD or life insurance Policy restricting overtime Ability to prospectively change compensation Employment contract State law

28 Communication Plan & Training Explain reason for change Focus on positive: Paid for time worked after hours Be prepared for the fallout Loss of status Tracking time Loss of flexibility

29 Communication Plan & Training Train non-exempt employees to track & report time Reset manager expectations re work after hours Use of phones/laptops Travel for non-exempt employees Manage Overtime

30 Alex Maultsby Partner Greensboro & Charlotte T (336) alex.maultsby@smithmoorelaw.com