FLSA Overtime Rules are Here! Are You Ready for the Change? Presented on Wednesday, July 6, 2016

Transcription

1 FLSA Overtime Rules are Here! Are You Ready for the Change? Presented on Wednesday, July 6,

2 2

3 Housekeeping 3 Credit Questions Today s topic Speaker

4 To earn RCH credit you must 4 Stay on the webinar, online for the full 60 minutes Be watching using your unique URL Certificates delivered by , to registered , by August 5 th

5 Our Focus For Today 5 The new minimum salary requirements for executive, administrative, and professional exempt employees The new minimum salary requirements for highly compensated employees How to use nondiscretionary bonuses and incentive payments to satisfy the new salary level How to communicate the new changes to effected employees The effects of the new rules on state wage and hour laws that are currently following the federal rules The effects of the new rules on states that have their own regulations

6 About the Speaker 6 Vicki M. Lambert, CPP, is President and Academic Director of The Payroll Advisor, a firm specializing in payroll education and training. The company s website offers a subscription payroll news service which keeps payroll professionals up-to-date on the latest rules and regulations. As an adjunct faculty member at Brandman University, Ms. Lambert is the creator of and instructor for the Practical Payroll Online payroll training program, which is approved by the APA for recertification credits.

7 President Obama 7 Signed Executive Order on March 13, 2014 directing Secretary of Labor to review overtime rules in order to expand who is eligible for overtime May 18, 2016 final rules are in!

8 Overtime Eligibility? 8 Who is automatically eligible for overtime pay? All Employees! You have to prove they are NOT subject to overtime and minimum wage You don t prove they are subject

9 White Collar Exemptions 9 Section 13(a)(1) of the FLSA provides an exemption from both minimum wage and overtime pay for employees who are employed in a bona fide: Executive; Administrative; Professional; or Outside Sales capacity. Certain computer employees may be exempt professionals under Section 13(a)(1) or exempt under Section 13(a)(17) of the FLSA.

10 Must Meet Three Tests for Exemption 10 Salary Level Test Salary Basis Test Job Duties Test Changes occur here only Minimum salary an employee must be paid to be exempt Must receive the same salary each week regardless of quality or quantity of work Must perform certain job duties to be considered exempt No change

11 Overview of Proposed Levels 11 Released on DOL website on June 30, 2015 as 295 page pdf. Published in Federal Register on July 6, pages of 3-column small print Proposes substantial changes to salary thresholds for executive, administrative and professional Also applies to the highly-compensated variant of those exemptions Presents no changes to the duties standards for any exemption The Payroll Advisor, 2016

12 Overview 12 Did solicit comments on number of topics including duties Comment period closed on September 4, day comment period was allowed DOL received over 247,000 comments The Payroll Advisor, 2016

13 Current Salary Level 13 For most employees, the current minimum salary level required for exemption is $455 per week Must be paid free and clear Currently less than poverty level for a family of four 1.6 times the federal minimum wage

14 New Salary Level 14 New level as of December 1, 2016 $913 per week Based on 40 th percentile of salaries in lowest region (south) Must still be free and clear Twice the poverty level for family of four 3.1 times federal minimum wage

15 Proposed Salary Levels 15 Used national averages to determine amounts New level reflects the 40 th percentile of earnings for full-time salaried employees Highly compensated reflects level at 90 th percentile for fulltime salaried employees Different rates will be used in American Samoa and for motion picture industry The Payroll Advisor, 2016

16 Proposed Salary Levels 16 American Samoa Current: $380 12/1: $767 Motion Picture Current: $695 12/1: $1,397 The Payroll Advisor, 2016

17 Scope of Proposal 17 Does not apply to outside sales Does not apply to computer employees paid hourly at $27.63 per hour Do not affect other exemptions not based on section 13(a)(1) of FLSA The Payroll Advisor, 2016

18 Does Not Apply To 18 Section 7(i) commissioned employees (retail or service) Seasonal amusement or recreational establishment employees Motor Carrier Act exemptions (section 13(b)(1)) Certain employees of rail and air carriers sections 13(b)(2) & (b)(3) The Payroll Advisor, 2016

19 New Highly Compensated Test 19 Total annual compensation of at least $134,004 as of 12/1 At least $913 as of 12/1 per week paid on a salary or fee basis cannot use new 10% rule for bonuses Perform office or non-manual work More relaxed in this area than in other exemptions Customarily and regularly perform any one or more of the exempt duties identified in the standard tests for the executive, administrative or professional exemptions

20 Total Annual Compensation 20 Total annual compensation includes: Commissions Nondiscretionary bonuses Other nondiscretionary compensation earned during a 52-week period Total annual compensation does not include: Credit for board, lodging or other facilities Payments for medical or life insurance Contributions to retirement plans or fringe benefits

21 Make-Up Payment & Pro-Rating 21 If an employee s total annual compensation does not equal $134,004 eff. 12/1 by the end of the year: The employer may, within one month after the end of the year, make one final payment to reach the salary level in effect; or The employee will be tested for exemption under the standard duties tests The salary may be pro-rated for employees who do not work the full year The employer may use any 52-week period as the year

22 New Nondiscretionary Bonus Rule 22 Nondiscretionary bonus or other incentive pays such as commissions are forms of compensation promised in advance to employees Can include bonuses for meeting production schedules or goals, retention bonuses, and commission payments on a fixed formula New rules allow these types of bonuses to be applied to satisfy a portion of the salary level test Payments for stipends or travel do not qualify

23 New Nondiscretionary Bonus Rule 23 Can be used to satisfy up to 10% of standard salary level Minimum of approx. $822 or 90% of standard salary level must be paid as weekly salary Payments of the bonuses or other payments must be made a minimum of quarter or on a more frequent basis

24 New Nondiscretionary Bonus Rule 24 Definition of quarterly is left up to the employer s discretion as to when the quarter begins Different employees can have different quarters Bonus must usually be at least $1,183 to make up the 10% of the salary not paid

25 New Nondiscretionary Bonus Rule 25 If employee fails to earn enough from nondiscretionary bonus or incentive payment in a given quarter the employee may make catch-up payment within one pay period at the end of the quarter This catch-up payment will only count towards the prior quarter s salary amount and not toward salary in the quarter in which it is paid. If payment not paid employee is entitled to overtime for the quarter

26 Examples for Qtr 1: January March paid $822 per week with $2,000 bonus meets salary level Qtr 2: April June paid $822 per week with $600 bonus--$583 short for meeting salary level for quarter employee gets overtime Qtr 3: July September paid $822 per week with $2,000 bonus meets salary level Qtr 4: October December paid $822 per week with $500 bonus--$683 short employer makes catch-up payment 1 st pay period in January

27 Automatic Updates 27 Every three years starting in January 1, 2020 Standard salary and annual compensation levels will be automatically updated Published in Federal Register at least 150 days prior to effective date by Secretary of Labor 2 nd Qtr of preceding year DOL will publish and maintain on its website Standard salary lever will be 40 th percentile of weekly earnings for full-time salaried employees working in the southern region (lowest)

28 Automatic Updates 28 Also starts in January, 2020 and every three years from then on American Samoa: updated to maintain the ratio of the standard salary level of 84% Motion picture industry: updated by increasing the base rate proportionately to the change in the standard salary level Highly compensated employees will be updated to equal 90 th percentile of annualized earnings of fulltime salaried workers nation-wide

29 General Information 29 Salary level of $913 applies whether employee is full time or part time Cannot give comp time in lieu of overtime for employees who don t meet salary level test Right to overtime determined on weekly basis not annual so employee must be paid minimum of $913 a week regardless of annual income

30 Handling the Change 30 The decision of who gets the increased salary and who is made nonexempt must be made by 12/1 but should be much sooner DOL says may not be required to track hours but states may differ best to have them begin tracking hours Communication should begin now the employee did nothing wrong Budgets need to reflect the new levels

31 Options for Responding to Changes 31 Raise salary to maintain exemption Lower hourly rate and pay overtime to equal old salary Pay current salary with overtime after 40 hours Reduce base salary and add OT to hold weekly pay constant Reorganize workloads to limit hours over 40 keeping same salary level Eliminate overtime

32 Salary Nonexempt Classification 32 FLSA permits salary nonexempt classification Fixed workweek under FLSA Most states permit including CA Different concept than exempt Subject to overtime but still paid on a salary Receives 1 ½ times regular rate of over 40 in workweek May help in transition

33 Salary Nonexempt Classification 33 FLSA permits salary nonexempt classification Fluctuating workweek under FLSA Most states don t permit Different concept than exempt Subject to overtime but still paid on a salary salary covers all hours worked for straight time Receives ½ times regular rate of over 40 in workweek but hourly rate fluctuates May help in transition

34 Where the States Stand 34 If they address the issue they can. 1. follow new federal rules or 2. Follow old rules exactly or 3. Follow either but have a different salary level or different job duties tests

35 Where the States Stand 35 State Follows FLSA: State code refers to FLSA in the statutes or states it follows federal State Has Own Law Right Now Stricter: State has its own statute that has higher standards than FLSA either in salary level or duties tests State Has Own Law Less Strict or Defers to FLSA: State code is less strict or it states that employers covered under FLSA not covered under state law No State Statute: State does not address issue at all in the statutes

36 Where the States Stand 36 State Follows FLSA: CO, D.C., IA, MD, MA, MT, NV, NM, *ND, OH, OK, RI, VT, State Has Own Law Right Now Stricter: AK, CA, CT, HI, IL, IN, KY, ME, MN, NJ, NY, OR, PA, WA, WV, WI, State Has Own Law Less Strict or Defers to FLSA: AR, KS, MI, MO, NH, NC, TX, UT No State Statute: AL, AZ, DE, FL, GA, ID, LA, MS, NE, SC, SD, TN, VA, WY * Some parts are stricter

37 For Example: CA 37 Follows FLSA rules with the following exceptions: Monthly salary 2 times state minimum wage for full time employment eff : $3,467 Computer professionals for 2016: $41.85 per hour, the minimum monthly salary exemption of $7,265.43, and the minimum annual salary exemption of $87, Physician Employee for 2016 $76.24 per hour

38 White Collar Exemptions to Overtime 38 Special care needed for when fed rules change on Dec. 1 st to $913 per week. Fed equals $47,476 per year or $ per month fed will be higher as of Dec 1, 2016 CA gets a minimum wage hike on Jan 1, 2017 to $10.50 for big businesses = $3640 per month-fed still higher 1/1/2019: CA minimum wage now $12 = $4160 per month CA now higher 1/1/2020: both have increase pending so we will see

39 Additional Resources 39 Field Operations Handbook Chapter 22 Final ruling: Full details and guidance by WHD

40 Are There Any Questions? 40

41 How Can Ascentis Help Me? 41 Ascentis Timekeeper Alert managers when employees approach overtime Performs multiple complex overtime calculations Calculations take into account start and stop times, scheduled hours, and type of duty performed Configure pay categories and assign o different rules and groups - with unique calculations and cost centers

42 To earn RCH credit you must 42 Stay on the webinar, online for the full 60 minutes Be watching using your unique URL Certificates delivered by , to registered , by August 5 th

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