Kyle B. Russell Overland Park, KS

Transcription

1 August 12, 2015 Kyle B. Russell Overland Park, KS Copyright 2015 Jackson Lewis P.C. 1

2 Loan officers Undertakers Salespeople Counselors in psychiatric hospitals 2 2

3 1939 law imposed on a 2015 business environment Business owners do not take the time to understand View that the results of not complying are de minimis 3 3

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5 Exemption based on two factors: o List of duties which define an exempt employee, AND o A salary threshold 5 5

6 [R]egulations regarding exemptions... particularly for executive, administrative, and professional employees... have not kept up with our modern economy. Directs the Secretary of Labor to propose revisions in order to: o [U]pdate existing protections consistent with the intent of the Act ; o [A]ddress the changing nature of the workplace ; and o [S]implify the regulations to make them easier for both workers and businesses to understand and apply. Because these regulations are outdated, millions of Americans lack the protections of overtime and even the right to the minimum wage. 6 6

7 In 1979, 62% of workers fell below the salary threshold Poverty line - $24,008 Exemption threshold - $23,

8 Released on the DOL website on June 30, 2015 as a 295-page.pdf. Published in the Federal Register on July 6, 2015, occupying 97 pages. See 80 Fed. Reg. 38,516. Proposes substantial increases to the salary thresholds for the executive, administrative, and professional exemptions, as well as for the highly-compensated employee exemption. Presents no changes to the duties standards. But solicits input on duties (what standards and other topics). Provides for a 60-day comment period, with comments currently due on or before September 4,

9 Would increase the current minimum salary level of $455 per week ($23,660 per year) to $921 a week ($47,892 per year), subject to annual increases thereafter. A 102% increase over present threshold DOL indicates that it intends to update the salary figure based on new economic data when it publishes the Final Rule, stating an expectation that the final number is likely to be $970 a week ($50,440 per year). DOL s rationale is that the new salary level reflects the 40th percentile of earnings for full-time salaried employees. 9 9

10 For highly compensated employees, in addition to salary-basis compensation of $921 (or $970) a week, the total minimum compensation increases from $100,000 a year to $122,148, subject to annual increases thereafter. DOL set this level at the 90th percentile for full-time salaried employees. For American Samoa, DOL sets the salary at 84% of the level applicable in the rest of the country, except that the general salary requirement shall apply when the highest industry minimum wage in American Samoa equals the general federal minimum wage. For the motion picture industry, the NPRM increases the alternative weekly standard allowing for partial-week pro-rating from $695 to $1,404, and in effect raises the minimum daily rate from $ (i.e., $695 / 6) to $ (i.e., $1,404 / 6)

11 The proposed changes apply only to the executive, administrative, and professional exemptions. They do not apply to outside sales employees, nor do they affect computer employees paid on an hourly basis at a rate of at least $27.63 per hour. The proposed regulations do not affect other exemptions not based on section 13(a)(1) of the Fair Labor Standards Act, such as: o Certain commissioned employees of retail or service establishments (section 7(i)); o Employees of seasonal amusement or recreational establishments (section 13(a)(3)); o Motor Carrier Act exemption (section 13(b)(1)); or o Certain employees of rail and air carriers (sections 13(b)(2) and (b)(3))

12 The Economic Policy Institute expects that these increases to the salary thresholds will render 6.1 million currently exempt salaried employees ineligible for exempt status, or about 25% of all exempt employees currently subject to the salary basis standards. Impact will largely be favorable to white men and women over the age of 25. Over the next ten years, annual increases in the salary thresholds will cause an additional 500,000 to one million currently exempt salaried employees to become ineligible for exempt status. The effects of these regulations will fall most heavily in the South, the Midwest, and in rural areas, where salary levels tend to be more moderate than in coastal and urban locations. Industries like retail, restaurants, healthcare, social services and manufacturing, with large numbers of front-line supervisors, will be hit hard. One service agency reports that unless other measures are implemented, it will cost it 15 million annually in increased pay

13 The Department is not making specific proposals to modify the standard duties tests but is seeking comments on whether the tests are working as intended to screen out employees who are not bona fide executive or professional employees; in particular, the Department is concerned that in some instances the current tests may allow exemption of employees who are performing such a disproportionate amount of nonexempt work that they are not executive or professional employees in any meaningful sense. The Notice of Proposed Rulemaking ( NPRM ) solicits input from the public on a variety of issues, without stating one way or the other whether it intends to incorporate these issues into the Final Rule

14 DOL seeks comments regarding: o Whether to adopt the California primarily engaged in standard for exempt status (i.e., one-half of time working engaged in exempt activity); o Whether to place other limits on the amount of non-exempt activity an exempt employee may perform; o Whether to allow nondiscretionary bonuses or even commissions to satisfy a portion (perhaps up to 10%) of the required salary; o What industries commonly have nondiscretionary bonuses and incentive compensation; o Whether requiring these bonuses to be paid monthly (or at some other frequency) is most appropriate

15 DOL seeks comments regarding: o Whether to readopt a long test / short test approach to exemptions, as existed before the 2004 revisions to these regulations; o Whether the concurrent duties concept for executive employees is working; o To what extent exempt executive employees are performing nonexempt work; o What further examples to list illustrating types of jobs that would be exempt under the computer employee exemption

16 There is now an opportunity to submit comments. The NPRM specifies a 60-day comment period, which closes on September 4. Various groups are requesting an extension of that period, and it is likely that DOL will extend the comment period by at least 30 days. There may be congressional oversight hearings challenging the proposed regulations on any number of grounds. Congress could also attempt to block the regulations through either the Congressional Review Act or the appropriations process. In the end, it seems likely that some form of these regulations will eventually become law. Unless blocked, DOL will issue a Final Rule, probably in early to mid 2016, effective days thereafter

17 1. If you haven t already done so, identify all employees currently classified as salaried exempt who earn less than $50,440 a year. 2. If you use the highly-compensated exemption, identify all employees earning between $100,000 and $122,148 a year. 3. Begin to develop a strategy for responding in the event that the minimum salary threshold for exemption increases to $50,440. o Increase employees to that level if their pay is close? o Set an hourly rate that assumes the same number of working hours after the conversion as before, and for the same total pay? o Manage the workload by reducing schedules to avoid overtime and increasing headcount or shifting exempt duties to other employees? 17 17

18 4. For employees who are in the zone for possible reclassification if these changes become effective, do you know how many hours they currently work? If not, consider taking steps to begin tracking their working time in order to assist with modeling postreclassification pay. 5. Consider treating these regulations as an opportunity to make other changes for which adequate messaging has previously not been available

19 Many employers will ignore the change many off-theclock cases will arise Smaller employers will just not understand it Others will make change by relying on a defective application of the fluctuating work week Don t work over 40 hour rule cases will increase 19 19

20 Kyle B. Russell Jackson Lewis P.C College Blvd., Suite 1150 Overland Park, KS (913)

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