1 THE OVERTIME RULE: WHAT YOU NEED TO KNOWSeptember 15, 2016 THE OVERTIME RULE: WHAT YOU NEED TO KNOW Presented By: Warren Averett & Starnes Davis Florie
2 TRIP UMBACH Trip chairs the Labor and Employment Law Practice Group for Starnes Davis Florie LLP Represents public and private employers in wage & hour, discrimination, and other labor and employment matters. J.D. University of Alabama Resides in Birmingham, AL and serves clients in Alabama and Florida 60 Attorneys in Birmingham & Mobile, AL, serving clients in Alabama and Florida Civil Litigation Only
3 Review of FLSA Basic and ChangesPresented by: Trip Umbach, Starnes Davis Florie Review of FLSA Basic and Changes
4 FAIR LABOR STANDARDS ACT (FLSA)Review of FLSA Basic and Changes FAIR LABOR STANDARDS ACT (FLSA) Minimum Wage OVERTIME
5 INTENT OF LAW Decrease hours worked Increase pay Create jobsReview of FLSA Basic and Changes INTENT OF LAW Decrease hours worked Increase pay Create jobs
6 DOES IT APPLY TO ALL EMPLOYERS?Review of FLSA Basic and Changes DOES IT APPLY TO ALL EMPLOYERS? Almost all Government agencies are covered
7 OVERTIME FUNDAMENTALSReview of FLSA Basic and Changes OVERTIME FUNDAMENTALS OT is hours worked over 40 in a work week [May use “work period” for police and firefighters] OT must be paid at 1½ times an employee’s regular rate Public employers can give “comp time” instead of paying OT Employers cannot agree with employees to not pay OT ALL employees are entitled to OT … unless EXEMPT
8 OVERTIME FUNDAMENTALSReview of FLSA Basic and Changes OVERTIME FUNDAMENTALS QUESTION ? True or False: Nonexempt employees must be paid overtime (or provided comp time) for hours worked over 40 hours in a workweek.
9 WHO IS EXEMPT? Generally, three requirements:Review of FLSA Basic and Changes WHO IS EXEMPT? Generally, three requirements: Salary basis Salary level Duties Employer has burden of proof
10 MOST COMMON EXEMPTIONSReview of FLSA Basic and Changes MOST COMMON EXEMPTIONS Executive Administrative Professional Highly Compensated Outside Sales
11 OVERTIME FUNDAMENTALSReview of FLSA Basic and Changes OVERTIME FUNDAMENTALS QUESTION ? True or False: Beginning 12/1/16, employees earning $47,476+ do not have to meet the Duties Test to be considered exempt from overtime.
12 WHAT IS THE RISK? (Why should you care?)Review of FLSA Basic and Changes WHAT IS THE RISK? (Why should you care?) Back wages (unpaid overtime) for 2 years (3 years if willful) Liquidated damages, unless good faith Attorney fees Collective/class action lawsuits Department of Labor No insurance
13 HOW CAN YOU MANAGE THE RISK?Review of FLSA Basic and Changes HOW CAN YOU MANAGE THE RISK? Review all exempt/non-exempt classifications Make changes where needed Consider legal opinion in close cases
14 OVERTIME FUNDAMENTALSReview of FLSA Basic and Changes OVERTIME FUNDAMENTALS QUESTION ? True or False: It is o.k. to have some employees classified as exempt and others as nonexempt from overtime in the same job title.
15 WHAT WILL CHANGE DEC. 1, 2016? Salary level Nothing elseReview of FLSA Basic and Changes WHAT WILL CHANGE DEC. 1, 2016? Salary level Nothing else
16 NEW SALARY LEVEL Executive, Administrative, ProfessionalReview of FLSA Basic and Changes NEW SALARY LEVEL Executive, Administrative, Professional $47,476/year or $913/week (up from $23,660/$455) Increase every 3 years Up to 10% nondiscretionary bonus, commission, incentive pay Catch up payment quarterly
17 NEW SALARY LEVEL Highly Compensated EmployeeReview of FLSA Basic and Changes NEW SALARY LEVEL Highly Compensated Employee $134,000/year (up from $100,000) Increase every 3 years Amounts above $47,476 can be nondiscretionary bonus, commission, incentive pay Catch up payment annually
18 KELLY COCHRAN, phr As Director of Human Resources for Warren Averett, Kelly develops policies, programs, and benefit packages to support the firm’s strategic objectives. With more than 800 employees across 4 states, Kelly stays busy with all facets of HR including benefit administration, employee relations, and HR compliance. Kelly also enjoys advising firm clients on HR and benefit best practices. MBA, Auburn University, Montgomery Resides in Montgomery, AL and serves clients across the Southeast
19 How to Respond to the Salary Level ChangesPresented by: Kelly Cochran, Director of HR, Warren Averett Yes, You Do Have Options! How to Respond to the Salary Level Changes
20 OPTIONS Raise salaries to maintain exemptionHow to Respond to the Salary Level Changes OPTIONS Raise salaries to maintain exemption Pay a fixed salary and pay overtime Convert to an hourly pay rate and pay overtime Adjust Wages Reorganize workloads and schedules to avoid overtime
21 CONSIDERATIONS TO MAINTAIN EXEMPTIONHow to Respond to the Salary Level Changes CONSIDERATIONS TO MAINTAIN EXEMPTION Do exempt employees meet the $47,476 threshold if you include bonuses and commissions? Can you afford to raise salaries/bonuses to meet the new threshold? Do they travel, work from home, mobile devices, or work other hard to track schedules? Do they meet the duties test?
22 MAINTAIN EXEMPTION BY INCLUDING BONUSES & COMMISSIONSHow to Respond to the Salary Level Changes MAINTAIN EXEMPTION BY INCLUDING BONUSES & COMMISSIONS Weekly Salary of at least $ ($42, annually) Salary + bonus/commission must average at least $913 per week ($11,869 quarterly) If salary + bonus/commission do not equal at least $11,869 for the quarter, you must pay a catch-up bonus
23 OVERTIME FUNDAMENTALSReview of FLSA Basic and Changes OVERTIME FUNDAMENTALS QUESTION ? True or False: 10% of wages earned through nondiscretionary bonuses can be counted toward the $47,476 threshold for exempt status.
24 CONSIDERATIONS TO CONVERT TO NONEXEMPTHow to Respond to the Salary Level Changes CONSIDERATIONS TO CONVERT TO NONEXEMPT Do your exempt employees making less than $47,476 work overtime (over 40 hours per week)? Do you know or can you estimate how much overtime is worked? Can you limit overtime? Will benefits be impacted/reduced by switching to nonexempt?
25 OPTIONS TO CONVERT TO NONEXEMPT PAID SALARIEDHow to Respond to the Salary Level Changes OPTIONS TO CONVERT TO NONEXEMPT PAID SALARIED Maintain current salary and pay OT for hours over 40 Maintain current salary but define it to include all regularly scheduled defined hours and pay half time for hours over 40 (and full OT for hours over the defined #) Adjust current salary taking expected OT into consideration Example: Jane earns $40,000 and is regularly scheduled to work 50 hours per week Method #1: $769 weekly salary + $288 OT = $1,057 ($54,964) Method #2: $769 weekly salary + $77 OT= $846 ($43,992) Would owe full OT for hours over 50 Method #3: $560 weekly salary + $210 OT = $770 ($40,040) Method #3(b): $700 weekly salary + $70 OT = $770 ($40,040)
26 OPTIONS TO CONVERT TO HOURLY / NONEXEMPTHow to Respond to the Salary Level Changes OPTIONS TO CONVERT TO HOURLY / NONEXEMPT Divide weekly salary by 40 hours Divide weekly salary by average weekly hours Adjust wages based on expected OT Example: Jane earns $40,000 and is regularly scheduled to work 50 hours per week #1: $19.23/hour = $769 +$ 288 OT = $1057 ($54,964) #2: $15.38/hour = $615 + $230 OT = $845 ($43,940) #3: $14.00/hour = $560 + $210 OT = $770 ($40,040)
27 ANOTHER OPTION Fluctuating Workweek Example: Paid $770/weekHow to Respond to the Salary Level Changes ANOTHER OPTION Fluctuating Workweek Hours must fluctuate from week to week Pay a fixed salary regardless of hours worked + Half rate for hours over 40 The hourly rate and Half rate changes based on hours worked that week Hourly rate cannot fall below minimum wage Must have a clear mutual understanding with employee Example: Paid $770/week Week 1: Works 55 hours; Half rate = $7x15 + $770 = $875 Week 2: Works 45 hours; Half rate = $8.56 = $812.80 Week 3: Works 40 hours; Half rate = 0 = $770 Week 4: Works 65 hours; Half rate = $5.92 = $918
28 OVERTIME FUNDAMENTALSReview of FLSA Basic and Changes OVERTIME FUNDAMENTALS QUESTION ? True or False: DOL specifies that hourly rates must be calculated by dividing annual salary by regardless of the number of hours worked.
29 SUMMARY Calculate and Analyze OptionsHow to Respond to the Salary Level Changes SUMMARY Calculate and Analyze Options See link: https://www.dol.gov/whd/overtime/final2016/general- guidance.pdf Consider Pros and Cons of each option Take other factors into consideration One Size Does NOT Fit All!
30 Gerriann fagan, sphr, shrm-scpGerriann is a Member of Warren Averett and leads the firm’s WORKPLACE Division. Her team provides leadership, career and human resources consulting and solutions for local and global clients. M.S. Industrial Relations, University of Minnesota Originally from Chicago, resides in Birmingham, AL and serves clients across the southeast and globally through partnership in Career Partners International
31 Other Considerations & OpportunitiesPresented by: Gerriann Fagan, Member, Warren Averett Workplace Other Considerations & Opportunities
32 BEST PRACTICES Communicate with IMPACT Start EarlyOther Considerations & Opportunities BEST PRACTICES Communicate with IMPACT Investigate Medium Plan Allies Content Test Start Early Prepare Talking Points Educate managers and supervisors Anticipate employee responses (+ and -) Document evaluation / next steps
33 Other Considerations & OpportunitiesOPPORTUNITES Housekeeping: job descriptions, pay and bonus programs, policies Demonstrate that you are on top of wage & hour laws/competitive; desire to comply in good faith Make it easy to understand
34 Other Considerations & OpportunitiesADMINISTRATIVE 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 Discretion & independent judgment in matters of significance Directly related to (examples): work in functional areas such as tax; finance; accounting; budgeting; auditing; insurance; quality control; purchasing; procurement; advertising; marketing; research; safety and health; personnel management; human resources; employee benefits; labor relations; public relations, etc. Major assignments / affect business operations to a substantial degree / authority to commit employer in matters that have significant financial impact / waive or deviate from established policies without approval
35 Other Considerations & OpportunitiesTHE BUZZ I'm not sure why my position and others similar to mine are non- exempt vs. exempt. So it doesn't make sense to me. I also resent "punching in and out" as Executive Assistants, we are on call all the time during off hours. I do get some flexibility for this "off time" but would rather be exempt because it is a pain when you need to leave early for an appointment and it just doesn't reflect the true nature of our jobs. Due to my executive requiring in office coverage for about hrs. per day, I am way glad that I'm hourly because I get close to 5 hrs. per week of OT pay which works out to be about $10-12K per year. If it were an option though, I would rather get the extra $$ in my base salary and be exempt.
36 DISCUSSION I don’t understand why I’m classified this wayOther Considerations & Opportunities DISCUSSION I don’t understand why I’m classified this way DOL outlines whether jobs are Exempt from Overtime Pay or Not Your job falls in the [X] category based on income and the essential duties of your job Complying with federal laws is part of our obligation to you At our firm, we always try to handle employment matters appropriately and to the letter of the law I’ve never had to track my time before Cool to Clock / Helps us stay on top of job costing / We’re all doing it New to all of us I thought I’d be getting a raise Our intent is to comply Clarify your pay review/merit process
37 OVERTIME FUNDAMENTALSReview of FLSA Basic and Changes OVERTIME FUNDAMENTALS QUESTION ? True or False: Non-exempt employees must clock in and out each day using a time clock.
38 OVERTIME POLICY/MISINTERPRETATIONOther Considerations & Opportunities OVERTIME POLICY/MISINTERPRETATION Work week begins 12:00 a.m. on Sunday a.m. and ends 11:59 p.m. on Saturday night. Although employees are normally scheduled for a 37.5 hour workweek, overtime payments do not commence until the employee exceeds 40 hours in a workweek. Supervisors are required to obtain approval from managers prior to the use of overtime. Employees who anticipate the need for overtime to complete the week’s work must notify their supervisors in advance and obtain approval prior to working hours that extend beyond their normal schedule. Although overtime payments do not commence until the employee exceeds 40 hours in a workweek, approval is required for hours that exceed 37.5 hours in a workweek.
39 OVERTIME POLICY/MISINTERPRETATIONOther Considerations & Opportunities OVERTIME POLICY/MISINTERPRETATION During busy periods, the employer may require employees to work extended hours. Supervisors who authorize staff members to work overtime without prior approval from management will be subject to disciplinary action. Supervisors who continually rely on the use of overtime hours to complete a week’s work without it being deemed as extenuating circumstances by management will be subject to disciplinary action. Employees who fail to obtain approval prior to working hours that extend beyond their normal 37.5-hour workweek will be subject to disciplinary action. Overtime offenses may result in termination.
40 EMPLOYEE COMMUNICATION PIECESOther Considerations & Opportunities EMPLOYEE COMMUNICATION PIECES
41 CLARIFICATIONS Overtime is time worked over 40 hours per week.Other Considerations & Opportunities CLARIFICATIONS Overtime is time worked over 40 hours per week. Vacation, sick, holiday, personal day or other PTO time, that is not included in the 40 hour calculation. Employers must pay for unapproved overtime pay. If employee doesn’t adhere to your overtime approval process, follow your counseling and discipline process.
42 TIPS Make it easy Web based system, time clock, otherOther Considerations & Opportunities TIPS Make it easy Web based system, time clock, other Nonexempt with standard hours Audit it / make sure that what you decide to do gets done Start now
43 Other Considerations & OpportunitiesCHANGE Remember in times of change: communicate, communicate, communicate most people want more information, not less when in times of uncertainty or confusion. Audit it / make sure that what you decide to do gets done Start now!!!
44 OVERTIME FUNDAMENTALSReview of FLSA Basic and Changes OVERTIME FUNDAMENTALS QUESTION ? True or False: If an employee fails to obtain approval prior to working overtime, you do not have to pay it.
45 Who We Are OFFICE LOCATIONS FLORIDA Destin Ft. Walton BeachPanama City Pensacola Tampa ALABAMA Anniston Auburn Birmingham Cullman Foley Huntsville Montgomery GEORGIA Atlanta TEXAS Houston CAYMAN ISLANDS Grand Cayman Island
46 Contact information Trip Umbach, Starnes Davis Florie LLP Kelly Cochran, Warren Averett Gerriann Fagan, Warren Averett Workplace
47 THANK YOU THANK YOU!